U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the Month of July 2023
Nexa Resources S.A.
(Exact Name as Specified in its Charter)
N/A
(Translation of Registrant’s Name)
37A, Avenue J.F. Kennedy
L-1855, Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F X | Form 40-F |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes | No X |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 27, 2023
Nexa Resources S.A. |
By:/s/ José Carlos del Valle Name: José Carlos del Valle |
Title: Senior Vice President of Finance and Group Chief Financial Officer |
EXHIBIT INDEX
Exhibit | Description of Exhibit |
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Nexa Resources S.A. Condensed consolidated interim financial statements (Unaudited) at and for the three and six-month periods ended on June 30, 2023 |
Contents
Condensed consolidated interim financial statements
Condensed consolidated interim income statement | 3 |
Condensed consolidated interim statement of comprehensive income | 4 |
Condensed consolidated interim balance sheet | 5 |
Condensed consolidated interim statement of cash flows | 6 |
Condensed consolidated interim statement of changes in shareholders’ equity | 8 |
Notes to the condensed consolidated interim financial statements
Nexa Resources S.A.
Condensed consolidated interim income statement
Unaudited
Periods ended on June 30
All amounts in thousands of US dollars, unless otherwise stated
Three-month period ended | Six-month period ended | ||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||
Net revenues | 4 | 626,704 | 829,434 | 1,294,022 | 1,551,570 | ||||
Cost of sales | 5 | (565,024) | (556,329) | (1,132,837) | (1,081,109) | ||||
Gross profit | 61,680 | 273,105 | 161,185 | 470,461 | |||||
Operating expenses | |||||||||
Selling, general and administrative | 5 | (32,621) | (37,119) | (61,101) | (73,168) | ||||
Mineral exploration and project evaluation | 5 | (21,261) | (26,826) | (43,289) | (44,070) | ||||
Impairment loss of long-lived assets | 16 | (57,187) | - | (57,187) | - | ||||
Other income and expenses, net | 6 | (66,077) | 30,442 | (71,548) | 9,537 | ||||
(177,146) | (33,503) | (233,125) | (107,701) | ||||||
Operating (loss) income | (115,466) | 239,602 | (71,940) | 362,760 | |||||
Results from associates’ equity | |||||||||
Share in the results of associates | 5,652 | - | 11,075 | - | |||||
Net financial results | 7 | ||||||||
Financial income | 6,700 | 8,435 | 12,317 | 12,143 | |||||
Financial expenses | (59,363) | (40,329) | (105,778) | (83,728) | |||||
Other financial items, net | 26,149 | (42,340) | 27,722 | 8,004 | |||||
(26,514) | (74,234) | (65,739) | (63,581) | ||||||
(Loss) income before income tax | (136,328) | 165,368 | (126,604) | 299,179 | |||||
Income tax benefit (expense) | 8 (a) | 33,544 | (41,848) | 8,410 | (101,481) | ||||
Net (loss) income for the period | (102,784) | 123,520 | (118,194) | 197,698 | |||||
Attributable to NEXA's shareholders | (102,486) | 109,002 | (122,214) | 172,014 | |||||
Attributable to non-controlling interests | (298) | 14,518 | 4,020 | 25,684 | |||||
Net (loss) income for the period | (102,784) | 123,520 | (118,194) | 197,698 | |||||
Weighted average number of outstanding shares – in thousands |
132,439 | 132,439 | 132,439 | 132,439 | |||||
Basic and diluted (losses) earnings per share – USD |
(0.77) | 0.82 | (0.92) | 1.30 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3 of 27 |
Nexa Resources S.A.
Condensed consolidated interim statement of comprehensive income
Unaudited
Periods ended on June 30
All amounts in thousands of US dollars, unless otherwise stated
Three-month period ended | Six-month period ended | ||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||
Net (loss) income for the period | (102,784) | 123,520 | (118,194) | 197,698 | |||||
Other comprehensive income (loss), net of income tax - items that can be reclassified to the income statement | |||||||||
Cash flow hedge accounting | 10 (c) | 66 | (6,156) | 909 | (5,078) | ||||
Deferred income tax | (97) | 3,844 | (785) | 3,262 | |||||
Translation adjustment of foreign subsidiaries | 57,942 | (109,403) | 87,862 | 56,025 | |||||
57,911 | (111,715) | 87,986 | 54,209 | ||||||
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) | (436) | 3,020 | 70 | 2,533 | ||||
Deferred income tax | 149 | (1,027) | (24) | (862) | |||||
Changes in fair value of investments in equity instruments | 702 | (2,324) | 970 | (2,132) | |||||
415 | (331) | 1,016 | (461) | ||||||
Other comprehensive income (loss) for the period net of income tax | 58,326 | (112,046) | 89,002 | 53,748 | |||||
Total comprehensive (loss) income for the period | (44,458) | 11,474 | (29,192) | 251,446 | |||||
Attributable to NEXA’s shareholders | (48,362) | 564 | (38,435) | 221,759 | |||||
Attributable to non-controlling interests | 3,904 | 10,910 | 9,243 | 29,687 | |||||
Total comprehensive (loss) income for the period | (44,458) | 11,474 | (29,192) | 251,446 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4 of 27 |
Nexa Resources S.A.
