Nexa Resources S.A.
Condensed consolidated interim financial statements (Unaudited)
at and for the three and nine-month periods ended on September 30, 2023
Contents
Condensed consolidated interim financial statements
Notes to the condensed consolidated interim financial statements
Condensed consolidated interim income statement
Unaudited
Periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Three-month period ended | Nine-month period ended | ||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||
Net revenues | 4 | 649,334 | 702,645 | 1,943,356 | 2,254,215 | ||||
Cost of sales | 5 | (582,546) | (617,846) | (1,715,383) | (1,698,955) | ||||
Gross profit | 66,788 | 84,799 | 227,973 | 555,260 | |||||
Operating expenses | |||||||||
Selling, general and administrative | 5 | (33,108) | (31,565) | (94,209) | (104,733) | ||||
Mineral exploration and project evaluation | 5 | (29,559) | (27,402) | (72,848) | (71,472) | ||||
Impairment loss of long-lived assets | 16 | (1,910) | - | (59,097) | - | ||||
Other income and expenses, net | 6 | (7,187) | 12,769 | (78,735) | 22,306 | ||||
(71,764) | (46,198) | (304,889) | (153,899) | ||||||
Operating (loss) income | (4,976) | 38,601 | (76,916) | 401,361 | |||||
Results from associates equity | |||||||||
Share in the results of associates | 6,328 | - | 17,403 | - | |||||
Net financial results | 7 | ||||||||
Financial income | 8,359 | 6,701 | 20,676 | 18,844 | |||||
Financial expenses | (45,316) | (41,571) | (151,094) | (125,299) | |||||
Other financial items, net | (27,400) | (17,423) | 322 | (9,419) | |||||
(64,357) | (52,293) | (130,096) | (115,874) | ||||||
(Loss) income before income tax | (63,005) | (13,692) | (189,609) | 285,487 | |||||
Income tax (expense) benefit | 8 (a) | (359) | (26,177) | 8,051 | (127,658) | ||||
Net (loss) income for the period | (63,364) | (39,869) | (181,558) | 157,829 | |||||
Attributable to NEXA's shareholders | (73,738) | (41,220) | (195,952) | 130,794 | |||||
Attributable to non-controlling interests | 10,374 | 1,351 | 14,394 | 27,035 | |||||
Net (loss) income for the period | (63,364) | (39,869) | (181,558) | 157,829 | |||||
Weighted average number of outstanding shares – in thousands |
132,439 | 132,439 | 132,439 | 132,439 | |||||
Basic and diluted (losses) earnings per share – USD |
(0.56) | (0.31) | (1.48) | 0.99 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Condensed consolidated interim statement of comprehensive income
All amounts in thousands of US Dollars, unless otherwise stated
Three-month period ended | Nine-month period ended | ||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||
Net (loss) income for the period | (63,364) | (39,869) | (181,558) | 157,829 | |||||
Other comprehensive income (loss), net of income tax - items that can be reclassified to the income statement | |||||||||
Cash flow hedge accounting | 10 (c) | 1,563 | 4,658 | 2,472 | (420) | ||||
Deferred income tax | (543) | (2,695) | (1,328) | 567 | |||||
Translation adjustment of foreign subsidiaries | (38,507) | (31,874) | 49,355 | 24,151 | |||||
(37,487) | (29,911) | 50,499 | 24,298 | ||||||
Other comprehensive income (loss), net of income tax - items that will not be reclassified to the income statement | |||||||||
Changes in fair value of financial liabilities related to changes in the Company’s own credit risk | 14 (b) | 150 | (230) | 220 | 2,303 | ||||
Deferred income tax | (51) | 78 | (75) | (784) | |||||
Changes in fair value of investments in equity instruments | (2,025) | (2,108) | (1,055) | (4,240) | |||||
(1,926) | (2,260) | (910) | (2,721) | ||||||
Other comprehensive (loss) income for the period net of income tax | (39,413) | (32,171) | 49,589 | 21,577 | |||||
Total comprehensive (loss) income for the period | (102,777) | (72,040) | (131,969) | 179,406 | |||||
Attributable to NEXA’s shareholders | (111,285) | (72,377) | (149,720) | 149,382 | |||||
Attributable to non-controlling interests | 8,508 | 337 | 17,751 | 30,024 | |||||
Total comprehensive (loss) income for the period | (102,777) | (72,040) | (131,969) | 179,406 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Condensed consolidated interim balance sheet
All amounts in thousands of US Dollars, unless otherwise stated
Unaudited | Audited | |||
Assets | Note | September 30, 2023 | December 31, 2022 | |
Current assets | ||||
Cash and cash equivalents | 414,325 | 497,826 | ||
Financial investments | 7,952 | 18,062 | ||
Other financial instruments | 10 (a) | 19,320 | 7,380 | |
Trade accounts receivables | 149,740 | 223,740 | ||
Inventory | 11 | 333,753 | 395,197 | |
Recoverable income tax | 16,473 | 2,455 | ||
Other assets | 92,113 | 75,486 | ||
1,033,676 | 1,220,146 | |||
Non-current assets | ||||
Investments in equity instruments | 6,060 | 7,115 | ||
Other financial instruments | 10 (a) | 7,990 | 63 | |
Deferred income tax | 8 (b) | 209,294 | 166,983 | |
Recoverable income tax | 5,387 | 4,914 | ||
Other assets | 134,668 | 134,474 | ||
Investments in associates | 37,337 | 38,990 | ||
Property, plant and equipment | 12 | 2,336,913 | 2,295,275 | |
Intangible assets | 13 | 966,916 | 1,016,927 | |
Right-of-use assets | 7,610 | 6,895 | ||
3,712,175 | 3,671,636 | |||
Total assets | 4,745,851 | 4,891,782 | ||
Liabilities and shareholders’ equity | ||||
Current liabilities | ||||
Loans and financings | 14 (a) | 49,715 | 50,840 | |
Lease liabilities | 2,396 | 3,661 | ||
Other financial instruments | 10 (a) | 27,244 | 11,435 | |
Trade payables | 342,881 | 413,856 | ||
Confirming payables | 259,615 | 216,392 | ||
Dividends payable | 7,159 | 7,922 | ||
Asset retirement and environmental obligations | 15 | 36,281 | 23,646 | |
Contractual obligations | 29,302 | 26,188 | ||
Salaries and payroll charges | 63,403 | 79,078 | ||
Tax liabilities | 26,534 | 40,610 | ||
Other liabilities | 54,050 | 25,136 | ||
898,580 | 898,764 | |||
Non-current liabilities | ||||
Loans and financings | 14 (a) | 1,612,612 | 1,618,419 | |
Lease liabilities | 3,410 | 1,360 | ||
Other financial instruments | 10 (a) | 31,685 | 20,416 | |
Asset retirement and environmental obligations | 15 | 245,448 | 242,673 | |
Provisions | 63,867 | 43,897 | ||
Deferred income tax | 8 (b) | 181,936 | 199,499 | |
Contractual obligations | 86,514 | 105,972 | ||
Other liabilities | 80,911 | 50,528 | ||
2,306,383 | 2,282,764 | |||
Total liabilities | 3,204,963 | 3,181,528 | ||
Shareholders’ equity | ||||
Attributable to NEXA’s shareholders | 1,267,525 | 1,442,245 | ||
Attributable to non-controlling interests | 273,363 | 268,009 | ||
1,540,888 | 1,710,254 | |||
Total liabilities and shareholders’ equity | 4,745,851 | 4,891,782 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5 of 28 |
Condensed consolidated interim statement of cash flows
Unaudited
Periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Three-month period ended | Nine-month period ended | |||||||
Note | 2023 | 2022 | 2023 | 2022 | ||||
Cash flows from operating activities | ||||||||
(Loss) income before income tax | (63,005) | (13,692) | (189,609) | 285,487 | ||||
Depreciation and amortization | 5 | 72,095 | 72,753 | 215,520 | 213,019 | |||
Impairment loss of long-lived assets | 16 | 1,910 | - | 59,097 | - | |||
Share in the results of associates | (6,328) | - | (17,403) | - | ||||
Interest and foreign exchange effects | 34,802 | 37,608 | 101,296 | 100,726 | ||||
(Loss) gain on sale of property, plant and equipment |
6 | (115) | 561 | 1,172 | 541 | |||
Changes in provisions | (12,368) | (3,371) | (34,437) | 3,236 | ||||
Tax voluntary disclosure – VAT discussions | 1 (b) | 15,649 | - | 86,290 | - | |||
Changes in fair value of loans and financings | 14 (b) | 296 | 433 | 511 | 1,052 | |||
Changes in fair value of derivative financial instruments | 10 (c) | 5,252 | 2,112 | (12,176) | (14,806) | |||
Energy forward contracts | 10 (d) | (2,272) | - | 7,429 | - | |||
Changes in fair value of offtake agreement | 10 (e) | (998) | (7,766) | (1,013) | (16,559) | |||
Contractual obligations | (4,859) | 4,431 | (19,772) | (11,239) | ||||
