Market Overview

Nexa Resources S.A. 2Q18 Results

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Nexa Resources S.A. (NYSE:NEXA)(TSX:NEXA) ("Nexa" or the
"Company") today reported operating and financial results for the SECOND
quarter of 2018 ("2Q18") and reinforced its production and capex
guidance for fiscal year 2018. We also announced our intention to
propose share buybacks to our shareholders.

Tito Martins, CEO of Nexa: "Our results for the 2Q18 reflect the good
momentum for the metal prices at the beginning of the year and the
increase in our metal sales levels, comparing to 2Q17. Our production
delivered to date make us confident in reiterating our guidance for the
year.

Our mineral exploration program continues advancing. We were authorized
to commence drilling activities at the Topara North area, located in the
region of Cerro Lindo, our largest zinc mine in operation.

We renegotiated US$200 million in outstanding debt with banks during the
quarter. This is part of our efforts and commitment to extend our debt
and reduce our financial costs, maintaining a sound balance sheet.

We believe our operating cash flow and strong capital structure provide
the ability to open new alternatives to create value to our Company and
its shareholders. The share buyback authorization being proposed
reinforces our confidence in the fundamentals and long-term outlook of
Nexa without impacting our growth strategy, including our capital
expenditure programs, our development of greenfield projects, and our
ability to keep paying dividends to our shareholders as we have done
since our initial public offering."

THIS EARNINGS RELEASE DATED AS OF JULY 31, 2018 SHOULD BE READ IN
CONJUNCTION WITH THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS OF NEXA AND THE NOTES THERETO AS AT AND FOR THE THREE AND
SIX-MONTH PERIODS ENDED JUNE 30, 2018. THIS DOCUMENT CONTAINS
FORWARD-LOOKING STATEMENTS. PLEASE REFER TO THE CAUTIONARY LANGUAGE
UNDER THE HEADING "CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS".

Conference Call
Wednesday, August 1, 2018 – 11am (ET)
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International: +1-412-317-5415

Documents:

www.nexaresources.com/investors

             

Highlights

Selected indicators:

 
Main KPIs 2Q18 1Q18 2Q17 2Q18 vs. 2Q17 1H18 1H17 1H18 vs. 1H17
Metal sales (kton) (1) 152.1 146.4 145.7 4.4 % 298.6 285.1 4.7 %
Zn mining production (kton Zn) 92.3 87.2 91.7 0.7 % 179.5 183.9 -2.4 %
Zn Eq mining production (kton) (2) 135.5   134.0   143.9   -5.8 % 269.5   279.1   -3.5 %
Mining cash cost (US$ / lb) (3) 0.25 0.22 0.21 20.1 % 0.24 0.30 -20.3 %
Mining AISC (US$ / lb) (4) 0.42 0.36 0.38 10.8 % 0.39 0.44 -11.5 %
Smelting cash cost (US$ / lb) (4) 1.30 1.43 1.08 20.7 % 1.37 1.09 25.5 %
Smelting AISC (US$ / lb) (4) 1.40   1.51   1.20   16.5 % 1.45   1.20   21.2 %
Revenue (US$ million) 636.5 676.2 571.4 11.4 % 1,312.7 1,120.7 17.1 %
Adjusted EBITDA (US$ million)(5) 162.9 191.2 139.7 16.6 % 354.2 283.7 24.8 %
Adj. EBITDA margin (%)(5) 25.6 % 28.3 % 24.4 % 120 bp 27.0 % 25.3 % 170 bp
Financial results (US$ million) -152.4 -29.0 -70.0 117.7 % -181.4 -65.9 175.2 %
Net income (loss) (US$ million) -35.3 62.8 5.1 N/A 27.4 60.3 -54.5 %
Earnings (loss) per share (US$)(6) -0.30   0.41   -0.04   N/A   0.11   0.40   -72.4 %
Adj. EBITDA mine (US$ million) (7) 116.3 160.6 110.1 5.6 % 276.9 211.1 31.2 %
Adj. EBITDA smelter (US$ million) (7) 46.7   29.9   35.4   31.9 % 76.6   80.4   -4.7 %
Capital expenditures (US$ million) 58.5 33.0 55.0 6.3 % 91.5 85.7 6.8 %
Expansion (US$ million) 19.2 9.6 15.9 20.9 % 28.9 24.8 16.6 %
Non-expansion (US$ million) 39.3   23.3   39.1   0.4 % 62.6   60.9   2.8 %
Gross Debt (US$ million) 1,421 1,384 1,407 1.0 % 1,421 1,407 1.0 %
Cash (US$ million)(8) 1,153 1,117 1,147 0.5 % 1,153 1,147 0.5 %
Net debt (US$ million) 260.8 261.4 269.6 -3.3 % 260.8 269.6 -3.3 %
Net debt/LTM EBITDA (x) 0.35 0.37 0.58 -39.1 % 0.35 0.58 -39.1 %
 

(1)

 

Consolidated sales of metallic zinc and zinc oxide (in kton of
product volume). Kton refers to one thousand metric tons.