Condensed consolidated interim balance sheet
All amounts in thousands of US Dollars, unless otherwise stated
Unaudited | Audited | ||||
Assets | Note | June 30, 2023 | December 31, 2022 | ||
Current assets | |||||
Cash and cash equivalents | 400,708 | 497,826 | |||
Financial investments | 20,771 | 18,062 | |||
Other financial instruments | 10 (a) | 17,650 | 7,380 | ||
Trade accounts receivables | 131,936 | 223,740 | |||
Inventory | 11 | 375,103 | 395,197 | ||
Recoverable income tax | 14,165 | 2,455 | |||
Other assets | 102,510 | 75,486 | |||
1,062,843 | 1,220,146 | ||||
Non-current assets | |||||
Investments in equity instruments | 8,085 | 7,115 | |||
Other financial instruments | 10 (a) | 6,306 | 63 | ||
Deferred income tax | 8 (b) | 202,211 | 166,983 | ||
Recoverable income tax | 6,175 | 4,914 | |||
Other assets | 148,515 | 134,474 | |||
Investments in associates | 32,390 | 38,990 | |||
Property, plant and equipment | 12 | 2,370,966 | 2,295,275 | ||
Intangible assets | 13 | 987,606 | 1,016,927 | ||
Right-of-use assets | 5,509 | 6,895 | |||
3,767,763 | 3,671,636 | ||||
Total assets | 4,830,606 | 4,891,782 | |||
Liabilities and shareholders’ equity | |||||
Current liabilities | |||||
Loans and financings | 14 (a) | 53,261 | 50,840 | ||
Lease liabilities | 2,230 | 3,661 | |||
Other financial instruments | 10 (a) | 20,791 | 11,435 | ||
Trade payables | 311,603 | 413,856 | |||
Confirming payables | 240,557 | 216,392 | |||
Dividends payable | 8,269 | 7,922 | |||
Asset retirement and environmental obligations | 15 | 30,834 | 23,646 | ||
Provisions | 46,924 | - | |||
Contractual obligations | 26,058 | 26,188 | |||
Salaries and payroll charges | 55,031 | 79,078 | |||
Tax liabilities | 12,988 | 40,610 | |||
Other liabilities | 28,206 | 25,136 | |||
836,752 | 898,764 | ||||
Non-current liabilities | |||||
Loans and financings | 14 (a) | 1,627,590 | 1,618,419 | ||
Lease liabilities | 863 | 1,360 | |||
Other financial instruments | 10 (a) | 35,188 | 20,416 | ||
Asset retirement and environmental obligations | 15 | 258,632 | 242,673 | ||
Provisions | 83,235 | 43,897 | |||
Deferred income tax | 8 (b) | 185,442 | 199,499 | ||
Contractual obligations | 93,330 | 105,972 | |||
Other liabilities | 53,512 | 50,528 | |||
2,337,792 | 2,282,764 | ||||
Total liabilities | 3,174,544 | 3,181,528 | |||
Shareholders’ equity | |||||
Attributable to NEXA’s shareholders | 1,378,810 | 1,442,245 | |||
Attributable to non-controlling interests | 277,252 | 268,009 | |||
1,656,062 | 1,710,254 | ||||
Total liabilities and shareholders’ equity | 4,830,606 | 4,891,782 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5 of 27 |
Nexa Resources S.A.
Condensed consolidated interim statement of cash flows
Unaudited
Periods ended on June 30
All amounts in thousands of US Dollars, unless otherwise stated
Three-month period ended | Six-month period ended | ||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||
Cash flows from operating activities | |||||||||
(Loss) income before income tax | (136,328) | 165,368 | (126,604) | 299,179 | |||||
Depreciation and amortization | 5 | 71,745 | 74,374 | 143,425 | 140,266 | ||||
Impairment loss of long-lived assets | 5 | 57,187 | - | 57,187 | - | ||||
Share in the results of associates | (5,652) | - | (11,075) | - | |||||
Interest and foreign exchange effects | 30,839 | 57,067 | 66,494 | 62,599 | |||||
Gain (loss) on sale of property, plant and equipment | 6 | 1,023 | (104) | 1,287 | (20) | ||||
Changes in accruals | (6,561) | (2,136) | (12,368) | 6,607 | |||||
Provisions – VAT discussions | 1 (b) | 70,641 | - | 70,641 | - | ||||
Changes in fair value of loans and financings | 14 (b) | 277 | 186 | 215 | 619 | ||||
Changes in fair value of derivative financial instruments | 10 (c) | (13,849) | (17,234) | (17,428) | (16,918) | ||||
Changes in fair value of offtake agreement | 10 (d) | (13,403) | (28,220) | (15) | (8,793) | ||||
Contractual obligations | (4,737) | (8,000) | (14,913) | (15,670) | |||||
Decrease (increase) in assets | |||||||||
Trade accounts receivables | 41,658 | (13,525) | 100,216 | 42,384 | |||||
Inventory | 64,866 | (60,092) | 60,180 | (165,557) | |||||
Other financial instruments | 17,827 | 6,719 | 15,994 | (1,778) | |||||
Other assets | (32,127) | 1,608 | (47,546) | 2,144 | |||||
Increase (decrease) in liabilities | |||||||||
Trade payables | (55,336) | 37,954 | (141,353) | (68,050) | |||||
Confirming payables | 37,060 | 14,456 | 23,418 | 64,458 | |||||
Other liabilities | 9,370 | (9,930) | (32,095) | (52,852) | |||||
Cash provided by operating activities | 134,500 | 218,491 | 135,660 | 288,618 | |||||
Interest paid on loans and financings | 14 (b) | (27,263) | (28,413) | (59,048) | (59,152) | ||||
Interest paid on lease liabilities | (120) | (357) | (135) | (416) | |||||
Premium paid on bonds repurchase | - | - | - | (3,277) | |||||
Income tax paid | (12,428) | (20,434) | (37,457) | (79,066) | |||||
Net cash provided by in operating activities | 94,689 | 169,287 | 39,020 | 146,707 | |||||
Cash flows from investing activities | |||||||||
Additions of property, plant and equipment | (59,991) | (98,486) | (116,505) | (181,759) | |||||
Additions of intangible assets | (85) | - | (85) | (194) | |||||
Net sales (purchases) additions of financial investments | (4,928) | (3,231) | 4,514 | (1,225) | |||||
Proceeds from the sale of property, plant and equipment | 365 | 183 | 365 | 395 | |||||
Investments in equity instruments | - | (7,000) | - | (7,000) | |||||
Dividends received | 1 (c) | 6,533 | - | 6,533 | - | ||||
Net cash used in investing activities | (58,106) | (108,534) | (105,178) | (189,783) | |||||
Cash flows from financing activities | |||||||||
New loans and financings | 14 (b) | - | - | - | 90,000 | ||||
Payments of loans and financings | 14 (b) | (7,228) | (5,009) | (12,829) | (9,748) | ||||
Bonds repurchase | 14 (b) | - | - | - | (128,470) | ||||
Payments of lease liabilities | (1,071) | (1,867) | (2,013) | (3,851) | |||||
Dividends paid | - | (8,930) | - | (52,804) | |||||
Payments of share premium | 1 (a) | - | - | (25,000) | (6,126) | ||||
Net cash used in financing activities | (8,299) | (15,806) | (39,842) | (110,999) | |||||
Foreign exchange effects on cash and cash equivalents | 6,142 | (16,111) | 8,882 | 15,286 | |||||
Increase (decrease) in cash and cash equivalents | 34,426 | 28,836 | (97,118) | (138,789) | |||||
Cash and cash equivalents at the beginning of the period | 366,282 | 576,192 | 497,826 | 743,817 | |||||
Cash and cash equivalents at the end of the period | 400,708 | 605,028 | 400,708 | 605,028 | |||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6 of 27 |
Nexa Resources S.A.
