Good morning, and welcome to the Nexa Resources Fourth Quarter and Full Year 2023 Conference Call. All participants will be in listen-only mode. [Operator Instructions] This event is being recorded and is 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] I would now like to turn the conference over to Mr. Rodrigo Cammarosano, Head of Investor Relations, for opening remarks. Please go ahead.

Good morning, everyone, and welcome to Nexa Resources fourth quarter and full year 2023 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 will 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 good morning to everyone. Please let’s move now to Slide number 3, where we will begin our presentation. We appreciate you joining us today to discuss our fourth quarter and full year 2023 results, along with insights into our outlook for 2024. I am pleased to report that we achieved our guidance for the year with metal production at the high end of guidance and total smelting sales at the midrange, while mining and smelting costs were in line with guidance. As many of you are aware, 2023 posed persistent challenges to our business, particularly due to zinc prices and the delay in the ramp-up of Aripuanã. Nonetheless, I would like to highlight the dedication and professionalism of our team, which supported us in improving efficiency across our organization, which enabled us to deliver solid operational results and also to mitigate in part the negative impacts of lower zinc prices in our 2023 cash flow. For the full year, total consolidated net revenues amounted to $2,573 million, down by 15% year-over-year, mainly due to lower zinc prices and lower metal sales. Adjusted EBITDA in the fourth quarter of 2023 was $105 million compared to $120 million a year ago. This performance was mainly driven by lower smelting sales volumes and zinc prices. Zinc was down 17% year-over-year. Compared to last quarter, adjusted EBITDA rose 28% due to higher zinc prices, which were partially offset by lower smelting sales volume. For the full year, adjusted EBITDA amounted to $391 million, down 49% year-over-year, primarily driven by lower LME metal prices, in addition to lower smelting sales volume. I want to reaffirm that we remain focused on completing the Aripuanã ramp-up and consequently reaching the nameplate capacity in the second quarter of this year, maintaining our operational and…

Thank you, Ignacio. Good morning to everyone. I will continue on Slide 11. As you can see, beginning with the chart on your upper left, total consolidated net revenues for the fourth quarter decreased by 19% year-over-year, mainly due to lower sync LME prices and lower smelting sales volumes. Compared to the third quarter of 2023, net revenues decreased by 3%, also as a result of lower smelter sales volumes, but partially offset by higher zinc prices and higher production in the mining segment. In 2023, consolidated net revenues reached $2.6 billion, down by 15% compared to 2022. In terms of profitability, consolidated adjusted EBITDA in the fourth quarter of 2023 was $105 million compared to $120 million in the fourth quarter of 2022. This lower performance was mainly explained by lower smelter sales volumes and lower zinc prices. Compared to the third quarter of 2023, adjusted EBITDA increased by 28%, mainly due to higher zinc prices and higher mining production, which was partially offset by lower smelter sales volumes. In 2023, consolidated adjusted EBITDA reached $391 million, down 49% from 2022. This is also explained by the reasons I mentioned a moment ago. Now let’s move to the next Slide, number 12. On the top left of the slide, we can see that in 2023 we invested $309 million in CapEx, of which sustaining investments, including mine development, totaled $293 million. The total investment in the fourth quarter was $111 million, leaving us within our guidance for the full year. With respect to mineral exploration and project evaluation, we invested a total of $92 million, of which $52 million were related to mineral exploration and mine development to support the exploration activities that Ignacio presented just a moment ago. The total invested in the fourth quarter was $24 million.…

Thank you, Jose Carlos. On our last slide, I would like to close this presentation by mentioning our priorities for 2024. As we look ahead to this year, we anticipate that volatility across commodities may persist for a while and continue to put pressure on our business. However, we will remain focused on our priorities, including the completion of the Aripuanã and Cerro Pasco integration project in addition to our commitment to always seek alternatives to optimize costs, CapEx and corporate expenses, as well as strengthen our balance sheet. We will continue our journey as we foster the creation of shared value through operational excellence, environmental protection and the integral development of our communities within a framework of ethics, transparency and responsibility. In summary, although we expect 2024 to be a challenging year, we are confident that the growth of our business and the long-term fundamental of our industry will be key to sustain our position. That concludes our remarks. Thank you all for attending this presentation. Operator, we are ready to open the floor for questions, please.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Camilla Barder from Bradesco. Please go ahead.

