Q3 2024 Nexa Resources SA Earnings Call
Good morning.
Speaker Change: And welcome to next I'd resources third quarter 2024 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing that Starkey followed by zero.
Speaker Change: This event is being recorded and is also being broadcast via webcast and may be accessed through next us Investor Relations Web site, where the presentation is also available.
Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May press star and one on your telephone keypad to withdraw your question. Please press Star then two.
Remember that the participants of the webcast will be able to register via website.
Speaker Change: Jim.
Speaker Change: 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 Mr. Rodrigo.
Rodrigo: And they're saying, though head of Investor Relations for opening remarks. Please go ahead. Good morning, everyone and welcome to extra resources third quarter 2024 earnings Conference call. Thank you for joining us today.
Rodrigo: During the call we will be discussing the company's performance that's pretty earnings release that we issued yesterday.
We encourage you to follow along with this brief presentation through the web.
Rodrigo: Before we begin I would like to draw your attention to slide number two where we'd be making forward looking statements about our business and we ask you to refer to the disclaimer and the completion hormones in those states.
Rodrigo: It is now my pleasure to introduce our speakers joining us today.
Speaker Change: Ignacio Rosado.
Our CFO Jose Carlos new value.
Speaker Change: Our senior Vice President of mining operations no not quite.
Speaker Change: So now I will turn the call over to Ignacio for his comments.
Speaker Change: Please go ahead.
Ignacio: Thank you Rodrigo and good morning to everyone and thanks for joining us today to go over our third quarter results for 'twenty to 'twenty four.
Ignacio: Let's move to slide number three where we will begin our presentation with the main highlights of the quarter.
We are pleased with our third quarter and year to date results.
Ignacio: We have delivered consistent operational performance on maintaining financial discipline.
Our commitment to cash flow generation in Asia has been a key driver supported by positive momentum in metal prices, especially zinc, which reinforces industry or chileans under strengthen market fundamentals.
With nine months behind US we are on track to meet our full year outlook.
Ignacio: Seeking metal oxide oxide made subs rose by 3% quarter over quarter supported.
Ignacio: By improved demand in our home markets.
Ignacio: In mining production zinc, what you read about the flip flop compared to last quarter, while it until were increased by 2% each driven by higher treated ore volumes and grades.
Ignacio: Well their production decreased by 4% due to lower grade areas in the period.
Ignacio: Our financial results were strong total consolidated net revenues for the third quarter reached $709 million up by 9% year over year, largely due to higher average let me prices.
Ignacio: Adjusted EBITDA was $183 million, 111% higher.
Ignacio: The 87 million reported in the same quarter last year with adjusted EBITDA margin of around 26% expanding by 12 basis points.
Ignacio: These Pittsburgh, they're four months was mainly driven by higher byproduct contribution higher zinc prices and lower mineral exploration and project evaluation expenses.
Ignacio: Our net leverage ratio improved to two two times down from 2.7 times in the second quarter of this year and three one times in the third quarter of last year.
Ignacio: Regarding 90 point on.
Ignacio: I would like to provide further details later, but here are some key points.
Ignacio: And are you in that eight at positive operating cash flow on marked its third consecutive quarter of EBITDA growth.
Ignacio: Treated ore volumes rose significantly due to improved plant performance and stability.
Ignacio: Notably, we reduce plant downtime and corrective maintenance boosting operational efficiency.
Ignacio: However seem production experienced a minor deep in the third quarter of this year compared to the second quarter, primarily due to lower grades and increases in talcott levels industrial stations here.
Ignacio: On the Cerro Pasco integration project I am pleased to share that the tailings pumping system.
Ignacio: He has stepped in phase one is currently undergoing the internal approval process I will provide more details India upcoming slides.
Ignacio: Additionally, as previously disclosed we announced the sale of the book that got got Greenfield project and that known operational Peruvian subsidiary.
Ignacio: It up on by the Covid or the old in there over that choppy might.
Ignacio: These sales are aligned with our portfolio optimization study prioritizing efficient capital allocation to high return assets.
Now, let's move to slide number four to discuss our operating performance.
Ignacio: Regarding the operating performance of the segment seeing production reached 83000 tons in the third quarter of this year down by 5% year over year.
Ignacio: This decline was primarily due to the absence of contributions from what Raul along with lower zinc other etch grades, particularly at my Sunday Honeywell Bahraini.
Ignacio: Compared to the second quarter of this year seeing production remain relatively stable supported by higher volumes from Basanti portway needs and not that much.
Ignacio: These was partially offset by the absence of contributions from Raul on the slightly lower volumes from several in the Aneth you point out.
In terms of cash costs in the third quarter of this year.
Ignacio: Cash cost decreased to one minus one cents per pound compared to 34 cents per pound in the third quarter of last year.
Ignacio: This decrease was mainly attributed to lower treatment charges on higher byproduct contribution in the period.
Ignacio: Compared to the second quarter of this year mining cash cost also decreased by four cents per pound driven by lower operating costs on a slightly higher zinc volumes.