(2)

Consolidated mining production in kton of Zinc Equivalent
calculated by converting copper, lead, silver and gold contents to
a zinc equivalent grade at 2017 average benchmark prices. The
prices used for this conversion are: Zinc: US$2,896/ton; Copper:
US$6,166/ton; Lead: US$2,317/ton; Silver: US$17/oz; Gold:
US$1,257/oz.

(3)

Zinc cash cost net of by-products credits, in US$/lb.

(4)

Zinc all-in sustaining cost net of by-products credits, in US$/lb.
For AISC reconciliation, please refer to our 2Q18 Earnings Release.

(5)

Refer to "Use of Non-IFRS Financial Measures" for further
information.

(6)

EPS is calculated considering Net income attributable to Nexa's
shareholders. Reflects corrected EPS for prior periods. See
"Restatement of Earnings Per Share" on note 2.2.2 of NEXA's 2Q18
Financial Statements ("FS") for further information.

(7)

The sum of segment adj. EBITDA does not equals consolidated adj.
EBITDA due to other lines before consolidation, please refer to FS
note #21(b).

(8)

Cash, cash equivalents and financial investments.

Mining Performance:

  • Production by metal in 2Q18 totaled 92.3kton of zinc, 9.0kton
    of copper, 12.7kton of lead, 1,847koz of silver and 7.1koz of gold
    compared to 91.7kton of zinc, 12.0kton of copper, 13.1kton of lead,
    2,046koz of silver and 9.4koz of gold in 2Q17.
  • Zinc equivalent metal production totaled 135.5kton in
    2Q18, down 5.8% compared to 143.9kton in the same period of the
    previous year mainly driven by the lower copper production. When
    compared to 1Q18, there was a slight increase of 1.5kton in 2Q18.
  • Per mine production on a zinc equivalent basis. In 2Q18, the
    Peruvian Cerro Lindo mine accounted for 43.3% of total production,
    followed by the Vazante, El Porvenir, Atacocha and Morro Agudo mines,
    which accounted for 26.4%, 16.8%, 8.4% and 5.1%, respectively.
  • Cash cost net of by-products credits increased 20.1% to
    US$0.25/lb (or US$553/ton) in 2Q18 compared to 2Q17. The increase was
    mainly due to: (i) lower by-products credits (–US$175/ton); (ii)
    higher operating costs (+US$167/ton) in Peru, resulting from process
    revisions that started in the second half of 2017 in order to
    reinforce safety conditions; (iii) higher development costs in Peru;
    and (iv) higher maintenance and personnel costs in Brazil.
  • All-in sustaining cost net of by-products credits ("AISC") also
    increased in 2Q18, amounting to US$0.42/lb (or US$920/ton) - up 10.5%
    compared to 2Q17.

Smelting Performance:

  • Metallic zinc sales including zinc oxide, of 152.1kton in 2Q18
    were 4.4% higher than 2Q17 of 145.7kton, explained by a higher
    production output in the quarter.
  • Cash cost net of by-products credits increased 20.7%, to
    US$1.30/lb (or US$2,862/ton) in 2Q18 compared to 2Q17, mainly due to
    higher raw material costs driven by higher zinc prices and lower
    treatment charges, partially offset by Brazilian currency devaluation
    in the period. Our cash cost net of by-products credits is measured in
    respect to zinc.
  • AISC increased 16.5% in 2Q18, to US$1.40/lb (or US$3,092/ton),
    impacted by the reasons listed above and partially offset by lower
    sustaining CAPEX.

Projects and Operations Developments:

  • Cerro Lindo:
    • The environmental authorities authorised us to explore the region
      north of the Topara river and we are planning to start the
      drilling activities in early August 2018.
    • We have been developing new galleries and stopes, which will
      enable us to grow production in 2H18.
    • We are investing in the construction of a new waste deposit and in
      the replacement of the seawater pipeline from the desalination
      plant (among other projects) in order to guarantee the long-term
      sustainability of the mine.
  • Aripuanã (greenfield)
    • The project is currently in final feasibility study (FEL3) which
      is 95% completed as of June 30, 2018.
    • The construction permit request has been submitted to the Mato
      Grosso state environmental authority (SEMA).
    • Mining plan and design are concluded and under final review by RPA
      Canada.
    • The construction of the project should be submitted to Nexa's
      Board of Directors for approval in the second half of 2018.

