Q3 2022 Nexa Resources SA Earnings Call
Good morning, and welcome to next of resources third quarter 2022 conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
This event is being recorded and is also being broadcast via webcast and maybe accessed through Nexus Investor Relations Web site, where the presentation is also available.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad to.
To withdraw your question. Please press Star then two.
Remember that the participants of the webcast will be able to register via website questions. So.
Simply type your question in the box and click send and that will be answered soon.
I would now like to turn the conference over to MS. Roberta Gorilla head of Investor Relations for opening remarks. Please go ahead.
Good day, and good afternoon, everyone and welcome to natural resources third quarter 2022 earnings conference call.
For joining us today.
During the call you'll be discussing the company's performance is pretty earnings release that we issued yesterday.
We encourage you to follow along with the designs coding presentation through the webcast.
Before we begin I'd like to draw your attention to slide number two as you will be making forward looking statements about our business and we just ask that you refer to disclaimer and the conditions surrounding those statements.
Now my pleasure to introduce our speakers joining us should be easy Nashville, who's idle hours to you what's that Carlos that Bali our CFO .
They would not do Quito, our senior Vice president of mining.
So now I would turn the call over to Ignacio for his comments Inacio. Please go ahead.
Thank you Rohit and thanks to everyone for joining us this morning.
Please let's move now to slide number three where we will begin our presentation.
Let me begin by saying that overall, we experienced a challenging third quarter.
Robert a deterioration of growth prospects, coupled with rising inflation HUD resulted in tightening monetary policy driving expectations of a global recession.
The uncertainty of the macroeconomics affected the perspective of our industry.
Well as increased commodity prices volatility.
Which contributed to a significant pressure on base metal prices since that mid second quarter of this year.
Despite all these holidays, we are delivering on production costs and Capex in line with our guidance.
We believe the fundamental value of zinc will continued to be strong given low physical inventory levels on a lower supply of metal in the smelters in Europe .
Nonetheless, we are taking appropriate actions to maintain a healthy balance sheet through the execution of our cost reduction programs capex optimization and improved cash flow generation of study.
Adjusted EBITDA decreased to $103 million in the third quarter of this year, mainly affected by the decrease in metal prices wholesale about you our new CFO will discuss all the all the effects influencing these numbers during his presentation.
As part of our measures we have also been working on reducing our corporate overhead.
During July we implemented actions to reduce our head count on corporate corporate costs that will generate annual savings in the range of $25 million to $30 million.
You know what you pointed out we are focused on optimizing process blended stability in recoveries, while steadily increasing the planned throughput rate.
The first batch of sync corporate unlit was successfully produce in the quarter.
We are on track to achieve commercial production by December .
Additionally, in light of our successful exploration program, we are expecting for a potential addition of new resources by the end of the year.
Before going into details in the next two slides I would like to emphasize our strong balance sheet with a solid cash position almost $850 million and a net debt to EBITDA ratio of one five times.
Now moving to slide number four.
In the slide number four regarding the operating performance of the mining segment.
You can see that's in production in the third quarter decreased to 76000 tons because of the lower average grade in settling.
This decrease was according to the mining plan for these periods.
I'd say rolling though we also hired a scheduled maintenance at the plant to increase the reliability of theaters unfiltered secrets, which reduce treated ore volume compared to the second quarter of this year.
Following this lowered treated or corporate productions in the third quarter also decreased by 5% year over year.
Late on the other Hon increased to 15000 tonnes as we access higher average grade areas in this quarter ancillary production remained relatively flat at $2 6 million ounces.
For the fourth quarter, we expect zinc and copper production to increase compared to the third quarter. While total laid on funeral production should be slightly lower.
We want to emphasize that we are on track to achieve from the mid to the upper range of our production guidance for all metals for all year 2022.
Now moving to the next slide.
And in slide number five run of mine mining cost in the third quarter was $43 per ton compared to $41 per ton in the third quarter of last year.
Reflecting inflationary pressures on cost.
Compared to the second quarter of this year run of mine mining cash cost was relatively flat.
Mining cash cost in this quarter increased to 57 cents per pound compared with 22 cents per pound in the third quarter of last year and 16 cents per pound in the second quarter of this year in.
