Q1 2025 Nexa Resources SA Earnings Call
And it will be muted throughout the meeting.
[music].
Speaker Change: Good morning, ladies and gentlemen, and welcome to <unk> resources first quarter 2025 earnings Conference call. Please note that today's event is being recorded and broadcast live.
Speaker Change: Zone with access also available through <unk> Investor Relations website.
Speaker Change: The presentation is accompanying today's webcast and is also accessible on our Investor Relations website, a replay of the conference call will be available following its conclusion.
Speaker Change: As a reminder, all participants are currently in a listen only mode. Following today's presentation, we will open the floor for questions.
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Rodrigo: Now I would like to turn the conference over to Mr. Rodrigo come out also head of Investor Relations and Treasury for his opening remarks. Please go ahead Sir.
Rodrigo: Good morning, everyone and welcome to the extra resources first quarter 2025 earnings conference call. Thank you for joining us today.
Rodrigo: During this call we will discuss the Companys performance as outlined in our earnings release issued here.
Rodrigo: We encourage you to follow along with the presentation through the webcast.
Rodrigo: Before we begin I would like to draw your attention to slide number two where we outline our forward looking statements about our business.
Rodrigo: Please refer to the disclaimer regarding these statements in the euro associated condition.
Speaker Change: Now it is my pleasure to introduce our speakers.
Speaker Change: Joining us today are our CEO Ignacio Rosado, our CFO will sit carnival, Bill White, and our senior Vice President of mining operations.
Speaker Change: I will turn the call over to Ignacio for his comments.
Speaker Change: Please go ahead.
Ignacio: Thank you Rodrigo and good morning, everyone. Thank you for joining us today as we review our first quarter 2025 results.
Ignacio: Let's move to slide number three where we highlight our results for the quarter.
Ignacio: Before discussing our quarterly performance I want to briefly acknowledge the current macro environment.
Ignacio: The past few months have been marked by significant volatility with concerns over global economic slowdown geopolitical tensions inflation and supply chain disruptions.
Ignacio: While the environment remains challenging we continue to see strong medium and long term fundamentals for zinc copper and other key made that's.
Ignacio: Supported by demand drivers like infrastructure development on industrial rabies agitation.
Ignacio: So blake constraints on historically low zinc treatment charges persist.
Ignacio: But we believe new demand opportunities will continue to emerge next.
Ignacio: <unk> is well positioned to navigate this environment focus on improving margins through disciplined operational performance and cost control.
Ignacio: In the first quarter of 2020 device, we faced some operational challenges at certain sites, which led to production volumes is slightly below our initial estimates.
Ignacio: In the mining segment.
Ignacio: <unk> was mainly due to a typically heavy rainfall in the Pasco region in <unk>.
Ignacio: Ill, probably need another court jesper formats, as well as Ah report now where precipitation levels, where Brooks, it's 80% above historical averages.
Ignacio: Although <unk>, but theres also operated slightly below our budget, we remain in line with our 2025 guidance, which anticipates a year over year reduction of <unk> 15000 tonnes to reflect a more volatile market environment along with Tcs.
Ignacio: Despite these challenges we delivered an adjusted EBITDA of $125 million.
Ignacio: With margins remaining within historical ranges.
Ignacio: Our consolidated net revenues totaled $627 million.
Ignacio: Even with lower smelting status volumes.
Ignacio: One one times at the end of the first quarter temporary impact by seasonal working capital intensity, which is higher early in the year, we expect to normalize these variations over the coming quarters.
Ignacio: Turning to Eddy border.
Ignacio: Heavy rains have picked it up performance of our tailings filters.
Ignacio: I would like to close the acquisition of the <unk> filter that's being completed.
Ignacio: It is currently under construction.
Ignacio: We are confident that these filter will pave the way to utilization and capacity increase and better support the operation during the rainy season.
Ignacio: In line with our grocery study uncle amendment to extend the life of our assets.
Ignacio: One of the Cerro Pasco integration project focus on the tailings Bob on <unk> East.
Ignacio: Progressing well I will share more details later in this presentation.
Ignacio: Now, let's move to slide number four to discuss our operating performance.
Ignacio: Turning to the operating performance of our mining segment zinc production in the first quarter of 2025 reach 67000 tons down 23% year over year at 8% quarter over quarter.
Ignacio: The year over year comparison was also impacted by the cessation of operations at Laura Weil.
