Nexa Resources S.A. (NEXA) Q3 2026 earnings review
Nexa operating profit rises 62%, but smelter write-downs bring a loss
Higher metal prices and a fixed bottleneck in Brazil lifted cash profit for the Latin American zinc miner, while a smelter write-down pushed it into a net loss. Revenue grew 23% from a year ago, and operating cash profit excluding one-offs rose 62% as chief executive Ignacio Rosado reported 90% September plant use at the Aripuanã mine. However, the company booked a $124 million non-cash charge on its Brazilian smelting assets and raised its full-year capital budget to $420 million.
| Revenue | $937M +23% from a year ago |
|---|---|
| Adjusted EBITDA (cash operating profit) | $301M +62% from a year ago |
| Net debt to Adjusted EBITDA | 1.24x 1.40x in June |
| Full-year capital spending outlook | Raised 10% to $420M (production plans held) |
⚖️ Verdict: ⚪ Neutral
The standing case is unchanged because progress at Aripuanã and lower debt ratios were offset by higher capital spending, smelter cost pressure, and a credit downgrade tied to the Boliden buyout. S&P cut the miner to junk status ahead of Votorantim's stake sale, triggering a mandatory buyout offer on $111 million of bonds, while working capital and Peruvian tax disputes drained another $58 million of cash.
The question now is whether volume gains at Aripuanã and stored metal at Cajamarquilla can carry cash flow once the boost from rising metal prices fades. If fourth-quarter shipments convert into cash, debt will fall before the ownership change; if working capital stays tied up, higher capital spending will absorb the windfall. Fourth-quarter cash flow and the 2027 smelter fee talks will decide.
🐂 Bull Case
Aripuanã Filter Lifted Plant Use to 90%
Aripuanã, Nexa's newest underground polymetallic mine in Brazil, had been held back by bottlenecks in drying and stacking mining waste. In the second quarter, the company commissioned a fourth tailings filter that "removed the main constraint on Aripuanã’s processing capacity". In the third quarter, the new filter handled 61% of all filtered waste at the site and cut plant downtime to 346 hours from 404 hours.
- Treated ore volume: a record 471 thousand tonnes, up 18% from last quarter
- Average plant utilization: 84% in the quarter, reaching 90% in September
- Zinc output at Aripuanã: 13 thousand tonnes, up 48% from last quarter
- Mine cost per tonne of ore: $90.9, down 8.5% from last quarter
This matters because higher ore processing dilutes fixed costs and proves the mine can run near design capacity. To keep the plant full in 2027, chief executive Ignacio Rosado added $24 million to this year's capital budget to open more underground mining fronts at Aripuanã.
What to watch: copper and lead recovery rates at Aripuanã in the fourth quarter. Both fell to 63% this quarter as flotation circuits adjusted to faster processing, and a rebound would confirm that higher volume does not sacrifice metal yield.
Metal Prices Cut Net Debt to 1.24x EBITDA
"The third quarter marked another step forward in our performance," chief executive Ignacio Rosado said. Higher market prices for zinc, silver and copper lifted gross margin by 5.9 percentage points from a year ago, as the cost of making the products fell to 73.9% of sales from 79.8%. Adjusted EBITDA — operating cash profit excluding one-offs — rose 62% from a year ago to $301 million, or 32.1% of revenue.
Stronger cash profit pushed net debt down to 1.24 times trailing twelve-month Adjusted EBITDA, from 1.40 times in June and 2.21 times a year ago. In the mining unit, by-product sales and concentrate price adjustments covered all production expenses, dropping mining cash cost to negative $0.64 per pound of zinc. Management lowered its full-year mining cash cost forecast by $0.35 per pound at the middle of the range.
What to watch: fourth-quarter Adjusted EBITDA against last year's $300 million result. Because metal prices already jumped late last year, year-on-year profit growth will slow sharply unless output volumes rise as planned.
🐻 Bear Case
Boliden Buyout Triggers Credit Downgrade and Debt Offer
In August, controlling shareholder Votorantim signed a deal to sell its 64.68% stake in Nexa to Swedish miner Boliden, offering 0.250 new Boliden shares for each Nexa share. After the deal closes in the first quarter of 2027, Boliden will launch a cash offer for the remaining public shares based on the same exchange ratio.
Credit agencies reacted negatively because Nexa is losing Votorantim's backing. Fitch placed the miner on negative watch, citing "limited visibility on the ties between Nexa and its prospective controlling shareholder". On October 27, S&P cut Nexa's credit rating out of investment grade to BB+ from BBB-, stating that Boliden's relationship with Nexa is one category weaker than Votorantim's.
This downgrade carries an immediate financial cost. Under its bond rules, the rating cut forces the group to make "a change of control tender offer for the 2028 Notes at a price of 101% of their principal amount" within 30 days of closing, covering $111 million of debt.