In both cases, the main drivers were the decrease in byproduct credits and lower zinc volume.
Cash cost guidance for 2022 is expected to be close to our annual guidance.
Now moving to the smelting segment in slide number six.
In slide number six regarding the operating performance of the smelting segment in the third quarter metal sales totaled 162000 tons up 4% year over year and up 7% quarter over quarter.
Following higher production volumes and improvement in lead times compared to previous periods.
In both Peru, and Brazil production increase due to the better performance on production is diabetes.
For the upcoming quarter smelter production is expected to remain stable compared to a third quarter of this year.
Sales are expected to follow the same positive trends.
Our smelting cash cost in the third quarter increased to $1.36 per pound compared to the same period of last year, mainly driven by higher <unk> prices.
Compared to the second quarter of this year, however, cash cost decreased by 6% due to lower operating costs are higher volumes.
Conversion cost in this third quarter was 26 cents per pound compared to the 20 cents per pound a year ago.
And this was mainly driven by higher energy prices.
Compared to the second quarter of this year conversion costs decreased by 10%, mainly driven by lower variable costs.
Now moving to slide number seven.
I will now give an update on the redesign program, we recently implemented.
We have revised our organizational structure on our internal process to operate more efficiently.
We made drastic changes in corporate head count and corporate overhead expenses, and we expect to generate annual savings in the range of $25 million to $30 million.
These actions not only look to optimize overhead, but also to improve organizational efficiency to focus more on supporting our operations and make more agile decisions.
Now moving to slide number eight where we will discuss progress around our D point out.
Ramp up like do you see any point out mine are progressing.
And we are focusing on a steadily increasing the planned throughput rates on the asset reliability.
The meeting utilization was expected to be between 30% to 40% in the third quarter and reached 32% at the end of the quad.
We expect to be between <unk>, 70% at the end of this year.
We believe we are on track to commence commercial production in December .
At the end of September there were approximately 646000 tonnes of ore available in stockpiles, which is enough to cover five months of the estimated ramp up period.
Furthermore, the mine is already fully operational and underground mining activities are focused on developing and preparing new areas and increasing mineral reserves with our infield drilling campaigns.
In the third quarter, we invested $9 million in antibody now totaling $63 million in Capex. The first nine months of this year, which includes a negative impact of the Brazilian real appreciation against the U S dollar of $5 $4 million.
The cumulative capex of the project seems that beginning of construction is 629 million.
And there is still minor investments to be made in these four quarter around $5 million.
As a result of additional contract expenses.
Now moving to the next slide where I will give you an update on what any partners exploration program.
And as you point out over 12000 meters of infill drilling were completed at an bricks umbrella true exploration targets.
The infill drilling campaign in <unk> for 2022 has been completed in the third quarter.
And the drilling rigs were moved to Bala, who exploratory campaign in order to be completed during the fourth quarter.
The latest read hauls ritual did indicated that the mineralization has been called freedom.
Which should support the conversion of inferred to indicated mineral resources.
For the fourth quarter, the drilling campaign will focus on the exploratory program over there by bus route target for resource definition on resource expansion at our northwest exchange.
In light of our successful exploration program, we're expecting four potential addition of new resources by the end of this year.
Now I would like to turn over the call to Jorge Carlos who will present, our financial results.
Sir Please go ahead.
Thank you Ignacio good morning, and good afternoon to everyone I will continue on slide 10.
Although our operations performed as expected in terms of production and costs financial results were affected by the decrease in Ele me base metal prices over the last few months.
As you can see beginning with the chart on your upper lift total consolidated net revenues for the third quarter increased by 7% year over year due to higher average zinc price metal sales and lead volumes, however, compared to second quarter of 2022 net revenues decreased by 50% as a result of the lower LNG prices I meant.
A moment ago.
Net revenues were also negatively impacted by the Remeasurement adjustment in the silver streaming agreement, we have for our Cerro Lindo mining unit registering a noncash reduction of $11 million.
The first nine months of this year consolidated net revenues reached $2 2 billion versus $1 9 billion in the same period last year, an increase of 16%.
In terms of EBIT that during last quarter consolidated adjusted EBITDA decreased to 103 million.