Decrease (increase) in assets | ||||||||
Trade accounts receivables | (23,756) | 29,136 | 76,460 | 71,520 | ||||
Inventory | 54,888 | 43,770 | 115,068 | (121,787) | ||||
Other financial instruments | (507) | 1,935 | 15,487 | 157 | ||||
Other assets | (25,645) | (32,637) | (73,191) | (30,493) | ||||
Increase (decrease) in liabilities | ||||||||
Trade payables | 49,138 | (12,423) | (92,215) | (80,473) | ||||
Confirming payables | 19,585 | (58,423) | 43,003 | 6,035 | ||||
Other liabilities | 21,214 | 5,337 | (10,881) | (47,515) | ||||
Cash provided by operating activities | 134,976 | 69,764 | 270,636 | 358,901 | ||||
Interest paid on loans and financings | 14 (b) | (29,414) | (29,319) | (88,462) | (88,471) | |||
Interest paid on lease liabilities | (28) | (292) | (163) | (708) | ||||
Premium paid on bonds repurchase | - | - | - | (3,277) | ||||
Income tax paid | (8,338) | (25,739) | (45,795) | (104,805) | ||||
Net cash provided by operating activities | 97,196 | 14,414 | 136,216 | 161,640 | ||||
Cash flows from investing activities | ||||||||
Additions of property, plant and equipment | (82,845) | (85,078) | (199,350) | (266,837) | ||||
Additions of intangible assets | (1,421) | (4,572) | (1,506) | (4,766) | ||||
Net sales of financial investments | 15,454 | 12,749 | 19,968 | 11,524 | ||||
Proceeds from the sale of property, plant and equipment | (165) | 10 | 200 | 405 | ||||
Investments in equity instruments | - | - | - | (7,000) | ||||
Dividends received | 1 (c) | 9,199 | - | 15,732 | - | |||
Net cash used in investing activities | (59,778) | (76,891) | (164,956) | (266,674) | ||||
Cash flows from financing activities | ||||||||
New loans and financings | 14 (b) | 60 | - | 60 | 90,000 | |||
Payments of loans and financings | 14 (b) | (7,191) | (9,946) | (20,020) | (19,694) | |||
Bonds repurchase | 14 (b) | - | - | - | (128,470) | |||
Payments of lease liabilities | (657) | (8,648) | (2,670) | (12,499) | ||||
Dividends paid | 1 (c) | (13,281) | (2,996) | (13,281) | (56,319) | |||
Payments of share premium | 1 (a) | - | - | (25,000) | (6,126) | |||
Net cash used in financing activities | (21,069) | (21,590) | (60,911) | (133,108) | ||||
Foreign exchange effects on cash and cash equivalents | (2,732) | (3,128) | (6,150) | (12,158) | ||||
Increase (decrease) in cash and cash equivalents | (13,617) | (87,195) | (83,501) | (225,984) | ||||
Cash and cash equivalents at the beginning of the period |
400,708 | 605,028 | 497,826 | 743,817 | ||||
Cash and cash equivalents at the end of the period | 414,325 | 517,833 | 414,325 | 517,833 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Nexa Resources S.A.
Condensed consolidated interim statement of cash flows
Unaudited
Periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Non-cash investing and financing transactions | ||||||||
Additions to right-of-use assets | (4,462) | - | (4,462) | (2,018) | ||||
Additions to intangible assets related to offtake agreement | - | (6,857) | - | (52,957) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Condensed consolidated interim statement of changes in shareholder’s equity
Unaudited
For the Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Capital | Share premium | Additional paid in capital | Retained earnings (cumulative deficit) | Accumulated other comprehensive loss | Total NEXA’s shareholders | Non-controlling interests | Total shareholders’ equity | |
At June 30, 2022 | 132,438 | 1,037,629 | 1,245,418 | (618,168) | (239,285) | 1,558,032 | 272,743 | 1,830,775 |
Net loss (income) for the period | - | - | - | (41,220) | - | (41,220) | 1,351 | (39,869) |
Other comprehensive loss (income) for the period | - | - | - | - | (31,157) | (31,157) | (1,014) | (32,171) |
Total comprehensive loss (income) for the period |
- | - | - | (41,220) | (31,157) | (72,377) | 337 | (72,040) |
Other equity movements | - | - | - | - | - | - | 1,008 | 1,008 |
Total distributions to shareholders | - | - | - | - | - | - | 1,008 | 1,008 |
At September 30, 2022 | 132,438 | 1,037,629 | 1,245,418 | (659,388) | (270,442) | 1,485,655 | 274,088 | 1,759,743 |
Capital | Share premium | Additional paid in capital | Retained earnings (cumulative deficit) | Accumulated other comprehensive loss | Total NEXA’s shareholders | Non-controlling interests | Total shareholders’ equity | |
At June 30, 2023 | 132,438 | 1,012,629 | 1,245,418 | (863,295) | (148,380) | 1,378,810 | 277,252 | 1,656,062 |
Net loss (income) for the period | - | - | - | (73,738) | - | (73,738) | 10,374 | (63,364) |
Other comprehensive loss (income) for the period | - | - | - | - | (37,547) | (37,547) | (1,866) | (39,413) |
Total comprehensive loss (income) for the period | - | - | - | (73,738) | (37,547) | (111,285) | 8,508 | (102,777) |
Dividends distribution to non-controlling interests - note 1 (c) | - | - | - | - | - | - | (12,397) | (12,397) |
Total distributions to shareholders | - | - | - | - | - | - | (12,397) | (12,397) |
At September 30, 2023 | 132,438 | 1,012,629 | 1,245,418 | (937,033) | (185,927) | 1,267,525 | 273,363 | 1,540,888 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Nexa Resources S.A.
Condensed consolidated interim statement of changes in shareholder’s equity
Unaudited
For the Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Capital | Share premium | Additional paid in capital | Retained earnings (cumulative deficit) | Accumulated other comprehensive loss | Total NEXA’s shareholders | Non-controlling interests | Total shareholders’ equity | |
At January 1, 2022 | 132,438 | 1,043,755 | 1,245,418 | (746,308) | (289,030) | 1,386,273 | 258,007 | 1,644,280 |
Net income for the period | - | - | - | 130,794 | - | 130,794 | 27,035 | 157,829 |
Other comprehensive income for the period | - | - | - | - | 18,588 | 18,588 | 2,989 | 21,577 |
Total comprehensive income for the period | - | - | - | 130,794 | 18,588 | 149,382 | 30,024 | 179,406 |
Dividends distribution to NEXA's shareholders - USD 0.33 per share - note 1 (c) | - | - | - | (43,874) | - | (43,874) | - | (43,874) |
Share premium distribution to NEXA's shareholders - USD 0.05 per share - note 1 (c) | - | (6,126) | - | - | - | (6,126) | - | (6,126) |
Dividends distribution to non-controlling interests – note 1 (c) | - | - | - | - | - | - | (14,951) | (14,951) |
Other equity movements | - | - | - | - | - | - | 1,008 | 1,008 |
Total distributions to shareholders | - | (6,126) | - | (43,874) | - | (50,000) | (13,943) | (63,943) |
At September 30, 2022 | 132,438 | 1,037,629 | 1,245,418 | (659,388) | (270,442) | 1,485,655 | 274,088 | 1,759,743 |
Capital | Share premium | Additional paid in capital | Retained earnings (cumulative deficit) | Accumulated other comprehensive loss | Total NEXA’s shareholders | Non-controlling interests | Total shareholders’ equity | |
At January 1, 2023 | 132,438 | 1,037,629 | 1,245,418 | (741,081) | (232,159) | 1,442,245 | 268,009 | 1,710,254 |
Net (loss) income for the period | - | - | - | (195,952) | - | (195,952) | 14,394 | (181,558) |
Other comprehensive income for the period | - | - | - | - | 46,232 | 46,232 | 3,357 | 49,589 |
Total comprehensive (loss) income for the period | - | - | - | (195,952) | 46,232 | (149,720) | 17,751 | (131,969) |
Share premium distribution to NEXA's shareholders - USD 0.19 per share | - | (25,000) | - | - | - | (25,000) | - | (25,000) |
Dividends distribution to non-controlling interests - note 1 (c) | - | - | - | - | - | - | (12,397) | (12,397) |
Total distributions to shareholders | - | (25,000) | - | - | - | (25,000) | (12,397) | (37,397) |
At September 30, 2023 | 132,438 | 1,012,629 | 1,245,418 | (937,033) | (185,927) | 1,267,525 | 273,363 | 1,540,888 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
1 | General information |
Nexa Resources S.A. (“NEXA”) is a public limited liability company (société anonyme) incorporated and domiciled in the Grand Duchy of Luxembourg. Its shares are publicly traded on the New York Stock Exchange (“NYSE”).