Hi. Good morning. Thanks for the presentation. Just a quick question on the cost side. If you could provide how you think cost evolving throughout the year for the semesters? And if you also could provide some color on free cash flow expectations, it would be great. Thank you.

So, regarding cost, as you saw in the presentation, we were able to keep cost flats in our mines in Peru and in Brazil. And this was, I would say, a combination of higher throughput and measures around reducing fixed cost incremental PVD in 2023, we reduce about 500 people in only our operations. And regardless, let’s say, inflation issues, especially in Brazil and some in Peru. And regarding some FX impacts, especially in Brazil, we were able to keep costs flat. However, there were some costs that we couldn’t control because we needed to develop some mines, such as El Porvenir. We have been taking additional measures for 2024. So the idea is that we also keep our cost of raw flat this year. We are very committed in making sure that all details at the mines and all these measures that we take are being follow up very closely. So we are confident that we might also have this under control for 2024.

Thank you. And can you comment on free cash flow expectations as well?

Well, free cash flow expectations will depend on prices. I would say that this year compared to last year, last year we had two effects on cash flow. The first one there was zinc prices, especially because zinc prices went down heavily on the second quarter. And the second one is that the ramp up of Aripuanã was delayed. And this cost us a lot of money. We’re spending Aripuanã around $200 million last year. And if you see that, and if you see the cash flow generation that we had in the third last quarter, that was positive. It was something that we feel proud of. In 2024, as we said, well, prices remain low, but Aripuanã is in the right track to be online play capacity in the second quarter. So the idea is that if prices go up a little bit, we expect that that is the case. We are in the bottom of the price cycle. We might generate some cash flow in 2024. Having said that, this cash flow for us is a priority because we have to start reducing our debt, debt went up. We are aware of the leverage we have. And then, debt went up because of Aripuanã mainly. So now that Aripuanã is being completed and is going to start generating cash flow, and with a combination of cash flow for the other mines, we believe that with some help on prices, the company is really in a good position to generate cash.

And just to confirm, Aripuanã breakeven is expected in the first semester or the second one?

Yes. No, to give you some numbers, we are now producing at a rate of 220 hours per ton a day – sorry, an hour. And the nameplate capacity is 280. And we are very close on that. February and January have been good months. Recoveries are high in the three metals. Quality of concentrate is also stable and good. So second quarter, we see achieving nameplate capacity. We are very close on that. So we are confident that in the second quarter, we will be able to achieve that target.

I mean, breakeven.

Yes, breakeven. Yes, a consequence of nameplate capacity – we are working on controlling our costs. So a consequence of nameplate capacity is going to be breakeven as well. So second quarter should – we should achieve breakeven on cash flow, yes.

Okay. Thank you very much. And thank you for the presentation.

Thank you.

[Operator Instructions] There are no more questions in the question queue. I’ll hand it back to Rodrigo for any webcast questions they may have.

Hey, thank you, operator. Good morning, everyone. We’re going to start with a question from Omar Avellaneda from Prima AFP. The first question is regarding, is the $300 million your annual sustaining CapEx?

Yes. No. Yes. $300 million is the CapEx that we have ongoing. Our sustaining CapEx more or less is $230 million or $240 million, and the rest is additional CapEx that we spend on explorations and other areas.

And the second question, also from Omar is, what is the CapEx for Pasco integration project? And when do you expect to approve the project?

Yes, it’s a good question. We have been talking about integration during the last year. We expect that CapEx – and we are still fine-tuning; that’s why we haven’t approved the project yet – to be around $150 million to $200 million. This comprises a new piping system that goes from El Porvenir to Atacocha tailing dam; a mine development between the two underground mines in Atacocha and El Porvenir; some upgrade of the shaft and some other developments, especially in Atacocha. So we are finalizing the studies here, and we expect to approve this project in the coming months. The idea is that we have – we work on – we finish all these studies, we have more certainty on the investments. So we might approve this probably in the second quarter or towards the middle of the year. So we can communicate to the market what will happen in this very important project.