Ignacio: In addition, lower output at LPL radius at our courtyard Eddy border, mainly due to heavy rainfall contributed to the decrease while besides that experience restricted access to higher grade areas. During this period.
Ignacio: Looking at cash cost.
Ignacio: Our mining cash cost significantly dropped to 11 cents per pound compared to 26 cents per pound in the same period last year.
Ignacio: This reduction was mainly driven by higher by political attribute issues lower treatment charges and foreign exchange gains, partially offset by lower volumes.
Ignacio: Compared to the previous quarter, the mining cash cost increased by 12 cents per pound due to lower sales volumes, which was partially offset by higher byproduct prices and lower treatment charges.
Ignacio: Our cost per run of mine in the quarter was $48 per ton up 7% year over year, and 8% quarter over quarter, mainly due to lower treated ore volumes and the inclusion of what you bought in the consolidated run of mine from Doug Liman.
Ignacio: Excluding that you brought up <unk>.
Ignacio: Run off mine costs remained flat in both comparisons.
Ignacio: Now, let's move to slide number five.
Ignacio: Turning to our smelting segment. The total sales in the first quarter reached 130000 tons.
Ignacio: Decreased by 6% year over year, and 14% what did all required these.
Ignacio: This reduction was primarily driven by lower production at <unk>.
Ignacio: The year over year decline was partially offset by better operational performance at Cahaba.
Ignacio: Our 2025 guidance as already anticipated a reduction in a smelter volume.
Ignacio: Accommodate a more volatile market environment and overall lower treatment charges.
Ignacio: Looking at costs consolidated smelting cash cost in the quarter was $1.17 per pound up from 98 cents per pound in the same period last year.
Ignacio: This was mainly due to higher raw material costs, driven by increasing prices on lower Tcs.
Ignacio: These impacts were partially offset by higher byproduct contribution and positive foreign exchange variations.
Ignacio: Compared to the previous quarter cash cost decreased by 7%, mainly reflecting lower zinc prices right.
Ignacio: Reduce operational costs.
Ignacio: However, these effects were partially offset by lower volumes and continued pressure from low disease.
Ignacio: Our conversion cost for the first quarter was 30 cents per pound.
Ignacio: Prior to the <unk> 30 cents per pound in the same period last year.
Ignacio: Slightly increase was mainly due to higher variable costs.
Ignacio: Maintenance expenses, partially offset by foreign exchange gains.
Ignacio: Compared to the previous quarter commercial growth rose by 11% driven by lower volumes of higher variable costs.
Ignacio: This move to slide number six where we will begin discussing I'd point out.
Ignacio: In the first quarter, how do you put in US production volume declined due to intense rainfall in the region with precipitation volumes, 30% higher than in previous years.
Ignacio: This led to a temporary reduction in production to stabilize operations and prevent overloading the dry stacking process.
Ignacio: Treated ore volumes also decreased quarter over quarter as planned downtime increased due to preventive and corrective as stoppages carryout during this period.
Ignacio: Concentrate quality remains stable and within commercial specifications, while metallurgical recoveries improve performing.
Ignacio: Target levels.
Ignacio: Regarding costs reported for the first time since the start of the operations. They stayed within that 2025 guidance range.
Ignacio: We anticipate a reduction in unitary costs in the upcoming quarters as we enhance capacity and increased sales volume, thereby improving operational efficiency and cost effectiveness.
Ignacio: As previously announced how deep went up my life increased to 15 years compared to 13 years in 2023.
Ignacio: This reflects our successful efforts to replace and expand mineral reserves year over year. The rainfall in the assets has strengths and sustainability.
Ignacio: This year's exploration strategy for 80, but up in gross really programs to validate that continuity of mineralization.
Ignacio: <unk> has geological confidence at Amazon do our target.
Ignacio: Located in the southeast area of debate.
Ignacio: As discussed last quarter, we approved the acquisition of a fourth daily to filter.
Ignacio: This investment will improve operational efficiency by enhancing our filtering capacity and supporting full products.
Ignacio: We expect the filter to be delivered and installed in 2025 with commissioning plan for the first quarter of 2026.
We expect to deliver higher adjusted EBITDA and operating cash flow in 2025 supported by our ongoing efforts to reduce costs and improve margins.
Ignacio: Let's move to slide number seven to discuss the latest advancements in the Cerro Pasco integration project.
Ignacio: Well this is slide I would like to highlight our progress with a separate pathway to Rachel.