The Company’s registered office is located at 37A, Avenue J. F. Kennedy in the city of Luxembourg in the Grand Duchy of Luxembourg.
NEXA and its subsidiaries (the “Company”) have operations that include large-scale, mechanized underground and open pit mines and smelters. The Company owns and operates three polymetallic mines in Peru, and two polymetallic mines in Brazil and is currently progressing with the ramp-up of its third polymetallic mine in Aripuanã, Brazil. The Company also owns and operates a zinc smelter in Peru and two zinc smelters in Brazil.
NEXA’s majority shareholder is Votorantim S.A. (“VSA”), which holds 64.68% of its equity. VSA is a Brazilian privately-owned industrial conglomerate that holds ownership interests in metal, steel, cement, and energy companies, among others.
Main events for the nine-month periods ended on September 30, 2023
(a) | Cash distribution |
On February 15, 2023, the Company’s Board of Directors approved, subject to ratification by the Company’s shareholders at the 2024 annual shareholders’ meeting in accordance with Luxembourg laws, a cash distribution to the Company’s shareholders of USD 25,000, which was paid on March 24, 2023, as share premium (special cash dividend).
(b) | VAT discussions – TAX Voluntary Disclosure and Contingent Liabilities |
As previously reported, Nexa is continuing to cooperate with the investigation being carried out by the Fiscal Office of the State of Minas Gerais and the Public Ministry of Minas Gerais (the “MG Authorities”) of the practices of certain of Nexa’s former customers with respect to commercial transactions and related value-added tax (VAT), as well as Nexa’s relationship with such former customers, that could result in liabilities for all parties involved in the commercial relationship.
In the third quarter of 2023, Nexa and the MG Authorities reached a resolution (the “Tax Resolution”) whereby, without admitting primary responsibility for the resolved claims, the Company agreed to make tax payments, including interest and penalties, to the State of Minas Gerais on behalf of certain customers that allegedly failed to properly comply with their tax obligations (“tax portion”), and subsequently on October 20, 2023 entered into a related additional agreement (the “Related Agreement”, and together with the Tax Resolution, the “Agreements”) to make a contribution to the State of Minas Gerais to support its ESG-related efforts (“ESG portion”).
Accordingly, in the third quarter of 2023, the Company recognized an additional amount of USD 5,170, which, along with the provision of USD 70,641 previously recognized in the second quarter of 2023, totaled an amount of USD 75,811, which is classified in the balance sheet in "Other liabilities. In the income statement for the nine months ended September 30, 2023, the Company recognized USD 65,512 as “Other Income and Expenses, net” related to the tax and ESG portions of the Agreements, and USD 10,299 as “Financial Expenses” related to the interest charged in connection with the VAT-related practices of its former customers.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
On September 29, 2023, Nexa paid USD 1,515 in cash as the initial installment under the Tax Resolution and used existing VAT tax credits of approximately USD 24,951 to offset part of the tax portion of the Tax Resolution. The remaining tax portion of USD 28,780, and the remaining ESG portion of USD 20,565, under the Agreements, will be paid in 35 and 46 monthly installments and will be updated by interest rate SELIC (the Brazilian federal funds rate), respectively. Nexa reserves the legal right to recover from certain customers the amounts that it has paid, or will pay, on their behalf in connection with the tax portion of the Agreements.
In addition to the Agreements, there are other tax-related ongoing investigations that might result in additional liabilities for Nexa, for which the Company recorded a provision in this quarter in the amount of USD 10,479 in “Other income and expenses, net” in the income statement. Notwithstanding the final resolution reached in the Agreements, it is possible that the conclusion of certain, remaining matters involving tax payments and interest may have a material impact on the Company’s business, results of operations and financial condition.
(c) | Associates’ dividend distribution |
On May 15, 2023, Enercan’s Board of Directors approved an additional dividend distribution to its shareholders related to the 2022 fiscal year and the Company’s subsidiary Pollarix S.A. (“Pollarix”) will be entitled to receive USD 15,426 (BRL 76,430). Pollarix received in cash the amount of USD 9,199 (BRL 44,887) and USD 15,732 (BRL 77,257) during the three-month and nine-month periods ended on September 30, 2023 respectively, from the outstanding amount of the dividend’s distribution.
On August 2, 2023, Pollarix's Board of Directors approved an additional distribution of dividends to its shareholders for the 2022 fiscal year. Nexa BR will be entitled to receive USD 4,959 (BRL 24,197) for common shares and the non-controlling interest will be entitled to receive USD 12,397 (BRL 60,492) for preferred shares. Pollarix paid in cash the amount of USD 13,281 (BRL 64,806) during the nine-month period ended September 30, 2023.
2 | Information by business segment |
The presentation of segments results and reconciliation to income before income tax in the consolidated income statement is as follows:
11 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Three-month period ended 2023 | |||||
Mining | Smelting | Intersegment sales | Adjustments (ii) |
Consolidated | |
Net revenues | 272,566 | 484,157 | (109,959) | 2,570 | 649,334 |
Cost of sales | (245,937) | (438,863) | 109,959 | (7,705) | (582,546) |
Gross profit | 26,629 | 45,294 | - | (5,135) | 66,788 |
Selling, General and administrative | (16,372) | (15,003) | - | (1,733) | (33,108) |
Mineral exploration and project evaluation | (27,572) | (1,987) | - | - | (29,559) |
Impairment loss of long-lived assets | (1,910) | - | - | - | (1,910) |
Other income and expenses, net | (2,968) | (3,166) | - | (1,053) | (7,187) |
Operating (loss) income | (22,193) | 25,138 | - | (7,921) | (4,976) |
Depreciation and amortization | 51,381 | 20,259 | - | 455 | 72,095 |
Miscellaneous adjustments | 11,252 | 3,328 | - | - | 14,580 |
Adjusted EBITDA | 40,440 | 48,725 | - | (7,466) | 81,699 |
Changes in fair value of offtake agreement 10 (d) | 997 | ||||
Impairment loss of long-lived assets - note 16 | (1,910) | ||||
Aripuaña ramp-up impacts (iv) | (3,549) | ||||
Loss on sale of property, plant and equipment | 115 | ||||
Remeasurement in estimates of asset retirement obligations | 2,636 | ||||
Remeasurement adjustment of streaming agreement | (2,323) | ||||
Energy forward contracts – MTM (iii) | 2,272 | ||||
VAT discussions (iv) | (12,818) | ||||
Miscellaneous adjustments | (14,580) | ||||
Depreciation and amortization | (72,095) | ||||
Share in result of associate | 6,328 | ||||
Net financial results | (64,357) | ||||
Loss before income tax | (63,005) | ||||
Three-month period ended | |||||
2022 | |||||
Mining | Smelting | Intersegment sales | Adjustments (ii) | Consolidated | |
Net revenues | 241,312 | 615,533 | (151,999) | (2,201) | 702,645 |
Cost of sales | (193,366) | (578,635) | 151,999 | 2,156 | (617,846) |
Gross profit | 47,946 | 36,898 | - | (45) | 84,799 |
Selling, general and administrative | (17,338) | (14,431) | - | 204 | (31,565) |
Mineral exploration and project evaluation | (24,848) | (2,554) | - | - | (27,402) |
Other income and expenses, net | (1,453) | 19,420 | - | (5,198) | 12,769 |
Operating income | 4,307 | 39,333 | - | (5,039) | 38,601 |
Depreciation and amortization | 49,096 | 19,611 | - | 4,046 | 72,753 |
Miscellaneous adjustments | 10,327 | (620) | - | - | 9,707 |
Adjusted EBITDA | 63,730 | 58,324 | - | (993) | 121,061 |
Changes in fair value of offtake agreement 10 (d) | 7,766 | ||||
Other adjustments | 270 | ||||
Pre-operating and ramp-up expenses of greenfield projects (Aripuanã) (ii) | (12,091) | ||||
Loss on sale of property, plant and equipment | (561) | ||||
Remeasurement in estimates of asset retirement obligations | 5,474 | ||||
Remeasurement adjustment of streaming agreement | (10,565) | ||||
Miscellaneous adjustments | (9,707) | ||||
Depreciation and amortization | (72,753) | ||||
Share in result of associate | - | ||||
Net financial results | (52,293) | ||||
Loss before income tax | (13,692) |
12 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
Nine-month
period ended 2023 | |||||
Mining | Smelting | Intersegment sales | Adjustments (ii) | Consolidated | |
Net revenues | 808,524 | 1,492,592 | (356,621) | (1,139) | 1,943,356 |
Cost of sales | (745,029) | (1,322,519) | 356,621 | (4,456) | (1,715,383) |
Gross profit | 63,495 | 170,073 | - | (5,595) | 227,973 |
Selling, General and administrative | (45,413) | (45,796) | - | (3,000) | (94,209) |
Mineral exploration and project evaluation | (66,512) | (6,336) | - | - | (72,848) |
Impairment loss of long-lived assets | (59,097) | - | - | - | (59,097) |