The cash cost for the first nine months of the year Hotspur formed within our updated guidance range for the year.
It is worth mentioning that last week, we issued a press release.
Ignacio: Informing the market of the reduction in our cash cost guidance for 'twenty to 'twenty four.
Ignacio: Which reflects a 64% decrease from the previous guidance issued.
Ignacio: Last February.
Ignacio: You said Jasmine is supported by higher Ele me metal prices year to date performance increased byproduct contribution on the slightly lower D. CS.
Ignacio: Our cost per run of mine for the acquired there.
Ignacio: Was $46 per ton up 6% year over year.
Ignacio: Due to lower treated volumes, resulting from the cessation of mining operations at the more we will.
Ignacio: These were partially offset by lower operating costs related to third party services personnel on energy.
The cost per run of mine in the first nine months of the year performed within our unchanged guidance range for the year.
Ignacio: Now moving to slide number five.
Ignacio: Regarding the operating performance of the smelting segment metal sales totaled 153000 tons in the third quarter down 1% from the third quarter of last year.
Ignacio: Compared to the second quarter of this year metal sales increased by 3% driven by higher production volumes at how about Ikea and tourism ideas, along with constructive demand in our domestic market.
Ignacio: Consolidated the smelting cash cost in the quarter was $1.15 per pound up from $1.01 per pound in the third quarter of last year.
Ignacio: This increase is mainly attributed to higher raw material costs, resulting from increasing prices on lower disease.
Ignacio: As well as higher operating costs, which was partially offset by byproduct contribution.
Ignacio: When compared to the second quarter of this year cash cost decreased by 3% mainly explained by lower disease, which was partially offset by the impact of lower zinc prices on our concentrates board traces on increased byproduct contribution.
Ignacio: Our commercial gross was 32 cents per pound compared to the 29 cents per pound in the third quarter of last year, mainly due to higher operational costs related to maintenance expense.
This was partially offset by the positive impact of foreign exchange variations in the period.
Ignacio: Compared to the second quarter of these year commercial cost increased by 6% driven by higher body all on one off and you're costing around Inca, how 'bout, Ikea, which were partially offset by a decrease in maintenance expenses.
Ignacio: I want to highlight that both cash costs and conversion costs in the first nine months of that way of 'twenty 'twenty four there for them within our unchanged guidance range for the year.
Ignacio: Now moving to slide number six.
Ignacio: Well, we will start talking about our D point out.
Ignacio: The third quarter of 'twenty for Wassa annoyed important quarter for that you point out.
Ignacio: We achieved positive adjusted EBITDA for the third consecutive quarter and recorded our first full quarter of positive operating cash flow.
Ignacio: These improved financial performance was driven by our ongoing efforts to enhance operational efficiency.
Ignacio: Along side, our strong zinc price environments.
Ignacio: In terms of production as I mentioned in the official slide we noted a significant improvement in treated ore volumes by 12% in September compared to the second quarter of this year and I remark about 27% increase compared to the first quarter of this year.
Ignacio: However, the foremost of our tailings filters is currently limiting our capacity will exceed 90%.
Ignacio: Throughout the year, we have been actively working to enhance stay needs filter performance. However, due to operational limitations of the existing filters, we have decided to acquire them for filter, which is expected to be delivered in 2025.
Ignacio: These are these Sean will significantly boost our filter in performance and support further production increase.
We also made meaningful progress in reducing plant downtime, achieving our lowest level to date without the 33% decrease compared to the second quarter of this year of 40.
Ignacio: Compared to the first quarter of this year.
Ignacio: Moreover, we maintain a stable concentrate quality within commercial specifications.
Ignacio: It is important to note that during this quarter average recoveries foreseen garlett were impacted by lower average rates and increased stock levels in the flotation sandwich.
Ignacio: In terms of metal production, we experienced flat zinc output on increasing copper production and a decrease inlet.
Ignacio: Looking ahead, we anticipate further increases in three days or throughput rates higher metal recoveries and cost reductions all aimed at improving our shots.
Ignacio: Now moving to slide number seven where we will talk about the advancements of the Cerro Pasco integration project.
Ignacio: And this is like I would like to highlight our progress with a separate busquin integration project.
Ignacio: As discussed in our previous calls this project has the potential to unlock significant value for next.
Ignacio: In the third quarter of this year, we made important strides across various work fronts, including the start of the approval process for the tailings pumping system.
Ignacio: The execution involves the construction of a tailings treatment plant in El Porvenir and <unk>.
Six kilometer tailings pipeline connecting the El Porvenir plant to the tailings storage facilities in that approach.
Ignacio: In addition to the Danish part B C. Stim phase one includes investments to raise dial poor ratings tailings dam, which is already underway as part of a poor veneers railroad our sustaining capex.
Ignacio: So consider this future investments to elevate the coach us tailings facility.
Ignacio: They all face is to significantly extend the operational capacity of our tailings storage facilities on the Pasco complex prolonging the operations.
Ignacio: In the next slide I will provide further details on the tailings pumping system now.