Condensed consolidated interim statement of cash flows
Unaudited
Periods ended on June 30
All amounts in thousands of US Dollars, unless otherwise stated
Non-cash investing and financing transactions | |||||||||
Additions to right-of-use assets | - | (1,561) | - | (2,018) | |||||
Additions to intangible assets related to offtake agreement | - | (46,100) | - | (46,100) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
7 of 27 |
Nexa Resources S.A.
Condensed consolidated interim statement of changes in shareholder’s equity
Unaudited
For the three-month periods ended on June 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 March 31, 2022 | 132,438 | 1,037,629 | 1,245,418 | (727,170) | (130,847) | 1,557,468 | 276,784 | 1,834,252 |
Net income for the period | - | - | - | 109,002 | - | 109,002 | 14,518 | 123,520 |
Other comprehensive loss for the period | - | - | - | - | (108,438) | (108,438) | (3,608) | (112,046) |
Total comprehensive income (loss) for the period | - | - | - | 109,002 | (108,438) | 564 | 10,910 | 11,474 |
Dividends distribution to non-controlling interests | - | - | - | - | - | - | (14,951) | (14,951) |
Total distributions to shareholders | - | - | - | - | - | - | (14,951) | (14,951) |
At June 30, 2022 | 132,438 | 1,037,629 | 1,245,418 | (618,168) | (239,285) | 1,558,032 | 272,743 | 1,830,775 |
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 March 31, 2023 | 132,438 | 1,012,629 | 1,245,418 | (760,809) | (202,504) | 1,427,172 | 273,348 | 1,700,520 |
Net loss for the period | - | - | - | (102,486) | - | (102,486) | (298) | (102,784) |
Other comprehensive income for the period | - | - | - | - | 54,124 | 54,124 | 4,202 | 58,326 |
Total comprehensive (loss) income for the period | - | - | - | (102,486) | 54,124 | (48,362) | 3,904 | (44,458) |
At June 30, 2023 | 132,438 | 1,012,629 | 1,245,418 | (863,295) | (148,380) | 1,378,810 | 277,252 | 1,656,062 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
8 of 27 |
Nexa Resources S.A.
Condensed consolidated interim statement of changes in shareholder’s equity
Unaudited
For the three-month periods ended on June 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 | - | - | - | 172,014 | - | 172,014 | 25,684 | 197,698 |
Other comprehensive income for the period | - | - | - | - | 49,745 | 49,745 | 4,003 | 53,748 |
Total comprehensive income for the period | - | - | - | 172,014 | 49,745 | 221,759 | 29,687 | 251,446 |
Dividends distribution to NEXA's shareholders - USD 0.33 per share | - | - | - | (43,874) | - | (43,874) | - | (43,874) |
Share premium distribution to NEXA's shareholders - USD 0.05 per share | - | (6,126) | - | - | - | (6,126) | - | (6,126) |
Dividends distribution to non-controlling interests | - | - | - | - | - | - | (14,951) | (14,951) |
Total distributions to shareholders | - | (6,126) | - | (43,874) | - | (50,000) | (14,951) | (64,951) |
At June 30, 2022 | 132,438 | 1,037,629 | 1,245,418 | (618,168) | (239,285) | 1,558,032 | 272,743 | 1,830,775 |
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 | - | - | - | (122,214) | - | (122,214) | 4,020 | (118,194) |
Other comprehensive income for the period | - | - | - | - | 83,779 | 83,779 | 5,223 | 89,002 |
Total comprehensive (loss) income for the period | - | - | - | (122,214) | 83,779 | (38,435) | 9,243 | (29,192) |
Share premium distribution to NEXA's shareholders - USD 0.19 per share | - | (25,000) | - | - | - | (25,000) | - | (25,000) |
Total distributions to shareholders | - | (25,000) | - | - | - | (25,000) | - | (25,000) |
At June 30, 2023 | 132,438 | 1,012,629 | 1,245,418 | (863,295) | (148,380) | 1,378,810 | 277,252 | 1,656,062 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
9 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 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 six-month periods ended on June 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 approximately USD 25,000, which was paid on March 24, 2023, as share premium (special cash dividend).
(b) | Contingent Liabilities and Provisions – VAT discussions |
Nexa is continuing to cooperate with the investigation by the Fiscal Office of the State of Minas Gerais and the Public Ministry of Minas Gerais (the “MG Authorities”) of commercial and value added tax (VAT) related practices of certain of Nexa’s former customers, as well as Nexa’s relationship with such former customers, that Nexa previously reported could result in liabilities for all parties involved in the commercial relationship.
Nexa is engaged in discussions with the MG Authorities, whereby, under a potential resolution, without admitting primary responsibility for the resolved claims, Nexa may voluntarily make certain tax payments on behalf of certain customers that allegedly failed to properly make their tax payments, as well as a contribution to the State of Minas Gerais including to support its ESG-related efforts. Based on the status of the discussions, in the second quarter of fiscal 2023 Nexa recognized a provision of approximately USD 70,641, comprised of a net provision of USD 63,173 recorded in “Other Income and Expenses, net” related to the potential resolution and USD 7,468 recorded in “Financial Expenses” related to the potential interest to be charged in connection with its former customers’ VAT-related practices.
It is estimated that Nexa will use accumulated tax credits to pay approximately one-half of the tax-related portion of the resolution and pay the remaining portion of the payment and the contribution to the State of Minas Gerais in cash in a series of monthly installments over a period of approximately three years. Nexa reserves the legal right to recover from certain customers the amounts that it will pay on behalf of those customers in connection with any resolution.
10 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
In addition to the potential resolution under discussion in respect of which a provision has been made, there are certain other related ongoing investigations that may result in additional liabilities for Nexa, which are expected to be less than the potential resolution currently under discussion. The final resolution of all of these matters involving tax payments, contributions to the State of Minas Gerais and interest are expected to 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 15,859 (BRL 76,430). During the three-month period ended on June 30, 2023, Pollarix received in cash the amount of USD 6,533 (BRL 32,370) from the outstanding amount of the dividend’s distribution.
