20-F: Nexa Resources Reports 2025 Net Income Reversal Amid Higher Metal Prices

Nexa Resources S.A. reported a net income of $223.1 million in 2025, reversing a net loss from the prior year, driven by higher metal prices despite decreased mining and smelting production volumes.

Summary

• Net income of US$223.1 million in 2025, a significant improvement from a net loss of US$187.4 million in 2024.
• Net revenues increased by 8.5% to US$3,002.1 million in 2025, primarily due to higher metal prices.
• Mining production decreased by 4.6% on a zinc equivalent basis to 672.4 thousand tonnes in 2025.
• Total smelting production (zinc metal + oxide) decreased by 5.1% to 564.4 thousand tonnes in 2025.
• Adjusted EBITDA increased by 8.1% to US$771.9 million in 2025.
• Capital expenditures totaled US$351.9 million in 2025, a 27.1% increase from 2024.
• Consolidated Mineral Reserves increased by 4.4% in mass to 115.1 Mt but decreased by 0.7% in zinc content.
• Consolidated Measured and Indicated Mineral Resources decreased by 11.8% in mass and 5.3% in zinc content.
• Consolidated Inferred Mineral Resources increased by 2.9% in mass but decreased by 3.6% in zinc content.
• Aripuan mine achieved 76% average capacity utilization in Q4 2025, with full operational capacity expected in H2 2026.
• Cerro Pasco Integration Project (Phase I) construction began in July 2025, with commissioning expected in 2026.
• Divestment of Otavi Project in Namibia completed for US$3.0 million upfront, plus up to US$7.0 million in contingent payments.
• Implemented a silver and gold revenue hedge strategy for Peruvian mining operations in 2026.
• The Board of Directors proposed a share premium reimbursement of US$17.5 million (US$0.132136 per share) for 2025.
• Net Debt to Adjusted EBITDA ratio improved slightly to 1.69 in 2025 from 1.70 in 2024.
• Successfully obtained a waiver from BNDES for the capitalization ratio covenant for fiscal year 2025, replacing it with a minimum corporate credit rating requirement.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, primarily driven by a significant turnaround to net income and strong revenue growth, despite some operational challenges and project delays. The company's strategic debt refinancing and ESG progress are also favorable.

Positives

• Net income of US$223.1 million in 2025, reversing a net loss of US$187.4 million in 2024.
• Net revenues increased by 8.5% to US$3,002.1 million, driven by higher metal prices.
• Adjusted EBITDA increased by 8.1% to US$771.9 million.
• Higher prices of silver and gold positively impacted net revenues by approximately US$175.1 million.
• Average LME zinc price increased by 3.3% to US$2,869.7 per tonne.
• Average LME copper price increased by 8.7% to US$9,944.9 per tonne.
• Decline in benchmark treatment charges from US$165 to US$80 per dry metric tonne benefited mining segment revenue.
• Aripuan mine achieved 76% average capacity utilization in Q4 2025, showing consistent improvement.
• Cerro Pasco Integration Project (Phase I) construction is on track for commissioning in 2026.
• Divestment of Otavi Project for US$3.0 million upfront, plus up to US$7.0 million in contingent payments, optimizing portfolio.
• Implemented a silver and gold revenue hedge strategy to reduce price exposure and protect operating margins in 2026.
• Net Debt to Adjusted EBITDA ratio improved to 1.69 from 1.70.
• Successfully obtained a waiver from BNDES for the capitalization ratio covenant for fiscal year 2025.
• Electricity matrix is almost entirely based on renewable sources (98.4% in 2025).
• TRIFR declined to 1.57 in 2025 from 2.36 in 2024, approaching the first-quartile ICMM benchmark.
• Scope 1 emissions decreased by 7.1% versus 2024 and 23.7% versus the updated 2020 baseline.
• Emissions intensity stood at 0.37 tCOe/tZn, a 20.8% reduction against the 2020 baseline.
• Water recirculation rate was 83.5% in 2025.
• Três Marias unit achieved 74.6% average filtration rate for tailings material in 2025, reaching 98.7% in December 2025.
• Geotechnical Monitoring Center (GMC) inaugurated at Três Marias unit.
• All Brazilian tailings dams received Stability Condition Declarations (DCEs) in 2025.
• Magistral MEIA rejection acknowledged as force majeure by Peruvian government, suspending investment commitment deadline and potential penalty.
• Peruvian Tax Court declared nullity of SUNAT's tax stability assessment for 2016 and 2017 for Atacocha, ordering cases back to audit phase.

