Earnings Call Transcript - NEXA Q1 2024

Operator, Operator

Good morning and welcome to Nexa Resources First Quarter 2024 Conference Call. This event is being recorded and is also being broadcast via webcast and may be accessed through Nexa's Investor Relations website where the presentation is also available. Now I would like to turn the conference over to Mr. Rodrigo Cammarosano, Head of Investor Relations, for opening remarks. Please go ahead.

Rodrigo Cammarosano, Head of Investor Relations

Good morning, everyone, and welcome to Nexa Resources' First Quarter 2024 Earnings Conference Call. Thanks for joining us today. During the call, we will be discussing the company's performance as per the earnings release that we issued yesterday. We encourage you to follow along with this on-screen presentation through the webcast. Before we begin, I would like to draw your attention to Slide #2, where we will be making forward-looking statements about our business and we ask you to refer to the disclaimer and conditions surrounding those statements. It is now my pleasure to introduce our speakers. Joining us today is our CEO, Ignacio Rosado; our CFO, José Carlos Del Valle; and our Senior Vice President of Mining Operations, Leonardo Coelho. So now I will turn the call over to Ignacio for his comments. Ignacio, please go ahead.

Ignacio Rosado, CEO

Thank you, Rodrigo. Good morning, everyone. Thanks for joining us today to discuss our results for the first quarter of 2024. Before starting our presentation, I regret to inform you that in early March, we had a fatal incident involving one of our employees in the El Porvenir mine. And earlier this week, another fatal incident involving one of our employees at a Vazante mine. This is a very difficult time for Nexa, and it becomes clear that we need to work even harder on reinforcing our safety system. We extend our heartfelt condolences to the families of our two employees and reassure them and all of our stakeholders that the safety and well-being of every person who works at Nexa are our main values and remain our utmost priority. We are committed more than ever to enhancing employee safety and achieving zero fatalities. Please let's move to Slide #3, where we will start our presentation with the main highlights of the quarter. Let me begin by saying that I am pleased to report that we had a positive start to the year. We have achieved another quarter of consistent operating performance, maintaining our focus on cost discipline and capital allocation. Despite ongoing challenges in our industry at the beginning of the year, such as weak macroeconomic conditions, commodity price volatility, and lower demand due to seasonality, we continue to make steady progress and remain focused on executing our priorities. In the first quarter of 2024, consolidated net revenues were $580 million, down by 13% year-over-year, mainly due to lower zinc prices, lower premiums, and lower metal sales. Adjusted EBITDA in the first quarter of '24 was $123 million compared to $133 million a year ago. This performance was mainly driven by lower zinc prices and lower metal sales. Despite the still low zinc price scenario in the first quarter of this year, compared to last quarter, adjusted EBITDA rose 17% due to strong production, lower costs, and lower mineral exploration and project evaluation expenses. Our Aripuanã project continues to make good progress, and we expect to conclude the ramp-up process in mid-2024. Concerning mineral reserves, we had very positive outcomes as evidenced by a 59% increase in mineral reserves at Cerro Pasco, as highlighted in our recently released technical report summary. Overall mineral reserves for 2023 increased by 10% compared to 2022. I encourage you to review both the technical report and our mineral reserves and mineral resources report which were published at the end of March and are available on our Investor Relations website. I would like to emphasize that we recently announced the divestiture of our Morro Agudo mine, making another step in our capital allocation strategy. Our team has done incredible work providing full support to the employees who work at Morro Agudo for many years. We estimate that around 25% of our employees will be allocated to other operations by the completion of the transaction. I want to reaffirm that we remain focused on completing the Aripuanã ramp-up by mid-2024. We observed improvements in metal recoveries and concentrate quality in the first quarter of this year, maintaining our operational and cost optimization discipline to achieve positive cash flow generation throughout this year and advancing with a formal approval process for execution of the Cerro Pasco integration projects. Before we move to our next slide, I would like to share that we released our 2023 sustainability report on April 25. This report highlights the collective efforts of our team in advancing our ESG initiatives meaningfully. Additionally, in April, we concluded important transactions in line with our liability management program. These transactions included extending our debt profile through the issuance of new debentures and bonds, marking a significant milestone for Nexa. This strategic move allowed us to optimize our financial structure, diversify our funding sources, and enhance our liquidity position. José Carlos will