However for the first nine months of this year consolidated adjusted EBITDA increased by 5% to 598 million. It is important to highlight that this amount includes pre operational expenses of $44 million related to I D point now.
We now move to slide 11, where I will explain in further detail.
Yeah.
Adjusted EBITDA in the third quarter of 2022 was 103 million, 64% lower than in the previous quarter. This performance is mainly explained by.
$106 million related to lower alumina prices and also to changes in market prices that result in mark to market adjustments.
Second the net negative hedge effect of $18 million, which is mainly due to hedge mark to market adjustments.
Result from lower oil prices in the second quarter of 2022.
Accounting rules resulted these adjustments being recognized in the company's P&L in advance of the physical sale of finished products.
And third lower byproduct contributions due to the already mentioned decreasing prices and volumes.
Moving to the next slide.
I'm now on slide number 12.
In the mining segment, the third quarter of 2022, net revenues totaled $241 million down 13% versus the same period of last year. This.
This is explained mainly by lower seek in copper volumes. In addition to the decrease in average <unk> prices and copper and that was partially offset by higher seed prices.
So in the first nine months of this year net revenue for the mining segment totaled $933 million.
Bear to the 842 million in the first nine months of 2021.
This is mainly due to higher metal prices had led bodies.
Regarding EBITDA on your upper right third quarter adjusted EBITDA for the mining segment was 45 million a reduction of 51% year over year, mainly explained by lower prices of volumes higher Tcs and a negative variation of 11 million related to pre operating expenses and Eddy border compared to the second quarter adjust.
EBITDA decreased by 69%, mainly driven by lower prices and volumes, which were partially offset by a decrease in other variable costs and mineral exploration expenses.
Finally, adjusted EBITDA for the mining segment in the nine months ended in 20 in September of 2022 was $318 million compared to 331 million last year, mainly due to a point now pure operating expenses of $44 million incurred this year.
So he came over to the smelting segment net revenues in the third quarter totaled 616 million, an increase of 18% versus the third quarter of 2021 supported by higher it would be prices and volumes compared to second quarter of 2022 net revenues decreased 9%, mainly due to lower price.
For the first nine months of this year.
For the smelting segment totaled $1 8 billion compared to $1 5 billion in the same period of last year, mainly due to higher metal prices.
When we look at adjusted EBITDA for the third quarter of 2022, we see that smelting segment reported 59 million down 9% for the third quarter of 2021 mainly explained by the negative price effect of $15 million related to higher zinc prices and positive changes in metal prices that resulted in mark to market.
Adjustments and increase in operating costs and the negative variation of 8 million related to the recognition of energy recovery costs that benefited the third quarter of 2021. This was partially offset by higher byproduct contribution.
Compared to the second quarter adjusted EBITDA for the smelting segment decreased by 58% mainly explained by the net negative hedge effect of 18 million that I mentioned earlier and also by lower prices.
Finally, the smelting segment's adjusted EBITDA for the nine months ended September 2022 totaled 282 million compared to 241 million a year ago.
I'm moving to slide 13 to discuss our investments.
On the top left of the slide we can see that in the third quarter, we invested $85 million in Capex of which 9 million are directly associated with the construction of 80 point now.
In the first nine months of this year Capex totaled 265 million of which 63 million was related to what you buy Nashville you.
During this period, we also invested 186 million in sustaining and HSE, including 28 million of hardship right now.
So it is important to make sure that the Brazilian real appreciation against the adult the U S. Dollar had a negative impact of $40 million in the first nine months of this year.
Based on these results and our projections for the year. We believe we will achieve 2022 capex guidance of $385 million.
With regards to mineral exploration and project evaluation, we invested a total of $34 million in the third quarter for a total of $64 million in the first nine months of the year.
I would like to emphasize that as part of our long term strategy. We are focusing our airports are replacing and increasing mineral reserves and resources supporting our organic growth.
Also important to mention that we're maintaining guidance on these expected to finish 2022 at about $82 million.
Now, let's move onto the next slide in which I will discuss our cash flow generation in the first nine months of the year.
I am now on slide 14.
So for the first nine months of 2022, and starting from the $641 million of adjusted EBITDA without <unk> expenses and investments we can see that cash flow provided by operations before working capital changes was 605 million we.