Negatives

• Mining production decreased by 4.6% in 2025, mainly due to lower volumes across all metals except gold.
• Total smelting production decreased by 5.1% in 2025.
• Lower smelting sales volume reduced net revenues by approximately US$67.5 million.
• Lower sales volume of copper and lead negatively impacted net revenues by approximately US$32.6 million.
• Smelting cost of sales increased 9.7% due to significantly lower treatment charges, raising raw material costs.
• Two fatalities recorded at El Porvenir in 2025, following three fatalities in 2024.
• Zero-fatality commitment not met in 2024 or 2025.
• Aripuan mine still faces tailings filtration constraints, requiring installation of a fourth filter.
• Magistral Project's MEIA was rejected by SENACE in May 2024, resulting in a US$58.4 million impairment charge in 2024.
• Peruvian Constitutional Court determined the prohibition to outsource core activities is constitutional, making a favorable outcome in the company's lawsuit remote.
• Ongoing tax-related discussions with SUNAT regarding Cerro Lindo stability agreement, with unfavorable tax court decisions for 2014 and 2015.
• Cajamarquilla received a new tax assessment for fiscal year 2018 (US$31.2 million) and a decision for 2017, leading to payments of US$18.3 million and US$24.0 million respectively, without acknowledging liability.
• Net cash flow used in financing activities was US$185.3 million in 2025, compared to US$62.4 million provided in 2024.
• Cash and cash equivalents decreased by US$104.6 million in 2025.
• Other income and expenses, net negatively impacted results by US$79.5 million, mainly due to a non-cash accumulated loss of US$49.3 million from the Aripuan copper concentrate offtake agreement.
• Financial expenses increased by 24.7% to US$306.5 million, primarily due to interest on tax contingency provisions and premiums on bond repurchases.
• Partial suspension of mining activities at Atacocha and El Porvenir mines for seven days in August 2025 due to community protests, resulting in an estimated zinc production loss of 1.2kt.
• Partial suspension of mining activities at Atacocha mine for approximately four weeks in January 2026 due to community protests, resulting in an estimated zinc production loss of 0.9kt.

