Nexa Resources trades at a discount to peers as operational issues at Cerro Lindo and Atacocha weigh on output. Zinc prices above $2,800 support a recovery if management hits 2025 guidance.
Alpha Score of 68 reflects moderate overall profile with strong momentum, strong value, moderate quality, moderate sentiment.
Nexa Resources (NEXA) is one of the world's largest zinc producers and the dominant integrated zinc company in Latin America, with mines and smelters in Peru and Brazil. Roughly two-thirds of its revenue comes from zinc, with the rest split between copper, lead, and silver. The stock has been under pressure this year as operational hiccups at its Cerro Lindo and Atacocha mines weighed on output. The underlying commodity cycle remains supportive.
Zinc prices have held above $2,800 per tonne on the LME, supported by tight concentrate supply and steady demand from galvanized steel markets in China and India. The global zinc market is expected to remain in a modest deficit through 2025, according to the International Lead and Zinc Study Group. That backdrop gives Nexa room to recover margins if it can stabilize production.
The company's Q3 2024 results showed a 12% year-over-year drop in zinc output, driven by lower grades and a planned shutdown at Cerro Lindo. Management guided for a recovery in Q4 and into 2025, citing investments in mine sequencing and processing upgrades. The market has priced in some of that risk. The stock trades at roughly 6x forward EBITDA, a discount to peers like Teck Resources and Lundin Mining.
The bull case rests on execution. If Nexa hits its 2025 production guidance of 320,000–340,000 tonnes of zinc, the combination of higher volumes and steady prices could push EBITDA past $600 million, up from an estimated $480 million in 2024. Free cash flow would turn positive, allowing the company to reduce its $1.2 billion net debt position.
The risks are operational and macro. A sharp slowdown in Chinese industrial demand would hit zinc prices directly. On the company side, further grade deterioration or cost inflation at Cerro Lindo could delay the recovery. Nexa's smelting margins have also been squeezed by higher energy costs in Brazil. The government's recent tariff cuts on imported electricity offer some relief.
The setup is a bet on management's ability to deliver on mine improvements. The zinc cycle is not the problem. The question is whether Nexa can execute well enough to capture it.
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