We then had $194 million related to interest paid in taxes, and a $157 million invested in sustaining capex.
We also paid dividends of $62 million, including the amount distributed by our subsidiary Polaris. Additionally, we invested $22 million in non sustaining capex regarding that you pointed out we invested approximately 200 million in the first nine months of the year equally capex pre operating expenses and working capital is.
It is important to mention that we had a negative net effect of $69 million due to the early redemption of our 2023 notes.
Partially offset by a new extra credit facility also foreign exchange effects on cash and cash equivalents was positive $12 million.
Finally, there was a working capital variation of 133 million, mainly due to higher prices when inventories and lower outstanding amounts of accounts payable with all the effects presented in this slide free cash flow was negative in $226 million. During the first nine months of 2022, we expect to reverse most of the increases in inventory.
During the coming months.
Now moving to slide 15.
In this slide you can see that our liquidity remains strong and we continue to report a healthy balance sheet with an extended debt profile.
By the end of the third quarter. Our current available liquidity was approximately 838 million, including our undrawn revolving credit facility of $300 million.
It is important to mention that a soft September 30th the average maturity of our total debt was four nine years with a five 7% average cost of debt.
Finally, our leverage measured by net debt to adjusted EBITDA ratio was one five times compared to one three times at the end of the second quarter and one two times a year ago.
With that I.
I'd like to turn over the call back to Ignacio for his final remarks. Thank you. Thank you Jose.
I am known as slide 17.
We recently announced our new targets on long term commitments on our U S strategy.
Which includes commitments across areas, such as water usage and disposal.
Safety on workplace and a reduction of Cotwo equivalent emissions in line with our sustainable development goals of the United Nations.
The issue on topics, such as waste dumps management local development decommissioning and human rights are also included in excess EOG is Friday.
Here, you can see our <unk> structure.
The structure.
Marine climate change natural capital health safety, and wellbeing and plurality with targets to be achieved by 2013 2040 in 2015.
Our determination to be SaaS based upon the strictest International standards is in line with our principles to operate with transparency and ethics, while creating a positive impact on the environment.
We also want to emphasize that we launch our new purpose.
Mining that changes with the work.
Which will guide all our initiatives for more information about our targets on commitments. Please visit our new ESG page under the institutional web site.
Now turning to our last slide.
I would like to close this presentation by briefly reinforcing our priorities not only for the rest of 2022.
For the next year.
As you point out is our first Greenfield project and we are very proud to have completed this project in a very challenging global environment.
As I mentioned earlier, we are in the ramp up stage and we should achieve commercial production in the coming months.
Our exploration is study is focused on increasing mineral resources to rapidly extend the life of the mine.
Despite a complex macro outlook, our focus on cost control efficiency and cash flow generation is aimed to allow us to achieve a healthy balance sheet as we remain confident that the long term dynamics of our industry are promising as fundamental value for zinc unaudited base metals is strong.
<unk>.
Looking for what we will continue to invest in our business for the long term.
We generated cash flow, while increasing the life of the mind of our assets and to be focused on our people our communities on our sustainability agenda.
Thank you all for attending this presentation with that we will be happy to take your questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
You also may send questions via chat on the webcast platform.
At this time, we will pause momentarily to assemble our roster.
Sure.
From your way could you. Please provide more color about the fourth quarter, what's your expectation in terms of reduced pricing and demand.
Yes.
I guess I guess first of all I would like to mention that.
Our third quarter in terms of the well.
Election, Gosling topics, we have been able to manage the business.
And if you see our EBITDA.
<unk> has a nice expectations Hasan logo.
Financial changes that we have been explaining in the in this report and the presentation, but I would like to emphasize that has been influenced by $11 million of.
<unk>.
Silver stream.
Date on our moment this is a non cash.
The market doesn't have that we have $15 million in any corner every month now that we are in the ramp up period in pre operation.
We also have the <unk>.
He brings over $18 million of the volatility of hedge that we have to.
Updates in the Mark to market every month and every quarter.
And also in the smelter we have a difference in the <unk>.
Our volume price from our minds on selling our concentrate given that as you know.
We don't hedge our hour.
Production from the mines so <unk>.