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:
Three-month period ended | |||||
2023 | |||||
Mining | Smelting | Intersegment sales | Adjustments (i) |
Consolidated | |
Net revenues | 268,239 | 465,094 | (108,541) | 1,912 | 626,704 |
Cost of sales | (255,630) | (415,116) | 108,541 | (2,819) | (565,024) |
Gross profit | 12,609 | 49,978 | - | (907) | 61,680 |
Selling, general and administrative | (14,281) | (15,659) | - | (2,681) | (32,621) |
Mineral exploration and project evaluation | (19,084) | (2,177) | - | - | (21,261) |
Impairment loss of long-lived assets | (57,187) | - | - | - | (57,187) |
Other income and expenses, net | (37,914) | (32,576) | - | 4,413 | (66,077) |
Operating (loss) income | (115,857) | (434) | - | 825 | (115,466) |
Depreciation and amortization | 52,813 | 18,820 | - | 112 | 71,745 |
Miscellaneous adjustments | 82,995 | 32,245 | - | - | 115,240 |
Adjusted EBITDA | 19,951 | 50,631 | - | 937 | 71,519 |
Changes in fair value of offtake agreement – note 10 (d) | 13,403 | ||||
Impairment loss of long-lived assets – note 16 | (57,187) | ||||
Aripuaña ramp-up impacts (ii) | 3,819 | ||||
Loss on sale of property, plant and equipment | (1,023) | ||||
Remeasurement in estimates of asset retirement obligations | (1,378) | ||||
Energy forward contracts – MTM (iii) | (9,701) | ||||
Provisions – VAT discussions (iv) | (63,173) | ||||
Miscellaneous adjustments | (115,240) | ||||
Depreciation and amortization | (71,745) | ||||
Share in result of associate | 5,652 | ||||
Net financial results | (26,514) | ||||
Loss before income tax | (136,328) |
11 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
Three-month period ended | |||||
2022 | |||||
Mining | Smelting | Intersegment sales | Adjustments (i) | Consolidated | |
Net revenues | 369,571 | 683,368 | (207,239) | (16,266) | 829,434 |
Cost of sales | (215,640) | (566,496) | 207,239 | 18,568 | (556,329) |
Gross profit | 153,931 | 116,872 | - | 2,302 | 273,105 |
Selling, general and administrative | (16,740) | (15,063) | - | (5,316) | (37,119) |
Mineral exploration and project Development | (24,107) | (2,719) | - | - | (26,826) |
Other income and expenses, net | 8,996 | 19,625 | - | 1,821 | 30,442 |
Operating income | 122,080 | 118,715 | - | (1,193) | 239,602 |
Depreciation and amortization | 51,224 | 21,766 | - | 1,384 | 74,374 |
Miscellaneous adjustments | (11,355) | (235) | - | - | (11,590) |
Adjusted EBITDA | 161,949 | 140,246 | - | 191 | 302,386 |
Changes in fair value of offtake agreement – note 10 (d) | 28,220 | ||||
Aripuaña ramp-up impacts (ii) | (18,939) | ||||
Loss on sale of property, plant and equipment | 104 | ||||
Remeasurement in estimates of asset retirement obligations | 2,205 | ||||
Miscellaneous adjustments | 11,590 | ||||
Depreciation and amortization | (74,374) | ||||
Net financial results | (74,234) | ||||
Income before income tax | 165,368 |
Six-month period ended | ||||||||
2023 | ||||||||
Mining | Smelting | Intersegment sales | Adjustments (i) |
Consolidated | ||||
Net revenues | 535,958 | 1,008,435 | (246,662) | (3,709) | 1,294,022 | |||
Cost of sales | (499,092) | (883,656) | 246,662 | 3,249 | (1,132,837) | |||
Gross profit | 36,866 | 124,779 | - | (460) | 161,185 | |||
Selling, general and administrative | (29,041) | (30,793) | - | (1,267) | (61,101) | |||
Mineral exploration and project evaluation | (38,940) | (4,349) | - | - | (43,289) | |||
Impairment loss of long-lived assets | (57,187) | - | - | - | (57,187) | |||
Other income and expenses, net | (56,417) | (19,686) | - | 4,555 | (71,548) | |||
Operating (loss) income | (144,719) | 69,951 | - | 2,828 | (71,940) | |||
Depreciation and amortization | 105,475 | 37,512 | - | 438 | 143,425 | |||
Miscellaneous adjustments | 100,704 | 32,330 | - | - | 133,034 | |||
Adjusted EBITDA | 61,460 | 139,793 | - | 3,266 | 204,519 | |||
Changes in fair value of offtake agreement – note 10 (d) | 14 | |||||||
Impairment loss of long-lived assets – note 16 | (57,187) | |||||||
Aripuaña ramp-up impacts (ii) | (1,837) | |||||||
Loss on sale of property, plant and equipment | (1,287) | |||||||
Remeasurement in estimates of asset retirement obligations | 137 | |||||||
Energy forward contracts – MTM (iii) | (9,701) | |||||||
Provisions – VAT discussions (iv) | (63,173) | |||||||
Miscellaneous adjustments | (133,034) | |||||||
Depreciation and amortization | (143,425) | |||||||
Share in result of associate | 11,075 | |||||||
Net financial results | (65,739) | |||||||
Loss before income tax | (126,604) | |||||||
12 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
Six-month period ended | |||||
2022 | |||||
Mining | Smelting | Intersegment sales | Adjustments (i) | Consolidated | |
Net revenues | 691,523 | 1,245,095 | (394,288) | 9,240 | 1,551,570 |
Cost of sales | (408,896) | (1,069,355) | 394,288 | 2,854 | (1,081,109) |
Gross profit | 282,627 | 175,740 | - | 12,094 | 470,461 |
Selling, general and administrative | (31,888) | (30,037) | - | (11,243) | (73,168) |
Mineral exploration and project Development | (40,041) | (4,029) | - | - | (44,070) |
Other income and expenses, net | (25,420) | 39,767 | - | (4,810) | 9,537 |
Operating income | 185,278 | 181,441 | - | (3,959) | 362,760 |
Depreciation and amortization | 96,091 | 41,440 | - | 2,735 | 140,266 |
Miscellaneous adjustments | 16,769 | (686) | - | - | 16,083 |
Adjusted EBITDA | 298,138 | 222,195 | - | (1,224) | 519,109 |
Change in fair value of offtake agreement – note 10 (d) | 8,793 | ||||
Aripuaña pre-operating expenses and ramp-up impacts (ii) | (28,638) | ||||
Loss on sale of property, plant and equipment | 20 | ||||
Remeasurement in estimates of asset retirement obligations | 3,742 | ||||
Miscellaneous adjustments | (16,083) | ||||
Depreciation and amortization | (140,266) | ||||
Net financial results | (63,581) | ||||
Income before income tax | 299,179 |
(i) The internal information used for making decisions is prepared using International Financial Reporting Standards (“IFRS”) based on accounting measurements and management reclassifications between income statement lines items, which are reconciled to the consolidated financial statements in the column “Adjustments”, as shown in the tables above. 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) For the six-month period ended on June 30, 2023, adjusted EBITDA excludes the effect of idle capacity costs of Aripuanã mine and plant of USD 27,645 incurred during its ramp up period, and excludes the net reversal of the net realizable value provision of Aripuanã’s inventory of USD 25,808 (income) recorded in the prior period (excluding the depreciation portion in both amounts). Management understands that given Aripuanã’s current post-commissioning and ramp-up phase status, its related expenses are not indicative of the Company’s normal operating activities. Although, once Aripuanã operation is stabilized and operational at its normal capacity, such effects will no longer be excluded.