provide more details on this topic in his presentation later on. Now moving to Slide #4. Regarding the operating performance of the mining segment, zinc production reached 87,000 tons in the first quarter of this year, up 17% year-over-year mainly explained by an increase in treated ore volume and higher zinc average grades, particularly at Cerro Pasco, Vazante, and Aripuanã mines. Compared to the fourth quarter of '23, zinc production was down 3%, explained by lower volumes from the Peruvian mines and Morro Agudo. Consolidated cash costs in the first quarter of '24 decreased to $0.27 per pound compared to the $0.43 per pound in the first quarter of '23, mainly explained by lower treatment charges and higher volumes. Compared to the fourth quarter of '23, mining cash cost decreased by $0.18 per pound, mainly explained by lower treatment charges and lower operating costs at Cerro Lindo and the El Porvenir mines. The cost per run of mine in the quarter was $45 per ton, relatively flat year-over-year and down 6% quarter-over-quarter, mainly explained by lower operating costs. Now moving to Slide #5. Regarding the operating performance of the smelting segment, metal sales totaled 139,000 tons in the first quarter, down 4% from the first quarter of '23 and 3% compared to the fourth quarter of last year, mainly impacted by lower production volumes and the typical seasonality of demand in the period. Smelting cash cost in the first quarter of this year decreased to $0.98 per pound, 22% lower compared to $1.25 per pound in the first quarter of 2023. This decrease was primarily explained by lower costs of raw materials attributed to lower zinc prices. Compared to the fourth quarter of last year, cash cost was down 3%. Our conversion cost was $0.30 per pound compared to $0.31 per pound in the first quarter of last year due to lower variable costs and lower energy costs. Compared to the fourth quarter of last year, conversion cost was up 4% due to higher variable costs and lower smelting sales. Now moving to Slide #6, where we will talk about Aripuanã. In the first quarter, activities in Aripuanã have progressed as planned with our efforts concentrated on the replacement of some critical equipment and on improving the metallurgical process. Those were important steps to keep improving plant stabilization and reliability. As a consequence, in the quarter, we saw significant advances in recoveries and concentrate quality. Although capacity utilization during the first quarter of 2024 was 57%, we saw an important increase in utilization in March and April, with levels reaching more than 80% on certain days of both months and stabilizing at around 70% in the second week of April. In the following months, we expect this positive trend to continue. In the first quarter of this year, we saw an increase in copper, lead, and silver production compared to the previous quarter, while zinc is flat. Our current focus continues on planned stabilization and on adjusting some critical processes such as improving the performance of the tailings, which will allow us to further increase capacity utilization, paving the way for the completion of the ramp-up, which is expected by mid-2024. Our exploration plan in Aripuanã in the first quarter also progressed as expected. And the results confirm the continuity of mineralization with high polymetallic contents, reaffirming that we have a robust mining asset with the potential to operate for many years. I would like to highlight the important results we obtained in the 2023 exploration campaign, which contributed to Nexa's overall 10% increase in mineral reserves. In the next two slides, we will see more details on the operational performance of Aripuanã in the quarter. Now moving to Slide #7. Starting with the planned downtime in the upper left side, we noted a decrease of 14% quarter-over-quarter indicating an improvement in the stabilization of the plant. Average capacity utilization averaged 57% in the quarter but increased to 70% during April. In the lower left side, we can see the progress of the zinc recovery, which reached 73% in March versus 66% in December. Copper and lead recoveries also improved significantly in March, indicating a strong positive trend. Now moving to Slide #8. On Slide 8, compared to the fourth quarter of 2023, zinc production was relatively flat. Copper production increased by 9%, while lead and silver production increased by 14% and 11%, respectively. These improvements indicate that we are moving in the right direction to complete the ramp-up in mid-2024. Now moving to Slide #9. On this slide, I would like to highlight that we continue progressing with our exploration program. We have reached important results with an overall 10% increase in our mineral reserves in 2023 net of depletion. This was mainly driven by the infill and brownfield positive results from drilling activities in Aripuanã and the inclusion of the Atacocha mineral reserves driven by the positive results from the Cerro Pasco integration project. The 2023 results reinforced Nexa's successful track record in not only replenishing but also increasing our mineral reserves and mineral resources base as well as showing the potential of our assets. Now I will turn over the call to José Carlos Del Valle, our CFO, who will present our financial results. José, please go ahead.