We have another question from Hernán Kisluk from MetLife. If Aripuanã reaches full capacity in the second quarter 2024, why does the guidance show increased production over the next few years?

Yes. This is because the first quarter, production was not on 100%. And in the second quarter, as we achieved nameplate capacity, we are also not on 100%. So I would say that if you extrapolate the second half of this year, through the other years, you will achieve the number that we are showing for 2025 and 2026.

We have another question from Joslyn Jensen. When do you expect to start the leveraging?

As I was saying, we expect delivering this year. As I said, this is a priority cash flow. We are in good shape in terms of what we can control in our mines and smelters. We are working very hard on production cost and CapEx, but we are exposed to prices, zinc prices did not began the year in a very good pace. So hopefully – and we are confident that they will recover in the following quarter. So with the cash flow that we will start generating, the idea is we start delivering the company.

We have a question from Rodrigo Murrieta from AFP Integra. Are you evaluating measures to decrease cost of per tonne of raw mat Cerro Lindo going forward?

Yes, Cerro Lindo is a challenge. Cerro Lindo is a big underground mine, probably is one of the largest underground mines in general. Yes, and the cost per tonne of raw mat is $40. And we have to give you an idea in Cerro Lindo as mine development, we have to develop 35 kilometers per year. So – and we have pressures on a given that the mine is extending, we have pressures on all of this. So we have been managing in the last two years to keep these $40 flat. And this has been a challenge. And as I was saying, we have some consolidation of contractors. We have some measures on productivity, reducing of people. We have some measures reducing costs. We have been optimizing our short grid. That is a support of the mine and many, many other measures. So for us to keep the cost of raw mat – cost per tonne below $40 is a challenge. But we believe that we can achieve that during 2024. 2025 we’ll see, but with the measures we take, the idea is that we keep our cost below $40.

We have another question. What is the expected CapEx that you are considering for the integration project in Pasco?

Yes. As I said before, between 150 to 200, I already explained what are the components of that. We are still assessing how are we going to finance that? This CapEx is going to be invested in three years. So part of the cash flow generation of Cerro Pasco is going to be allocated to this. And the rest we are assessing, it might be some debt or some other cash flow that we might have from other operations. But still we will communicate that once we go forward.

Okay. We have another question for Hernán. Can you comment on the alternatives for the Morro Agudo asset?

Yes. The Morro Agudo asset is a marginal asset for us. It’s a very small asset. And this is not transformational, has a low life of mine, so I cannot comment on specific actions. But what I can tell is that we are assessing in detail what are our options in Morro Agudo. We have provide a guidance for production for 2024, but not for 2025 and 2026, because as I said, this is a marginal asset and we are assessing the options. As soon as we have some clarity on that, we will come back to the market and communicate what are the next steps on this asset.

There are no more questions in the queue. This concludes our question-and-answer session. We will now hand the call over to Ignacio his final remarks. Mr. Rosado. please go ahead

Thank you. Thank you everyone for attending. This has been – 2023 has been a very challenging year. As I was saying, Aripuanã, the delay on Aripuanã, a consumer a lot of cash flow. Prices have not been there. As I said, we believe that we are in the bottom of the cycle and we are confident that this year is going to be better. The evolution of Aripuanã and all the measures that we have taken will help us generating cash flow for this year. We are committed to that. We are committed on our cash discipline and making sure that Aripuanã is up and running. We are hoping that we approve soon the integration project of Cerro Pasco. This is important for the company because it will unlock a lot of value, more life of mine, for sure, because of all these resources that are in the underground part, but also more profitability, given the economies of the scale of the two assets. So we are committed to that. We are committed to all these measures, and we thank you for the time and we look forward to speak to you at the end of April with our first quarter results. Thank you very much and have a good day.

Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.