(iii) The Company registered a USD 9,701 loss related to the mark-to-market (“MtM”) fair value of the energy surplus derived from purchase and sale contracts of NEXA’s subsidiary Pollarix. This way of presenting Adjusted EBITDA, without the effects of the MtM has the objective of having the results of current operations without including the future effects of negotiations already done, as well as the effect of market price variations on the long or short directional position.
(iv) This provision is adjusted from the Company’s
Adjusted EBITDA, considering that is related to a potential resolution related to VAT´s discussions mentioned in note 1(b), in which
Nexa may voluntarily make certain tax payments on behalf of certain customers that allegedly failed to properly make their tax payments.
Based on that, these tax payments are not direct related to Nexa´s operation, then they are not indicative of the Company’s
normal operating activities and should be adjusted from the EBITDA.
13 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
3 | Basis of preparation of the condensed consolidated interim financial statements |
These condensed consolidated interim financial statements as at and for the three and six-month periods ended on June 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 a supplementary information, the condensed consolidated interim statement of cash flows for the three-month periods ended on June 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 June 30, 2023 and 2022 in accordance with SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification.
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 six-month periods ended on June 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 six-month periods ended on June 30, 2023 were approved on July 27, 2023 to be issued in accordance with a resolution of the Board of Directors.
14 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
4 | Net revenues |
Three-month period ended | Six-month period ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Gross billing | 698,136 | 963,587 | 1,431,315 | 1,794,448 | |||
Billing from products (i) | 672,259 | 937,137 | 1,374,261 | 1,741,675 | |||
Billing from freight, insurance services and others | 25,877 | 26,450 | 57,054 | 52,773 | |||
Taxes on sales | (70,870) | (132,741) | (136,335) | (240,105) | |||
Return of products sales | (562) | (1,412) | (958) | (2,773) | |||
Net revenues | 626,704 | 829,434 | 1,294,022 | 1,551,570 |
(i) Billing from products decreased in the three-month period ended on June 30, 2023, compared with that of the same period of 2022 mainly due to the lower metal prices and the lower volumes in the Company´s smelting segment. The decrease in the six-month period ended on June 30, 2023 is mainly because of the lower metal prices.
5 | Expenses by nature |
Three-month period ended | ||||
June 30, 2023 | ||||
Cost of sales (i)/(ii) | Selling, general and administrative |
Mineral exploration and project evaluation |
Total | |
Raw materials and consumables used | (344,690) | - | - | (344,690) |
Third-party services | (96,019) | (5,648) | (14,298) | (115,965) |
Depreciation and amortization | (71,072) | (669) | (4) | (71,745) |
Employee benefit expenses | (49,036) | (11,150) | (2,924) | (63,110) |
Other expenses | (4,207) | (15,154) | (4,035) | (23,396) |
(565,024) | (32,621) | (21,261) | (618,906) |
Six-month period ended | ||||
June 30, 2023 | ||||
Cost of sales (i)/(ii) | Selling, general and administrative |
Mineral
exploration and project evaluation |
Total | |
Raw materials and consumables used | (676,475) | - | - | (676,475) |
Third-party services | (208,842) | (5,917) | (30,597) | (245,356) |
Depreciation and amortization | (142,042) | (1,373) | (10) | (143,425) |
Employee benefit expenses | (98,927) | (25,617) | (6,164) | (130,708) |
Other expenses | (6,551) | (28,194) | (6,518) | (41,263) |
(1,132,837) | (61,101) | (43,289) | (1,237,227) |
Three-month period ended | ||||
June 30, 2022 | ||||
Cost of sales | Selling, general and administrative |
Mineral exploration and |
Total | |
Raw materials and consumables used | (371,762) | - | - | (371,762) |
Third-party services | (60,763) | (5,987) | (17,397) | (84,147) |
Depreciation and amortization | (73,067) | (1,296) | (11) | (74,374) |
Employee benefit expenses | (47,258) | (16,709) | (5,248) | (69,215) |
Other expenses | (3,479) | (13,127) | (4,170) | (20,776) |
(556,329) | (37,119) | (26,826) | (620,274) |
15 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
Six-month period ended | ||||
June 30, 2022 | ||||
Cost of sales | Selling, general and administrative |
Mineral exploration and |
Total | |
Raw materials and consumables used | (718,024) | - | - | (718,024) |
Third-party services | (129,204) | (12,631) | (29,170) | (171,005) |
Depreciation and amortization | (137,579) | (2,671) | (16) | (140,266) |
Employee benefit expenses | (89,111) | (33,365) | (8,384) | (130,860) |
Other expenses | (7,191) | (24,501) | (6,500) | (38,192) |
(1,081,109) | (73,168) | (44,070) | (1,198,347) |
(i) In the six-month period ended on June 30, 2023, the Company recognized USD 7,218 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 1,027 recognized in June in Atacocha, due to the Unit’s temporary suspension caused by illegal protest activities undertaken by communities.
(ii) Cost of sales includes a reversal of USD 33,278 (including depreciation of USD 7,471) 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. This amount also includes USD 39,488 (including depreciation of USD 11,843) related to the idleness of the Aripuanã mine and plant capacity during the ramp-up phase.
6 | Other income and expenses, net |
Three-month period ended | Six-month period ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
ICMS tax incentives (i) | 8,193 | 22,693 | 17,228 | 39,928 | |||
Changes in fair value of offtake agreement - note 10 (d) | 13,404 | 28,220 | 15 | 8,793 | |||
Changes in fair value of derivative financial instruments – note 10 (c) | (760) | (2,995) | (1,030) | (335) | |||
(Loss) gain on sale of property, plant and equipment | (1,023) | 104 | (1,287) | 20 | |||
Changes in asset retirement and environmental obligations - note 15 (ii) | (540) | 4,673 | (703) | 5,715 | |||
Slow moving and obsolete inventory | (2,837) | (877) | (334) | (4,378) | |||
Provisions – VAT discussions - note 1 (b) | (63,173) | - | (63,173) | - | |||
Provision of legal claims | (6,575) | (2,257) | (11,333) | (6,364) | |||
Contribution to communities | (2,899) | (4,226) | (3,263) | (5,384) | |||
Pre-operating expenses related to Aripuanã (ii) | - | (18,939) | - | (28,638) | |||
Energy forward contracts – MTM – Note 10 (d) | (9,701) | - | (9,701) | - | |||
Others | (166) | 4,046 | 2,033 | 180 | |||
(66,077) | 30,442 | (71,548) | 9,537 | ||||
(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 six-month period ended on June 30, 2022, the main amounts were related to the idleness of the Aripuanã mine and plant relative to its nominal 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.