José Carlos Del Valle, CFO

Thank you, Ignacio. Good morning to everyone. I will continue on Slide 10. As you can see, beginning with the chart on your upper left, total consolidated net revenue for the first quarter decreased by 13% year-over-year. Mainly due to lower zinc prices, lower net premiums, and lower smelting sales volumes, which were partially offset by higher mining sales volumes. Compared to the fourth quarter of 2023, net revenue decreased by 8%, also as a result of lower smelting sales volumes and lower zinc prices. In terms of profitability, consolidated adjusted EBITDA in the first quarter of 2024 was $123 million, compared to $133 million a year ago. This lower performance was mainly explained by a 22% reduction in zinc prices year-over-year and lower smelter sales volumes. Compared to the fourth quarter of 2023, despite lower zinc price levels, adjusted EBITDA decreased by 17%, primarily due to lower costs and lower mineral exploration and project evaluation expenses. Finally, it is worth noting that our consolidated adjusted EBITDA margin increased to 21%, 1 basis point and 3 basis points higher compared to the first quarter of 2023 and to the fourth quarter of 2023 respectively. Now let's move to the next slide, #11. The top left to the slide, we can see that in the first quarter of 2024, we invested $74 million in CapEx, nearly all of which went to sustaining activities including mining development and tailings storage facilities. In line with this, our 2024 CapEx guidance for the year remains unchanged at $311 million. With respect to mineral exploration and project evaluation, we invested a total of $12 million, of which $9 million were related to mineral exploration and mine development to support our exploration activities. However, we expect our investments in these areas to accelerate in the upcoming quarters. Therefore, we are maintaining unchanged our 2024 guidance for exploration and project evaluation at $72 million. Now let's move on to the next slide in which I will discuss our cash flow. Starting from the $123 million of adjusted EBITDA net of nonoperational items, we paid $46 million related to interest and taxes and spent $75 million in total CapEx in our operations. Additionally, loans and investments had a positive net impact of $24 million, mainly due to a new $30 million short-term facility that became effective in March. We then had a negative impact of $3 million due to the effect of foreign exchange on our cash and cash equivalents, driven by the depreciation of the Brazilian real against the U.S. dollar during the period. Finally, we saw a negative effect of $125 million related to working capital which is a typical cycle observed in the first quarter of each year and in line with our established payment terms and annual tax obligations in the jurisdictions where we operate. As in 2023, we expect this negative working capital effect to be reversed throughout the year. Combining all these effects, our free cash flow in the first quarter of 2024 was negative $144 million. Now moving to Slide 13. In this slide, I see that our liquidity remains healthy, and we continue to present a sound balance sheet with an extended maturity profile. At the end of the first quarter of 2024, our available liquidity totaled approximately $644 million, including our undrawn sustainability-linked revolving credit facility of $320 million. Furthermore, in March, we successfully renegotiated and extended by five years, one of our remaining export credit notes totaling $90 million, which was previously set to mature in October 2024. Regarding our overall profile in the first quarter of 2024, average debt maturity was 3.7 years and carried an average cost of 6.1%. It is important to mention that as of March 31, our total cash position is sufficient to cover the payment of all obligations maturing in the next three years. In terms of our leverage measured by the net debt to adjusted EBITDA ratio, it increased from 3.2 to 3.7x quarter-over-quarter. This expected increase is primarily due to the previously explained temporary decrease of $144 million in our cash balance quarter-over-quarter and to the lower adjusted EBITDA registered in the last 12 months, driven by the prevailing trend of lower zinc prices in the period. As previously disclosed and in line with our proactive approach to liability management, in April, Nexa successfully extended its debt profile from 3.7 years to around 7 years through the execution of our new bond issuance and tender offers for existing bonds. This strategy also included the issuance of a new $130 million 6-year ESG-linked debentures in the Brazilian market. In relation to the bonds transactions, the new $600 million 10-year bond carries a 6.75% coupon and allowed us to repurchase around $485 million and $100 million of the existing notes due in 2027 and 2028, respectively. These transactions marked a significant milestone for the company, as Ignacio mentioned at the beginning of his presentation. These strategic initiatives also optimize our financial structure, diversify our funding sources, and enhance our liquidity position. It is important to understand that the extension of our debt profile is part of an ongoing optimization effort and reflects our commitment to prudent financial management and our confidence in the long-term prospects of our business. Moving now to Slide 14. Regarding market fundamentals, it is worth noting that in the first quarter of 2024, LME zinc prices averaged $2,450 per ton down by 22% from the first quarter of 2023. This decrease primarily stems from the conditions present at the beginning of 2024, reflecting lower demand prospects and uncertainties regarding the U.S. economy, especially in relation to inflation. Compared to the fourth quarter of 2023, LME zinc prices were down 2%, mainly explained by the Chinese New Year holiday, and also lower demand due to seasonality during the first quarter of 2024. LME copper prices averaged $8,438 per ton in the first quarter of 2024, down by 5% from the first quarter of 2023 and up 3% from the fourth quarter of 2023, also showing high sensitivity to the Chinese economy throughout the first quarter. Looking ahead, zinc prices are expected to be positively supported by the macroeconomic stimulus in China and by the current tight zinc concentrate market that has driven benchmark treatment charges to levels that are 40% lower than what they were in 2023. In the mid- to long term, the fundamental outlook for both zinc and copper prices remains positive. Additionally, investments in construction infrastructure and in the automotive sector will continue to have a positive impact on demand expectations for base metals.