Ignacio: Now moving to slide number eight.
Ignacio: I said before that key benefit of this investment is a substantial increase in tailings storage capacity on the Pasco complex, allowing us to operate for over 10 years.
Speaker Change: Yes. He made the execution period for these projects is two years from 20 to 25 to 2026 with an expected operational start in the first half of 2027.
Ignacio: The total investment for this initiative is estimated to be between 85 and $90 million distributed over two years of execution.
Ignacio: Key components of the system include a thickener area water clarification on reagent system in Albania.
Ignacio: As well as the tailings pumping and transport agencies team along with the necessary electrical infrastructure.
Ignacio: We are confident in the potential D C investment brings to our operations. The subsequent phases of the project industrial sustainability over the Pasco complex.
Speaker Change: I will turn the call over to Jose Carlos they'll buy our CFO, who will present our financial results.
Speaker Change: Sir Please go ahead.
Jose Carlos: Thank you Ignacio good morning to everyone I will continue on slide nine.
Jose Carlos: As you can see from the chart in the upper left total consolidated net revenues for the third quarter increased by 9% year over year.
Jose Carlos: This increase was primarily driven by higher lemme metal prices with exception of late although it was partially upset by slightly lower smelting sales volume and a lower net premium.
Jose Carlos: When compared to the second quarter of 2024 net revenues decreased by four 4% driven by lower let me base metal prices and lower byproduct contribution partially offset by increased smelting sales volume and higher net premium.
Jose Carlos: For the first nine months of 2024 net revenues totaled $2.03 billion up by 4% from the same period a year ago.
In terms of profitability consolidated adjusted EBITDA for the third quarter of 2020 or reach $183 million up from $87 million a year ago.
Jose Carlos: This improvement was mainly attributed to higher byproduct contribution increasing prices and higher margins in a deep way now.
Jose Carlos: Compared to the second quarter of 2024, adjusted EBITDA decreased by 11% driven by lower base metal prices and lower byproduct contribution partially offset by an increase in smelting sales volume.
Jose Carlos: For the first nine months of 2024, adjusted EBITDA totaled $517 million.
Jose Carlos: A remarkable 75% increase compared to the same period last year.
Jose Carlos: This growth was primarily driven by higher byproduct contribution increased zinc prices and higher margins in that point now.
Jose Carlos: Additionally, lower costs and reduce mineral exploration and project evaluation expenses contributed to this increase.
Jose Carlos: Finally, it is worth noting that our consolidated adjusted EBITDA margin increased to 26% in the third quarter of 2024, representing a 12 basis point improvement compared to the third quarter of <unk> 23.
Jose Carlos: Although decreased by two basis points compared to the second quarter of 2024.
Jose Carlos: Now, let's move to the next slide number 10.
Jose Carlos: On the adult left of the slide we can see that in the first nine months of 2024, we invested $191 million in Capex with nearly all of this amount direct it towards sustaining activities, including mining development and tailing storage facilities in.
Jose Carlos: In line with our ongoing capital allocation strategy, we have reduced our capital expenditures guidance by $11 million updating the figure from 311 million to 300 million.
Jose Carlos: With respect to mineral exploration and project evaluation, we invested a total of $45 million in the first nine months of 2024 with a $28 million allocated specifically to mineral exploration and mine development to support our exploration activities.
Jose Carlos: Following the typical pattern, we observe each year, we expect our investments to increase in the fourth quarter of 2024.
Jose Carlos: Therefore, we are maintaining our 2024 guidance for exploration and project evaluation at 72 million.
Jose Carlos: Now, let's move on to the next slide where I will discuss our cash flow generation for the quarter.
Jose Carlos: Starting with the $183 million of adjusted EBITDA net of non operational items, we generated a strong cash flow from operations before working capital variations totaling $198 million in the quarter.
Jose Carlos: We then paid $38 million related to interest and taxes and invested 55 million in the total capex in our operation.
Additionally, loans and investments had a negative impact of $6 million, primarily due to premiums state on our bond repurchase program.
Jose Carlos: Along with payments for loans and financing and lease liabilities.
Jose Carlos: Next were partially offset by the cash dividend received from Maynard again, and net sales of financial investments.
Jose Carlos: We also paid $7 million in contractual dividends to noncontrolling interest for their more we had a positive impact of $2 million from foreign exchange variations in our cash and cash equivalents driven by the appreciation of the Brazilian real against the U S dollar during the period.
Ali we had a negative effect of $43 million related to working capital.
Jose Carlos: Despite a negative year to a position we remain focus on implementing initiatives such as enhanced reseal of management to reverse this position in our next quarter.
Combining all of these effects, our free cash flow generation in the third quarter of 2024 amounted to $51 million.
Jose Carlos: Now moving to slide number 12.
Jose Carlos: In this slide you can see that our liquidity has improved and remains healthy and we continue to maintain a sound balance sheet with an improved and extended debt maturity profile.
Jose Carlos: At the end of the third quarter of 2024, our available liquidity was approximately $845 million, which includes our undrawn sustainability linked revolving credit facility of 320 million.