16 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
7 | Net financial results |
Three-month period ended | Six-month period ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Financial income | |||||||
Interest income on financial investments and cash equivalents |
3,135 | 4,981 | 6,165 | 7,114 | |||
Interest on tax credits | 115 | 261 | 195 | 627 | |||
Other financial income | 3,450 | 3,193 | 5,957 | 4,402 | |||
6,700 | 8,435 | 12,317 | 12,143 | ||||
Financial expenses | |||||||
Interest on loans and financings | (29,920) | (22,851) | (59,332) | (47,817) | |||
Premium paid on bonds repurchase | - | - | - | (3,277) | |||
Interest accrual on asset retirement and environmental obligations - note 15 |
(6,628) | (6,618) | (12,882) | (11,231) | |||
Interest on other liabilities | (1,303) | (2,019) | (3,746) | (4,596) | |||
Interest on contractual obligations | (1,037) | (1,191) | (2,141) | (2,437) | |||
Interest on lease liabilities | (51) | (166) | (166) | (386) | |||
Interest on Provisions – VAT discussions | (7,468) | - | (7,468) | - | |||
Interest on Factoring operations | (4,290) | (3,960) | (7,871) | (4,270) | |||
Other financial expenses | (8,666) | (3,524) | (12,172) | (9,714) | |||
(59,363) | (40,329) | (105,778) | (83,728) | ||||
Other financial items, net | |||||||
Changes in fair value of loans and financings – note 14 (b) | (277) | (186) | (215) | (619) | |||
Changes in fair value of derivative financial instruments – note 10 (c) |
(386) | 394 | (212) | 816 | |||
Foreign exchange gain (loss) (i) | 26,812 | (42,548) | 28,149 | 7,807 | |||
26,149 | (42,340) | 27,722 | 8,004 | ||||
Net financial results | (26,514) | (74,234) | (65,739) | (63,581) |
(i) The amounts for the three-month period ended on June 30, 2023, and 2022 include USD 13,080 and USD (9,822), respectively, which are related to the outstanding USD denominated intercompany debt of NEXA BR with NEXA and accounts payables of NEXA BR with related parties. The exchange variation of NEXA BR’s loans and account payables with its related parties are not eliminated in the consolidation process and both transactions were impacted by the volatility of the Brazilian Real (“BRL”), which appreciated against the USD during the second quarter of 2023 (in 2022 BRL had a higher appreciation than in 2023).
8 | Current and deferred income tax |
(a) | Reconciliation of income tax expense |
Three-month period ended | Six-month period ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(Loss) income before income tax | (136,326) | 165,368 | (126,602) | 299,179 | |||
Statutory income tax rate | 24.94% | 24.94% | 24.94% | 24.94% | |||
Income tax benefit (expense) at statutory rate | 34,000 | (41,243) | 31,575 | (74,615) | |||
ICMS tax incentives permanent difference | 2,786 | 7,715 | 5,858 | 13,575 | |||
Tax effects of translation of non-monetary assets/liabilities to functional currency | 6,457 | 3,654 | 9,864 | 5,258 | |||
Special mining levy and special mining tax | (1,059) | (5,643) | (2,372) | (10,790) | |||
Difference in tax rate of subsidiaries outside Luxembourg | 19,525 | (3,602) | 18,624 | (15,576) | |||
Provisions - VAT discussions – note 1 (b)/(i) | (24,018) | - | (24,018) | - | |||
Unrecognized deferred tax on net operating losses | (7,534) | 744 | (29,050) | (13,785) | |||
Other permanent tax differences | 3,387 | (3,473) | (2,071) | (5,548) | |||
Income tax benefit (expense) | 33,544 | (41,848) | 8,410 | (101,481) | |||
Current | (12,044) | (68,647) | (33,457) | (111,871) | |||
Deferred | 45,588 | 26,799 | 41,867 | 10,390 | |||
Income tax benefit (expense) | 33,544 | (41,848) | 8,410 | (101,481) |
17 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
(i) In relation to the provision explained in note 1 (b), the Company treated this expense as non-deductible and, consequently, did not book a deferred tax asset.
(b) | Effects of deferred tax on income statement and other comprehensive income |
June 30, 2023 | June 30, 2022 | ||
Balance at the beginning of the period | (32,516) | (40,378) | |
Effect on loss for the period | 41,867 | 10,390 | |
Effect on other comprehensive loss – Fair value adjustment | (809) | 2,400 | |
Effect on other comprehensive income – Translation effect included in cumulative translation adjustment |
9,872 | 7,109 | |
Uncertain income tax treatments | (1,645) | - | |
Balance at the end of the period | 16,769 | (20,479) |
(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 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 June 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 June 30, 2023, is USD 389,191 (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 expenses deductions, in view of the evaluation made by internal and external advisors.
9 | Financial instruments |
(a) | Breakdown by category |
The Company’s financial assets and liabilities are classified as follows:
June 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 | 400,708 | - | - | 400,708 | |||||
Financial investments | 20,771 | - | - | 20,771 | |||||
Other financial instruments | 10 (a) | - | 23,956 | - | 23,956 | ||||
Trade accounts receivables | 43,623 | 88,313 | - | 131,936 | |||||
Investments in equity instruments | - | - | 8,085 | 8,085 | |||||
Related parties (i) | 2 | - | - | 2 | |||||
465,104 | 112,269 | 8,085 | 585,458 | ||||||
18 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
June 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) | 1,590,224 | 90,627 | - | 1,680,851 | ||||
Lease liabilities | 3,093 | - | - | 3,093 | |||||
Other financial instruments | 10 (a) | - | 55,979 | - | 55,979 | ||||
Trade payables | 311,603 | - | - | 311,603 | |||||
Confirming payables | 240,557 | - | - | 240,557 | |||||
Use of public assets (ii) | 23,176 | - | - | 23,176 | |||||
Related parties (ii) | 981 | - | - | 981 | |||||
2,169,634 | 146,606 | - | 2,316,240 |
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.