Other income and expenses, net | (59,385) | (22,852) | - | 3,502 | (78,735) |
Operating (loss) income | (166,912) | 95,089 | - | (5,093) | (76,916) |
Depreciation and amortization | 156,856 | 57,771 | - | 893 | 215,520 |
Miscellaneous adjustments | 111,956 | 35,658 | - | - | 147,614 |
Adjusted EBITDA | 101,900 | 188,518 | - | (4,200) | 286,218 |
Changes in fair value of offtake agreement 10 (e) | 1,011 | ||||
Impairment loss of long-lived assets - note 16 | (59,097) | ||||
Ramp-up expenses of greenfield projects (Aripuanã) (ii) | (5,386) | ||||
Loss on sale of property, plant and equipment | (1,172) | ||||
Remeasurement in estimates of asset retirement obligations | 2,773 | ||||
Remeasurement adjustment of streaming agreement | (2,323) | ||||
Energy forward contracts - MTM (iii) | (7,429) | ||||
VAT discussions (iv) | (75,991) | ||||
Miscellaneous adjustments | (147,614) | ||||
Depreciation and amortization | (215,520) | ||||
Share in result of associate | 17,403 | ||||
Net financial results | (130,096) | ||||
Loss before income tax | (189,609) |
Nine-month period ended | |||||
2022 | |||||
Mining | Smelting | Intersegment sales | Adjustments (ii) | Consolidated | |
Net revenues | 932,835 | 1,860,628 | (546,287) | 7,039 | 2,254,215 |
Cost of sales | (602,262) | (1,647,990) | 546,287 | 5,010 | (1,698,955) |
Gross profit | 330,573 | 212,638 | - | 12,049 | 555,260 |
Selling, general and administrative | (49,226) | (44,468) | - | (11,039) | (104,733) |
Mineral exploration and project evaluation | (64,889) | (6,583) | - | - | (71,472) |
Other income and expenses, net | (26,873) | 59,187 | - | (10,008) | 22,306 |
Operating income | 189,585 | 220,774 | - | (8,998) | 401,361 |
Depreciation and amortization | 145,187 | 61,051 | - | 6,781 | 213,019 |
Miscellaneous adjustments | 27,095 | (1,305) | - | - | 25,790 |
Adjusted EBITDA | 361,867 | 280,520 | - | (2,217) | 640,170 |
Changes in fair value of offtake agreement 10 (d) | 16,559 | ||||
Other adjustments | 270 | ||||
Pre-operating and ramp-up expenses of greenfield projects (Aripuanã) (ii) | (40,729) | ||||
Loss on sale of property, plant and equipment | (541) | ||||
Remeasurement in estimates of asset retirement obligations | 9,216 | ||||
Remeasurement adjustment of streaming agreement | (10,565) | ||||
Miscellaneous adjustments | (25,790) | ||||
Depreciation and amortization | (213,019) | ||||
Share in result of associate | |||||
Net financial results | (115,874) | ||||
Income before income tax | 285,487 |
13 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
In December 2022, Nexa revised the definition of Adjusted EBITDA to exclude certain items, aiming to provide a better understanding of the operational performance of the Company’s business without the potential distortions from (i) pre-operating and ramp-up expenses incurred during the commissioning and ramp-up phases of greenfield projects (Aripuanã is currently the only greenfield project that has reached this phase), (ii) events that are non-recurring, unusual or infrequent, and (iii) other specific events that, by their nature and scope, do not reflect Nexa’s operational performance for the specific period. The third quarter numbers of 2022 have been adjusted in our condensed consolidated interim financial statements to be comparable with the revised definition.
(i) The internal information used by the Chief Operation Decision Maker is primarily the “Segment Adjusted EBITDA” which is reconciled to the Company’s accounting figures prepared under International Financial Reporting Standards (“IFRS”). The table above demonstrates this reconciliation, consisting primarily of reclassifications between income statement line items, as demonstrated in the column “Adjustments”. These adjustments include reclassifications of certain overhead costs and revenues from Other income and expenses, net to Net Revenues, Cost of sales and/or Selling, general and administrative expenses. It also includes the results not allocated in any segment related with small subsidiaries that are not material to measure the segments performance.
(ii) Consolidated Adjusted EBITDA excludes the impact of commissioning, pre-operating and ramp-up expenses of greenfield projects that do not specifically reflect Nexa’s operational performance for the specific period when the projects’ nameplate capacity has not been achieved as of the reporting period. For the three and nine-month periods ended on September 30, 2023, adjusted EBITDA excludes the effects of idle capacity costs of the Aripuanã of USD 14,144 and USD 41,789 respectively and excludes the net reversal of the net realizable value provision of Aripuanã’s inventory of USD 10,595 (income) and USD 36,403 respectively, which provisions were recorded in the prior periods (excluding the depreciation portion in both amounts).
(iii) The Company recognized a USD 7,429 loss for the nine-month period ended September 31, 2023 (for the three-month period, a gain of USD 2,272) related to the mark-to-market (“MtM”) adjustment of the energy surplus derived from electric energy purchase and sale contracts of NEXA’s subsidiary, Pollarix. This adjustment to EBITDA, has the objective to exclude from the current year´s performance the remeasurement effects of energy contracts without cash impact.
(iv) Represents the impact of accruals related to VAT’s discussions disclosed in note 1(b). These accruals are not directly related to Nexa´s operations and performance and are excluded from EBITDA.
3 | Basis of preparation of the condensed consolidated interim financial statements |
These condensed consolidated interim financial statements as at and for the three and nine-month periods ended on September 30, 2023 have been prepared in accordance with the International Accounting Standard 34 Interim Financial Reporting (“IAS 34”) using the accounting principles consistent with the IFRS as issued by the International Accounting Standards Board (“IASB”).
The Company made a voluntary election to present, as supplementary information, the condensed consolidated interim statement of cash flows for the three-month periods ended on September 30, 2023 and 2022. The Company is also presenting a condensed consolidated interim statement of changes in shareholders’ equity for the three-month periods ended on September 30, 2023 and 2022 in accordance with SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification.
14 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
These condensed consolidated interim financial statements do not include all disclosures required by IFRS for annual consolidated financial statements and accordingly, should be read in conjunction with the Company’s audited consolidated financial statements for the year ended on December 31, 2022 prepared in accordance with IFRS as issued by the IASB.
These condensed consolidated interim financial statements have been prepared on the basis of, and using the accounting policies, methods of computation and presentation consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended on December 31, 2022.
The preparation of these condensed consolidated interim financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses for the period end. Such estimates and assumptions mainly affect the carrying amounts of the Company’s goodwill, contractual obligations, non-current assets, indefinite-lived intangible assets, inventory, deferred income taxes, and the allowance for doubtful accounts. These critical accounting estimates and assumptions represent approximations that are uncertain and changes in those estimates and assumptions could materially impact the Company’s condensed consolidated interim financial statements.
The critical judgments, estimates and assumptions in the application of accounting principles during the three and nine-month periods ended on September 30, 2023 are the same as those disclosed in the Company’s audited consolidated financial statements for the year ended on December 31, 2022.
These condensed consolidated interim financial statements for the three and nine-month periods ended on September 30, 2023 were approved on October 30, 2023 to be issued in accordance with a resolution of the Board of Directors.
4 | Net revenues |
Three-month period ended | Nine-month period ended | |||||
2023 | 2022 | 2023 | 2022 | |||
Gross billing | 713,640 | 802,326 | 2,144,955 | 2,596,774 | ||
Billing from products (i) | 689,288 | 774,146 | 2,063,549 | 2,515,821 | ||
Billing from freight, insurance services and others | 24,352 | 28,180 | 81,406 | 80,953 | ||
Taxes on sales | (63,311) | (98,168) | (199,646) | (338,273) | ||
Return of products sales | (995) | (1,513) | (1,953) | (4,286) | ||
Net revenues | 649,334 | 702,645 | 1,943,356 | 2,254,215 |
(i) Billing from products decreased in the three-month period ended on September 30, 2023, compared with that of the same period of 2022 mainly due to the lower zinc price and the lower volumes in the smelting segment, partially offset by higher production in the Company’s mines. The decrease in the nine-month period ended on September 30, 2023 is mainly because of the lower metal prices.