Ignacio: We're in the cooperative we advance of phase, one which comprises that tailings, Bobby and piping system.
Ignacio: Engineered activities for that tail is infrastructure at El Toro needed at that culture proceeded on schedule and.
Ignacio: And mayor equipment manufacturing is underway.
Ignacio: With construction is scheduled to commence during the second quarter of this year.
Ignacio: Okay Palottery work for the phase III, including technical assessments of that be castle shaft.
Ignacio: Underground integration is also progressing as planned.
Ignacio: As mentioned before phase one involves the construction of a tailings treatment plant at El Pollo <unk>, along with a six kilometre tailings by connecting that LPL ready to process that through the attack or chat tailings storage facilities.
Ignacio: The primary goal is to significantly extend the operational capacity of the daily storage infrastructure.
Ignacio: Turing long term sustainability at the Cerro Pasco complex.
Ignacio: This phase also lays the groundwork for subsequent stages of the project, which includes integrating the underground mines on upgrading the <unk> shaft at airport radio.
Ignacio: Now, let's move to slide number eight where we will discuss some of the key value drivers of that project.
Ignacio: A key value driver is access to high quality mineral resources in the underground section of that approach.
Ignacio: Unlocking its economic potential through a highly attractive net smelter return.
Ignacio: Tapping into these resources will boost mineral resources and reserves improve average hedge rates.
Ignacio: Provides greater operational flexibility for the asset.
Ignacio: Moreover, our exploration focus remains on the ratio target.
Ignacio: Our region with exceptional geological potential.
Ignacio: The highly promising appetite for that project.
Ignacio: Ultimately the combination of these levers adds substantial value basis that way for long term success at that separate Pasco complex.
Ignacio: We remain confident in the projects progress and most importantly, its potential value at each.
Speaker Change: I will turn the call over to Jose Carlos de <unk> our CFO.
Speaker Change: Who will walk us through our financial results. Please go ahead.
Speaker Change: Thank you Ignacio good morning, everyone. I will now continue with slide number nine starting with the chart on the upper left total consolidated net revenues for the first quarter increased by 8% year over year. This growth was mainly driven by higher metal prices, except for lead these gains were partially offset by lower <unk>.
Speaker Change: <unk> sales volumes, however, compared to the fourth quarter of 2024 net revenues declined by 15%, mainly due to lower smelting sales volumes and decreasing and let Brian.
Speaker Change: Moving onto profitability, our consolidated adjusted EBITDA for the first quarter reached $125 million.
Speaker Change: Representing a 3% decrease year over year.
Speaker Change: This decline was primarily driven by lower smelting sales volumes, partially offset by higher zinc prices increased byproduct contribution and foreign exchange gains.
Speaker Change: Compared to the fourth quarter of 2024, adjusted EBITDA decreased by 36%, mainly due to lower sales volumes in both the smelting in the mining segment higher costs and expenses and lower TCE stayed by third party concentrate suppliers.
Speaker Change: Finally, our consolidated adjusted EBITDA margin reached 20% in the period two percentage points lower than in the same period a year ago.
Speaker Change: Let's move onto slide number 10.
Speaker Change: Looking at the top left of the slide in the first quarter of 2025, we invested $50 million in Capex with nearly all of this amount directed toward sustaining activities, including mine development maintenance and tailing storage facility.
Speaker Change: Additionally investments related to phase one of the faster integration project totaled $1 million in line with our project execution plan.
Speaker Change: Previously disclosed in our annual guidance. The total investment expected for this project in 2035 is $44 million.
Speaker Change: Accordingly, our 2025 Capex guidance for the year remains unchanged at $347 million with disbursements expected to accelerate in the upcoming quarters.
Speaker Change: With respect to mineral exploration and project evaluation, we invested a total of $16 million of this amount 12 million, what specifically allocated to mineral exploration and mine development to support ongoing exploration activity.
We expect investments in these areas to also accelerate in the upcoming quarters recent while we are reaffirming our 2035 guidance for exploration and project evaluation at 88 million.
Speaker Change: Now, let's move on to the next slide to discuss our cash flow generation for the quarter.
Speaker Change: Starting from the left with a $125 million.
Speaker Change: Adjusted EBITDA net of non operational items Nick's it generated a healthy operating cash flow before working capital variations of $158 million for the quarter.
Speaker Change: From this amount, we paid $76 million in interest and taxes and invested 51 million in capex across our operations. Additionally, loans and investments had a positive net impact of $4 million.
