Why were smelter costs running ahead of guidance in H1, and can they recover in H2? What is the current general inflation rate versus budget, and the outlook for 2027?

Smelter costs were impacted by the Cajamarquilla fire (reduced throughput) and Brazilian real appreciation. Management expects costs to return to guidance in H2 due to full capacity production and cost control. Inflation is driven by labor (40% of costs) and higher maintenance, but the company is committed to keeping unit costs flat for 2027 through mitigation efforts. “So in the second half, given that all of our smelters are going to produce at full capacity and Cajamarquilla is going to recover all the metal that we can, because we have an inventory of cathodes as -- and only, it's a matter of processing them. That's why with the cost control initiatives that we have and the throughputs going up, we are expecting to be in guidance.”

Does the current ownership situation impact M&A views? With debt reducing, is there more immediacy for M&A, or is the focus still on internal growth and deleveraging?

The company's capital allocation priorities are extending mine life and advancing early-stage projects. While actively looking for opportunities, current net debt makes large transformational acquisitions ($800M-$1B) difficult. Deleveraging over the next 3-4 years will align with a more aggressive acquisition strategy. The focus remains on internal growth and conservative assessment of external opportunities. “So today, it's not something that is doable. Going forward, with these projections on our cash flow generation for the next 3 to 4 years, our deleverage is going to go down significantly, and that will match with our acquisition strategy.”

Now that the fourth tailings filter is installed, what are the expected run rate and capacity utilization for Aripuana for the rest of 2026 and 2027 onwards?

After the filter implementation, Aripuana is reaching 260 tonnes per hour, very close to nameplate capacity. The plant is undergoing a 2-3 month adjustment period to the new throughput, after which full capacity is expected. Management is confident in achieving full capacity in the coming months, leading to significant cash flow generation. “So we are now reaching 260 tonnes per hour, which is very close to the nameplate capacity. So the expectation that we have is that in the coming months, we adjust operational parameters and the team learns how to operate at a different level so that you can reach the numbers that you have planned since the beginning of the year.”

NEXA

Nexa Resources (NEXA) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Materials· Aug 6, 2026

Source: earnings call transcript

Executive summary

Nexa Resources Q2 FY26 — Operational Inflection and Strong Financial Performance

Nexa Resources demonstrated a significant operational inflection in Q2 FY26, driven by a constructive metal price environment and recovery in Peruvian mining operations. Despite a fire at Cajamarquilla and a substantial tax settlement payment impacting free cash flow, the company achieved strong EBITDA growth and continued deleveraging. Key operational milestones, including the Aripuana tailings filter and Cerro Lindo's block caving, position Nexa for increased production and efficiency in the second half of the year, with management committed to meeting full-year guidance.

Highlights

Adjusted EBITDA grew 78% year-over-year to $286 million with a 31% margin.
Net income reached $98 million, or $0.52 per share.
Net leverage continued to decrease, closing the quarter at 1.4x, down from 2.28x a year ago.
The fourth tailings filter at Aripuana is now fully operational, removing a key bottleneck.
Implemented the block caving mining method at Cerro Lindo, expected to lower unit costs and access higher grades.