Jose Carlos: Regarding our overall debt profile the average debt maturity in the third quarter of 2024. It was 5.7 years, resulting in an average cost of debt of six point, 36% importantly, as of September 30th our total cash position is sufficient to cover all obligations maturing over the next three.
Jose Carlos: Nine years.
Jose Carlos: In terms of leverage our net debt to adjusted EBITDA ratio decreased from 2.7 times to 2.2 times quarter over quarter.
Jose Carlos: This decline is primarily attributed to the increase in adjusted EBITDA over the last 12 months and a reduction in net debt.
Jose Carlos: We will remain attentive to market conditions continuously evaluating options to optimize our financial structure debate diversify our funding sources and enhance our liquidity position.
Jose Carlos: They need that maturity profile aligned with a long life of our assets and achieve the most competitive cost is our utmost priority.
Jose Carlos: The extension of our debt profile. This part of our ongoing optimization efforts and reflects our commitment to prudent financial management and confidence in the long term prospects of our business.
Jose Carlos: Moving now to slide 13.
Jose Carlos: Regarding the zinc market fundamentals. It is noteworthy that in the third quarter of 2020 for the aliens zinc price averaged $2779 per ton.
Jose Carlos: By 14% from the third quarter of 2023 and down 2% from the second quarter of 2024.
Jose Carlos: As anticipated the mento for zinc remained solid and constructive provided positive support for prices with recent levels exceeding $3000 per ton.
Jose Carlos: These fundamentals are underpinned by a trend that began this year when low sink prices in the second half of 2023 prompted some players to cut zinc production there.
Jose Carlos: This he has been adversely affected global concentrate supply, resulting in decreased treatment charges.
As illustrated in the lower part of the slide T. Six have been sharply declining since September 2023 spot.
Jose Carlos: Spot Tcs in China had been trading at negative levels since mid June to July this year, which has began to adversely impact smelters margins by increasing raw material costs. Consequently in August a group of Chinese smelters part of the China zinc smelter purchase team announced potential cuts to metal production due to.
Jose Carlos: Tighter supplies will sink concentrate and low T six.
Jose Carlos: Given this scenario, we expect metal production they need to defer to be lower than in 2023 in our view. These market conditions are unlike likely to dissipate quickly continuing to provide positive support for price.
Jose Carlos: Now to slide 14.
Jose Carlos: In the third quarter of 2020 for copper price averaged $9210 per ton by 10% from the third quarter of 2023 and down 6% from the second quarter of 2024.
In the short term copper prices are expected to remain positively supported by China's economic stimulus, which could provide additional support to copper demand along with US still died concentrate mark.
Jose Carlos: For silver the price averaged $29 per ounce in the third quarter of 2024 by 25% from the third quarter of 2023, and 2% from the second quarter of 2024.
Jose Carlos: The short term fundamentals for silver are also positive driven by the energy transition and concerns about future silveira availability.
Jose Carlos: Most of them very still used as a byproduct of other metals and relies on new mine projects two coming online.
Jose Carlos: Next is our significant silver producer with annual production estimated to be around 11 to 13 million ounces. According to our 2020 for guidance.
Jose Carlos: Looking ahead copper and silver prices are expected to remain positively supported by U S. Monetary policy economic stimulus in China, and therefore, it's related to the energy transition.
Speaker Change: Now I will hand over the presentation back to Ignacio for his final remarks.
Ignacio: Thank you Jose Carlos.
Ignacio: As we look to the remainder of the year, we are confident that zinc and copper prices will continue to receive strong support from global fundamentals reinforcing our outlook for a robust close to 2024.
Ignacio: The landscape shaping debates made those market, especially zinc.
Ignacio: It's characterized by stable demand supply constraints on the pivotal role <unk> plays in Gallois 19 sustainable infrastructure.
Ignacio: This is at the heart of today industrial growth and Tomorrows Green innovations.
Our commitment to enhancing productivity efficiency.
Ignacio: Performance across all operations remains steadfast.
Ignacio: We're focused on extending the life of our mines and consistently improving our cash generation.
Ignacio: All while prioritizing the safety of our people.
Ignacio: We believe <unk> is very well positioned to size growth opportunities with a well established business a proven track record and a strong commitment to stakeholders value creation.
Ignacio: This concludes our remarks. Thank you for your support operator, we are ready to open the floor for questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Withdraw your question. Please press Star then two.
Speaker Change: You may also send questions via chat.
Webcast platform.
Speaker Change: Our first question comes from Oren, if I walk a day with Scotiabank. Please go ahead.
Oren: Hi, Good morning, I wanted to get more color on the status of our apart are you mentioned that you need a another tailings filter that's coming next year.
Can you give us more specifics I E, whereas current throughput constrained until that new equipment is put in and when it when next year do you expect that to be operational.
Oren: Yes.
Speaker Change: So what do we say it is.
Speaker Change: It's already in operation.
Speaker Change: We're all set.