For more details about the Aripuanã project, please refer to our 2Q18
Earnings Release.

Financial Performance:

  • Revenues of US$636.5 million in 2Q18, up 11.4% compared to
    2Q17, driven by higher metal prices and higher sales volumes from our
    smelters.
  • Adjusted EBITDA of US$162.9 million in 2Q18 compared to
    US$139.7 million in 2Q17 - up 16.6%.
  • Adjusted EBITDA margin of 25.6% in 2Q18 compared to 24.4% in
    2Q17.
  • Net Debt/Adj. EBITDA of 0.35x as of June 30, 2018.
  • Average maturity of the total debt1 of 6.4
    years
    at an average cost of 4.8% as of June 30, 2018, with only
    21% of the total debt maturing within the next five years. We
    renegotiated US$200 million in outstanding debt with banks during the
    quarter, extending the average maturity of such debt by 1.5 years and
    reducing the all-in cost by more than 120 b.p.
  • Cash position of US$1.15 billion as of June 30, 2018 (cash
    and cash equivalents plus financial investments).
  • Net loss attributable to Nexa's shareholders amounted to
    US$40.5 million in 2Q18, compared to a loss of US$4.1 million in 2Q17,
    mostly due to the negative impact of exchange variation on
    intercompany loans, a non-cash effect. For more information please
    refer to our 2Q18 Earnings Release.

Corporate Highlights

  • Share repurchase program: The Board of Directors determined to
    convene a general meeting of shareholders of the Company to be held on
    September 13, 2018, in order to consider the approval of share
    repurchases of up to 6.5 million shares over a three-year period. The
    share buyback authorization being proposed reinforces our confidence
    in the fundamentals and long-term outlook of Nexa without impacting
    our growth strategy, including our capital expenditure programs, our
    development of greenfield projects, and our ability to keep paying
    dividends to our shareholders as we have done since our initial public
    offering.

Please refer to the press release published today for further details.

  • Mineral reserves and resources report: On April 30, 2018 we
    filed our annual report on Form 20-F for the fiscal year ended
    December 31, 2017 and published a report with updated information
    relating to mineral reserves and resources as of December 31, 2017
    ("2017 YE MRMR Update"). Such report discloses estimated contained
    metal in the Proven and Probable Mineral Reserve categories estimated
    as of December 31, 2017 in accordance with the 2014 CIM (Canadian
    Institute of Mining. Metallurgy and Petroleum) Definition Standards,
    whose definitions are incorporated by reference in NI 43-101 totaling
    an aggregate of contained metal in reserves of 3,897.2 thousand tonnes
    of zinc, 430.8 thousand tonnes of copper, 592.6 thousand tonnes of
    lead, 3,468,642 kilograms of silver and 2,919 kilograms of gold,
    representing an increase of 8.7% for zinc, 5.6% for copper, 6.6% for
    lead, 7.9% for silver and a 5.4% decrease in gold, in comparison to
    information provided in our previous 2017 publicly available technical
    reports on SEDAR (www.sedar.com)
    and on EDGAR (www.sec.gov).

2018 Outlook

The Company continuously monitors the performance of its operations and,
based on current results, we are reiterating our annual guidance for
mining production, smelting sales, CAPEX and OPEX related to exploration
and project development for the 2018 fiscal year as reported on February
15, 2018. These estimates are based on a number of assumptions that
management believes to be reasonable and representative of the Company's
expectations as of the publication of this report. Our independent
registered public accounting firm has not audited, compiled, performed
any procedures on, or reviewed these estimates and, therefore does not
express an opinion or any other form of assurance with respect to these
estimates. Accordingly, you should not place undue reliance on these
estimates, which may differ materially from our final results. Please
refer to the Cautionary Statement on Forward-Looking Statements at the
end of this earnings release. Details regarding the guidance and
performance of each indicator in the first half 2018 in our 2Q18
Earnings Release.

Mining Production

Mining production in 2Q18 reached 135.5kton in zinc equivalent terms. In
the first half of 2018, we produced 98.5% of the volume planned for the
period, which allows us to reinforce our annual guidance. Production is
slightly below the planned amount for 1H18, due to delays in developing
new mining galleries at Cerro Lindo. The performance improvement in
Vazante and El Porvenir partially offset this effect.