Ignacio Rosado, CEO

Thank you, José Carlos. As I mentioned earlier, we expect to conclude the ramp-up at Aripuanã by mid-2024 as we continue gradually reducing plant downtime while increasing capacity utilization and improving recoveries of all the metals. Our Cerro Pasco integration project is progressing as expected towards the approval process. Our exploration results provide significant indications not only of the potential to further extend the life of our current mines but also of our consistent track record of replenishing reserves. We are focused on our ESG strategy, which prioritizes safe performance across our operations, higher environmental standards, and the development of our communities within a framework of ethics, transparency, and responsibility. We already took an important step in strengthening our balance sheet with the execution of the liability transactions at the beginning of this year, which combined with disciplined capital allocation and positive cash flow generation, will allow Nexa to start deleveraging and improve its financial position. That concludes our remarks. Thank you for your support and confidence. Operator, we are ready to open the floor for questions.

Operator, Operator

Our first question comes from Camilla Barder from Bradesco BBI. Camilla, please go ahead.

Camilla Barder, Analyst

Two questions on my side. The first one, you commented yesterday on the release about a potential impact on legal impact in legislation in Brazil and Peru, results and cash flow. Could you please give more details in terms of magnitude and timing for those impacts? And for Brazil, what would be the exact impact? Is there any cash outflow expected for that? And the second question is about the guidance. You kept production guidance despite the investment in Morro Agudo, right? So could you please share a little bit about the rationale for this maintenance of the guidance? Do you expect better production in other mines to offset the divestment, or could we potentially expect production more towards the end of the guidance, the low end?