Speaker Change: 130 to $140000.
Speaker Change: Well.
Speaker Change: This is equivalent to 90% of that capacity.
Speaker Change: So the the problem that we face is we have a loyal clients and the capacity of that.
Speaker Change: No.
So it limits.
Speaker Change: These have been because these whatsapp.
Speaker Change: Fast track for Ya.
Speaker Change: And then make them go away.
Speaker Change: Isolated area, so that the design of the filters that we had an implementation of there were no broker.
Speaker Change: We are protesting.
Speaker Change: Having said that.
Speaker Change: The whole theater is necessary.
Speaker Change: Yes.
Speaker Change: New lease seems a February or March of this year.
Speaker Change: So we have been doing that.
Speaker Change: Ah globally.
Speaker Change: Higher capacity and how does that capacity.
Speaker Change: In order to immediately okay.
Speaker Change: So we are ready to approve that this is going to happen in the next two weeks.
Speaker Change: <unk> will take between.
Speaker Change: We are trying to pass back to that.
Speaker Change: Costs might be between $14 million.
It was we approve it and we are in an.
Speaker Change: Executing the project, we will give more flavor on that.
Speaker Change: Pete.
Speaker Change: Bill gave us not only let's say full capacity, but we have some.
Speaker Change: More capacity in the early parts of that process.
Speaker Change: So if.
Speaker Change: We are able to develop that might as we are expecting that.
Speaker Change: We might even increase for electrical father.
Speaker Change: I'll pass it over that design capacity of these IDT Julie.
Speaker Change: So that's more or less where we are.
Speaker Change: But is that does that imply then it sounds like all of 2025 will be constrained at around 90, 490%.
Yes, yes, I mean, we are aiming to produce between 140 to 150 in all.
Speaker Change: 25.
Speaker Change: There's nothing we can do because the pieces there.
Speaker Change: The production.
Speaker Change: The manufacturing of the filter will take more or less six to eight months, but then we would have to run them, but I really want to see if it works.
Speaker Change:
We we already have that these data you want they lenses as well.
Speaker Change: Kimball.
Kimball: Okay, but just I assume that means there's no downside risk to your previous 2025 guidance that are a part of I think it was 58 to 72 any idea at this point how much impact that could have.
Speaker Change: I would say that we are we are still fine tuning the life of mine plan for next year I would say that it will be safer for us to give you that information.
Kimball: <unk> estimates that we provided in January.
Kimball: So for that I would rather wait for that because it would be more accurate and we are still fine tuning.
Speaker Change: Thank you.
Kimball: Okay.
Speaker Change: And the next question comes from Carlos de Alba with Morgan Stanley. Please go ahead.
Speaker Change: Yeah. Thank you very much.
Speaker Change: One of the tier twos here and maybe what's your view on the impact of the recent trends on <unk> for next are you I know that you have a staggered contracts over the next three years, but.
Speaker Change: Nonetheless, as you got you.
Speaker Change: I have some some exposure and sort of wanted to get your take on that.
Speaker Change: Yeah. This is that this is the main question in the market.
Speaker Change: This is a question so what is happening in the market is that this is Matthew.
Speaker Change: Is there an unusual situation for everybody given the.
Speaker Change: Short digital content ratings.
Speaker Change: The same content, that's helping in 'twenty 'twenty four 2023.
Speaker Change: The capacity of the.
Speaker Change: The smelting capacity in the world So.
Speaker Change: We estimate there is.
Speaker Change: Half two minors.
Speaker Change: To get the quote generates unfortunately.
Speaker Change: Very unusual situation that I don't think is going to.
Prevail or mainly more or thereabout.
Speaker Change: Besides this and because of that rotation.
Speaker Change: And a recession in Europe that is still to go.
Speaker Change: That the premiums that.
Speaker Change: That we are facing today.
Speaker Change: We get to sell them.
Speaker Change: Metal are also growing rollout.
Speaker Change: Broadly to normal levels that we had five years ago. Okay. So the two main sources of equal.
Speaker Change: All of these measures.
Speaker Change: Reducing sometimes has to be there I think because of that.
Speaker Change: So are we.
Speaker Change: We gather with most at Masters and everybody's got a relapse.
In the case of mix that is the same.
Speaker Change: We are evaluating exactly what was that.
Speaker Change: We will make decisions.
Speaker Change: The C zone.
Speaker Change: And if we believe that buying both <unk> and.
Speaker Change: Selling at lower premiums.
Speaker Change: We will not be we will get through that we can do that easily how much or what percentage of our production is going to be got we don't know yet and once we have our budget approved.
Speaker Change: We will come back to that market.
Speaker Change: The thing is that and this is this is reflected in that seems right.
Speaker Change: The market more.
Speaker Change: So given that inventories are low.
Speaker Change: Imagine discussing production will generate a problem in the in the market. Even if there is a recession and then I would say father prices.
Speaker Change: The increase is food topic.
Speaker Change: My view my personal view is that the market will adjust to you in the next three to six months, but when did 25, it will be a really bad year for its masters and theirs.