Risks

• Business is highly dependent on cyclical and volatile international market prices of metals (zinc, copper, silver, lead, gold).
• Adverse economic developments in China could negatively impact revenues, cash flow, and profitability due to its significant demand for commodities.
• Changes in global trade policy, including U.S. tariffs, could adversely affect business by increasing input costs, impacting equipment availability, and dampening demand.
• Changes in demand and supply for metals, including due to global economic cyclicality, could adversely affect sales volume and revenues.
• The mining industry is highly competitive, affecting sales, supply, labor prices, and ability to acquire new properties.
• Estimates of Mineral Reserves and Resources may differ materially from actual recovered quantities, and changes in assumptions (metal prices, costs) may render them uneconomical.
• Dependence on ability to replenish Mineral Reserves for long-term viability.
• Mineral exploration efforts are highly speculative and may be unsuccessful.
• Acquisitions or divestitures may not be successful or achieve expected benefits.
• Failure to meet ESG standards and commitments could adversely affect business, reputation, and financial condition.
• Political, economic, and social conditions in operating countries (Peru, Brazil) could adversely impact business, financial condition, and trading price of securities.
• Political and social opposition to mining activities could adversely impact business and reputation, leading to delays or interruptions.
• Operations depend on relations and agreements with local communities; disputes or non-compliance could have material adverse effects.
• VSA (controlling shareholder) has substantial control, limiting other shareholders' influence.
• Challenges relating to slope and stability of underground openings, especially as mines deepen, could increase costs and liabilities.
• Projects are subject to operational risks (increased costs, delays, lack of infrastructure, permitting issues, accidents, labor disputes, equipment failures, water shortages).
• Unique risks inherent to underground mines (geotechnical conditions, floods, harmful gases, rockfalls, seismic activity) may impact cash flows.
• Mine closure and environmental reclamation obligations may require substantial financial assurance and negatively impact liquidity.
• Changes in assumptions underlying asset carrying amounts could result in significant impairment charges.
• Disruption in supply of zinc concentrate, secondary feed materials, zinc calcine, key-consumables, natural gas, and electric energy could materially affect production and financial results.
• Exposure to litigation and administrative proceedings, with potential for unfavorable rulings.
• Potential liability for payments to individuals employed by third-party contractors under Peruvian and Brazilian law.
• Business could be adversely affected by failure of counterparties (customers, suppliers, financial institutions, JV partners) to perform obligations.
• Failure or unavailability of adequate infrastructure and skilled labor.
• Labor disputes (work slowdowns, stoppages, strikes) could materially affect business.
• Failures or interruptions in information technology systems or automated machinery, including cyber-attacks, could lead to significant challenges.
• Disruptions, damage, failure, and risks associated with implementation and integration of new technologies (e.g., AI) may adversely affect systems.
• The failure of a tailings dam could negatively impact business, reputation, and results, with expensive implementation of associated regulations and decommissioning.
• Exposure to health, safety, and environmental risks in operations, with inability to prevent accidents.
• Natural disasters and increasing severity of weather-related events (mudslides, earthquakes, heavy rainfall, drought) could affect business.
• Interruptions of energy supply or increases in energy costs may materially and adversely affect operations.
• Shortages of water supply, explosives, critical spare parts, maintenance service, and new equipment/machinery due to permitting, regulations, or supply chain issues.
• Financial position and results may be materially and adversely affected by currency exchange rate fluctuations (USD vs. BRL/PEN).
• Fluctuations in interest rates could increase debt servicing costs and affect financial performance.
• Hedging and other derivatives activity may not be successful and could result in losses or tax liabilities.
• Risk of debt acceleration due to non-compliance with restrictive covenants.
• A downgrade of credit ratings could increase borrowing costs and limit access to capital markets.
• Tax-related investigations by governments may result in material impact on business.
• Business, financial position, and results may be adversely affected by inflation.
• Business requires substantial capital expenditures and is subject to financing risks.
• Exposure to credit risk from contractual and trading counterparties, and hedging/derivative counterparties.
• Mining business is subject to inherent risks, some of which are not insurable.
• Dividends or other distributions will be subject to Luxembourg withholding tax.
• Anti-corruption, anti-bribery, and anti-money laundering laws and regulations; violations could have material adverse impact.
• Misconduct by employees, third-party contractors, or customers.
• Health, safety, and environmental laws and regulations may increase costs, restrict operations, or result in fines/permit revocations.
• Recent and potential changes in commercial and mining laws, including resource nationalism, may significantly impact operations.
• Changes in tax laws and related agreements may increase tax burden.
• Differing interpretations of agency regulations or court rulings could result in unintended non-compliance.

Future Outlook

Nexa Resources expects to invest approximately US$380.8 million in capital expenditures in 2026, with US$375.4 million directed towards non-expansion investments and US$5.4 million towards expansion projects. The Aripuan mine is expected to achieve full operational capacity in the second half of 2026, driven by the commissioning of a fourth tailings filter in the first half of 2026. The Cerro Pasco Integration Project's Phase I is also expected to be commissioned in 2026, with environmental approvals for major filings anticipated in Q1 2027. The company aims for a 10% reduction in Scope 1 emissions intensity and specific water consumption in mining and smelting by 2030, and plans to develop a Climate Change Adaptation Plan by 2030 and a carbon neutrality roadmap by 2035. Management has not identified any conditions indicating a potential downgrade below required credit rating levels.

Management Comments

• We are confident in the long-term value this project will generate for us and remain focused on its successful execution.
• Once the 4th tailings filter is up-and-running, we expect it to enhance utilization capacity, ensuring optimal performance, in line with our commitment to operational excellence.
• We expect to achieve full operational capacity in the second half of 2026.
• Safety is our number one priority throughout all our operations, we cannot eliminate the risk of accidents.
• We believe making direct year-over-year comparison of severity rates is informative only when read alongside fatality counts.
• We continue to invest in competitive compensation structures, including fixed and variable pay components and long-term incentive programs, to support talent retention across our operations.