José Carlos Del Valle, CFO

I wanted to clarify. Thanks, Camilla, for the question. You were talking about some illegality in Brazil. I didn't quite get the question. Could you please clarify?

Camilla Barder, Analyst

Yes. In Brazil, there was a law that requires the submission of impacts for June, but I am not sure if there is any outflow related to that or if it's just a legal matter.

José Carlos Del Valle, CFO

I honestly not sure exactly which legislation you're referring to on that one. And you mentioned that there was another one on Peru as well. You're right exactly about something in Peru. Maybe it's a communication that it wasn't so clear, sorry.

Camilla Barder, Analyst

In Peru, you mentioned about a discussion regarding tax that could impact results along 2024.

José Carlos Del Valle, CFO

You're probably talking about some tax contingencies related to tax reform. These are standard phrases we include because there are always discussions about potential changes in tax regulations in both Peru and Brazil. I would like to know if you are referring to something specific regarding a particular operation or if your question is about the two countries in general.

Camilla Barder, Analyst

Yes. In general.

José Carlos Del Valle, CFO

Yes. As far as I know, is there something else you wanted to say?

Camilla Barder, Analyst

No, go ahead, please.

José Carlos Del Valle, CFO

I can comment in general, I'm happy to get in touch after the call if you have a specific question that we can help you with. But in general terms, I think there are always discussions both in Peru and Brazil about potential changes in the tax legislation. And this is something that happens in other countries as well, related to the desire of the government to increase their income. But there is no material that we have flagged as of now, either in Peru or in Brazil, even though there have been discussions. But we have not flagged anything that is material that may affect significantly our operations in either of the countries. But happy to get in touch after the call if you have something specific in mind, maybe that you have read somewhere else or you need further detail, we can help you with that.

Camilla Barder, Analyst

Okay. There is also only stability of Cerro Lindo that you mentioned.

José Carlos Del Valle, CFO

This issue has been ongoing for several years in Peru and is impacting all mining companies with tax stability agreements with the Peruvian government. As someone who previously worked at Antamina, I encountered the same challenge there. Currently, there is an international arbitration taking place between Cerro and the Peruvian government. These disputes are continuing, and in our commitment to transparency, we acknowledge that they could potentially impact us. However, we believe we have a strong case and recognize the need to disclose this information. This situation is not new; we are ensuring that we address this contingency just like other mining companies with stability agreements in Peru.

Camilla Barder, Analyst

Okay. Clear. And regarding the guidance, feel free to add anything you would like.

Ignacio Rosado, CEO

Morro Agudo was a very small and marginal operation for us, which is why we decided to sell it. It was included in our guidance, but we are still maintaining our guidance on production and costs. We don’t believe that selling Morro Agudo and ceasing production there will impact our guidance for the end of the year.

Camilla Barder, Analyst

Okay. It's because it's a marginal investment, do you expect that?

Operator, Operator

And our next question comes from Carlos De Alba from Morgan Stanley.

Carlos De Alba, Analyst

Two questions. The first one is if you can provide a little bit more comment on the Magistral environmental impact study and the issue there that apparently it might be rejected by the authorities. Just I wanted to understand what is behind this and what the repercussions? And then second question, maybe on the working capital. Typically, yes, there is a seasonality on working capital in Q1, but this time, relative to the last several years, the consumption of cash flows for working capital was much bigger. So I wanted to understand how much of that do you expect to be reversed in the second quarter or throughout the year?