This is a situation that we have.
Speaker Change: Alright, and but.
Speaker Change: You have a very high level of vertical integration right. What what is right now what are your expectations for the vertical integration between concentrate and and as melting capacity for 2025.
Speaker Change: It's a very important question because in Kahala Archie yeah.
Speaker Change: Okay.
Speaker Change: 50% of your theatre in key yet gone through our minds. So the benefits that the benefit goes to our own lives, but the order of 50%.
Speaker Change: It comes from the market and that's where it gets the B E.
Speaker Change: No.
Speaker Change: How about the year and that one.
Speaker Change: In decades of Brazil, the percent that you saw here between the 80% to 90% of the homes.
Speaker Change: It comes from all our mines, but.
Speaker Change: But the oil 10% comes from the market, but there are a few first LIBOR.
Speaker Change: Hum.
Speaker Change: I mean, the local market and Barry will provide a zinc okay.
Speaker Change: But I feel imports into the reinsurance pool.
Speaker Change: So that the penalty for Brazil is higher.
Speaker Change: The integration with our minds.
Speaker Change: With these a situation and that's why our smelters are in a better position with the if you compare then with the rest of the stomach.
Thank you.
Speaker Change: And the next question comes from Ross.
Speaker Change: Winter with Bank of America. Please go ahead.
Ross Winter: Thank you operator, and good morning, everyone I appreciate the updates today.
May I ask on capital allocation, particularly M&A and are in the context of your rising free cash flow. So I mean, despite the issues that are already poniard and the other assets are a.
Ross Winter: Remarkably offsetting those challenges.
Ross Winter: And and you are generating robust cash flow at this point, where is your thinking in terms of timing of that.
Ross Winter: Potential M&A is the focus still on copper or to what extent might you also consider.
Ross Winter: M&A in the zinc.
Ross Winter: Zinc space. Thank you very much.
Speaker Change: Yes, yes, that's a great question and thank you for the question.
Speaker Change: Yes, we are starting to generate cash flow as you were saying I think one is multiple to mean anymore. It gotcha.
Speaker Change: We see them.
Speaker Change: The rest of the mine site at these prices.
Speaker Change: I have a lot of cash.
Speaker Change: So the aim is to reduce our debt right away because you believe that our net debt is 1213.
Speaker Change: Our gross debt is high.
Speaker Change: We wanted to make sure that we review that.
Speaker Change: Right away because the interests that are competitive I would say is it's still a cool and.
Speaker Change: We wanted to make sure that we have a minimum cash and reduce debt.
Speaker Change: The gross debt so that the aiming for that's what we are trying to achieve in the next one or two years in Bali.
Speaker Change: We are.
Speaker Change: Developing our our mine.
We are developing basketball hoop in some capital allocation there are $140 million a pumping system. It's nice N easy integration with the mindset of the upgrade of a shop that is happening in next two years and that will bring us more proactively so part of the capital allocation will go there and then.
Speaker Change: We are finding some very good targets in that rolling off with.
Speaker Change: The most profitable way.
So next year would be a very very good year in trying to call yet.
Speaker Change: Could have more life of mine.
Speaker Change: So that's that is seen in our in the that that capital allocation within the hour.
Speaker Change: Having said that yes, we are still aiming to why poker poker. The reason one is behind that.
Speaker Change: The the mines or the profile of the mindset.
Speaker Change: Similar to the mines that we have today.
Speaker Change: The ticket for us is around $800 million. These last 50.
Speaker Change: 50 to 60000 folks over.
Speaker Change: The reason behind you that we've gotten is steel.
Speaker Change: It produced and manage this.
Speaker Change: This type of mice, but corporate has less volatility than the zinc and he will diversify us thinking about that.
Speaker Change: But we are actively looking in the market we have been doing that for the last three years. There are some options that we have to wait.
Speaker Change: So why are we are reducing.
Speaker Change: The debt that we are looking for opportunities and once we have those opportunities we will decide on that.
Speaker Change: Next three years capital allocation and that's where we are today.
Speaker Change: Luckily that the zinc prices.
Speaker Change: Great prices.
Speaker Change: Without all the mines running.
Speaker Change: Our full capacity, but that is born out of that.
Speaker Change: Going through these challenges.
Speaker Change: Go into a difficult situation today, but I don't think that's why not.
Speaker Change: Be the case in 2026th so going forward, yes, we will start losing cash flow and reducing debt and looking for the opportunity.
Speaker Change: Especially on Eagle.
Speaker Change: Yeah. Thank you very much Ignacio that's very helpful. And then if I could just follow up on your release from.
Speaker Change: Two weeks ago on exploration.
Speaker Change: Uh huh.
Speaker Change: What is your.
Speaker Change: Current thinking on year end reserves.
Speaker Change: You know, particularly at Cerro Lindo, because you've highlighted the fact that you'd like to extend the.
Speaker Change: Lifeline, there, but also what was out there in our E Con yet do you expect that you can replace reserves.