Speaker Change: We also saw a positive impact of $4 million related to foreign exchange variations, primarily due to the appreciation of the Brazilian real against the US dollar finally, we experienced a negative working capital impact of $265 million. This is in line with the typical payment cycle of served in the first quarter of.
Speaker Change: Each year, reflecting our established payment terms and annual tax and labor obligations in the jurisdictions, where we operate.
Speaker Change: As in previous years, we reaffirm our focus on implementing initiatives to optimize nicks us working capital cycle, such as enhanced we seal and payments management. We expect these working capital position to gradually reverse in the following quarters.
Speaker Change: All these factors our total free cash flow in the first quarter of 2025 was negative $276 million.
Speaker Change: Now, let's move to slide number 12.
Speaker Change: As you can see our liquidity position remains health, allowing us to maintain a solid balance sheet and improved and extended debt maturity profile at.
Speaker Change: At the end of the first quarter of 2025, our available liquidity stood at approximately $721 million, including our Undrawn 320 medium sustainability linked revolving credit facility.
Speaker Change: At our debt profile the average maturity at the end of the first quarter of 2035 was five three years with an average cost of debt of six 3%.
Speaker Change: Importantly, as of March 31st our total cash position was sufficient to cover all obligations maturing over the next three years.
Speaker Change: In terms of leverage our net debt to adjusted EBITDA ratio increased from one seven times at the end of 2024 to two one times at the end of the first quarter of 2025.
Speaker Change: This increase was primarily due to a seasonal decrease of $236 million and our cash balance quarter over quarter and to a lesser extent to a slightly lower adjusted EBITDA over the last 12 months.
Speaker Change: The east coast and in line with our proactive approach to liability management. In April next are successfully extended its debt maturity profile for a five three years to approximately eight years through a new bond issuance and two tender offers for the existing notes due in 2037 and 2020.
Speaker Change: The new 500 million 12 year bond carries a six 6% coupon and allowed us to repurchase around $105 million and $289 million of the existing 2027 and 2028 nodes respectively.
Speaker Change: Additionally, as announced on April 33rd the remaining 2037 notes of approximately $110 million or plan to be fully redeemed the make whole call option to be executed on may 20 <unk>.
Speaker Change: These transactions marked a significant milestone for the company extending nexus debt maturity profile enhancing financial flexibility reinforcing our solid credit metrics and our investors coffees, reducing near term refinancing risk.
Speaker Change: We continue to evaluate opportunities to further optimize our capital structure diversify our funding sources and strengthening our liquidity.
Speaker Change: As mentioned before maintaining a debt maturity profile that is aligned with the long life of our assets while securities. The most competitive financing costs remain a top priority.
Speaker Change: In line with this we consistently explore strategic initiatives to extend maturities reduce our average cost of debt and assess financing alternatives all with the goal of enhancing our financial position and long term resilience.
Speaker Change: Now moving to slide number 13.
Speaker Change: Regarding zinc market fundamentals in the first quarter, Yeah, Let me think price averaged $2838 per ton, reflecting a 16% increase year over year, and a 7% decrease quarter over quarter.
Speaker Change: The quarter was marked by volatility driven by geopolitical tensions and macroeconomic uncertainties, including concerns over a potential global economic slowdown and speculation about the impact of tariffs. Despite these zinc market fundamentals remained resilient and continued to support prices on.
Speaker Change: On the supply side concentrate inventory levels remained limited, reflecting the ongoing type market and even considering some restocking after the Chinese new year, they still remain constrained reinforcing expectations of lower refined metal production ahead.
Speaker Change: Spot Tcs in China started to timidly recovered from the negative territory as seen last year, turning slightly positive in January are reaching $79 per ton in March are signs of market improvement, although the environment remains tight.
Speaker Change: Meanwhile, benchmarking negotiations resulted in a sharply lower TCE of $80 per ton down 52% from 2024. This level is critical for smelter Martin and May lead to further constraints in the refined metal supply.
Speaker Change: Looking ahead, we maintain a positive mid to long term outlook with continued support foreseen price.
Speaker Change: Moving now to slide number 14.
Speaker Change: During the first quarter <unk> copper price averaged $9340 per ton up 11% year over year, and 2% quarter over quarter. The U S investigation on copper imports trigger accelerated buying and boosted premiums copper market fundamentals continue.
Speaker Change: To be strong and prices are expected to remain supportive.