Ignacio Rosado, CEO

Yes. Yes. So thank you, Carlos. So regarding Magistral, what happens is that ANA, which is the National Water Authority, has issued a report where they stated that some of the observations regarding the project's impact on the water deposits that are near our projects. This means that this report goes to the Senate, which is the main authority that is going to issue a report of approval of this approval. And this is now in the hands of the Senate. So we expect that they will come back to us with an answer in the next one to two months. In the context of that, I would like to say that, and we said this many times, Carlos, that Magistral is a new project for us, and it still is an investment of $1 billion, and we always want to compare this investment of $1 billion with all investments that we might be able to move, not only in Peru but also in other countries. So the contract that we have signed with the government means that we can invest in Magistral until 2028 to start investing in Magistral. In the case that project EBITDA gets approved, we will need to start again all these processes, which is going to take us at least four years. But then in that case, we will have to assess if that's a priority or we just let Magistral go for the moment, put it on hold, and try to look for other items in our pipeline. So that's mainly what is happening in Magistral. I guess for the next call in July, we will have more information, and we can answer that in a very specific way. And regarding working capital. José Carlos, please.

José Carlos Del Valle, CFO

Yes. As we have seen in prior years and actually in discussions that we've had with different funds and analysts, there is a lot of seasonality in our working capital, particularly in the first quarter of the year. This is very typical. And it's actually not too different from what we saw last year and it has to do with increased receivables and much lower payables because there is a trend of increased spending towards the end of the prior year, particularly in CapEx that are large numbers. So you have to pay all of that in the first quarter of the following year. You have to rebuild the inventories because typically you sell everything that you have at the end of the prior year as well. And in addition to that, in the first quarter, we paid a significant amount of taxes and employee bonuses, etc. So for those reasons, mainly the first quarter is always negative in working capital and, therefore, negative in terms of cash flow. Just like last year, we expect this to start reversing throughout the year. Obviously, prices will have an important impact on how quickly this happens. But we will see the reversing trend starting in the second quarter.

Operator, Operator

And our next question is going to come from Lawson Winder from Bank of America.

Lawson Winder, Analyst

Thank you, operator, and Ignacio and team. Thank you for the update. I have a few questions if you don't mind. First on the balance sheet and the debt. What is your target net debt-to-EBITDA ratio? And when do you expect to reach that? And then when you think about capital allocation, at what point might more attention be given to an update to the dividend?

José Carlos Del Valle, CFO

Yes, I can address that. I can't provide general comments on leverage. In the first quarter, as anticipated, we experienced a higher leverage ratio. This will change throughout the year, quarter by quarter, not only as we accumulate more cash due to these prices but also as our adjusted EBITDA improves. As Ignacio mentioned, our Aripuanã project is performing well, and we are progressing towards completing the ramp-up we have discussed in previous calls. Consequently, our EBITDA will improve over time, and we expect that net leverage will decrease significantly this year, falling well below the levels we observed in the first quarter. That being said, reducing our debt—not just leverage—remains our top priority. The plan is to gradually start paying down our debt over the next few years as we begin generating cash from Aripuanã and increasing cash flow as a company overall. We have mentioned several times that we prefer net leverage ratios around 1.5x as this provides a cushion to navigate through low price cycles like those we've experienced in recent quarters. Therefore, it is a priority for us to return to those levels and reduce our debt accordingly. We expect to see a significant improvement this year, but it will likely take several more quarters to bring debt down to levels that will allow for a leverage ratio of approximately 1.5x. Regarding dividends, we will assess market conditions and company performance in the second half of the year before making any decisions, which remains our plan. The performance of Aripuanã is promising, and although prices have increased, we are uncertain how long these elevated levels will last. These factors will certainly be part of our considerations as we approach our decision for the second half of the year.

Lawson Winder, Analyst

Okay. That's very helpful. And then just kind of sticking with this theme of capital allocation. So Aripuanã is ramping up. There's still quite a bit of CapEx left to go. Next project is Cerro Pasco. When you look beyond Cerro Pasco, what is kind of the thinking around the next likely project that Nexa might be tackling?