Concerns

Free cash flow was slightly negative at $10 million, mainly due to a $131 million tax settlement payment in Peru.
Smelting zinc metal and oxide sales decreased 7% year-over-year and 8% quarter-over-quarter, impacted by a fire at Cajamarquilla.
Smelting cash cost net of byproducts was $1.44 per pound, above the upper end of annual guidance.
Smelting conversion cost was $0.36 per pound, slightly above guidance due to lower volumes at Cajamarquilla.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 CapEx	$381 million high materiality	FY26 · 2026	High
Full-year 2026 Exploration and Project Evaluation	$86 million medium materiality	FY26 · 2026	High
Net leverage	close to 1x high materiality	Year-end · 2026	High
Smelting sales volume	unchanged medium materiality	FY26 · 2026	High
Mining production	unchanged medium materiality	FY26 · 2026	High
Smelting cash cost net of byproducts	move back towards the guidance range medium materiality	H2 FY26 · 2026	Medium
Smelting conversion cost	move back towards the guidance range medium materiality	H2 FY26 · 2026	Medium
Unit costs	flat medium materiality	FY27 · 2027	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Mining Strong financial picture driven by higher metal prices and increased volumes. Year-over-year zinc production increase from better ore grades across key assets. Cash cost well below guidance due to strong byproduct credits and lower treatment charges. Zinc production: 79,000 tonnes (+8% YoY)Cash cost net of byproducts: $0.04/lbCost per tonne of run-of-mine: $57/tonne	$524 million	—	—	42% EBITDA margin
Smelting Sales impacted by the Cajamarquilla fire, but partially offset by higher volumes at Brazilian smelters. Strong financial performance despite lower volumes, driven by lower raw material costs and a stronger byproduct contribution. Costs were above guidance due to higher zinc LME prices and temporary operating costs. Zinc metal and oxide sales: 134,000 tonnes (-7% YoY, -8% QoQ)Cash cost net of byproducts: $1.44/lbConversion cost: $0.36/lbSulfuric acid sales: +4% YoYSilver content sales: +22% YoYCopper cement sales: +40% YoY	$584 million	—	—	11% EBITDA margin

Capital programs

Cerro Pasco Integration Project Phase 1 underway $180 million

Period spend: $9 million

Spent to date: $17 million (H1 FY26)

Benefit:Sustain production longer from Atacocha open pit; derisks project and strengthens integrated position

Total estimated investment revised from $138 million to $180 million. Q2 spend was $9 million, H1 spend was $17 million. Incorporates geomembrane lining and anticipates Atacocha TSF raise. Phase 2 deferred to 2032. Expect MEIA approval and operating authorization process in Q1 2027.

Risks & headwinds

Cajamarquilla fire Q2 FY26

Smelting sales down 7% YoY and 8% QoQ; temporary higher operating costs

Mitigation:Continued cathode production during incident; activities resumed gradually and returned to normal levels in June; expect to recover affected volume in H2 FY26 using cathode inventory.

Tax settlement payment Q2 FY26

$131 million payment; free cash flow negative $10 million (including payment)

Mitigation:Payment made to preserve legal right to dispute assessments in Peruvian judicial system; secured reductions in penalties and interest; company believes in strong basis for recovering disputed amounts.

El Nino phenomenon Q4 FY26 onwards

Potential for heavy rains impacting operations (roads, consumables, concentrate delivery)

Mitigation:Company has experience managing such events; putting measures in place to prevent business interruptions; do not expect a lot of impact this year based on current scenarios.

Smelter margins compression Q2 FY26

Spot treatment charges in China fell to -$109 per tonne

Mitigation:Byproducts (especially sulfuric acid) cushion the pressure; well positioned as a net producer of sulfuric acid.

Inflationary pressures Ongoing

Higher labor costs (almost 40% of total costs); higher maintenance costs

Mitigation:Implementing initiatives to offset impact (reducing people, renegotiating long-term contracts); committed to keeping unit costs flat for 2027.

FX impact (Brazilian real appreciation) Q2 FY26

Increased cost in dollar terms for Brazilian mines and smelters

Mitigation:Implementing measures to mitigate inflation in reais; committed to keeping unit costs flat for 2027.

What to watch in Q3 FY26

Aripuana full production capacity

next 2-3 months

Current 71% plant utilization (Q2 avg), 86% (June avg), 249 tonnes/hour feed rate (June)

Target Full capacity

Why it matters

Unlocking full production capacity at Aripuana is a key pillar of long-term cash flow generation strategy.

So you will see that this step-up on full capacity will happen only in the next 2 or 3 months. However, we know what we are doing, and we know that full capacity is coming.

Find out whether NEXA delivers this. Inve re-checks your case every morning.

Q&A highlights

Given H1 production for other metals (copper, silver, lead) was at the lower end of guidance, what is the expectation for H2 to reach midpoint or higher? Also, what is the timeline for gross debt payments now that leverage is lower?

Management expects to increase production in H2 for both mining and smelting to meet unchanged full-year guidance, recovering from H1 setbacks and the Cajamarquilla fire. For gross debt, the priority remains reduction, using excess cash after dividends, but a precise timeline is difficult to provide due to market factors.