Speaker Change: For silver Yeah, let me priced averaged $32 per ounce up 37% year over year and 2% quarter over quarter.
Short term fundamentals for silver remain positive largely driven by concerns around future availability supported by its role as a safe Haven asset.
Speaker Change: Over the mid to long term the outlook is expected to remain bullish as demand continues to outpace supply expectations.
Speaker Change: Looking ahead metal prices in general are likely to remain volatile amid ongoing trade tensions and macroeconomic uncertainty.
Speaker Change: Base metals in particular strong fundamentals are expected to continue to sustain prices in 2025, driven by low inventories challenged smelter production and their role in the global energy transition.
Ignacio: I will now hand, the presentation back to Ignacio for his final remarks.
Ignacio: Thank you Jose Carlos I would like to briefly highlight our key priorities for 2025, and where we are focusing our efforts.
Ignacio: Starting with growth the favorite basketball integration project is moving forward as planned.
Ignacio: Construction of the tailings pumping system should begin in the second quarter and that project will support us in extending operations for over 10 years, adding substantial everybody.
Ignacio: We are working to increase production improved filter performance I'd make that might more flexible while keeping our cost efficiency efforts in place.
Ignacio: Will support better margins and stronger cash flow going forward.
Ignacio: Exploration remains a key pillar of our long term strategy.
Ignacio: We are working to extend the life of our assets, particularly by advancing geological studies here that you brought up.
Speaker Change: Looking at the integration with Sony basketball and deepening our airports etcetera.
Speaker Change: On the ESG front, we continue to track our progress towards public commitments activity.
Speaker Change: I want to make sure that we have just published.
Speaker Change: 'twenty 'twenty four Unvalued report, which brings a comprehensive view of our performance our progress on strategic fronts.
Speaker Change: The report is available on our Investor Relations website.
Speaker Change: Financially, we are continuing to execute our liability management and their labor Union strategy aiming to improve financial flexibility.
Speaker Change: Quick reminder, that our annual general meeting will be held in Luxemburg on may eight.
Speaker Change: The convening notice a proxy cards have already been made available to shareholders.
Speaker Change: Finally, we remain guided by financial and operating.
Speaker Change: Disciplined.
Speaker Change: <unk> cash generation on a smart capital allocation.
Speaker Change: With our long term strategy.
Speaker Change: Nobody can put it in the volatile environment disciplined approach continues to be the foundation of our strategy unrestrained use.
Speaker Change: Thank you all for again for joining US today, we appreciate your continued support and confidence Unix.
Speaker Change: Operator, please open the line for questions.
Speaker Change: Thank you we will now begin the question and answer session to ask a question. If you are joining via zoom. Please click the raise hand button.
Speaker Change: May also submit your question using the Q&A icon at the bottom of the screen.
Speaker Change: Please include your name and company when typing your question.
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Cannula: Our first question comes from cannula by today with Bradesco BBA.
Speaker Change: And your microphone.
Speaker Change: Okay.
Speaker Change: We cannot listen.
Speaker Change: Camilla we cannot listen.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: I think cumulus, having some trouble I'm going to pass.
Speaker Change: The first question to Aetna is look with Metlife you can open your microphone Sir.
Speaker Change: Yeah.
Speaker Change: Hello. Good morning, Thank you for taking my question.
Speaker Change: I was wondering maybe if you can provide more color on what you mean by geotechnical issues that youre, having at the center and also we have a monitor in Cerro Lindo production levels in the last two quarters. It has been below historical averages. So if you can also provide some color on what is happening there, so, particularly focusing in the knee.
Speaker Change: Near term you think production will recover in upcoming quarters and also particularly advantaged.
Speaker Change: Joe technical issues have consequences for the medium and long term operations of the mine.
Speaker Change: Yes sure no.
Speaker Change: Technical issues.
Speaker Change: Related to a stope that we have.
Speaker Change: Matt.
Speaker Change: One of the pillars that support the stope collapse this was isolated.
Speaker Change: On the.
Speaker Change: What happened is that the mineral contained in that so had a very high grade.
Speaker Change: So we have two isolated the zone, we couldn't extract the mineral to provide that in the coming months.
Speaker Change: I want to have a higher grade that was anticipated in our mining plan.
Speaker Change: The idea is that we recover some of that production of Sunday, we're still working on recovery I mean, this is stope areas.
Speaker Change: It is that we recovered part of their production.
Speaker Change: Sandy.