Based on that.
We have like between $60 million to $70 million in the third quarter, but have influence.
The the EBITDA so.
It should be higher on that.
Amounts in the third quarter, given that our operations have been.
On drug in.
In the fourth quarter, we don't see any of our old ratios.
Therefore in a different way.
We see that we will achieve the budget and the guidance to the market.
That's going to be the case.
In the case of prizes.
We don't know what could happen in prices.
Market is is now comprises is still we believe that definitely momentum youre seeing in the short term should be strong in terms of.
<unk>.
We don't have we have lower inventories of three.
<unk> mill in Uruguay would Andrew Lim courthouse.
The stope, which are 700000 boes.
So and we see that on the disease and we see that on the premium.
So we believe there is there is a mental batesville I would think that that will support the fourth quarter, but you never know so from a company point of view we are on track.
To achieve the guidance as we said on production costs on Capex and we expect it.
Some recoveries on the brands of <unk>. So.
I'd say that intangible of the year the whole year, we ask Nick.
Snakes are real achieved Illinois law variables are we going forward.
The next question comes from Lawson Winder of Bank of America. Please go ahead.
Okay.
Lawson Your line is open did you mute on your end.
Oh, I apologize Hello, I am here good morning, Ignacio Thank you for the update and.
My comments today I wanted to ask about.
The language around full operation in Q2 'twenty three so in Q2, there were some pretty clear language that you expected or upon yet to be full.
Fully operational at some point in Q2, 2003, and I Couldnt find that language in today's release.
I'd like to get your thoughts on the implications of that please thank you.
No Brian .
Where do we sit on the Maisons within wealth.
The words.
We finished our commissioning and with the ramp up period, and we said that on the fourth quarter we were.
A commercial production and we thought that.
The ramp up period was going to last.
Between six to eight months, okay. So that is still decades.
Bob.
You know in the ramp up period.
Youll face some bottlenecks that sometimes you don't know because you are in the process of ramping up the plants.
This was lucky so at the end of September we were supposed to be between 30% to 40%.
On our capacity.
On the plant and it was 32% it was in the lower range.
But we have been.
Working on all of these bottlenecks.
<unk> on the pump.
Equipment.
Oh, there are variables in the in the mind that have been affecting us more.
Hey, guys. It's top of mind from a decline from from time to time, but this is something that we are not facing favorable. So we are still aiming to hop through startup.
Commercial production engine that is the case if I were to tell you is we might be like I don't know 15 days to a month behind.
<unk> is ramping up and we are.
We are ready to but we are willing to declare commercial production.
Okay. That's fantastic color and then also.
So is achieving nameplate capacity in Q and Q2 of 'twenty three still.
Achievable.
Yes, yes, no that's for sure I guess, we said also in the in the.
In the press release that towards the end of this year, we should be at 70% now the way we.
We define commercial production needs at least 60% of the plants.
On a on a four week period has to be as stable.
<unk>.
The mid.
Ocean freight that goes the quality of the concentrate that goes to the smelters hostile vehicle merger. So that's the way we define that is starting in December so towards the end of December is going to be at 70%.
I would say.
The industrial in the first three months.
Over the year should be close.
<unk> to 90%.
On a yes, we will be at the end of Laguardia are beginning.
For the second quarter, 100% of.
Fantastic. Thank you for clarifying all that.
I wanted to ask about the stream effect and the new mine plan. So we haven't seen the documentation around the new mine plan, but.
Is the implication of the stream effect that the negative impact of the stream is increased or reduced under the new mine plan.
No.
This is this is Bob.
Sure.
For the company.
The the stream is good news, but also for US because you know minus stable and given that mindset will you add more reserves and resources on when you update the plan you have to give up $11 million more based on <unk> and <unk>.
Yeah.
So that.
Yes on your part, but that said you will have also the seeing the copper and the lead that comes with that.
With guns with the extension of the life of the mine also earlier. So this is mainly the case.
Okay. That's very clear. Thank you and then just one final question.
Relating to Cerro Pasco and the Capex around that.
At the Investor day.
You talked about.
Investing $150 million in Cerro Pasco over the next few years when do you expect that.
To start and how much of that could end up in 2023.