“So we expect -- it's hard to say if this is going to be midpoint or lower end, but we are confident that we're going to be able to keep increasing production in the second half and try to maximize production as much as we can.”

asked by Pedro Mello · answered by Rodrigo Cammarosano

3 min read 7 chapters

Detailed narrative

Operational Inflection and Financial Performance

Nexa Resources achieved a significant operational inflection in Q2 FY26, with Adjusted EBITDA growing 78% year-over-year to $286 million, representing a 31% margin. Net income was $98 million, or $0.52 per share. This performance was supported by a constructive metal price environment, particularly for silver (up 117% YoY), and the recovery of production at Peruvian mines.

Net leverage continued its downward trend, reaching 1.4x, a substantial improvement from 2.28x a year ago, underpinned by over $1 billion in LTM adjusted EBITDA.

Mining Operations and Costs

Zinc production from mining operations reached 79,000 tonnes, an 8% increase year-over-year, driven by better ore grades across key assets. Cash cost net of byproducts was $0.04 per pound in Q2, resulting in -$0.35 per pound for the first half, well below the 2026 guidance range.

This was primarily due to strong byproduct credits from higher copper, silver, and gold prices, as well as lower treatment charges. Cost per tonne of run-of-mine was $57 per tonne for both the quarter and the first half, in line with full-year guidance, despite higher personnel and maintenance costs and Brazilian real appreciation.

Aripuana Ramp-up and Milestones

Aripuana delivered strong year-over-year performance, with treated ore up 33% to 399,000 tonnes and zinc production up 44% to 8,800 tonnes. A key milestone was the commissioning of the fourth tailings filter, which processed over 50,000 tonnes of tailings and supported average plant feed rates of 249 tonnes per hour in June, achieving 86% capacity utilization.

This new capacity is expected to enable higher throughput and increased production in the second half of the year, reducing exposure to weather disruptions. Exploration efforts focused on infill drilling in H1, with a geophysical program planned for H2 to identify new opportunities.

Cerro Pasco Integration Project Update

The Cerro Pasco Integration Project underwent a scope review, increasing the total estimated investment from $138 million to $180 million for Phase 1, with incremental investments allocated to 2027 and beyond. This revision incorporates a geomembrane lining and anticipates the Atacocha tailings storage facility raise.

Phase 2 has been deferred to 2032, as the Atacocha open pit mine is now expected to remain in operation longer due to a more favorable metal price environment. Mechanical completion of the pumping system is expected in December 2026, with operating authorization processes starting in Q1 2027.

Smelting Performance and Costs

Smelting zinc metal and oxide sales totaled 134,000 tonnes, down 7% year-over-year and 8% quarter-over-quarter, primarily due to a fire at Cajamarquilla in May. However, the company continued producing cathodes and expects to recover lost volume in the second half.

Byproducts significantly contributed to the segment, with sulfuric acid sales up 4%, silver content sales up 22%, and copper cement sales up 40% year-over-year. Cash cost net of byproducts was $1.44 per pound in Q2, above guidance, reflecting higher zinc LME prices impacting raw material costs and temporary higher operating costs at Cajamarquilla.

Liquidity and Capital Allocation

Nexa maintains a healthy liquidity position with $707 million in total liquidity, including an undrawn $320 million sustainability-linked revolving credit facility. Cash on hand covers financial commitments for the next three years, and the average debt maturity stands at seven years with an average cost of debt of 6.22%.

The company remains committed to disciplined deleveraging, targeting net leverage close to 1x by year-end 2026, while prioritizing gross debt reduction and extending the life of existing mines through capital allocation.

Market Fundamentals and ESG Priorities

Zinc prices remained strong, averaging $3,466 per tonne (up 31% YoY), supported by tight fundamentals and geopolitical risk, though smelter margins were compressed by negative spot treatment charges. Copper prices averaged $13,329 per tonne (up 40% YoY), driven by tight fundamentals and electrification expectations.

Precious metals, particularly silver ($73/ounce, more than double YoY), provided diversification and strong byproduct credits. Nexa continues to advance ESG priorities, including strengthening safety controls, investing in communities, deploying AI in operations, and reinforcing risk management and tailings management practices.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.