Speaker Change: The year.
Speaker Change: And that is that is the main explanation in the case of the other mines.
Speaker Change: In Pasco.
Speaker Change: Rainy season, as we say it impacted a bit.
Speaker Change: Gotcha.
Speaker Change: Training anymore. So.
Speaker Change: <unk> to ensure that we will recover.
Speaker Change: All of our production.
Speaker Change: We didn't have in the first quarter through the year.
Speaker Change: And then that is going to be the same for borrowing need for Venezuela recover also full production.
Speaker Change: Through the year in the case of already but is more difficult because.
Speaker Change: This is this as I said before this has been a very difficult brick to build.
Speaker Change: The only bottleneck that we have today either tailings filters.
Speaker Change: Is it in the last quarter. These tailings filters really perform but it's difficult to maintain them is difficult to change parts. When we have to change parts. So we have capacity constraints that we the rainy season deteriorate, even more the four feet there will solve that problem.
Speaker Change: But it's coming.
Speaker Change: In the first quarter of next year. So as you point out might be in that in the lower range of that guidance. So if you add button.
Speaker Change: The mid to lower range of the guidance achieving guidance in the other two mines, Cerro lindo going very well.
Speaker Change: <unk> a.
Speaker Change: The low range.
Speaker Change: That should be that we will be in the meat around the mid range of the guidance. So that's what we're expecting.
Speaker Change: I mean, we are putting all the measures to make sure that the second quarter is better.
Speaker Change: The rest of the year, which we will show this improvement.
Nancy: Thank you Nancy.
Camilla: I have camilla.
Camilla: With Bradesco BBA here again on the line. Please you can open your microphone.
Camilla: Hello can you hear me now.
Camilla: Yes, yes.
Camilla: Okay. So sorry, if I got that so good morning, and thank you for taking my questions.
Speaker Change: Two questions on my side first on D. C. I just wanted to hear a little bit about your views on the back of the recent trends on Tcs Esport next I know youll have some call to export next years, but you still have some exposure. So I just wanted to get your thoughts on that and the second question was about leverage so next.
Speaker Change: <unk> has done a good job on it still average ASP over the past quarter, but last quarter leverage went up falling corporate free cash flow estimate.
Speaker Change: The as you mentioned there should be reversed.
Speaker Change: My question is how do you see collaborating with all of the next quarter, then what would you consider as a reasonable targets for the end of the year.
Speaker Change: Thank you.
Speaker Change: Okay. So I will talk about the Tcs and then.
Speaker Change: Jose Carlos.
Speaker Change: The question on the leverage so the Pcs.
Speaker Change: It was a surprise to have this $80 Tc agreed between <unk> and <unk>.
Speaker Change: In Korea.
Speaker Change: Korea's Inc.
Speaker Change: We.
Speaker Change: As you say, we closed most of our contracts already.
Speaker Change: For the year.
The one thing that we have is that we have breached contracts, which account that.
Speaker Change: Pete.
Speaker Change: The conditions of our Dcs coffee a three year.
So we have also conditional on Dcs of the previous two years that better and we will be affected by this year's Pcs, having said that.
Speaker Change: But in our minds, we use a benchmark.
Speaker Change: So.
Speaker Change: Basically we use before was above $100 today's $80, but.
Speaker Change: Between now and all of our mines it doesn't matter because it will go from one bucket to another bucket. So the mind will benefit on the smelters.
Speaker Change: Hit by this $40 difference that we have in the case of the risk of the concentrate that we bifurcate hamartia Smith.
Speaker Change: Ministers in Brazil as well.
Speaker Change: I'll say, we already have closed contracts. So they are not exposed most of them are not exposed to benchmark.
So we believe that.
Speaker Change: In that regard for us this year that Pcs.
Speaker Change: Sort of underground drilling we don't have a lot of spot.
Speaker Change: Sales or purchasing concentrate for four hours smelters this year.
Speaker Change: Having said that I would like to comment that with this DC of $80.
Speaker Change: The prices are seeing today is 2600.
Speaker Change: Premiums that there were really low.
Speaker Change: The last year and this year as well.
Speaker Change: Goodbye.
Speaker Change: The smelters profitability in the world are going to suffer very much.
Speaker Change: The stocks are low today.
Speaker Change: So we will see that evolution during the first half of this year and we will see.
Speaker Change: We expect to see a reduction in metal as well because.
Speaker Change: These are very low numbers for the market.