What to watch: Fitch's rating review upon deal closing in the first quarter of 2027. A downgrade by Fitch would trigger mandatory buyout offers on Nexa's 2034 and 2037 bonds as well.
Smelting Write-Down Exposes Cost and Concentrate Squeeze
Nexa argues that its combined mining and smelting setup protects profit when zinc ore is scarce, because mining gains offset smelter pressure. Yet in the third quarter, the group booked a $124 million non-cash impairment loss, including $118 million on its Juiz de Fora and Três Marias smelting and mining units in Brazil, which pushed the company into a $47 million net loss.
- Chinese spot treatment charges (fees miners pay smelters to refine ore): negative $236 per tonne, worse than negative $109 in June
- Smelting cash cost: $1.65 per pound in Q3, up 25% from a year ago
- Full-year smelting cash cost plan: raised 22% at the middle of the range, to $1.41–$1.62 per pound
- Full-year capital spending plan: raised 10% to $420 million
The write-down contradicts the claim that integration solves the smelter squeeze. Nexa wrote down the Brazilian plants because of "lower long-term TC assumptions reflecting a tighter zinc concentrate market", a stronger Brazilian real, and higher maintenance spending. Because the company buys half of its smelter feed from outside miners, high zinc prices and low refining fees directly raise its raw material bill.
What to watch: the 2027 annual benchmark treatment charge negotiation in the first quarter. Industry participants at LME Week expected benchmark fees to fall again from 2026's $85 per tonne, which would keep independent smelting margins compressed.
Stockpiling and Tax Disputes Drained Operating Cash
Chief executive Ignacio Rosado listed "operating safely, maximizing free cash flow, reducing gross debt, and creating long-term value" as the company's clear priorities. However, working capital and other asset changes consumed $58 million of cash in the third quarter and $423 million over the first nine months, holding third-quarter free cash flow to $73 million despite $306 million of pre-working-capital operating cash flow.
Inventory rose by $85 million as the Peruvian smelter Cajamarquilla had shipments in transit to North America and Europe and "built strategic zinc concentrate inventories to support smelter continuity" ahead of El Niño rains. In addition, the company paid another $16.7 million to Peru's tax authority SUNAT in August to "preserve the admissibility of its appeal before the Tax Court", bringing total contested tax cash paid to $235 million, with $98 million of installments still to go.
What to watch: working capital cash flow in the fourth quarter. Management expects delayed overseas shipments from Cajamarquilla to turn into sales and cash collections before year-end.
Copper Output Dropped 30% on Lower Grades
While market copper prices jumped 44% from a year ago to a record in September, Nexa produced much less of the metal to sell into the rally. Consolidated copper output fell 30% from a year ago and 4% from last quarter to 6.0 thousand tonnes, as mining at Cerro Lindo and Aripuanã moved through zones with lower copper concentration.
Through nine months, copper output of 18.7 thousand tonnes is down 26% from last year and sits at 67% of the middle of the full-year plan. The company kept its 26 to 30 thousand tonne target range but warned that copper output will finish toward the bottom of that range. By our math, even hitting the 26 thousand tonne floor requires fourth-quarter output to jump 22% from the third quarter.
What to watch: fourth-quarter copper grades at Cerro Lindo. The mine plan calls for sequencing to return to richer copper zones while a new block-caving mining sector ramps up.
👓 Other Themes
El Niño Preparations and Cerro Pasco Permitting
Weather agencies forecast a strong El Niño through early 2027, bringing flood risks to Peru and drought risks to Brazil. The weather caused no disruption in the third quarter, and 100% of Peruvian power is contracted for 2027. Separately, environmental permit approvals for the Cerro Pasco integration project are now expected in March and April 2027 rather than the first quarter, though waste pumping is still set for the third quarter of 2027.
💲 Other KPIs
Smelting sales rose 28.7% from a year ago and 19.2% from last quarter as the Cajamarquilla plant in Peru recovered from a May fire and processed stockpiled material. Segment operating cash profit excluding one-offs nearly tripled from a year ago to $65.0 million, helped by higher sulfuric acid and silver by-product sales.
Cash generated from operations before inventory and receivable swings grew 50% from a year ago and 7% from last quarter. Over the first nine months, this measure reached $900.5 million, up 65% from last year on higher zinc, silver and copper prices, before working capital and tax payments absorbed most of the gain.
Cash and short-term investments rose 7% from June after falling in the first half, though the balance remains 12% below a year ago. Gross debt stayed flat from last quarter at $1,752.5 million, with an average maturity of 6.8 years and an average interest cost that rose to 6.70% from 6.22% in June.