Additionally, in September 2023, the Company recognized a reduction of USD 2,323 (September 2022: USD 10,565) as a remeasurement adjustment of its silver stream revenues previously recognized considering the higher long-term prices for its Cerro Lindo mining unit. According to the Company’s silver streaming accounting policy, prices are a variable consideration and revenue recognized under the streaming agreement should be adjusted to reflect the updated variable.
15 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
5 | Expenses by nature |
Three-month period ended | ||||
September, 2023 | ||||
Cost
of sales (i/ii) |
Selling, general and administrative | Mineral exploration and project evaluation | Total | |
Raw materials and consumables used | (349,859) | - | - | (349,859) |
Third-party services | (108,215) | (1,192) | (20,157) | (129,564) |
Depreciation and amortization | (71,501) | (578) | (16) | (72,095) |
Employee benefit expenses | (51,006) | (15,083) | (4,238) | (70,327) |
Other expenses | (1,965) | (16,255) | (5,148) | (23,368) |
(582,546) | (33,108) | (29,559) | (645,213) |
Three-month period ended | ||||
September, 2022 | ||||
Cost of sales | Selling, general and administrative | Mineral exploration and project evaluation | Total | |
Raw materials and consumables used | (292,024) | - | - | (292,024) |
Third-party services | (204,204) | (8,653) | (17,140) | (229,997) |
Depreciation and amortization | (72,080) | (656) | (17) | (72,753) |
Employee benefit expenses | (45,516) | (11,365) | (6,214) | (63,095) |
Other expenses | (4,022) | (10,891) | (4,031) | (18,944) |
(617,846) | (31,565) | (27,402) | (676,813) |
Nine-month period ended | ||||
September, 2023 | ||||
Cost of sales (i/ii) |
Selling, general and administrative | Mineral exploration and project evaluation | Total | |
Raw materials and consumables used | (1,026,334) | - | - | (1,026,334) |
Third-party services | (317,057) | (7,109) | (50,754) | (374,920) |
Depreciation and amortization | (213,543) | (1,951) | (26) | (215,520) |
Employee benefit expenses | (149,933) | (40,700) | (10,402) | (201,035) |
Other expenses | (8,516) | (44,449) | (11,666) | (64,631) |
(1,715,383) | (94,209) | (72,848) | (1,882,440) |
Nine-month period ended | ||||
September, 2022 | ||||
Cost of sales | Selling, general and administrative | Mineral exploration and project evaluation | Total | |
Raw materials and consumables used | (1,010,048) | - | - | (1,010,048) |
Third-party services | (333,408) | (21,284) | (46,310) | (401,002) |
Depreciation and amortization | (209,659) | (3,327) | (33) | (213,019) |
Employee benefit expenses | (134,627) | (44,730) | (14,598) | (193,955) |
Other expenses | (11,213) | (35,392) | (10,531) | (57,136) |
(1,698,955) | (104,733) | (71,472) | (1,875,160) |
16 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
(i) In the nine-month period ended on September 30, 2023, the Company recognized USD 9,256 in Cost of sales related to idle-capacity costs: (i) USD 6,191 recognized in the first quarter in Cerro Lindo, due to the suspension of the mine for almost two weeks caused by unusually heavy rainfall levels and overflowing rivers originated by cyclone Yaku; and, (ii) USD 3,065 recognized in June and July in Atacocha, due to the Unit’s temporary suspension caused by illegal protest activities undertaken by communities (for the nine-month period ended on September 30, 2022 is USD 2,197).
(ii) Cost of sales includes: (i) a reversal of USD 48,840 (including depreciation of USD 12,437) related to the adjustment in the provision of Aripuanã’s inventory to its net realizable value, for both its ore stockpile and its produced concentrates, as explained in note 11; and, (ii) USD 59,061 (including depreciation of USD 17,272) related to the idleness of the Aripuanã mine and plant capacity occurred during the ramp-up phase.
6 | Other income and expenses, net |
Three-month period ended | Nine-month period ended | ||||
2023 | 2022 | 2023 | 2022 | ||
ICMS tax incentives (i) | 7,911 | 16,769 | 25,139 | 56,697 | |
Changes in fair value of offtake agreement - note 10 (e) | 998 | 7,766 | 1,013 | 16,559 | |
Changes in fair value of derivative financial instruments – note 10 (c) | (456) | 1,698 | (1,486) | 1,363 | |
Gain (loss) on sale of property, plant and equipment | 115 | (561) | (1,172) | (541) | |
Changes in asset retirement and environmental obligations - note 15 (ii) | 1,908 | 5,909 | 1,205 | 11,624 | |
Slow moving and obsolete inventory | (2,805) | (948) | (3,139) | (5,326) | |
Tax voluntary disclosure – VAT discussions note 1 (b) | (12,818) | - | (75,991) | - | |
Provision of legal claims | 1,059 | (1,408) | (10,274) | (7,772) | |
Contribution to communities | (4,138) | (4,670) | (7,401) | (10,054) | |
Pre-operating expenses related to Aripuanã (ii) | - | (15,062) | - | (43,700) | |
Energy forward contracts – MTM – Note 10 (d) | 2,272 | - | (7,429) | - | |
Others | (1,233) | 3,276 | 800 | 3,456 | |
(7,187) | 12,769 | (78,735) | 22,306 |
(i) Since December 2021, the Company adhered to a Brazilian Law that states that government grants of the “Imposto sobre circulação de mercadorias e serviços” (“ICMS”) tax incentives are considered investment subsidies and should be excluded from taxable income for the purpose of calculating the Corporate Income Tax and the Social Contribution on Net Income tax.
(ii) In the nine-month period ended on September 30, 2022, the main amounts were related to the idleness of the Aripuanã mine and plant relative to its nameplate capacity, which were recorded in this account until Aripuanã started to generate revenues in November 2022, when the idleness amounts started to be recorded as Cost of sales.
17 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
7 | Net financial results |
Three-month period ended | Nine-month period ended | |||||
2023 | 2022 | 2023 | 2022 | |||
Financial income | ||||||
Interest income on financial investments and cash equivalents | 3,100 | 5,090 | 9,265 | 12,204 | ||
Interest on tax credits | 114 | 178 | 309 | 805 | ||
Other financial income | 5,145 | 1,433 | 11,102 | 5,835 | ||
8,359 | 6,701 | 20,676 | 18,844 | |||
Financial expenses | ||||||
Interest on loans and financings | (24,699) | (28,286) | (84,031) | (76,103) | ||
Premium paid on bonds repurchase | - | - | - | (3,277) | ||
Interest accrual on asset retirement and environmental obligations - note 15 |
(6,989) | (7,975) | (19,871) | (19,206) | ||
Interest on other liabilities | (1,341) | (175) | (5,087) | (4,771) | ||
Interest on contractual obligations | (1,287) | (2,179) | (3,428) | (4,616) | ||
Interest on lease liabilities | (1) | (119) | (167) | (505) | ||
Interest on VAT discussions - note 1(b) | (2,831) | - | (10,299) | - | ||
Interest on Forfaiting and Confirming Payables operations | (3,687) | (2,541) | (11,558) | (6,811) | ||
Other financial expenses | (4,481) | (296) | (16,653) | (10,010) | ||
(45,316) | (41,571) | (151,094) | (125,299) | |||
Other financial items, net | ||||||
Changes in fair value of loans and financings – note 14 (b) | (296) | (433) | (511) | (1,052) | ||
Changes in fair value of derivative financial instruments – note 10 (c) |
(222) | (914) | (434) | (98) | ||
Foreign exchange gain (loss) (i) | (26,882) | (16,076) | 1,267 | (8,269) | ||
(27,400) | (17,423) | 322 | (9,419) | |||
Net financial results | (64,357) | (52,293) | (130,096) | (115,874) |
(i) The change of the three-month period ended on September 30, 2023 is mainly due to exchange variation loss on the outstanding USD accounts receivables and accounts payables of NEXA BR with NEXA in the amount of USD 10,078 (September 30, 2022: loss of USD 5,639), exchange variation loss of USD 10,967 (September 30, 2022: loss of USD 5,803) mainly related to the intercompany loan of Nexa BR with its related parties which is not eliminated in the consolidation process. The transactions were impacted by the volatility of the Brazilian Real (“BRL”), which depreciated against the USD during the third quarter of 2023.