Yeah.
We are still assessing that and as I was saying we have some a.
Okay.
Operator, and shops opened we need we have.
An expansion on the smallest bunch of the plans and people who need we have to build a pumping system tailings pumping system from input really throughout the quarter and we have to develop the coach on Israel.
The main objective of this of this bottleneck is that two to access resources from beyond the Rossville, Georgia useful of these infrastructure that.
Two grade more.
<unk> opportunities and produce more upgrade more cash flow. So we are working on that yeah.
We are presenting this to our board.
December <unk>.
The budget season, so we will get back to you before the year end with investments that will come next year, but this is a four year investment period.
So it will be clear for you at the beginning of next year.
How much of reinvesting in these projects going forward.
Okay I look forward to that thank you very much.
Thank you. Thank you.
The next question comes from Carlos de Alba of Morgan Stanley . Please go ahead.
Great. Thank you good morning, everyone.
If I may ask a few just on the first one is just going through the release there is a couple of things.
We're struggling to reconcile first on our viewpoint on the.
Capex guidance for the year.
Sanctioned projects is 59 million, however year to year to September the nine in the first nine months. According to the table in the release you have already spent $63 million. So I'm wondering if you can help us understand.
But if you're going to have negative capex in Uruguay in the fourth quarter or why do you say, what's taking place there.
The second and the second point, where we're struggling to.
Reconcile is in the reconciliation of realized prices for the smelting business or for metal.
The realized price was $1 one dollar per pound.
There was no price adjustments and you say, what's your close to zero zero in that table and that seems a little below based on on the price.
The price average that we have seen in the in the second quarter and in the third quarter.
Please help us understand and that would also be a quite interesting and then finally.
Regarding cost for the mining sector.
The guidance I think the guidance for the year has remained unchanged. However, when we looked at the cash.
Cash cost for the first.
The first nine months was 31.
Dollars per pound net of byproduct the guidance for the year continues to be 28 cents, but.
But in the third quarter, Yeah. It was it.
It was significantly higher than that so.
If you could help us understand.
What is going to drive.
What seems to be a very dramatic implied decrease in cash cost for the mining division. So that you can meet the guidance.
Sure.
Thank you for the questions Carlos Carlos.
I will start with the cost.
The the third quarter.
On the on that.
Q1 cash costs has been influenced by a general in Maine.
So Cerro Lindo as I was explaining.
Lower throughput.
We have lower zinc grade as well because of the of the mine plan and these lowered throughput this lower.
Fine great.
Great and also lower copper grade because we'll be.
The area mined than we were mining.
We will give you.
A higher cost per ton because of the lower throughput and we'll give you.
LOE by broad in terms of the corporate which is very significant so that picked at Cerro lindo that affected.
Awesome average rents for color in mind.
In the fourth quarter, Cerro Lindo is recovering.
The throughput on these luxury Korean debt rates.
Cerro Lindo.
And the cost per ton.
As well so several lingo is going back to what we have in our budget. So that's why we are confident that this is a.
We're going to be in the range of what we give in.
As a guidelines with the market.
The rest of the mines have been performing.
Very well so all the all our cost per tonne, which is which are the ones that we control in the mines.
Towards the end of the year are in line with budget and in line with what we have.
<unk> into the market.
And if prices do not change that.
W approach contribution should should be also is something that won't affect the Q1 cash flow. So that's why we are.
<unk>.
Informing the market that we will be in <unk>.
With the what we have right. So that's those are finished with I don't know if that's clear.
Yes, thanks for asking that yeah.
Yes that was clear.
So the delta from the third quarter cash cost of 57 cents in the third quarter.
To get to the guidance of $29 for the year is basically driven by Cerro Lindo.
Okay Alright.
Alright.
Okay.
Yes. The first question regarding any point on yeah.
You know we spend we spend a the capex that we're spending that Ebola it seems like <unk> is in Brazil in local currency.
There is an FX impact.
Part of <unk> was $5 $4 million.
Two closed up room, okay. So thus thus why do you who wins the the the difference that you have been mentioning but.
But having said that yeah, you know that in the Indiana Commission in periods before the ramp up.
We have some.
Travel in the thickener.
