Nexa Resources S.A. NEXA has sold its stake in Minera Pampa de Cobre S.A.C., transferring its rights and interests in the Chapi copper mine to Quilla Resources Peru S.A.C. This move aligns with NEXA’s ongoing portfolio optimization strategy to improve its free cash flow and returns by focusing on its productive mines.
Nexa Resources had ceased operations on the Chapi mine in 2013 and had placed it under care and maintenance. The mine had been a financial burden for NEXA due to ongoing maintenance costs. Quilla plans to resume operations at the Chapi mine, which has an annual production capacity of approximately 10kt of copper. It will be responsible for executing the future mine closure, including any environmental liabilities or obligations.
NEXA to Receive Milestone-Driven Payments for Chapi
Nexa Resources received $1 million in cash from Quilla. It will receive another $4 million after the commencement of commercial production. The company will also receive contingent payments totaling up to $11 million if the average copper price exceeds certain thresholds and the mine achieves certain production milestones, and an NSR royalty on minerals produced from the Chapi mine.
NEXA’s Ongoing Efforts to Drive Growth
Nexa Resources is a large-scale, low-cost, integrated zinc producer with more than six decades of experience in developing and operating mining and smelting assets in Latin America. It currently owns and operates five long-life mines, three located in the central Andes region of Peru and two in Brazil. Nexa Resources also owns and operates three smelters.
Nexa Resources continues to invest in maintaining and expanding existing brownfield operations and developing greenfield projects to sustain and extend the life of its existing mines to increase production.
In the mining industry, a greenfield project refers to the exploration and development of mineral reserves in areas where no mining activities have been conducted previously. The evolution of a greenfield project can take decades to reach full capacity and is capital-intensive. The steps through the whole process are pre-feasibility, feasibility study, construction/execution, commissioning, ramp-up and full/normal capacity.
Over the past few years, NEXA has been reviewing its assets and optimizing its portfolio per its disciplined capital allocation plan. In 2022, the company decided not to progress on the Pukaqaqa and the Shalipavco greenfield projects. NEXA has interests in three greenfield projects in Peru (Magistral, Hilarión and Florida Canyon Zinc) and one in Namibia, as well as several prospects in Peru, Brazil and Namibia. Magistral is currently under review and both Hilarión and Florida Canyon Zinc are in the exploration phase. Aripuanã is the only greenfield project that NEXA has built in recent decades and is in the ramp-up stage.
In sync with its optimization efforts, in July 2024, Nexa Resources sold the Morro Agudo Complex in Brazil's Minas Gerais state, which consisted of the Morro Agudo mine and the Ambrósia mine. The total purchase price of the deal was set at R$80 million (around $16 million).
In September, NEXA announced the deal to sell the Chapi mine to Quilla. In November, the company completed the sale of the Pukaqaqa Project located in the Huancavelica region of Peru. Nexa Resources received an initial payment of $0.3 million in cash. It will receive another $1 million within 12 months and $3 million after 48 months. The company will also receive contingent payments totaling $25 million, payable in cash in three installments. This is, however, subject to the project achieving certain milestones in its development.
Nexa Resources will continue to focus on improving Aripuanã’s performance and developing the Cerro Pasco Integration Project while also extending the life of its existing mines.
Nexa Resources Stock Price Performance
Nexa Resources’ shares have gained 17.9% in the past year against the miscellaneous mining industry's 21.7% decline.
Image Source: Zacks Investment Research
NEXA’s Zacks Rank & Stocks to Consider
Nexa Resources currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation CRS, New Gold NGD and Fortuna Mining Corp. FSM. CRS currently sports a Zacks Rank #1 (Strong Buy) and NGD and FSM carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has an average trailing four-quarter earnings surprise of 14.1%. The Zacks Consensus Estimate for CRS’ fiscal 2025 earnings indicates 42% year-over-year growth. Its shares have gained 138% in the last year.
New Gold has an average trailing four-quarter earnings surprise of 37.50%. The Zacks Consensus Estimate for NGD’s 2024 earnings indicates 17% growth from the prior year. Its shares have gained 65% in the past year.
The Zacks Consensus Estimate for Fortuna Mining’s 2024 bottom line indicates year-over-year growth of 118%. The company has a trailing four-quarter earnings surprise of 53.6%, on average. FSM’s shares gained 10% in the last year.
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