18 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
8 | Current and deferred income tax |
(a) | Reconciliation of income tax expense |
Three-month period ended | Nine-month period ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(Loss) income before income tax | (63,005) | (13,692) | (189,609) | 285,487 | |||
Statutory income tax rate | 24.94% | 24.94% | 24.94% | 24.94% | |||
Income tax benefit (expense) at statutory rate | 15,713 | 3,415 | 47,288 | (71,200) | |||
ICMS tax incentives permanent difference | 2,690 | 5,710 | 8,547 | 19,285 | |||
Tax effects of translation of non-monetary assets/liabilities to functional currency | 5,251 | (8,212) | 15,115 | (2,954) | |||
Withholding tax over subsidiary capital reduction | - | (5,264) | - | (5,264) | |||
Special mining taxes | (1,410) | (1,238) | (3,782) | (12,028) | |||
Difference in tax rate of subsidiaries outside Luxembourg | 2,534 | (2,223) | 21,158 | (17,799) | |||
Tax voluntary disclosure – VAT discussions Note 1 (b)/(i) | (5,500) | - | (29,518) | - | |||
Unrecognized deferred tax on net operating losses | (12,212) | (16,254) | (41,262) | (30,039) | |||
Other permanent tax differences | (7,425) | (2,111) | (9,495) | (7,659) | |||
Income tax benefit (expense) | (359) | (26,177) | 8,051 | (127,658) | |||
Current | (17,851) | (20,502) | (51,308) | (132,373) | |||
Deferred | 17,492 | (5,675) | 59,359 | 4,715 | |||
Income tax benefit (expense) | (359) | (26,177) | 8,051 | (127,658) |
(i) VAT expense related to the tax voluntary disclosure is not deductible in the income tax and, consequently, Nexa did not recorded a deferred tax asset.
(b) | Effects of deferred tax on income statement and other comprehensive income |
September 30, 2023 | September 30, 2022 | ||
Balance at the beginning of the period | (32,516) | (40,378) | |
Effect on loss for the period | 59,359 | 4,715 | |
Effect on other comprehensive loss – Fair value adjustment | (1,403) | (217) | |
Effect on other comprehensive income – Translation effect included in cumulative translation adjustment | 3,323 | 1,765 | |
Uncertain income tax treatments | (1,405) | - | |
Balance at the end of the period | 27,358 | (34,115) |
(c) | Summary of uncertain tax positions on income tax |
There are discussions and ongoing disputes with tax authorities related to uncertain tax positions adopted by the Company in the calculation of its income tax, and for which management, supported by its legal counsel, concluded that the risk of loss is not more likely than not to occur, and it is not probable that an outflow of resources will be required. In such cases, a provision is not recognized. As of September 30, 2023, the main legal proceedings are related to: (i) the interpretation of the application of Cerro Lindo´s stability agreement; and (ii) the carryforward calculation of net operating losses. The estimated amount of these contingent liabilities on September 30, 2023, is USD 391,713 (December 31, 2022, of USD 349,322), and the increase is mainly related to the change of the risk evaluation from remote to possible of some expense’s deductions, in view of the evaluation made by internal and external advisors.
19 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
9 | Financial instruments |
(a) | Breakdown by category |
The Company’s financial assets and liabilities are classified as follows:
September 30, 2023 | ||||||||
Assets per balance sheet | Note | Amortized cost | Fair value through profit or loss | Fair value through Other comprehensive income | Total | |||
Cash and cash equivalents | 414,325 | - | - | 414,325 | ||||
Financial investments | 7,952 | - | - | 7,952 | ||||
Other financial instruments | 10 (a) | - | 27,310 | - | 27,310 | |||
Trade accounts receivables | 56,173 | 93,567 | - | 149,740 | ||||
Investments in equity instruments | - | - | 6060 | 6,060 | ||||
478,450 | 120,877 | 6,060 | 605,387 | |||||
September 30, 2023 | ||||||||
Liabilities per balance sheet | Note | Amortized cost | Fair value through profit or loss | Fair value through Other comprehensive income | Total | |||
Loans and financings | 14 (a) | 1,571,452 | 90,875 | - | 1,662,327 | |||
Lease liabilities | 5,806 | - | - | 5,806 | ||||
Other financial instruments | 10 (a) | - | 58,929 | - | 58,929 | |||
Trade payables | 342,881 | - | - | 342,881 | ||||
Confirming payables | 259,615 | - | - | 259,615 | ||||
Use of public assets (ii) | 21,827 | - | - | 21,827 | ||||
Related parties (ii) | 2,560 | - | - | 2,560 | ||||
2,204,141 | 149,804 | - | 2,353,945 | |||||
December 31, 2022 | ||||||||
Assets per balance sheet | Note | Amortized cost | Fair value through profit or loss | Fair value through Other comprehensive income | Total | |||
Cash and cash equivalents | 497,826 | - | - | 497,826 | ||||
Financial investments | 18,062 | - | - | 18,062 | ||||
Other financial instruments | 10 (a) | - | 7,443 | - | 7,443 | |||
Trade accounts receivables | 53,123 | 170,617 | - | 223,740 | ||||
Investments in equity instruments | - | - | 7,115 | 7,115 | ||||
Related parties (i) | 2 | - | - | 2 | ||||
569,013 | 178,060 | 7,115 | 754,188 | |||||
December 31, 2022 | ||||||||
Liabilities per balance sheet | Note | Amortized cost |
|
Fair value through profit or loss | Fair value through Other comprehensive income | Total | ||
Loans and financings | 14 (a) | 1,578,864 | 90,395 | - | 1,669,259 | |||
Lease liabilities | 5,021 | - | - | 5,021 | ||||
Other financial instruments | 10 (a) | - | 31,851 | - | 31,851 | |||
Trade payables | 413,856 | - | - | 413,856 | ||||
Confirming payables | 216,392 | - | - | 216,392 | ||||
Use of public assets (ii) | 23,263 | - | - | 23,263 | ||||
Related parties (ii) | 1,033 | - | - | 1,033 | ||||
2,238,429 | 122,246 | - | 2,360,675 | |||||
(i) Classified as Other assets in the consolidated balance sheet.
(ii) Classified as Other liabilities in the consolidated balance sheet.
20 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
(b) | Fair value by hierarchy |
September 30, 2023 | |||||||
Note | Level 1 | Level 2 (ii) | Total | ||||
Assets | |||||||
Other financial instruments | 10 (a) | - | 27,310 | 27,310 | |||
Trade accounts receivables | - | 93,567 | 93,567 | ||||
Investments in equity instruments (i) | 6,060 | - | 6,060 | ||||
6,060 | 120,877 | 126,937 | |||||
Liabilities | |||||||
Other financial instruments | 10 (a) | - | 58,929 | 58,929 | |||
Loans and financings designated at fair value (ii) | - | 90,875 | 90,875 | ||||
- | 149,804 | 149,804 |
December 31, 2022 | |||||||
Note | Level 1 | Level 2 | Total | ||||
Assets | |||||||
Other financial instruments | 10 (a) | - | 7,443 | 7,443 | |||
Trade accounts receivables | - | 170,617 | 170,617 | ||||
Investment in equity instruments (i) | 7,115 | - | 7,115 | ||||
7,115 | 178,060 | 185,175 | |||||
Liabilities | |||||||
Other financial instruments | 10 (a) | - | 31,851 | 31,851 | |||
Loans and financings designated at fair value (ii) | - | 90,395 | 90,395 | ||||
- | 122,246 | 122,246 |
(i) To determine the fair value of the investments in equity instruments, the Company uses the share’s quotation as of the last day of the reporting period.
(ii) Loans and financings are measured at amortized cost, except for certain contracts for which the Company has elected the fair value option.
