Good morning and welcome to Nexa Resources' Third Quarter Conference Call. [Operator Instructions] The presenter in this call is Ms. Roberta Varella Head of Investor Relations. Also joining the call and available for questions are Mr. Tito Martins CEO of Nexa Resources; and Mr. Rodrigo Menck CFO of Nexa Resources. [Operator Instructions]
I would now like to turn the conference over to Mr. Tito Martins CEO of Nexa Resources. Please go ahead.
Thank you. Good morning and good afternoon everyone and thank you for participating in another Nexa's earnings conference call. Today we will be talking about our results for the third quarter of 2019. Please let's move to slide three where we will begin our presentation. Here we present some of the main highlights of the quarter. Beginning with our segment performance our mining operations were solid. Zinc production was 97000 tons over 80% compared with third quarter of 2018 driven by Cerro Lindo and Vazante growth. Regarding our smelting segment production was affected by technical issues in the purification process in Tres Marias smelter during September. As a result metallic zinc sales in third quarter of 2019 decreased by 0.8% from last year. Compared to second quarter 2019 however sales volume was at 1.2%. It was affected by the 6% volume increase in Cajamarquilla driven by higher export sales. Moving to our financials. Adjusted EBITDA was $58 million in third quarter compared with $120 million last year. Lower average LME prices and changes in market prices in respect of quotation period adjustments had a negative impact in G&A costs related to operational efficiency initiatives that I will comment later in our presentation. Liquidity remains strong and we end the quarter with a leverage of 1.4x. Despite the challenging pricing scenario operating cash flow was positive in $105 million driven by working capital improvement. Free cash flow was also positive in $35 million. In third quarter we recognized a non-cash interim loss of $142 million in Cerro Pasco cash generating unit primarily driven by lack of mine production. As a result of the above-mentioned factors net loss was $171 million in the third quarter. Regarding guidance we've revised our zinc production range downwards due to an equipment failure in Vazante. Equipment repair should last about 30 days and we expect a production loss of 8000 to 1000 tons of zinc in concentrates. We are maintaining the production forecast for the other metals. In respect of investments we have revised our capital allocation strategy and we are prioritizing operation investments that will contribute not only in the short term but it will also sustain our long-term growth. As a consequence project development expenses were reduced to $35 million.
Regarding our main project construction works in Aripuana continued to advance with 66% of the total capex project committed and 18% physical progress. We also closed the Karmin 30% state acquisition on October 3. Moving to the next slide we'll talk about market fundamentals. In third quarter average zinc price was $2248 per
President and Chief Executive Officer
Senior Vice President Finance and Group Chief Financial Officer
Carlos de Alba
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