Speaker Change: Or better again this year.
Yeah. So.
Speaker Change: Let me see if I hear you correctly.
Speaker Change: That gets upset or lingo, yeah. If you look at the profile looks ethylene though.
Speaker Change: The Obi eight Adobe nine five.
Speaker Change: I've been replacing a yearly reset it seems that the lingo or velocity.
So what we are doing is that we are drilling near these deposits.
Speaker Change: Do you need to bring more.
Speaker Change: A life of mine and today.
Speaker Change: Close to eight to 10 years of life of mine, which was the case many years ago, but I think we are increasing.
Speaker Change: The good thing with that is that these resources out of the vehicle.
Speaker Change: Reserves for these 10 years are still profitable theyre very close to the infrastructure that we have.
Speaker Change: So we are going to end up that makes it 10 years etcetera window would be very similar to what we have today.
Speaker Change: Having said that we are we have we are a we found some anomalies.
Yeah.
Speaker Change: For spectrum.
Speaker Change: Oh, Yeah, sorry, Yeah, we started really.
Yeah and showed up with danger, we want it and it was like three kilometers away, but there is a.
Speaker Change: A new area.
Speaker Change: If that is two or three kilometers, but on the other side of the infrastructure that we will start reading on 2025.
Locate an $8 million to that.
Speaker Change: And we will have some results towards the end of it.
Speaker Change: Sadly.
Speaker Change: But nobody's showed that we might have a oh things out there that.
Speaker Change: Can bring us five to seven years more so so that is a priority for us even that.
A sample even though he is the most appropriate outlined by far.
Speaker Change: In the case of Eddie why not.
Speaker Change: And you Wonder if it is a very good case because.
Speaker Change: No one else has been a really bad for you it could be he wasn't fast rock, we spend a lot of money. It was between <unk> and <unk>, we made a lot of mistakes.
Speaker Change: We are at the end of that process.
Speaker Change: However, we have also been reading it went up.
Speaker Change: And then the the outlook that we have for that mine is that we can easily have 30 to 35 years of reserves in the area that because in that realm is a we have a mineral district that we have to go to 48.
Speaker Change: It's also a priority for us because yes. It has gone through a lot of cash flow.
Speaker Change: Hey, we don't need to drill more but at least we have too.
Speaker Change: He is bringing in.
Speaker Change: Resources to make sure that the potential is there and you can see that from our greenfield something from them.
Speaker Change: There is a lot of that got me in D C.
Speaker Change: So decided that too are there or not.
Speaker Change: In our operation.
Speaker Change: Third one and I don't know if you if you didn't mention that is possible.
Speaker Change: In basketball Yeah pass.
Speaker Change: Michael is going to integrate that one that robotics as we were saying be unfortunate.
Speaker Change: Portugal is not operating from the underground and because that 10 million tonnes of ore resources cannot go back into he says because we don't know.
Speaker Change: That same day.
Speaker Change: But if you connect them with the venue that will reduce our capex significantly and you take them in a thoughtful way using.
Speaker Change: You've seen the shock that we would operate that shot okay. We have also been reading a lot.
Speaker Change: Theyre section.
Speaker Change: Orders of magnitude when you discussed I mean, there that is worth $100.
At our courtyard Honeywell P C.
I mean, there are that we are finding in the entire sector has a lot of the things that these 200.
Speaker Change: So the idea is that once they are in there.
Speaker Change: We will increase that the.
Speaker Change: Yeah.
Speaker Change: And it's hard to put all the units out of basketball and.
Speaker Change: We will increase broker.
Speaker Change: So basketball is a mine that is one of the highest paying 15 20 years of life of mine.
Speaker Change: A better Renaissance.
Speaker Change: At least the location that we know so these are the priorities for us.
Speaker Change: These are the priorities.
Speaker Change: We'll explain to the market in 'twenty five 'twenty six what we will do in these three important points seems three boys on operations.
Okay Fantastic and just one follow up I appreciate you touching on the the regional target at Cerro Lindo, So just on that target.
Speaker Change: What is the thinking right now in terms of what you'll spend on that in 2025, and then secondly is that region subject to the silver stream.
No he is not subject to a silver stream.
Speaker Change: Well friends, but a.
Speaker Change: Hey.
Today, we have a we felt a very big and normal either.
Speaker Change: <unk>.
Speaker Change: Two or three calls more than a thousand meter three calls.
Gross these big anomaly, Yeah, we found me.
Speaker Change: C mirrors, what we have in the in the Obi eight there'll be.
Speaker Change: Nine years.
Speaker Change: Infrastructure, but we are okay.
Speaker Change: What we are doing it.
Speaker Change: <unk> is putting like but five more.
Speaker Change: Worse.
Speaker Change: With a more than a thousand meters to start to designate what is the shape of it.
Speaker Change: These are normal.
Speaker Change: And this is W union or whatever.
Speaker Change: This is just starting in January.
Speaker Change: I said $8 million. So I would say don't was June until what he said, but we will have more information on both.
You know our team is conservative on that.
