NEXA

ANALYST NOTE: NEXA RESOURCES S.A. (NEXA) DATE: 2026-06-13 CURRENT PRICE: $14.24

1. Structural Readiness

• Conservative Entry: Not yet defined (awaiting confirmed breakout).
• Aggressive/Pre-Breakout Entry: Not applicable (setup is forming, not active breakout).
• Breakout Level: Not yet fired.
• Current Price: $14.24.
• Extension: Not applicable (price is within the consolidation range, not extended above a breakout).
• ATR Context: Current ATR is 7.2% (Very High). This indicates elevated volatility, which increases the risk of whipsaws during the forming phase but suggests significant potential for a large move once the breakout occurs.

2. Thesis Layer

• Thesis Classification: TACTICAL / SETUP-LED.
• Macro Thesis Status: NONE.
• There is no named secular thesis (e.g., "Green Energy Transition" or "AI Infrastructure Boom") explicitly attached to this specific setup at this date. While the company benefits from broader commodity cycles, the investment case here is driven strictly by the quality of the technical setup (the forming coil) and the immediate operational fundamentals disclosed in the recent earnings cycle. We are judging this name on its structural readiness and business execution, not on a pre-existing macro narrative.

3. Business Overview

Nexa Resources S.A. is a large-scale, low-cost, integrated polymetallic producer with zinc as its primary product. The company operates a vertically integrated model, owning and operating five mines (four underground, one open-pit) and three smelters.

• Operations & Geography:
• Peru: Operates three mining sites (Cerro Lindo, La Arena, and others) and the Cajamarquilla smelter, the largest zinc smelter in the Americas. Nexa Peru is a public company listed on the Lima Stock Exchange, with 83.55% ownership by Nexa Resources.
• Brazil: Operates two underground mines (Aripuanã is in development) and two smelters (Três Marias and Juiz de Fora) in Minas Gerais.
• Production Mix: While zinc is the core, the company extracts and produces silver, gold, copper cement, lead, sulfuric acid, and limestone.

• Recent Operational Performance (Source: Earnings Transcript, 2026-05-07):
• Zinc Production: Reached 79,000 tonnes in the quarter, up 18% year-over-year, driven by improved ore grades across all five mines.
• Smelting: Zinc metal and oxide sales totaled 147,000 tonnes, up year-over-year and quarter-over-quarter.
• Financials: Adjusted EBITDA more than doubled year-over-year to $283 million, achieving a margin of nearly 32%.
• Silver Streaming Update: In April 2026, the company reached a delivered threshold under its Cerro Lindo silver streaming agreement. Consequently, the stream share of production stepped down from 65% to 25%, meaning 75% of future production will be sold at prevailing market prices, significantly improving upside leverage to silver prices.

• Capital Projects & Guidance:
• Cerro Pasco Phase 1: Construction is targeted for completion in Q3 2026, with full finalization expected in Q4 2026. Operating authorization is expected to begin in Q2 2027.
• Tailings Filter: The fourth tailings filter construction and installation were completed in late April 2026, with commissioning expected to conclude in Q2 2026.
• CapEx: Management reaffirmed total 2026 CapEx guidance of $381 million, with disbursements weighted toward the back of the year as project execution intensifies.

4. Archetype and Conviction Analysis

• Archetype: Cyclical Recovery.
• *Fit:* The company is demonstrating a clear inflection in operational efficiency (EBITDA doubling, production up 18%) and cost structure optimization (streaming threshold reached). The business is moving from a phase of heavy capital deployment (Cerro Pasco, Aripuanã) toward operational maturity and cash generation.
• Valuation Context:
• Forward consensus EPS for FY1 is $2.77 and FY2 is $2.69.
• At a current price of $14.24, the stock trades at approximately 5.1x FY1 forward earnings.
• Conviction Stack:
• Thesis Strength: Low (No named macro thesis; purely tactical).
• Evidence Quality: High. Recent earnings (May 2026) provide concrete data on production growth, margin expansion, and specific project milestones.
• Structural Quality: Moderate to High. The "Forming" coil indicates a stable base, but the "Very High" ATR (7.2%) suggests the market is still digesting volatility. The structural quality is supported by the "low-cost" positioning and the shift in silver streaming economics.
• Setup Readiness: Partial. The setup is "Forming," meaning the structure is valid, but the breakout has not fired. This is a positive signal but requires confirmation.
• Rerating Potential: Moderate. The combination of margin expansion (32% EBITDA margin) and the unlocking of silver upside (75% market price capture) provides a fundamental catalyst for rerating, contingent on the technical breakout.

5. Invalidations, Strengths, and Gaps

• What Would Invalidate:
• A significant delay in the Cerro Pasco Phase 1 completion beyond Q4 2026 or a failure to secure operating authorization by Q2 2027.
• A sharp deterioration in zinc or silver prices that compresses the 32% EBITDA margin.
• What Would Strengthen:
• A confirmed breakout above the resistance level (price action clearing the forming coil).
• Further confirmation of the "low-cost" status amidst the tariff impacts mentioned in the 2026-03-26 filing.
• Successful commissioning of the fourth tailings filter in Q2 2026 as guided.
• Gaps in Evidence:
• Tariff Impact Quantification: While the 2026-03-26 filing mentions tariffs increased costs and impacted logistics, the specific financial impact (e.g., $X million in increased OpEx) is not quantified in the provided text.
• Aripuanã Timeline: The profile mentions Aripuanã is being developed, but no specific completion or production start date is provided in the evidence, unlike Cerro Pasco.

PRIVATE ANALYST CALL

Judgment: Speculative Confidence: medium Key evidence: Adjusted EBITDA doubled to $283M with 32% margin; Zinc production up 18% YoY; Silver streaming threshold reached, shifting 75% of production to market price. Key risks: Very high ATR (7.2%) indicates elevated volatility and whipsaw risk; Tariffs increasing input and logistics costs; Cerro Pasco Phase 1 execution delays into 2027. Sizing hint: Position size should be reduced relative to a confirmed breakout due to the "forming" status and high volatility. Expected path: Management expects Cerro Pasco completion in Q3/Q4 2026 and tailings commissioning in Q2 2026; if these milestones are met, operational leverage should increase. Expected horizon: 6 to 12 months for the setup to resolve into a confirmed breakout or invalidation.