In the scene in the corporate <unk>, Yes, we were commissioning goes and we've had some trouble and we need to extend the contractors and we need to to bring.
The equipment providers and we needed to have more fixed costs.
Thanks.
Yes.
Settling those both owned brands it could be around $45 million more so that's more or less where the capex. One is right now.
And this is something that happened.
Happen in June and we are a XIAFLEX I mean, it's something that we cannot manage but.
The commission in bonds and finding these in particular is something that we have been happening in June and July so were communicated out to the market.
So starting with <unk>.
I'm not sure that I understood that.
The issues with the with <unk>.
<unk> and other parts of the equipment are increasing capex by around $4 million for time spent in <unk> in 2022.
But that is more than offset by the currency effect in the fourth quarter that will therefore basically imply.
A reduction in Capex in the fourth quarter in dollar terms.
Not necessarily because we don't know what that FX is going to be.
So what I'm trying to say is that from the number we provided in June is.
This $5 million more because of FX.
From the number that we will grow each quarter is $4 million more because of more expenses related to our theaters.
FX effect I don't know what's going to be.
Understood.
What is the ethics that is implicit in.
In your guidance of 50 an hour.
Sure.
<unk> was 555.
The reais per dollar and today is.
Is it varies very much used by one or two depending on the week and depending on the show is like I don't know is like 2% or 3% less and that influence and in the third quarter that the FX was in the budget.
<unk> is that we provide to the market with the budget. It was about five five and we ended up with pipe. So it was a 200 <unk>.
So.
So while we don't know what's going to be the ethics.
Mainly the.
I guess the assumption.
Yeah, Okay. So from a from a smelting point of view I.
I guess, what really influences melting and this is something that we have been we as a company.
They have been.
The policy on the company was that all the wholesale rates from D. A.
But it's not our minds where hedge yeah.
On the constant rates for all months were unhedged so.
If we if you if prices have variances.
I'll translate that price to the mine is it spotty.
The mines are exposed to that all the mines in the world.
Yeah, because we were looking at that at the business. It was in the range. We integrated okay. So this sharp decrease in price really effective this month.
Let's say.
You paid a big.
A good price.
The concentrate to our own minds yeah.
And you saw that goes but that metal.
At a lower price so that.
As a created a difference on the on the realized price that.
You are projecting on does that.
What explains that difference.
Yeah going forward and we are discussing this very closely with the board.
Google we have is that.
The business businesses have to be independent.
So demand will follow the quotation periods of the market as always and dismissed the hospital follow 100% of niche in the in the in the mid in the concentrate they buy.
In the meantime, we sell.
We are aiming to create natural hedge in terms of.
A a much older positions that we buy with some of our positions that we sell and this is a process and we are starting to move in this world.
But so it means that when you buy a concentrate from your own mines during do it.
With a T plus two or three depots for.
The acquisition of <unk>, you'll do it on a spot basis, and therefore, you pay them a high zinc price.
Better price in the concentrate that you bought.
And I'd say.
In.
During the second quarter or early to acquire that you treated during the third quarter and you pay higher zinc prices to your own minds, because you paid close to spot or a spot and then when do you solve that concentrating in the smelting business.
You saw that at a lower revenue at a lower price.
Yes, Doug.
The company in the third quarter and it was significant because the trend of the surprise was.
Yes.
EMEA.
So that was the case in the third quarter and that was only for the mines the concentrate that you're mining Dubai from your own mines.
The risk there is didn't happen because.
We were hedging 100% of the metal.
The content that we buy that much that the meta let yourself.
Now in the table in the table that you provided in your release.
Do you have coverage period sales, one one and you have price adjustments and basically zero. So wouldn't that impact that you mentioned that you referred to.
Have to flow through that price adjustment line in Europe cancellation table.
Yes.
To be honest.
I will hub.
I can get back to you, but what I can tell you that the.
The.
The mechanism I've been explaining what is what really why.
Our effective.
In the third quarter in terms of E.
The adjustment on prices always matters.
Okay. Thank you very much.
Okay.
We have some questions here from the web.
So one theory.
Okay.
We're also launching it looks good.
Could acquire a new mine in Latam.
We want to know what were expecting that well.
Well go to acquire.