10 | Other financial instruments |
(a) | Composition |
Derivatives financial instruments | Offtake agreement measured at FVTPL | Energy forward contracts at FVTPL(i) | September 30, 2023 | ||||
Current assets | 14,999 | - | 4,321 | 19,320 | |||
Non-current assets | 20 | - | 7,970 | 7,990 | |||
Current liabilities | (18,260) | (1,649) | (7,335) | (27,244) | |||
Non-current liabilities | (173) | (19,171) | (12,341) | (31,685) | |||
Other financial instruments, net | (3,414) | (20,820) | (7,385) | (31,619) | |||
Derivatives financial instruments | Offtake agreement measured at FVTPL | Energy forward contracts at FVTPL | December 31, 2022 | ||||
Current assets | 7,380 | - | - | 7,380 | |||
Non-current assets | 63 | - | - | 63 | |||
Current liabilities | (9,711) | (1,724) | - | (11,435) | |||
Non-current liabilities | (307) | (20,109) | - | (20,416) | |||
Other financial instruments, net | (2,575) | (21,833) | - | (24,408) |
(i) On September 30, 2023, due to the current scenario of high energy supply in Brazil, the Company has a projected energy surplus based on its self-production and forward contracts with some suppliers. Consequently, the Company recognized the fair value arising from the mark-to-market of current purchase and sale contracts until 2026, which resulted in an expense in the amount of USD 7,429. This amount was accounted for as a loss within “Other income and expenses, net” (Note 6) and will vary according to the market’s energy prices. Sales of surplus energy, being traded in an active market meet the definition of financial instruments, because they are settled in the Free Contracting Environment (“ACL”) and readily convertible into cash.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
(b) | Derivative financial instruments: Fair value by strategy |
September 30, 2023 |
December 31, 2022 | ||||||
Strategy | Per Unit | Notional | Fair value | Notional | Fair value | ||
Mismatches of quotational periods | |||||||
Zinc forward | ton | 256,184 | (3,225) | 209,319 | (2,357) | ||
(3,225) | (2,357) | ||||||
Sales of zinc at a fixed price | |||||||
Zinc forward | ton | 8,393 | 267 | 8,297 | 74 | ||
267 | 74 | ||||||
Interest rate risk | |||||||
IPCA vs. CDI | BRL | 100,000 | (456) | 226,880 | (292) | ||
(456) | (292) | ||||||
(3,414) | (2,575) |
(c) | Derivative financial instruments: Changes in fair value – At the end of each period |
September 30, 2023 | |||||||
Strategy | Inventory | Cost of sales | Net revenues | Other income and expenses, net | Net financial results | Other comprehensive income | Realized (loss) gain |
Mismatches of quotational periods |
- | 16,186 | 1,264 | (1,486) | - | 2,472 | 19,304 |
Sales of zinc at a fixed price |
- | - | (3,354) | - | - | - | (3,547) |
Interest rate risk – IPCA vs. CDI |
- | - | - | - | (434) | - | (270) |
September 30, 2023 | - | 16,186 | (2,090) | (1,486) | (434) | 2,472 | 15,487 |
September 30, 2022 | (1,014) | 13,727 | (186) | 1,363 | (98) | (420) | 157 |
(d) | Energy forward contracts |
September 30, 2023 |
September 30, 2022 |
Notional September 30, 2023 |
Notional September 30, 2022 | |
Balance at the beginning of the period | - | - | - | - |
Changes in fair value | (7,429) | - | - | - |
Foreign exchanges effects | 44 | - | - | - |
Energy forward contracts (Megawatts) | - | - | 271,489 | - |
Balance at the end of the period | (7,385) | - | 271,489 | - |
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
(e) | Offtake agreement measured at FVTPL: Changes in fair value |
September 30, 2023 |
September 30, 2022 |
Notional September 30, 2023 |
Notional September 30, 2022 | |
Balance at the beginning of the period | (21,833) | (46,100) | 30,810 | 30,810 |
Changes in fair value | 1,013 | 16,559 | - | - |
Deliveries of copper concentrates (i) | - | - | (2,071) | - |
Balance at the end of the period | (20,820) | (29,541) | 28,739 | 30,810 |
(i) On January 25, 2022, the Company signed an offtake agreement with an Offtaker to sell 100% of the copper concentrate produced by Aripuanã for a 5-year period, up to a specified volume, at the lower of current market prices or a price cap. In June 2023, the Company began with the deliveries of copper concentrates in relation to the offtake agreement mentioned above. Since the current copper price is lower than the price cap, there was no market-to-market impact for three and nine-months period.
11 | Inventory |
Composition |
September 30, 2023 | December 31, 2022 | ||
Finished products | 99,138 | 142,935 | |
Semi-finished products (i) | 97,274 | 163,805 | |
Raw materials | 60,523 | 68,497 | |
Auxiliary materials and consumables | 127,195 | 115,562 | |
Inventory provisions (ii) | (50,377) | (95,602) | |
333,753 | 395,197 |
(i) Semi-finished products decreased in the nine-month period ended on September 30, 2023, mainly due to lower ore stockpile volume in Aripuanã given the higher stockpile consumption in Aripuanã's plant.
(ii) Inventory provisions decreased in the nine-month period ended on September 30, 2023, due to the reversal of a portion of the net realizable value provision of Aripuanã’s ore stockpile and produced concentrates in the total amount of USD 48,840 (including depreciation of USD 12,437).
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
12 | Property, plant and equipment |
Changes in the nine-month period ended on September 30
September 30, 2023 |
September 30, 2022 | ||||||||
Dam and buildings | Machinery, equipment, and facilities | Assets and projects under construction | Asset retirement obligations | Mining projects (i) | Other | Total | Total | ||
Balance at the beginning of the period | |||||||||
Cost | 1,512,360 | 2,636,582 | 521,191 | 200,665 | 221,077 | 44,052 | 5,135,927 | 4,678,973 | |
Accumulated depreciation and impairment | (671,028) | (1,870,697) | (65,386) | (125,118) | (92,652) | (15,771) | (2,840,652) | (2,591,243) | |
Balance at the beginning of the period | 841,332 | 765,885 | 455,805 | 75,547 | 128,425 | 28,281 | 2,295,275 | 2,087,730 | |
Additions | - | 813 | 198,492 | - | - | 45 | 199,350 | 282,539 | |
Disposals and write-offs | - | (207) | (1,115) | - | - | (50) | (1,372) | (946) | |
Depreciation | (63,484) | (89,300) | - | (3,863) | (989) | (990) | (158,626) | (142,919) | |
Impairment loss of long-lived assets - note 16 | (11,462) | (26,279) | (5,226) | (6,570) | (7,257) | (2,276) | (59,070) | - | |
Foreign exchange effects | 25,320 | 23,210 | 10,561 | 2,455 | 1,027 | 848 | 63,421 | 34,367 | |
Transfers | 78,871 | 131,726 | (212,998) | - | 127 | 1,666 | (608) | (1,100) | |
Remeasurement | - | - | - | (1,457) | - | - | (1,457) | (45,919) | |
Balance at the end of the period | 870,577 | 805,848 | 445,519 | 66,112 | 121,333 | 27,524 | 2,336,913 | 2,213,752 | |
Cost | 1,619,696 | 2,808,929 | 513,135 | 202,581 | 215,122 | 43,408 | 5,402,871 | 4,954,892 | |
Accumulated depreciation and impairment | (749,119) | (2,003,081) | (67,616) | (136,469) | (93,789) | (15,884) | (3,065,958) | (2,741,140) | |
Balance at the end of the period | 870,577 | 805,848 | 445,519 | 66,112 | 121,333 | 27,524 | 2,336,913 | 2,213,752 | |
Average annual depreciation rates % | 4 | 9 | - | UoP | UoP |
(i) Only the amounts related to the operating unit Atacocha are being depreciated under the units of production (“UoP”) method. Other mining projects will be depreciated once their development stage finishes, and the project’s operation starts.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
13 | Intangible assets |
Changes in the nine-month period ended on September 30
2023 | 2022 | ||||
Goodwill | Rights to use natural resources | Other | Total | Total | |
Balance at the beginning of the period | |||||
Cost | 611,909 | 1,855,014 | 65,026 | 2,531,949 | 2,537,627 |
Accumulated amortization and impairment | (267,342) | (1,207,596) | (40,084) | (1,515,022) | (1,480,856) |
Balance at the beginning of the period | 344,567 | 647,418 | 24,942 | 1,016,927 | 1,056,771 |
Additions | - | - | 1,506 | 1,506 | 57,529 |
Amortization | - | (51,946) | (2,329) | (54,275) | (62,680) |
Impairment loss of long-lived assets | - | - | (27) | (27) | - |
Foreign exchange effects | 125 | 955 | 982 | 2,062 | 2,325 |
Transfers | - | 158 | 565 | 723 | 1,100 |
Balance at the end of the period | 344,692 | 596,585 | 25,639 | 966,916 | 1,055,045 |
Cost | 612,034 | 1,856,509 | 68,581 | 2,537,124 | 2,599,394 |
Accumulated amortization and impairment | (267,342) | (1,259,924) | (42,942) | (1,570,208) | (1,544,349) |
Balance at the end of the period | 344,692 | 596,585 | 25,639 | 966,916 | 1,055,045 |
Average annual depreciation rates % | - | UoP | - |
14 | Loans and financings |
(a) | Composition |
Total | Fair value | |||||||
September 30, 2023 | December 31, 2022 | September 30, 2023 | December 31, 2022 | |||||
Type | Average interest rate | Current | Non-current | Total | Total | Total | Total | |
Eurobonds – USD | Pré USD 5.84% | 19,641 | 1,193,476 | 1,213,117 | 1,210,483 | 1,142,576 | 1,162,741 | |
BNDES | TJLP
+ 2.82 % SELIC + 3.10 % TLP - IPCA + 5.46 % |
27,690 | 180,114 | 207,804 | 216,316 | 167,591 | 183,452 | |
Export credit notes | LIBOR
+ 1.54 % 134.20% CDI SOFR + 2,5% |
2,288 | 229,459 | 231,747 | 232,790 | 225,453 | 227,201 | |
Other | 96 | 9,563 | 9,659 | 9,670 | 7,202 | 7,054 | ||
49,715 | 1,612,612 | 1,662,327 | 1,669,259 | 1,542,822 | 1,580,448 | |||
Current portion of long-term loans and financings (principal) | 24,979 | |||||||
Interest on loans and financings | 23,791 |
(b) | Changes in the nine-month period ended on September 30 |
September 30, 2023 | September 30, 2022 | ||
Balance at the beginning of the period | 1,669,259 | 1,699,315 | |
New loans and financings | 60 | 90,000 | |
Payments of loans and financings | (20,020) | (19,694) | |
Bonds repurchased | - | (128,470) | |
Foreign exchange effects | 14,351 | 12,501 | |
Changes in fair value of financing liabilities related to changes in the Company´s own credit risk |
(220) | (2,303) | |
Changes in fair value of loans and financings - note 7 | 511 | 1,052 | |
Interest accrual | 85,083 | 84,449 | |
Interest paid on loans and financings | (88,462) | (88,471) | |
Amortization of debt issue costs | 1,765 | 1,857 | |
Balance at the end of the period | 1,662,327 | 1,650,236 |
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
(c) | Maturity profile |
September 30, 2023 | |||||||
2023 | 2024 | 2025 | 2026 | 2027 | As from 2028 |
Total | |
Eurobonds – USD (i) | 14,736 | 4,366 | (2,200) | (2,270) | 698,567 | 499,918 | 1,213,117 |
BNDES | 7,396 | 26,667 | 25,494 | 22,625 | 14,018 | 111,604 | 207,804 |
Export credit notes | 1,812 | 89,523 | 50,412 | - | 90,000 | - | 231,747 |
Other | 104 | 103 | 1,351 | 1,351 | 1,351 | 5,399 | 9,659 |
24,048 | 120,659 | 75,057 | 21,706 | 803,936 | 616,921 | 1,662,327 |
(i)The negative balances refer to related funding costs (fee)
amortization.