     
Metal Contained (in concentrate) 2017 actual YTD 2018 2018 estimated
Zinc (kton) 375.4 179.5 370       -       390
Lead (kton) 52.6 25.0 55 - 60
Copper (kton) 44.2 19.6 39 - 42
Silver (koz) 7,946 3,731 7,600 - 8,000
Gold (koz) 32.5 14.5 17 - 19
 

Main assumptions behind the annual guidance are: (i) the increase in
total treated ore by more than 6% compared to the previous year; (ii)
lower grades, especially in the Cerro Lindo mine, as expected; and (iii)
planned operational dilution reduction in Vazante. We are focusing our
efforts to sustain high levels of production in Cerro Lindo during the
2H18, as planned. Our ability to adapt our mining plan throughout the
year supports our decision to reiterate our mining production guidance.

Metal Sales

Smelting metallic zinc sales totaled 143.1 ktons in the quarter while
zinc oxide sales reached 9.0 ktons. In 2Q18 our smelters ran at capacity
while roasters performance increased as expected. Weather conditions in
2Q18 were more favorable than the prior year enabling us to operate
within our planned schedule and focus our efforts on cost efficiency and
enhancing our safety standards.

Smelting sales     2017 actual     YTD 2018     2018 estimated
Zinc Metal (kton) 555.4 280.4 560       -       580
Zinc Oxide (kton) 38.5 18.1 37 - 39
Total 593.9 298.6 597 - 619

The main assumptions for the annual smelting sales are: (i) increase in
the performance of roasters across each of the Company's smelters; and
(ii) regular production throughout 2018.

Capital expenditures ("CAPEX")

We invested US$58.5 million during the quarter, US$35.2 million within
our mining business, US$19.1 million within our smelting business and
US$4.1 million in other fronts. Total capital expenditures were US$9.0
million below budget for 2Q18 - 80% of this difference is explained by
the depreciation of Brazilian reais (BRL) since most of the CAPEX in
Brazil is denominated in reais (BRL) and translated to dollars.

     
Capex per segment (US$mm) 2017 actual 2018 YTD 2018 estimated
Mining 107.1 55.2 172
Smelter 81.0 29.2 108
Others 9.5 7.0 -
Total 197.6 91.5 280
 
Capex per category (US$mm) 2017 actual 2018 YTD 2018 estimated
Expansion/Greenfield 48.8 28.9 90
Modernization 21.4 1.7 20
Sustaining 59.4 24.3 68
HS&E/Tailing dams 62.1 31.7 92
IT/Others 5.9 4.9 10
Total 197.6 91.5 280
 

Please refer to our 2Q18 Earnings Release for a list of the main
projects for 2018 and related CAPEX.

Expenses related to Project Development and Exploration2

In 2Q18, we spent US$20.7 million in mineral exploration on our
greenfield and brownfield project and open field targets. Project
development expenses amounted to US$6.8 million in 2Q18. As the Company
advances with its exploration and drilling campaigns and further
develops its pipeline of projects, the expenses estimated for 2018 are
expected to meet the guidance.

     
(US$mm) 2017 actual 2018 YTD 2018 estimated
Mineral exploration 76.2 36.6 86.2
Project development(1),(2) 16.6 10.2 30.0
Adjustment(2) -1.6
Total 92.7 46.8 116.2
 

(1) Exploration and project development expenses consider several stages
of development, from mineral potential definition, R&D, and subsequent
scoping and pre-feasibility studies (FEL1 and FEL2)

(2) Projects amounting to US$23.6 million were reclassified to CAPEX or
to Corporate Projects reducing the previously disclosed guidance of
US$139.8 million for Project Development and Exploration for 2018 to
US$116.2 million.

Mineral exploration highlights

The Company is advancing in its exploration and drilling campaigns to
ensure the long-term sustainability of the business through the increase
of its mineralized areas. A total of US$36.6 million was invested in the
first half of 2018, totaling 147,381 meters of diamond drilling. For a
summary of exploration drilling results to date, please refer to our
2Q18 Earnings Release for mineral results.