Speaker Change: We don't know what will happen with the supply and that's also something that we will have to wait because we all know what happened but in any case with this context smelters are going to be hard but in profitability.
Speaker Change: Our view is if the supply remains is that in the second quarter.
Speaker Change: <unk> pricing is going to go up substantially because otherwise won't be metal won't be inventories.
Speaker Change: The market will react and have an impact on price so that does more or less the colombia that more or less the context on our smelters and mines.
Carlos: Carlos Please go ahead with it.
Carlos: Yes, Thank you Ignacio and thank you for the question.
Carlos: In terms of leverage you are right. We have seen an increase in leverage from one seven at the end of 2024 to $2. One at the end of the first quarter.
Carlos: Something that we expected because of the seasonality that we have in that we have in our first quarter related mostly to working capital.
Carlos: However, we do expect that we will as we have done in the in the last couple of years that this trend will reverse throughout the year and the expectation is that at prices similar to the ones. We had in the first quarter. We should have leverage at the end of the year that is equal or slightly lower than.
Carlos: While we had at the end of 2024. So we continue to believe that will be the case I hope that answers your question.
Speaker Change: Very clear thank you very much.
Carlos: Sure.
Moderator: Our next question comes from Carlos de Alba with Morgan Stanley You can open your microphone.
Speaker Change: Yes. Good morning, Thank you very much for this.
Jeff: The comments Jeff.
Jeff: I'm just following up.
Jeff: On a prior comment on working capital.
Jeff: <unk>.
Jeff: Yes.
Jeff: The net working capital in the quarter was $265 million I understand the seasonality of the first quarter, but this was like twice as negative as we have seen in the first quarter of prior years.
Jeff: And as you have been mentioning.
Jeff: The market is challenging.
Jeff: Yeah.
Jeff: Prices and G&P chassis so.
Jeff: Do you use.
Jeff: Do you expect at this point in time to fully reverse that $285 million net working capital in the year finished.
Jeff: <unk> thousand 75, with a cash inflow from working capital.
Carlos: Thank you Carlos I can comment on that.
Jeff: For planning purposes.
Speaker Change: What we normally assume is that working capital should be flat.
Speaker Change: On an annual basis. So despite these fluctuations within the year that we see that.
Speaker Change: We have been seeing in the in the last few years.
Speaker Change: Our assumption is that it will be flat. So it should it should be mid tier one particular aspect.
Speaker Change: Got it.
Speaker Change: Net working net working capital in the first quarter I would say is related to taxes taxes, because we have better profitability in 2024 compared to prior years.
Speaker Change: We had to pay more taxes and this all happens in the first quarter and there was one nonrecurring item.
Speaker Change: As mentioned in earnings release, we paid $61 million related to some of the tax contingencies that we have to take advantage of discounts on interests.
Speaker Change: Im penalties.
Speaker Change: And there is an amnesty related to one of the years that we that we also had many related to what our core channel Port we need. So this was a one off effect of $61 million that by itself is already a significant difference. So the combination of those two factors is what has in a way enhanced this a volunteer.
Speaker Change: <unk> that we see in the first quarter. So we continue to expand that throughout the year, we will be able to reverse that and then.
Speaker Change: Close to flat.
Speaker Change: Alright, thank you.
Speaker Change: Then my second question is.
Speaker Change: So if im doing the remainder of the year seeing prices don't improve to emerge but.
Speaker Change: The way the market one salad.
The current tough situation for his masters is for Tcs to improve.
Speaker Change: Spot to improve and the benchmark contract next year to improve.
Speaker Change: And therefore that improve the productivity of our smelters that would be no.
Speaker Change: The best scenario for Neste My right.
Joel: On this view Joel.
Joel: Benefit more you've seen prices go up.
Joel: That is only Dc's golf right.
Yes, yes, as I was saying.
Joel: We already closed our thesis.
Joel: So we will have a lot of impact if they if the spot price improves we won't have a lot of impact. This year. However, we started negotiating and so as I was saying we have brief context. So we will start negotiating for next year and next year will be a net benefit.
Joel: But for this year, we will.
It mostly benefit for better prices okay.
Joel: Having said.
Joel: Carlos.
Joel: You'll see that we also produce a silver and copper.
Joel: The appraisal of <unk> today is at $33 and we produced 12 million ounces of silver.
Joel: And then <unk>.
Joel: Almost 30000 tonnes of copper on pretzel cooperating fully swap. So that is something that is going to help us mitigate these price levels of zinc that we have today.