(b) | Fair value by hierarchy |
June 30, 2023 | ||||||||||||||
Note | Level 1 | Level 2 (ii) | Total | |||||||||||
Assets | ||||||||||||||
Other financial instruments | 10 (a) | - | 23,956 | 23,956 | ||||||||||
Trade accounts receivables | - | 88,313 | 88,313 | |||||||||||
Investments in equity instruments (i) | 8,085 | - | 8,085 | |||||||||||
8,085 | 112,269 | 120,354 | ||||||||||||
Liabilities | ||||||||||||||
Other financial instruments | 10 (a) | - | 55,979 | 55,979 | ||||||||||
Loans and financings designated at fair value (iii) | - | 90,627 | 90,627 | |||||||||||
- | 146,606 | 146,606 | ||||||||||||
19 of 27 |
Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
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 | ||||
Investments 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 | June
30, 2023 Total | |
Current assets | 13,582 | - | 4,068 | 17,650 |
Non-current assets | 81 | - | 6,225 | 6,306 |
Current liabilities | (13,748) | (1,865) | (5,178) | (20,791) |
Non-current liabilities | (146) | (19,953) | (15,089) | (35,188) |
Other financial instruments, net | (231) | (21,818) | (9,974) | (32,023) |
Derivatives financial instruments | Offtake agreement measured at FVTPL | Energy forward contracts at FVTPL | December 31, 2022 Total | |
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 June 30, 2023, due to the current scenario of high
energy supply the Company has a projected energy surplus based on its self-production and forward contracts with some suppliers. Consequently,
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 9,701. 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 price. Sales of surplus energy, being traded in an active market meet the definition
of financial instruments, due to the fact that they are settled in 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 Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
(b) | Derivative financial instruments: Fair value by strategy |
June 30, 2023 | December 31, 2022 | |||||
Strategy | Per Unit | Notional | Fair value | Notional | Fair value | |
Mismatches of quotational periods | ||||||
Zinc forward | ton | 276,139 | 2,421 | 209,319 | (2,357) | |
2,421 | (2,357) | |||||
Sales of zinc at a fixed price | ||||||
Zinc forward | ton | 14,050 | (2,054) | 8,297 | 74 | |
(2,054) | 74 | |||||
Interest rate risk | ||||||
IPCA vs. CDI | BRL | 226,880 | (598) | 226,880 | (292) | |
(598) | (292) | |||||
(231) | (2,575) |
(c) | Derivative financial instruments: Changes in fair value – At the end of each period |
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 |
- | 34,837 | (11,215) | (1,030) | - | 909 | 18,723 |
Sales of zinc at a fixed price | - | - | (4,952) | - | - | - | (2,824) |
Interest rate risk – IPCA vs. CDI |
- | - | - | - | (212) | - | 95 |
June 30, 2023 | - | 34,837 | (16,167) | (1,030) | (212) | 909 | 15,994 |
June 30, 2022 | 783 | 13,677 | 2,760 | (335) | 816 | (5,078) | (1,778) |
(d) | Energy forward contracts |
June 30, 2023 | December 31, 2022 | |||||
Per Unit | Notional | Fair value | Notional | Fair value | ||
Energy contract | Megawatts | 423,418 | (9,974) | - | - | |
(9,974) | - |
(e) | Offtake agreement measured at FVTPL: Changes in fair value |
June 30, 2023 | June 30, 2022 | Notional June 30, 2023 |
Notional June 30, 2022 | |
Balance at the beginning of the period | 21,833 | 46,100 | 30,810 | 30,810 |
Changes in fair value | (15) | (8,793) | - | - |
Deliveries of copper concentrates (ii) | - | - | (927) | - |
Balance at the end of the period | 21,818 | 37,307 | 29,883 | 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.
(ii) In June 2023, the Company began with the deliveries of copper concentrates in relation to the offtake agreement mentioned above. Given that the current copper price is lower than the price cap, there was no market-to-market impact.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
11 | Inventory |
(a) | Composition |
June 30, 2023 | December 31, 2022 | |||
Finished products | 120,586 | 142,935 | ||
Semi-finished products (i) | 129,131 | 163,805 | ||
Raw materials | 68,791 | 68,497 | ||
Auxiliary materials and consumables | 127,279 | 115,562 | ||
Inventory provisions (ii) | (70,684) | (95,602) | ||
375,103 | 395,197 |
(i) Semi-finished products decreased in the six-month period ended on June 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 six-month period ended on June 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 33,278 (including depreciation of USD 7,471).
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
12 | Property, plant and equipment |
(a) | Changes in the six-month period ended on June 30 |
2023 | 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 | - | 356 | 116,105 | - | - | 44 | 116,505 | 197,461 | |
Disposals and write-offs | - | (195) | (1,115) | - | - | (45) | (1,355) | (375) | |
Depreciation | (43,245) | (59,463) | - | (2,510) | (706) | (765) | (106,689) | (93,154) | |
Impairment loss of long-lived assets - note 16 | (11,732) | (23,919) | (12,541) | (6,692) | - | (2,276) | (57,160) | - | |
Foreign exchange effects | 50,661 | 45,783 | 19,210 | 4,807 | 1,657 | 1,627 | 123,745 | 80,484 | |
Transfers | 41,618 | 95,386 | (138,882) | - | 3 | 1,293 | (582) | (44) | |
Remeasurement | - | - | - | 1,227 | - | - | 1,227 | (39,748) | |
Balance at the end of the period | 878,634 | 823,833 | 438,582 | 72,379 | 129,379 | 28,159 | 2,370,966 | 2,232,354 | |
Cost | 1,612,797 | 2,808,545 | 517,866 | 208,934 | 222,867 | 44,716 | 5,415,725 | 4,940,104 | |
Accumulated depreciation and impairment | (734,163) | (1,984,712) | (79,284) | (136,555) | (93,488) | (16,557) | (3,044,759) | (2,707,750) | |
Balance at the end of the period | 878,634 | 823,833 | 438,582 | 72,379 | 129,379 | 28,159 | 2,370,966 | 2,232,354 | |
Average annual depreciation rates % | 4 | 9 | - | UoP | UoP |
(i) Only the amounts related to the operating unit Atacocha and Aripuanã are being depreciated under the units of production (“UoP”) method. The other balances of mining projects will be amortized once their development stage finishes, and the projects operation starts.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
13 | Intangible assets |
(a) | Changes in the six-month period ended on June 30 |
June 30, 2023 | June 30, 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 | - | - | 85 | 85 | 46,293 | ||
Disposals and write-offs | - | (297) | - | (297) | - | ||
Amortization | - | (34,106) | (1,526) | (35,632) | (42,012) | ||
Impairment (loss) reversal of long-lived assets – note 16 |
- | - | (27) | (27) | - | ||
Foreign exchange effects | 247 | 3,695 | 1,911 | 5,853 | 4,910 | ||