But you'll see you'll see their faces and they look happy So we'll see we'll see what happens.
Speaker Change: Okay. Thank you very much Nigel.
Speaker Change: Yeah, and if you have a question. Please press star and then one.
Speaker Change: At this time, we are showing them where.
Speaker Change: I see and we can move to the webcast.
Speaker Change: Question.
Speaker Change: We have some follow up questions from the audience Oh the web. So the first one is comes through my feels more data from graduates will be V. I.
Speaker Change: Hi, guys congratulation for the results well, we have seen overall positive dynamics for zinc prices in the past few weeks.
Speaker Change: With continued tightness on the supply side, but we'll report a how do you see a supply demand dynamics. So I believe that the NASA has already addressed but I was.
We will complement the quest.
Speaker Change: Thank you Robert are you good morning, everyone.
Speaker Change: Yes, yes.
Speaker Change: As you might remember we've.
Speaker Change: We've been anticipating a dis a situation and in previous calls expressing that we leapt into fundamental so sync and we expect it for prices to increase at some point.
Speaker Change: So in the last few months this has materialized and as Ignacio mentioned, we currently have a very tight concentrate market.
Speaker Change: And that the story foreseeing continues to be more.
Speaker Change: Life's story.
Speaker Change: Even though we currently have a soft demand in China.
Speaker Change: What we're seeing art constraints in terms of supply of concentrate just a couple of days ago. If I remember correctly, there was a publication by BMO.
Speaker Change: Anticipating that a sing concentrate production for 2024, it will actually be lower than sink concentrate production in 2023.
Speaker Change: So and you know it is very unlikely the way we see the prices will will go back down to levels that we saw last year 2400, 2020, 2500, a I think a personally that these prices are a better reflection of off market.
Speaker Change: That makes and going forward it.
Speaker Change: Even though seek demand grows at low single digits. It's a very it's a very consistent demand growth. So based on based on the limitations that we have on supply.
In in the concentrate market that may aid later translate to the metal market because of the actions that could be taken by smelters. These situation of tightness.
Speaker Change: Prevail could prevail for some time.
And with the with the potential growth of think going forward is supported also by its participation in the energy transition economy. We.
Speaker Change: We expect that fundamentals will continue to be strong that supply will continue to be constrained and that we should continue to have strong fundamentals. We don't know whether this will be at 3000 at 3200 2800, but certainly we don't see prices going back down to the lower levels that we saw before there can be some volatility.
Speaker Change: The way, it's never a straight line.
Speaker Change: But I think the what the dynamics that we're seeing will will continue.
Speaker Change: Continued to where he is a strong fundamentals of the seed market.
Speaker Change: Hope that answered the question.
Jose Carlos: Hey, Thanks Jose.
Speaker Change: One question. This is mark connected to the connector to the to the leverage so strong Julian real some F N B <unk> Nikko securities.
Speaker Change: So let's pay attention of the companies to reduce gross debt.
Do you guys have any specific type of liability management that we as a company you as a company expect to undertake.
Speaker Change: Yes, and in general terms and I think it's consistent with what we have explained before and we are we're in a cyclical in a cyclical industry. So we will feel more comfortable with lower levels of leverage we are there as part of the leverage that we control and.
Speaker Change: That we can influence and there is part of the leverage that we can and we saw our net leverage levels peak in the first quarter of 'twenty 'twenty four if I remember correctly. It was around 3.73 points out of five.
It was mainly due to the decline in the price of oil cycle more at ease that we sell the situation is reverting because of the higher prices that we have or we have better results and also we are having better operational performance and a higher contribution from my deep right now so that peak level of three seven is now at two point.
Speaker Change: A 2.2 and with these operational levels and these prices. We continue to expect that that a that that trend is going to prevail going forward. So we would like to be below two for sure a target would be something in the range between one and one on the half so that it will give us a buffer.
Speaker Change: Her to absorb the different.
Speaker Change: Cycles that we can see or short term volatility that could still take place.
Speaker Change: Going forward. So that that is in line also with a comment made by Ignacio that we want to reduce gross debt that will help us reduce our net leverage and also allow us to reuse and the interest a the cost of interest every year, which is significant for a couple of minutes I self makes it so that will continue to be a priority.
Speaker Change: Yes.
Speaker Change: This concludes our question and answer session now we will hand, the call over to Ignacio for our final remarks. Mr. Rosado. Please go ahead.
Ignacio: Thank you Dave.
Ignacio Rosado: Thank you very much everyone for attending the call and we look forward to close the year.
Ignacio Rosado: In all of our target and a TV guy that we're very committed to that we're very committed to our 'twenty 'twenty five 'twenty six challenges.
Ignacio Rosado: We believe that at least one hour that's performing on became a very shortly operation or what we believed the basketball.
Or you're just going to give us a lot of upside.
Ignacio Rosado: We believe that we are well positioned to look for similar efficacy.
Ignacio Rosado: Thank you again, and we look forward to hear from you in the following quarter.
Ignacio Rosado: Okay.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.