About Nexa

Nexa Resources is a large-scale, low-cost integrated zinc producer with
over 60 years of experience developing and operating mining and smelting
assets in Latin America. The Company owns and operates five long-life
underground polymetallic mines, three of which are located in the
Central Andes of Peru (Cerro Lindo, El Porvenir and Atacocha) and two
located in the Brazilian state of Minas Gerais (Vazante and Morro
Agudo). Two of the Company's mines, Cerro Lindo and Vazante, are among
the 10 largest zinc mines in the world, which, along with the Company's
other mining operations, ranked the Company among the top five producers
of mined zinc worldwide in 2017, according to Wood Mackenzie. Nexa also
operates three smelting assets, two in Brazil - in the state of Minas
Gerais (Três Marias and Juiz de Fora) - and one in Peru (Cajamarquilla).
Nexa produces substantial amounts of copper, lead, silver and gold as
by-products, which reduce our overall cost to produce mined zinc.

Use of Non-IFRS Financial Measures

Nexa's management uses non-IFRS measures such as Adjusted EBITDA, among
other measures, for internal planning and performance measurement
purposes. We believe these measures provide useful information about the
financial performance of our operations that facilitates
period-to-period comparisons on a consistent basis. Management uses
Adjusted EBITDA internally to evaluate our underlying operating
performance for the reporting periods presented and to assist with the
planning and forecasting of future operating results. Management
believes that Adjusted EBITDA is a useful measure of our performance
because it reflects our cash generation potential from our operational
activities excluding exceptional items of the period. These measures
should not be considered in isolation or as a substitute for profit
(loss) or operating profit, as indicators of operating performance, or
as alternatives to cash flow as measures of liquidity. Additionally our
calculation of Adjusted EBITDA may be different from the calculation
used by other companies, including our competitors in the mining
industry, so our measures may not be comparable to those of other
companies.

In this News Release, we present Adjusted EBITDA, which we define as (i)
net income (loss) for the period, plus (ii) share in the results of
associates, plus (iii) depreciation and amortization, plus/less (iv) net
financial results, plus/less (v) income tax, less (vi) gain on sale of
investment (loss), plus; (vii) impairment of other assets, plus/less
(viii) (reversion) impairment of property, plant, equipment. In
addition, management may exclude non-cash items considered exceptional
from the measurement of Adjusted EBITDA.

We also present herein our net debt, which we define as (i) loans and
financing, less (ii) cash and cash equivalents, less (iii) financial
investments, plus or less (iv) the fair value of derivative financial
instruments. Our management believes that net debt is an important
figure because it indicates our ability to repay outstanding debts that
become due simultaneously using available cash and highly liquid assets.

See "Cautionary Statement on Forward-Looking Statements" below.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This News Release contains certain forward-looking information and
forward-looking statements as defined in applicable securities laws
(collectively referred to in this News Release as "forward-looking
statements"). All statements other than statements of historical fact
are forward-looking statements. Forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of NEXA to be materially
different from any future results, performance or achievements expressed
or implied by the forward-looking statements. These forward-looking
statements include estimates, forecasts, and statements as to
management's expectations with respect to the business and operations of
the Company and mining production, smelting sales, CAPEX and OPEX
related to exploration and project development for the 2018 fiscal year.

Forward-looking statements are necessarily based upon a number of
factors and assumptions that, while considered reasonable by management,
are inherently subject to significant business, economic and competitive
uncertainties and contingencies. Statements concerning future production
costs or volumes are based on numerous assumptions of management
regarding operating matters and on assumptions that demand for products
develops as anticipated, that customers and other counterparties perform
their contractual obligations, that operating and capital plans will not
be disrupted by issues such as mechanical failure, unavailability of
parts and supplies, labor disturbances, interruption in transportation
or utilities, adverse weather conditions, and that there are no material
unanticipated variations in the cost of energy or supplies.

We assume no obligation to update forward-looking statements except as
required under securities laws. Further information concerning risks and
uncertainties associated with these forward-looking statements and our
business can be found in our public disclosures filed under our profile
on SEDAR (www.sedar.com)
and on EDGAR (www.sec.gov).

Technical Information

The scientific and technical information contained in this Earnings news
release has been reviewed, verified and approved by Thiago Nantes
Teixeira B. Eng, FAusIMM, Mining Manager of Nexa Resources, a "Qualified
Person" as defined in NI 43-101. The report with updated information
relating to mineral reserves and resources estimates as of December 31,
2017 and technical reports relating to Nexa Resources' mineral
properties referenced in this News Release are available under the
Company's SEDAR profile at www.sedar.com.
Such reports include relevant information regarding, among others, the
effective dates and the assumptions and parameters relating to mineral
reserves and resources cited in this News Release, as well as
information regarding data verification, exploration procedures and
other matters relevant to the scientific and technical disclosure
contained in this News Release.

1 Our total debt refers to short and long term loans and
financing (principal only).
2 Including exploration,
expansion, modernization, R&D, health, safety and environment among
others.

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