🔮 Guidance
Raised. The company increased its full-year capital spending budget by $39 million, or 10%, after holding it steady for two quarters. The extra money goes to faster underground development at Aripuanã (+$24 million), pulling forward work on the Cerro Pasco tailings pipe (+$10 million), and a stronger Brazilian real. By our math, that leaves $148 million to spend in the fourth quarter, up 18% from a year ago.
Cut. Management lowered its mining cash cost forecast by $0.35 per pound at the middle of the range because silver, gold and copper by-product credits are much higher than assumed in February. Nine-month actual costs averaged negative $0.45 per pound. By our math, the middle of the new range implies fourth-quarter cash cost of negative $0.13 per pound, compared with negative $0.64 in the third quarter.
Raised. The smelter cash cost plan moved up 22% at the middle of the range because Nexa raised its full-year zinc price assumption by 26% to $1.62 per pound, which increases the cost of buying zinc ore, alongside a stronger Brazilian real. Nine-month costs averaged $1.50 per pound, and by our math the plan points to $1.56 per pound in the fourth quarter.
Raised. The cost of converting concentrate into metal (excluding raw material cost) rose 5% at the middle of the range, driven by a 15% increase at the Três Marias smelter in Brazil from currency strength and fixed expenses. Nine-month conversion cost stood at $0.35 per pound. By our math, hitting the $0.34 midpoint requires fourth-quarter costs to drop to $0.31 per pound as Cajamarquilla sells stored inventory.
Raised. Direct mining cost per tonne of ore treated moved up 1% at the middle of the range to $54.0 per tonne, reflecting a 6% hike at Aripuanã and currency pressure in Brazil. Nine-month costs averaged $55.7 per tonne after improving to $54.1 in the third quarter. By our math, the middle of the range implies $48.9 per tonne in the fourth quarter, so full-year costs will likely finish near the top end.
Unchanged. The plan calls for 335 thousand tonnes of mined zinc at the middle of the range, up 6% from 2025. Nine-month output reached 244 thousand tonnes, or 73% of the target. By our math, the middle of the range leaves 91.4 thousand tonnes for the fourth quarter, up 8% from the third quarter and flat against last year's fourth quarter.
Unchanged. Management kept the 26 to 30 thousand tonne range but said output will land toward the bottom end after lower grades cut nine-month production to 18.7 thousand tonnes. By our math, the 28 thousand tonne midpoint requires 9.3 thousand tonnes in the fourth quarter (+15% from a year ago), and even the 26 thousand tonne floor requires 7.3 thousand tonnes (+22% from the third quarter).
Unchanged. Lead output reached 48.9 thousand tonnes in the first nine months, or 77% of the 63.5 thousand tonne midpoint. By our math, that leaves 14.6 thousand tonnes for the fourth quarter to hit the middle of the range, which is 20% below third-quarter production and 17% below a year ago, putting the target well within reach.
Unchanged. Nine-month silver output totaled 8.0 million ounces, or 75% of the 10.5 million ounce midpoint. By our math, the middle of the range leaves 2.5 million ounces for the fourth quarter, down 14% from both the third quarter and a year ago, as Peruvian mines expect higher silver grades in the final three months.
Unchanged. Total refined zinc metal and oxide sales reached 428 thousand tonnes in the first nine months, or 73% of the 585 thousand tonne midpoint, with oxide sales expected near the low end of their 35 to 40 thousand tonne sub-range. By our math, the midpoint requires 157.4 thousand tonnes in the fourth quarter, up 8% from the third quarter and 11% from a year ago, supported by shipments currently in transit.
Unchanged. The company spent $53 million in the first nine months, or 62% of the $86 million annual budget, alongside $8 million of the $16 million budget for technology and community work. By our math, that leaves $33 million of exploration and project spending for the fourth quarter, up from $21 million in the third quarter.
❓ Key Questions
How much cash did the Cerro Lindo silver step-down add?
The streamed share of Cerro Lindo silver dropped from 65% to 25% in May, making the third quarter the first full period under the lower rate. Management booked a $51 million non-cash remeasurement charge on the contract but did not disclose the actual dollar cash gain.
How will Nexa fund the $111 million 2028 bond tender?
S&P's downgrade to BB+ requires the company to offer to buy back its 2028 Notes at 101% of face value within 30 days of the Boliden deal closing. Investors need to know if Nexa will use cash on hand or new credit lines.
Will the $85 million third-quarter inventory build reverse in Q4?
Working capital drained $423 million in the first nine months, including an $85 million third-quarter inventory jump from delayed overseas shipments at Cajamarquilla and El Niño concentrate stockpiling. How much of that inventory turns back into cash in the fourth quarter?
Is the year-end target of 1.0x net leverage still in place?
Last quarter, management targeted year-end net debt at roughly 1.0 times Adjusted EBITDA. The third-quarter release did not repeat that figure, and raising the capital budget by $39 million while lapping a $300 million fourth-quarter EBITDA from last year makes further drops harder.