Transfers | - | - | 697 | 697 | 44 | ||
Balance at the end of the period | 344,814 | 616,710 | 26,082 | 987,606 | 1,066,006 | ||
Cost | 612,156 | 1,859,371 | 69,437 | 2,540,964 | 2,592,098 | ||
Accumulated amortization and impairment | (267,342) | (1,242,661) | (43,355) | (1,553,358) | (1,526,092) | ||
Balance at the end of the period | 344,814 | 616,710 | 26,082 | 987,606 | 1,066,006 | ||
Average annual depreciation rates % | - | UoP | - |
14 | Loans and financings |
(a) | Composition |
Total | Fair value | ||||||
June 30, 2023 | December 31, 2022 |
June 30, 2023 |
December 31, 2022 | ||||
Type | Average interest rate | Current | Non-current | Total | Total | Total | Total |
Eurobonds – USD | Pré USD 5.84% | 18,430 | 1,192,886 | 1,211,316 | 1,210,483 | 1,148,211 | 1,162,741 |
BNDES | TJLP + 2.82 % SELIC + 3.10 % TLP - IPCA + 5.46 % |
28,505 | 193,523 | 222,028 | 216,316 | 179,646 | 183,452 |
Export credit notes |
LIBOR + 1.54 % 134.20% CDI SOFR + 2,5% |
6,217 | 231,270 | 237,487 | 232,790 | 233,739 | 227,201 |
Other | 109 | 9,911 | 10,020 | 9,670 | 7,372 | 7,058 | |
53,261 | 1,627,590 | 1,680,851 | 1,669,259 | 1,568,968 | 1,580,452 |
(b) | Changes in the six-month period ended on June 30 |
June 30, 2023 | June 30, 2022 | |||
Balance at the beginning of the period | 1,669,259 | 1,699,315 | ||
New loans and financings | - | 90,000 | ||
Payments of loans and financings | (12,829) | (9,748) | ||
Bonds repurchase | - | (128,470) | ||
Foreign exchange effects | 24,013 | 19,608 | ||
Changes in fair value of financing liabilities related to changes in the Company´s own credit risk |
(70) | (2,533) | ||
Changes in fair value of loans and financings – note 7 | 215 | 619 | ||
Interest accrual | 58,139 | 59,413 | ||
Interest paid on loans and financings | (59,048) | (59,152) | ||
Amortization of debt issue costs | 1,172 | 1,284 | ||
Balance at the end of the period | 1,680,851 | 1,670,336 |
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
(c) | Maturity profile |
June 30, 2023 | |||||||
2023 | 2024 | 2025 | 2026 | 2027 | As from 2028 |
Total | |
Eurobonds – USD (i) | 19,461 | (2,115) | (2,219) | (2,290) | 698,560 | 499,919 | 1,211,316 |
BNDES | 14,610 | 27,391 | 26,201 | 23,293 | 14,567 | 115,966 | 222,028 |
Export credit notes | 5,940 | 89,166 | 52,382 | - | 89,999 | - | 237,487 |
Other | 114 | 107 | 1,399 | 1,399 | 1,399 | 5,602 | 10,020 |
40,125 | 114,549 | 77,763 | 22,402 | 804,525 | 621,487 | 1,680,851 |
(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 June 30, 2023.
As of June 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 |
(a) | Changes in the six-month period ended on June 30 |
June 30, 2023 | June 30, 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) | - | 1,842 | 1,842 | 15,702 |
Payments | (1,877) | (2,010) | (3,887) | (12,144) |
Foreign exchange effects | 8,282 | 3,940 | 12,222 | 8,508 |
Interest accrual – note 7 | 10,834 | 2,048 | 12,882 | 11,231 |
Remeasurement - discount rate (i) / (ii) | (1,667) | 1,755 | 88 | (45,463) |
Balance at the end of the year | 235,495 | 53,971 | 289,466 | 241,985 |
Current liabilities | 21,707 | 9,127 | 30,834 | 30,735 |
Non-current liabilities | 213,788 | 44,844 | 258,632 | 211,250 |
(i) As of June 30, 2023, the credit risk-adjusted rate used for Peru was between 12.05% and 12.21% (December 31, 2022: 10.92% and 12.04%) and for Brazil was between 7.80% and 11.11% (December 31, 2023: 8.22% and 8.61%). As of June 30, 2022, the credit risk-adjusted rate used for Peru was between 8.52% and 12.06% (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 in the period ended on June 30, 2023, was mainly due to the timing of the expected disbursements on decommissioning obligations in certain operations, in accordance with updates in their asset retirement and environmental obligations studies, and the increase in the discount rates, as described above. In this way, asset retirement obligations for operational assets, increased in an amount of USD 1,227 (June 30, 2022: decrease of USD 24,046) as shown in note 12; and asset retirement for non-operational assets and environmental obligations expense in USD 703 (June 30, 2022: gain of USD 5,715) as shown in note 6.
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
16 | Impairment of long-lived assets |
Impairment test analysis
In accordance with NEXA’s accounting policy, the Company evaluates, at each reporting date, whether there are indications that the carrying amount of an asset or cash generation unit (CGU) may not be recovered, or an impairment previously recorded should be reversed.
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.
The impairment assessment resulted in the recognition of an impairment loss of USD 57,702 in the Morro Agudo CGU as of June 30, 2023. In addition to this economic impairment, the Company recognized a net reversal of impairment of other non-relevant individual assets in the amount of USD 515. As a result, a net impairment loss of USD 57,187 (after tax USD 37,705) was recorded for the second quarter of 2023.
For the six-month period ended June 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, discount rate and LOM 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) | 2,787 | 2,787 | |||
Discount rate (Brasil) | 8.02% | 8.03% | |||
Brownfield projects - LOM (years) | From 4 to 14 | From 5 to 15 |
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Nexa Resources S.A.
Notes to the condensed consolidated interim financial statements Unaudited Six-month periods ended on June 30 All amounts in thousands of US Dollars, unless otherwise stated | |
(b) | Impairment loss – Morro Agudo CGU |
As mentioned above, an impairment loss was identified at the CGU level, not being directly related to a single asset. Then, the loss was allocated to the following assets:
Carrying amount prior to impairment | Impairment | Carrying amount after impairment | |
Property, plant and equipment | 57,675 | (57,675) | - |
Intangible assets | 27 | (27) | - |
57,702 | (57,702) | - |
(c) | 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% |
17 | Events after the reporting period |
At the end of June 2023, the operations at the Atacocha San Gerardo open pit mine were temporarily suspended due to protest activities by local communities, as mentioned in note 5.
Since then, the Company has been negotiating with the communities of Atacocha, with the support of government authorities, and on July 26, 2023, the illegal protest activities were ceased. The Company is currently taking the necessary measures to resume operations at the Atacocha mine in the following days.
*.*.*
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