Industry Context

StockSavvy.ai notes that Nexa Resources' performance in 2025 reflects broader industry trends, with higher metal prices, particularly for silver and gold, significantly boosting revenues. The zinc market experienced notable volatility, with U.S. tariffs initially dragging prices down, followed by a strong recovery driven by U.S. dollar depreciation and sustained depletion of exchange inventories outside China. Copper prices also saw an increase, reinforced by robust Chinese consumption and speculative long positions amid supply constraints. The decline in benchmark treatment charges, while increasing smelting raw material costs, benefited mining segment revenues, highlighting the resilience of Nexa's integrated mining-to-smelting model against commodity cycle fluctuations. The company's focus on renewable energy sources and ESG commitments aligns with increasing stakeholder demands and evolving regulatory frameworks in the mining sector.

Comparison to Industry Standards

• Nexa Resources was among the top six global zinc producers in 2025, according to Wood Mackenzie.
• Cajamarquilla was ranked as the fifth largest zinc smelter globally by production volume in 2025, according to Wood Mackenzie.
• Peru is the second largest producer of mined zinc in the world, also according to Wood Mackenzie.
• Nexa's life-cycle carbon footprint for zinc production ranks among the lowest reported in the industry, as verified against International Zinc Association (IZA) data by an independent third party.
• TRIFR of 1.57 in 2025 is approaching the first-quartile ICMM benchmark of 1.46.

Management Changes

Corporate Governance

Legal Proceedings

• Total probable and possible legal claims amounted to US$711.1 million as of December 31, 2025, with a net provision of US$148.7 million.
• Civil and environmental claims: US$160.9 million (probable/possible), US$22.5 million (net provision).
• Tax claims: US$493.8 million (probable/possible), US$101.1 million (net provision).
• Labor claims: US$56.3 million (probable/possible), US$25.1 million (net provision).
• VAT investigation in Minas Gerais: Company reached a settlement in 2023 and 2024, agreeing to make tax payments on behalf of former customers, concluding the investigation as it relates to Nexa.
• Cerro Lindo stability agreement: Ongoing tax-related discussions with Peruvian tax authorities (SUNAT) regarding the applicability of a special income tax rate. Unfavorable tax court decisions for 2014 and 2015, appealed by Nexa. Peruvian Tax Court declared nullity of SUNAT's tax stability assessment for 2016 and 2017, ordering cases back to audit. Payments of US$18.3 million (2018) and US$12.2 million (2019) made without acknowledging liability, legal defense continues.
• Cajamarquilla Transfer Pricing litigation: New tax assessment for fiscal year 2018 (US$31.2 million) and decision for 2017, leading to payments of US$18.3 million and US$24.0 million respectively, without acknowledging liability.
• Peruvian Constitutional Court determined the prohibition to outsource core activities is constitutional, making a favorable outcome in the company's lawsuit remote.
• Contingent tax liabilities (possible likelihood): US$124.072 million for income tax over transfers of shares in Peru, US$16.147 million for compensation for exploration for mineral resources, US$71.600 million for PIS and COFINS tax credit offsetting.
• Contingent labor liabilities (possible likelihood): US$31.250 million for various claims including overtime, illness-related damages, and social benefits.
• Contingent civil liabilities (possible likelihood): US$13.569 million for indemnity lawsuits alleging property damages, contractual breaches, personal injuries, etc.
• Contingent environmental liabilities (possible likelihood): US$83.072 million for alleged pollution of the São Francisco River.

