Nexa Resources S.A. — FY 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; filed March 20, 2023. This is an annual report, not a standalone Q4 report, and the supplied filing text does not provide clear Q4-only financial results. Financial statements are audited and prepared under IFRS as issued by the IASB.
Business context and key results
Nexa is an integrated zinc miner and smelter operating mines and smelters in Peru and Brazil. Aripuanã began ramp-up in July 2022 and sold concentrates meeting market specifications in Q4. The company reported strong operating performance overall, but higher costs and weaker zinc grades pressured profitability.
| Metric | FY 2022 | FY 2021 | Change / context |
|---|---|---|---|
| Net revenue | US$3,034.0 million | US$2,622.1 million | Up 15.7%, mainly from higher zinc prices |
| Gross profit / margin | US$638.8 million / 21.1% | US$633.1 million / 24.1% | Profit nearly flat; margin contracted |
| Operating income / margin | US$359.2 million / 11.8% | US$446.2 million / 17.0% | Down 19.5% |
| Net income | US$76.4 million | US$156.1 million | Down 51.1%; EPS US$0.37 vs. US$0.86 |
| Adjusted EBITDA | US$760.3 million | US$743.8 million | Up 2.2%; adjusted EBITDA margin 25.1% vs. 28.4% |
| Net cash from operating activities | US$266.6 million | US$493.0 million | Down 45.9%, reflecting working capital and income-tax payments |
| Capital expenditures | US$381.2 million | US$507.9 million | Down 24.9%, primarily as Aripuanã construction neared completion |
| Cash and cash equivalents at year-end | US$497.8 million | US$743.8 million | Down US$246.0 million |
| Debt / net debt | US$1,669.3 million / US$1,161.0 million | US$1,699.3 million / US$962.5 million | Net debt/Adjusted EBITDA 1.53x vs. 1.29x |
Operating performance and changes versus prior year
- Mining production totaled 495.7 thousand tonnes zinc-equivalent, essentially flat year over year. Zinc in concentrate fell 7.3% to 296.4 thousand tonnes, while copper, lead and silver production increased.
- Refined zinc and zinc oxide sales totaled 616.2 thousand tonnes, down 0.4%. Smelter output was affected by lower concentrate availability following flooding at Vazante early in 2022.
- Higher zinc prices lifted revenue, but cost of sales rose 20.4% to US$2,395.2 million, driven mainly by higher volumes and prices of purchased zinc concentrates, energy and other operating costs.
- Mining segment Adjusted EBITDA declined to US$439.8 million from US$476.9 million; smelting segment Adjusted EBITDA rose to US$326.4 million from US$270.9 million.
- Management revised its Adjusted EBITDA definition in December 2022 and recast comparative figures. This non-IFRS measure is not a substitute for IFRS profit or cash flow.
Liquidity, debt and unusual items
- Cash from operations was more than offset by investing cash outflow of US$378.9 million and financing cash outflow of US$149.2 million. Investing included property, plant and equipment additions and investment in Tinka; financing included debt payments, early redemption of 2023 notes and distributions.
- Only US$50.8 million of debt was current at year-end; management reported covenant compliance. The US$300 million revolving credit facility was undrawn and matures October 2024. Most outstanding debt matures in or after 2027.
- FY 2022 net impairment loss on long-lived assets was US$32.5 million: a US$79.5 million reversal in Cerro Pasco was offset by goodwill and other asset impairments, including write-downs related to discontinued Shalipayco and Pukaqaqa projects.
- The Aripuanã copper-concentrate offtake agreement generated a US$24.3 million non-cash fair-value gain. Aripuanã pre-operating and ramp-up impacts were US$87.5 million in the Adjusted EBITDA reconciliation.
- Legal and administrative claims classified as probable or possible totaled US$305.6 million; the recorded net provision for probable losses was US$43.9 million. Separately, the company disclosed US$349.3 million of uncertain income-tax positions for which it concluded a loss was not probable and recorded no provision.
- Distributions paid in 2022 totaled US$50 million. A further US$25 million share-premium distribution was approved in February 2023 for payment in March 2023.
Outlook, risks and management commentary
- For 2023, management guided to zinc-in-concentrate production of 307–351 thousand tonnes, copper of 31–36 thousand tonnes, lead of 56–71 thousand tonnes, and silver of 9–11 million ounces. Aripuanã was expected to reach nameplate capacity in the second half of 2023.
- 2023 sales guidance was 545–565 thousand tonnes of metallic zinc and 35–40 thousand tonnes of zinc oxide. Estimated 2023 capital expenditures were US$310 million; planned exploration and project-evaluation expenses were US$110 million.
- Management estimated 2023 mining cash cost, net of by-product credits, at US$0.49–$0.54 per pound of zinc sold, excluding Aripuanã during ramp-up; smelting cash cost at US$1.13–$1.18 per pound. These are non-IFRS estimates.
- After year-end, heavy rainfall suspended Cerro Lindo production in March 2023. At the filing date, restart timing and the impact on 2023 guidance were uncertain. Atacocha also experienced community blockades and a temporary suspension in January 2023.
- Key risks include volatile metal prices, inflation and foreign exchange movements, energy and concentrate supply, water availability, mine ramp-up and project execution, tailings and environmental obligations, labor and community disputes, and changes in Brazilian and Peruvian regulation or taxation. Three 2022 fatalities at El Porvenir and Cajamarquilla were under investigation; their work-related status had not been established in the filing.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Impairment testing was identified as a critical audit matter because it relied on significant judgments about metal prices, discount rates and projected cash flows.
Important facts for investors to verify
- Check Q4-specific results separately: this annual filing’s reported financial metrics are full-year figures.
- Track Cerro Lindo’s restart, subsequent production and any revisions to 2023 guidance.
- Assess Aripuanã’s ramp-up, operating costs, inventory valuation and progress toward nameplate capacity.
- Review cash conversion and working-capital trends, capital spending, debt maturities and the assumptions behind Adjusted EBITDA and net debt.
- Monitor the uncertain tax matters, legal provisions, community disputes, fatality investigations and permitting or tailings-dam requirements.