Excellent good effect.
<unk>.
Thank you Neil.
Uh huh.
Hi, Chris.
Yeah, No I guess.
As I was saying in the final remarks of this presentation. We are now focused on finishing that you point out <unk> is a very good mine.
We are I mean, we are in the ramping up period.
Next year, we need to consolidate our Newport Nashville, that's very important for us on this our priorities in parallel on that we are always active in the market looking for some.
Mines or a no.
In the <unk>.
Brownfield advanced royalty producing mines I would say that are similar to the ones that we have several lean ROA or.
Or are you for now and we are active on that okay, but that doesn't mean that we're going to.
Execute sometimes section.
In the next few months because of leap one IC is a priority for us, but we are active with us.
Regarding the capital allocation the way we see it is that dividends is something that we will always be.
And on the and apologies there and we have been paying dividends in the last four or five years in that policy.
The way, we will finance our our these new growth is going to be between our cash flow on somewhat some debt. We have the capacity of that and I think the cash flow that will come in the next 234 years is going to help us that with the debt.
To finance these new York residual going forward.
But.
For today I think one is is what we need to be focused on right.
Right now.
The next question comes from <unk>.
We expect will be de levering fourth quarter to be similar to third quarter.
Expected dividend.
Yes, we can hear netherlander expectations for year end.
'twenty three.
Yes, I guess I guess the.
We're closing the year, what I can say is that the.
I don't know whats going to be the EBITDA, because we don't know where the prices are going but we are providing guidance on production costs. So that is something that we control and we can we can I can I can make sure that this is going to be the case towards the end of the year, depending on prices we will have.
EBITDA.
For the for the for the rest of the quarter. So I cannot provide any information.
Regarding 2023, we're putting together the budget, we are being conservative when prices because.
Even if we believe that.
The same could be as strong in the short term.
These royalties is going through a lot of noise on different factors on volatility and we don't know where the price of zinc copper and lead and silver is going to be so we're cautious on that and we're trying to make sure that our operations with a low price.
Therefore.
That is something that we're going through that right now we will present to our board in December and we will provide the market our outlook for 2023 at the end of December or in China. So that's mainly what I can say.
In these west.
The next question comes her Orlando Bahia from credit Corp.
So at which net net.
Ratio when do you start to feel uncomfortable. In addition, we did slightly more conservative with cash usage, given the current rate levels recession and lower metal price.
Yes no.
We run scenarios, we have a very detailed strategic plan and.
And we have run scenarios on lira.
And I guess.
Between two five and three times leverage is the limit for us.
And the scenario that we have run our lower yes, but still we have to eco charities and central flavor. That's because you will know.
The fluctuations on prices.
In the cycles, Okay. So two five or three times is the limit.
From a from a as you were saying we have to be concerned about this we are we are working in.
With a tight budget, because we believe that 2023, who would reflect.
Barry.
Conservative price scenario and we are working on that so we are putting all the measures not only at our minds on our smelters, but our corporates and theyre on our initiatives to make sure that cash preservation and something that is very important.
So that is the case.
I said, we're going to prove that with our board in December and we will provide the market with more color in this at the end of December .
Okay.
We have one more question here from a sales call.
Glad to have some more color on your cost outlook for the next quarter. Thank you.
Yeah, very similar to what I said several into influenced the third quarter.
And in the fourth quarter, given the cost per tonne of our minds on the commercial cost of our smell.
That we control.
Believe that will be in line with what we control and the if prices do not change the the byproducts that influenced that C. One cash cost will be.
Very similar so that's why we are keeping our guidance on the fourth quarter.
So if prices goes down it might it might vary a little bit.
But I mean, it should be in the range of what we believe it could be and that's why we are provide.
Providing this guidance to the market.
Okay.
This concludes our question and answer session now we will hand over to Ignacio for final remarks. Mr. Rosado. Please go ahead.
Thank you and thank you everybody for attending the B our call in the Q&A session.
Can only say that we are very committed to growth.
Year from a production cost and Capex perspective in a very disciplined way and I can tell you that the company is ready and prepared to be committed to.
This equals to 2023.
And we will provide more color towards the end of January . So thank you very much for attending and we look forward to speaking to usual.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
[music].