Nexa Resources sells Pukaqaqa project to optimize portfolio – September 9, 2024

Nexa Sources SA (NEXA Quick quoteNEXA – Free Report) announced that it has agreed to sell the Pukaqaqa Project for $29.3 million (to be received in multiple installments). This move is in line with NEXA’s ongoing portfolio optimization strategy to enhance its free cash flow and returns.

Over the past few years, NEXA has been reviewing its assets and optimising its portfolio in line with its disciplined capital allocation plan. In 2022, it announced its decision not to proceed with Pukaqaqa after a close review of its portfolio.

Details of Nexa Resources’ Pukaqaqa project deal

The Pukaqaqa Project, located in the Huancavelica region of Peru, is a greenfield project in the pre-feasibility study phase. The project involves the development of an open-pit copper and molybdenum mine, with additional gold credits.

The sale to Olympic Precious Metals Ltd is expected to close in December 2024, subject to the satisfaction of certain customary closing conditions. The conditions include the transfer of certain peripheral concessions held by Nexa Resources.

Nexa Resources will receive an initial payment of $0.3 million in cash at closing. It will receive a further $1 million within 12 months and $3.0 million after 48 months. The company will also receive contingent payments totalling $25 million, payable in cash in three installments. However, this is subject to the achievement of certain milestones in the development of the project.

NEXA’s continued efforts to drive growth

Nexa Resources is a large-scale, low-cost, integrated zinc producer with over six decades of experience developing and operating mining and smelting assets in Latin America. The company currently owns and operates five long-lived mines, three of which are located in the Central Andes region of Peru and two in Brazil.

Nexa Resources continues to invest in maintaining and expanding existing brownfield assets and developing greenfield projects to extend the life of its existing mines and increase production.

In the mining sector, a greenfield project refers to the exploration and development of mineral reserves in areas where no mining activities have been carried out previously. The development of a greenfield project can take decades to reach full capacity and is capital intensive. The steps in the whole process are pre-feasibility, feasibility study, construction/execution, commissioning, ramp-up and full/normal capacity.

In 2022, the company, together with Pukaqaqa, had planned to not proceed with the Shalipavco greenfield projects. NEXA has interests in three greenfield projects in Peru (Magistral, Hilarión and Florida Canyon Zinc) and one in Namibia, as well as a number of prospects in Peru, Brazil and Namibia. Magistral is currently under appraisal and both Hilarión and Florida Canyon Zinc are in the exploration phase. Aripuanã is the only greenfield project Nexa Resources has built in the past decades and is in the start-up phase.

In line with its optimization efforts, Nexa Resources sold the Morro Agudo Complex in the Brazilian state of Minas Gerais, which consisted of the Morro Agudo mine and the Ambrósia mine, in July 2024. The total purchase price of the deal was set at R$80 million (approximately $16 million).

Nexa Resources continues to focus on improving the performance of Aripuanã and developing the Cerro Pasco Integration Project, while extending the life of existing mines.

Share price development of Nexa Resources shares

Shares of Nexa Resources have fallen 3.3% over the past year, while the sector has fallen 10.8%.

Image Source: Zacks Investment Research

NEXA’s Zacks Rank and Stocks to Consider

Nexa currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks from the basic materials sector include: Carpenter Technology Corporation (CRS Quick QuoteCRS – Free report) , IAMGOLD Corporation (IAG Quick QuoteIAG – Free report) and Eldorado Gold Corporation (EGO Quick quoteEGO – Free Report). CRS, IAG and EGO currently have a Zacks Rank #1 (Strong Buy). You can see The complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2025 earnings is set at $6.06 per share. The consensus earnings estimate has moved 17% higher over the past 60 days. The average earnings surprise over the past four quarters is 15.9%. Shares of CRS have gained 107% in a year.

IAMGOLD’s consensus earnings estimate for 2024 is set at 39 cents per share. The consensus earnings estimate has increased 44% over the past 60 days. The average earnings surprise over the past four quarters is 200%. IAG shares have increased 116% over the past year.

The Zacks Consensus Estimate for Eldorado Gold’s 2024 earnings is set at $1.32 per share. The consensus earnings estimate has moved 22% higher over the past 60 days. The average earnings surprise over the past four quarters is 430%. Shares of EGO have gained 24% so far this year.