Joel: In any case, we are concentrating our efforts on what we can control which is the operational.
Joel: The improvement of our minds, we are aware that this quarter was really bad.
Joel: We acknowledge that and we believe that we have the rest of the year to show the market that.
Joel: Most of our appraisals are going to improve on that one.
Joel: We have to wait for the <unk> field, but it still is going to improve because in the dry season.
Joel: This will perform as expected.
Joel: Thank you very much.
Joel: Okay, now I would like to turn the call over to the company for the written questions. Please go ahead.
Speaker Change: Thank you operator, so thank you. Thank you everybody for the questions. So I will start with a question actually it was a question from a Zika Braga from Morgan Stanley about the impacts on working capital, but I believe that it was already addressed by Jose Carlos and also about the production which will.
Speaker Change: Also addressed by Ignacio.
Speaker Change: The second question comes from Declan Hanlon from Santander and it's basically the first part of the question, which is in regards to the working capital was already answered and the second part is a student expectation to reverse reversing the majority of this working capital in the following quarters already out.
Speaker Change: Dress and the second part of the question is if the company can talk about the tariff risks.
Speaker Change: And how the company is managing the expectations over the build those risks and contingency plans that the company may have.
Speaker Change: If the scenario deteriorates.
Speaker Change: Okay.
Speaker Change: Yes, so about tariffs.
Speaker Change: As we have been saying this we're not exposed to <unk> in terms of zinc today.
Speaker Change: As I was saying most of our contracts already closed.
Speaker Change: And.
Speaker Change: The relationship we have with states is mainly through <unk> in Peru.
Speaker Change: Pedro.
Speaker Change: The U S has a play a 10% tariff on payroll, but there is an exception on zinc.
Speaker Change: The sync market in the U S is around.
Speaker Change: 1 million tons, they them on 1 million tons most of it comes from.
Speaker Change: Canada.
Speaker Change: Mexico, Okay, and we provide to states with almost 8% of what they demand. So we have noticed specced in.
Speaker Change:
Speaker Change: Our drop in our demand for.
Speaker Change: Our zinc there.
Speaker Change: Having said that we don't know what will happen, but the comment that I can make that is that.
Speaker Change: There is no recession this year in the U S. These 1 million tons of demand is going to be there.
Speaker Change: They will demand that they will have to pay more.
Speaker Change: Given that Mexico has been.
Speaker Change: It has a direct today on zinc I think I believe is 25% and Canada as well I don't see.
Speaker Change: American companies buying zinc from other parts of the worse.
Speaker Change: Because as I will say there is no single way lower.
Speaker Change: Most of the measures that as states put is hurting the customers in the U S.
Speaker Change: In terms of let's say a consumables at the mines. We don't have studies, we are not at all.
Speaker Change: We don't we don't import more most from the states.
Speaker Change: And we don't have <unk>. So so all the logistics chain hasnt been interrupted.
Speaker Change: So for this year, we are only tracking I would say expectations, which is something that is influencing the zinc price mainly.
Speaker Change: So far.
Speaker Change: There is resistance for the <unk> 2600, we'll see what happens next of the year and we are monitoring that monitoring that means that we want to accomplish our operational budgets, but we are aware of cash flow as well. So we will benefit from probably better prices.
Speaker Change: Silver and copper, but we will referred from prices, losing so the idea is we take measures to try to stabilize our cash flow and reached levels.
Speaker Change: That will help us with the leverage that <unk> has been explained so this is more or less what we do through the year. We keep control every two weeks of what is going on.
Speaker Change: We make sure that.
Speaker Change: Our mines are.
Speaker Change: <unk> always been drag on production cost and Capex. So this is the only thing we can do so we will see what happens in the in the coming.
Speaker Change: Months.
Speaker Change: And yes, yes, where we.
Speaker Change: We are aware of all of them.
Speaker Change: Yeah.
Speaker Change: Thank you. This concludes the question and answer session I would now like to hand, the call over to Mr. Ignacio Rosado for his closing remarks. Please go ahead Sir.
Ignacio Rosado: Okay. Thank you very much for attending the call.
Speaker Change: As I said before we are aware that we had.
Ignacio Rosado: Tough quarter in terms of our operations.
Ignacio Rosado: We are working on the measures to make sure that we recovered most of the production for the rest of the year.
Ignacio Rosado: We are also aware that we have a volatility.