Related Party Transactions

• Transactions with Votorantim S.A. (VSA) and other Votorantim Group entities are conducted on an arms-length basis.
• VSA owns 64.68% of Nexa's common shares, influencing corporate decisions.
• Shared services contracts with Votorantim Group for operational efficiencies (insurance, IT).
• All executive officers participate in FUNSEJEM pension fund (Votorantim Group).
• Scotiabank Peru S.A.A. (where a Nexa director is Chairman) has transactions with Nexa related to leasing (US$8.667 million outstanding) and confirming operations (US$55.199 million outstanding).
• Nexa entered into contracts with Consórcio Construtor Nova Aripuan (Andrade Gutierrez group) for Aripuan project; Andrade Gutierrez ceased to be a related party in mid-2024.
• Balances as of December 31, 2025: Cash and cash equivalents with Scotiabank Peru S.A.A. (US$40.3 million); Trade Accounts Receivables from Companhia Brasileira de Alumínio (US$0.2 million), Acerbrag S.A. (US$0.8 million), Votorantim Cimentos S.A. (US$0.6 million); Trade payables and leases to Votorantim S.A. (US$1.4 million), Votorantim Cimentos S.A. (US$0.4 million), Auren Comercializadora de Energia Ltda. (US$0.6 million), Campos Novos Energia S.A. (US$10.0 million), Scotiabank Peru S.A.A. (US$63.9 million); Dividends payable to Auren Comercializadora de Energia Ltda. (US$24.2 million).

Stakeholder Impact

• Shareholders: Positive impact from net income reversal, proposed share premium reimbursement, and improved leverage ratio. Potential negative impact from ongoing tax disputes and operational risks.
• Employees: Focus on health, safety, and well-being, with improved TRIFR and significant training hours. Negative impact from fatalities and labor disputes (Cajamarquilla strike, Atacocha protests).
• Customers: Stable supply contracts, diversified customer base, and focus on customer experience. Potential impact from global trade policy changes and supply chain disruptions.
• Communities: Investments in social initiatives (US$9.4 million in Peru, US$1.9 million in Brazil), supporting 169 projects benefiting over 6,000 people. Negative impact from community protests leading to operational suspensions at Atacocha and El Porvenir.
• Creditors: Improved Net Debt to Adjusted EBITDA ratio and successful waiver of BNDES financial covenants. Potential impact from credit rating downgrades or inability to service debt.

Next Steps

• Commissioning of Aripuan's fourth tailings filter in H1 2026.
• Aripuan mine expected to achieve full operational capacity in H2 2026.
• Commissioning of Phase I of the Cerro Pasco Integration Project in 2026.
• Environmental approvals for Cerro Pasco Integration Project's major filings expected in Q1 2027.
• Installation of a new dry stacking facility at Três Marias, awaiting environmental authority decision on preliminary and installation licenses.
• Vazante mine deepening project: first stage expected to be completed in 2027, second in 2032. Civil works planned for 2027.
• Development of a Climate Change Adaptation Plan by 2030.
• Define a carbon neutrality roadmap by 2035.
• Board of Directors' proposed share premium reimbursement for 2025 is subject to approval at the annual general shareholder meeting on June 25, 2026, with payment expected around August 11, 2026.
• Negotiations with Peruvian government to assess impact of force majeure on Magistral project execution.
• SUNAT is auditing income tax returns for 2020 and 2021 fiscal years.
• Company will continue pursuing legal defense for 2018 and 2019 tax periods despite payments.
• Company will continue to litigate tax court decisions for 2014 and 2015 Cerro Lindo stability agreement.
• Amending BNDES loan agreements within 120 days from December 22, 2025, to reflect new minimum corporate credit rating covenant.

Key Dates

Recommendation

Nexa Resources demonstrated a strong financial turnaround in 2025 with a return to net income and increased revenues, supported by favorable metal prices and strategic debt management. Operational improvements at Aripuan and progress on the Cerro Pasco Integration Project are positive indicators for future production. However, persistent operational challenges, including tailings filtration constraints, ongoing community protests, and significant tax-related legal disputes, introduce considerable uncertainty. While the company is actively addressing these issues and has a robust ESG framework, the inherent risks in the mining sector, coupled with geopolitical and macroeconomic volatility, suggest a 'hold' recommendation. Investors should monitor the resolution of legal proceedings, the successful ramp-up of projects, and the management of community relations for clearer long-term direction.

Keywords

Nexa Resources, Mining, Smelting, Zinc, Copper, Lead, Silver, Gold, SEC Filing, 20-F, Financial Results, Mineral Reserves, Mineral Resources, Capital Expenditures, ESG, Luxembourg, Brazil, Peru, Commodities, Tailings Management, Debt, Cybersecurity, Taxation