Ignacio Rosado, CEO

Yes, it's a great question. Regarding Aripuanã, as José Carlos mentioned, we expect the ramp-up to conclude in the coming months. Most of the capital expenditure for Aripuanã will be sustaining rather than growth-focused. Moving on to Cerro Pasco, we anticipate approval in the latter half of this year. Although we are prepared to approve Cerro Pasco, we want to ensure that we complete the ramp-up at Aripuanã first. The estimated cost for the project is between $140 million and $160 million, with investments occurring over the next three years. This year, we are focusing on investing in alternatives, which is our main approach, and finalizing the engineering for the pumping system. Additionally, as José Carlos indicated regarding capital allocation, we plan to prioritize debt reduction with the cash generation we will achieve. In terms of capital allocation, we are also working on our pipeline of projects. For example, we have resources that now have a new technical report, and we need to decide whether to move forward with that. There are additional projects in our pipeline that we can advance, but it will take about five to eight years for them to potentially become mines. I would say the next project we pursue will come from our M&A strategy, as we are evaluating various projects of our size. These are similar to our existing mines, which involve investments of around $600 million to $800 million. That is why we require the leverage of 1.5 times that José Carlos mentioned, as it will enable us to invest using our cash flow along with some debt to fund more projects. This reflects our current position. We are actively pursuing M&A and remain committed to exploring projects with additional coverage, which is primarily our capital allocation strategy moving forward.

Lawson Winder, Analyst

Okay. Fantastic. And since you touched on M&A, I might follow up and just ask for a little bit more clarification on your latest thinking. I mean, it sounds like it's largely in line to what you said before. In terms of the timeline, I mean, what does it look like for you at this point, when do you expect to transact on a copper acquisition?

Ignacio Rosado, CEO

Yes, projects are always costly, whether times are good or bad. We operate in a niche, and for the copper project we’re looking for, around 50,000 tons, it may also involve some polymetallic and lead components. This positions us in the range of $600 million to $800 million, which is below the interest of most large mining companies, and we recognize that. We are open to corporate or asset mergers and acquisitions, but our primary focus is on understanding the assets we aim to acquire. We are prioritizing brownfield projects that are nearing production, as these projects require expertise to unlock greater value. Though there are not many such projects, they do exist. Given our investment strategy and current leverage, our shareholders and board tend to be conservative. Therefore, we need to complete Aripuanã first, get approval for Cerro Pasco, which is expected this year, and execute on that. Meanwhile, as we generate cash flow, we will look to evaluate and potentially announce an acquisition of an advanced copper-zinc project, targeting developments within the year.

Operator, Operator

Thank you. At this time, to handle questions brought up through the webcast. I will turn the conference over to Rodrigo Cammarosano, the Nexa's Head of IR. Rodrigo, please go ahead.

Rodrigo Cammarosano, Head of Investor Relations

Thank you, operator. We have two questions from the webcast. The first one is from Hernán Kisluk from MetLife. And we also have another question from Alina Seppä from Evli Fund Management company. So those questions are pretty much the same. And those have been already answered by José Carlos; they are related to the leverage and the dividend payment. So I believe that those questions have already been addressed. And we don't have any other questions. So I will turn the call over to Ignacio for his final remarks.

Ignacio Rosado, CEO

Thank you very much, Rodrigo. Thank you to everyone for attending the call. We look forward to speaking with you in the next quarter. I want to emphasize our commitment to our safety program. This is a challenging time for us with two fatalities in two months, which has never happened before. We are focused on ensuring that our safety system, which is effective, is reinforced, and that all our team members understand that safety is our top priority. We will dedicate significant time to this matter. We are also working diligently to ensure that Aripuanã is nearing the final stages of its ramp-up. Our path is clear, and we can approve it today, but we want to ensure we first complete Aripuanã. We continue to strive for guidance on costs, optimizing capital expenditures, and production to maintain a stable product. This is straightforward—a simple strategy that we need to implement daily. We hope to demonstrate progress on this during the second quarter and by the end of the second quarter. Thank you for joining us, and have a good day.

Operator, Operator

And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect, and have a great day.