Nexa Reports 1Q26 Net Income of US$118 Million; Aripuana Sets New Quarterly Zinc Production Record

Nexa’s results are strong, but capital risks and execution hurdles remain significant.

Risk flags

• ●Execution risk on major capital projects is high: The Cerro Pasco Integration Project and the fourth tailings filter at Aripuanã are both capital-intensive and have multi-quarter timelines, with finalization and regulatory approvals not expected until late 2026 or 2027. Delays or cost overruns could materially impact returns and cash flow.
• ●Rising net debt and negative free cash flow: Net debt increased to US$1,481 million from US$1,300 million in just one quarter, with a free cash outflow of US$126 million. While leverage ratios have improved, sustained negative cash flow could pressure the balance sheet if commodity prices weaken or project costs rise.
• ●Heavy reliance on commodity price tailwinds: The year-over-year improvement is attributed in part to a 164% increase in the LBMA silver price. If metal prices revert or decline, earnings and cash flow could deteriorate rapidly, especially given high fixed costs.
• ●Limited quantification of ESG and operational claims: While the company highlights numerous social, environmental, and operational initiatives, most lack numerical targets or evidence of impact. This makes it difficult for investors to assess the true value or risk mitigation provided by these programs.
• ●Forward-looking statements outpace supporting data: Several key milestones—such as project completion, regulatory approvals, and operational normalization—are described as on track or expected, but without detailed evidence or contingency planning. This increases the risk that timelines slip or outcomes fall short.
• ●Geographic and regulatory concentration: Nexa’s core operations are in Brazil and Peru, both of which carry political, regulatory, and environmental risks. Delays in permitting or changes in local policy could materially affect project economics and timelines.
• ●Management transition risk: The retirement of Mauro Boletta, a senior executive with over 40 years at the Votorantim Group, introduces potential for disruption in smelting and commercial operations, even with a planned transition period.
• ●Capital intensity with distant payoff: The company is committing US$381 million in CAPEX for 2026, with some projects not generating returns until 2027 or later. This creates a mismatch between near-term cash outflows and long-term value realization, increasing exposure to market and execution shocks.

Bottom line

For investors, this announcement signals that Nexa Resources is currently delivering strong financial and operational results, with year-over-year and sequential improvements in net income, EBITDA, and production volumes. The company’s leverage metrics are improving, and Fitch’s reaffirmation of its investment grade rating provides external validation of credit quality. However, the rising net debt and negative free cash flow highlight that much of the current performance is being achieved alongside significant capital outlays, with some of the largest projects (notably Cerro Pasco) not expected to deliver returns until late 2026 or 2027. The narrative is credible for realized financials, but less so for forward-looking operational and ESG claims, which lack granular supporting data. The retirement of a key executive is a potential source of operational risk, though the transition appears managed. To change this assessment, Nexa would need to provide more detailed project-level financials, clear evidence of on-schedule project delivery, and quantifiable outcomes for its ESG initiatives. Key metrics to watch in the next reporting period include free cash flow, net debt trajectory, project milestone completion (especially for Cerro Pasco and Aripuanã), and any regulatory developments in Peru and Brazil. Investors should treat this as a strong signal to monitor closely, but not as a green light for aggressive new investment until more evidence of project execution and cash flow stabilization emerges. The single most important takeaway: Nexa is performing well now, but the path to sustained value depends on flawless execution of capital projects and disciplined financial management in the face of commodity price volatility.

Announcement summary

Nexa Resources S.A. (NYSE: NEXA) reported net income of US$118 million for the first quarter of 2026, up from US$29 million in 1Q25 and US$81 million in 4Q25. Adjusted EBITDA reached US$283 million, a 126% year-over-year increase, and net revenues totaled US$888 million, up 42% year-over-year. The company achieved record zinc production at Aripuanã and saw significant improvements at its Brazilian smelters. CAPEX for 1Q26 was US$72 million, with net debt closing at US$1,481 million. Fitch Ratings reaffirmed Nexa's 'BBB-' investment grade rating and assigned its Brazilian subsidiary a first-time National Long-Term Rating of 'AAA(bra)'.

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