(d) | Guarantees and covenants |
The Company has loans and financings that are subject to certain financial covenants at the consolidated level, such as: (i) leverage ratio; (ii) capitalization ratio; and (iii) debt service coverage ratio. When applicable, these compliance obligations are standardized for all debt agreements. No changes to the contractual guarantees occurred in the period ended on September 30, 2023.
As of September 30, 2023, the Company was in compliance with all its financial covenants, as well as with other qualitative covenants.
15 | Asset retirement and environmental obligations | |
Changes in the nine-month period ended on September 30 |
September 30 | September 30 | |||
2023 | 2022 | |||
Asset retirement obligations | Environmental obligations | Total | Total | |
Balance at the beginning of the year | 219,923 | 46,396 | 266,319 | 264,151 |
Additions (ii) | - | 2,597 | 2,597 | 16,144 |
Payments | (3,748) | (3,935) | (7,683) | (18,208) |
Foreign exchange effects | 3,939 | 1,945 | 5,884 | 4,757 |
Interest accrual - note 7 | 16,711 | 3,160 | 19,871 | 19,206 |
Remeasurement - discount rate (i) / (ii) | (6,987) | 1,728 | (5,259) | (57,985) |
Balance at the end of the year | 229,838 | 51,891 | 281,729 | 228,065 |
Current liabilities | 27,400 | 8,881 | 36,281 | 36,532 |
Non-current liabilities | 202,438 | 43,010 | 245,448 | 191,533 |
(i) As of September 30, 2023, the credit risk-adjusted rate used for Peru was between 12.75% and 13.76% (December 31, 2022: 10.92% and 12.04%) and for Brazil was between 7.85% and 9.18% (December 31, 2022: 8.22% and 8.61%). As of September 30, 2022, the credit risk-adjusted rate used for Peru was between 10.53% and 13.82% (December 31, 2021: 3.54% and 7.28%) and for Brazil was between 8.49% and 11.25% (December 31, 2021: 7.68% and 8.67%).
(ii) The change observed for the period ending September 30, 2023, was mainly due to the scheduling of anticipated disbursements related to decommissioning obligations in specific operations, in line with updates in their asset retirement and environmental obligations, coupled with the increase in the discount rates mentioned earlier. Consequently, asset retirement obligations for operational assets saw a decrease of USD 1,457 (September 30, 2022: decrease of USD 30,217) as detailed in note 12; and asset retirement obligations for non-operational assets along with environmental obligations experienced a gain of USD 1,205 (September 30, 2022: gain of USD 11,624) as outlined in note 6.
26 of 28 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
16 | Impairment of long-lived assets | |
Impairment test analysis |
Following NEXA’s accounting policy, the Company, at each reporting date, evaluates whether there are signs that the carrying amount of an asset or cash generation unit (CGU) might not be recoverable, or if a previously recorded impairment needs to be reversed. Additionally, the Company conducts its yearly impairment test for the CGUs to which goodwill has been previously allocated, using key assumptions from the strategic planning process. This test will be conducted in the fourth quarter, incorporating various factors discussed during the planning process.
In 2Q23, NEXA’s management continued to analyze the operational optimization and strategic alternatives for the Três Marias System (STM), a CGU formed by the combined operations of the Três Marias smelter and the Vazante and Morro mines. Based on the current and projected macroeconomic and price scenarios, as well as on possible future operational scenarios for the STM, management concluded that the implied value of processing zinc concentrate from Morro Agudo in the Três Marias smelter could no longer continue to be recognized.
As a result, the company concluded that there could be scenarios without the need to consider the two operations in an integrated manner, and thus, the CGU of the STM was split in two: (i) the STM CGU (comprising the Três Marias smelter and the Vazante mine) and (ii) the Morro Agudo CGU (comprised of Morro Agudo mine and Bonsucesso greenfield). After this change, an impairment test was triggered for both CGUs.
As of June 30, 2023, the impairment assessment resulted in the recognition of an impairment loss of USD 57,702 in the Morro Agudo CGU.
In addition to this economic impairment, the Company recognized in the third quarter of 2023 a net impairment loss of other non-relevant individual assets of USD 1,910. As a result, a net impairment loss of USD 59,097 (after tax USD 39,004) was recorded for the nine-month period ended in 2023.
Furthermore, in the third quarter of 2023, an updated test for Cajamarquilla was conducted, as its goodwill assessment was performed 12 months ago, and no impairment was identified in the current test.
For the nine-month period ended September 30, 2022, the Company performed its quarterly impairment review, and did not identify any additional impairment indicators for the period, and thus no additional provision for impairment was recognized.
(a) | Key assumptions used in impairment test |
The recoverable amounts for each CGU were determined based on the FVLCD method, which were higher than those determined based on the VIU method.
The Company identified long-term metal prices and discount rate as key assumptions for the recoverable amounts determination, due to the material impact such assumptions may cause on the recoverable value. Part of these assumptions are summarized below:
2023 | 2022 | ||
Long-term zinc price (USD/t) | 2,800 | 2,787 | |
Discount rate (Peru) | 7.22% | 6.93% |
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements
Unaudited
Nine-month periods ended on September 30
All amounts in thousands of US Dollars, unless otherwise stated
(b) | Impairment results – Other tested CGU |
The Company estimated the amount by which the value assigned to the key assumptions must change in order for the assessed CGU recoverable amount, which was not impaired, to be equal to its carrying amount:
CGU | Excess over recoverable amount | Decrease in Long term Zinc (USD/t) | Increase in WACC | |||||
Change | Price | Change | Rate | |||||
Três Marias System | 182,427 | (7.31%) | 2,583 | 88.95% | 15.16% | |||
Cajamarquilla | 804,004 | (27.96%) | 2,017 | 117.84% | 15.73% |
17 | Events after the reporting period |
On October 20, 2023, the Company entered into a sustainability-linked revolving credit facility with a group of financial institutions of lenders, which allows the Company to borrow up to USD 320,000. The revolving credit facility has a term of five years, and the amounts drawn are subject to an initial interest rate of 1.60% plus Term SOFR (Secured Overnight Financing Rate). The applicable margin is subject to compliance with certain sustainability key performance indicators. The new facility replaces Nexa’s 2019 USD 300,000 revolving credit facility, which was set to mature in October 2024.
As of October 30, 2023, the Company has not drawn on this revolving credit facility.
*.*.*
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