Nexa (NEXA) Q4 2025: Mining EBITDA Margin Hits 50% as Aripuana Ramps, Silver Leverage Rises

2026-02-27 | By EarningsIQ Research

Nexa’s integrated mine-to-smelter platform delivered a step-change in mining profitability, with segment EBITDA margin reaching 50% on the back of operational stability and favorable zinc and byproduct pricing. Aripuana’s ramp and Cerro de Pasco integration are extending mine life and cash flow visibility, while a structural shift in the silver streaming agreement will unlock material earnings leverage as early as Q2 2026. Management’s disciplined capital allocation and debt reduction signal a pivot toward balance sheet strength and future copper growth opportunities.

Summary

• Mining Margin Expansion: Operational execution and market support drove mining EBITDA margin to 50%.
• Asset Stabilization: Aripuana and Cerro de Pasco projects are unlocking volume and mine life extensions.
• Silver Upside Catalyst: Silver stream step-down boosts realized exposure, enhancing future EBITDA leverage.

Performance Analysis

Nexa’s Q4 2025 results underscore the earnings power of its mining segment, with mining EBITDA margin surging to 50% on higher zinc volumes, robust byproduct pricing, and disciplined cost control. The mining division generated $532 million in net revenue and $266 million in adjusted EBITDA, representing the company’s strongest quarterly performance of the year. Smelting, while steady, faced softer zinc oxide demand and higher input costs, capping segment EBITDA margin at 6% for the year.

Full-year results reflect execution against guidance, with consolidated zinc production of 316,000 tons and smelting sales of 567,000 tons both meeting targets. Adjusted EBITDA for the year reached $772 million, up 8% YoY, and net income totaled $223 million. Free cash flow was negative $105 million, shaped by deliberate debt reduction and shareholder returns, but liquidity remains robust at $842 million. Net leverage improved to 1.7x, down from 2.2x last quarter, positioning Nexa for further deleveraging and capital flexibility.

• Mining Margin Outperformance: Segment delivered 50% EBITDA margin, highlighting cost discipline and price realization.
• Smelting Margin Pressure: Tight concentrate supply and lower zinc oxide demand weighed on profitability.
• Balance Sheet Strengthening: Net leverage improved to 1.7x, reflecting strong operating cash flow and debt paydown.

Operational momentum is anchored by asset stabilization at Aripuana and progress at Cerro de Pasco, with both projects set to drive incremental volume and cash generation in 2026.

Executive Commentary

Strategic Positioning

1. Mining Margin and Cost Leadership

Nexa’s mining portfolio delivered outsized profitability, with cash cost (net of byproducts) at negative $0.58/lb in Q4 and negative $0.30/lb for the year, both below guidance. Byproduct credits and lower treatment charges offset inflationary pressures, while operational reliability at core sites reduced downtime and stabilized output. This cost structure positions Nexa as a margin leader among zinc miners.

2. Aripuana Ramp and Debottlenecking

Aripuana, a polymetallic mine in Brazil, is now operating at a stabilized throughput of 140-145kt/month, even during the rainy season—a historic operational bottleneck. The fourth tailings filter, set for commissioning in H1 2026, will remove remaining volume constraints, allowing full capacity in H2 2026. This asset anchors Nexa’s near-term volume and cash flow growth, with ongoing exploration confirming additional high-grade zones.

3. Cerro de Pasco Integration and Mine Life Extension

The Cerro de Pasco integration project in Peru is advancing on schedule, with Phase I capex on budget and technical studies for Phase II underway. Recent drilling is uncovering higher-grade intersections, prompting management to postpone Phase II finalization to maximize reserve inventory. This measured approach is extending mine life by over 15 years, supporting long-term profitability and regional leadership.

4. Silver Stream Step-Down: Structural Earnings Catalyst

Beginning Q2 2026, Nexa’s Cerro Lindo silver streaming obligation drops from 65% to 25%, freeing up 40% of silver production for direct market exposure. With annual silver output around 11 million ounces, this transition will materially increase realized silver-linked EBITDA, providing a structural tailwind as silver prices remain elevated.

5. Capital Allocation and Copper Optionality

Management is prioritizing debt reduction and maintaining an investment-grade profile, using excess cash to pay down debt and fund dividends per policy. With balance sheet flexibility improving, Nexa is actively evaluating copper growth opportunities, positioning itself to pivot into higher-growth metals as its zinc base stabilizes.

Key Considerations

This quarter marks a strategic inflection for Nexa, as operational stability and disciplined capital allocation converge with market catalysts to reshape its forward earnings profile.

Key Considerations:

• Aripuana Throughput Reliability: Rainy season no longer constrains production, supporting sustained volume ramp in 2026.
• Silver Streaming Step-Down: Transitioning from 65% to 25% delivery unlocks significant upside to silver-linked EBITDA.
• Cerro de Pasco Drilling Upside: Higher-grade discoveries are extending mine life and deferring capex-heavy expansions.
• Smelting Margin Sensitivity: Recovery in treatment charges is expected, but regional energy costs and supply tightness remain watchpoints.
• Balance Sheet Flexibility: Improved leverage opens the door for copper asset M&A as the next growth vector.

Risks

Key risks include exposure to commodity price volatility, particularly for zinc and byproducts, and continued margin pressure in the smelting segment if concentrate supply remains tight or energy costs escalate. Political instability in Peru, though historically decoupled from mining operations, could introduce regulatory or community-related headwinds. Execution on Aripuana’s final ramp and Cerro de Pasco’s integration timeline are also critical to sustaining cash flow momentum.

Forward Outlook

For Q1 2026, Nexa expects:

• Continued stable mining output, with Aripuana maintaining current throughput and ramping further post-filter commissioning
• Smelting segment to face persistent margin pressure until treatment charges recover

For full-year 2026, management reiterated focus on:

• Delivering full capacity at Aripuana in H2
• Completing Phase I of Cerro de Pasco integration on budget
• Further debt reduction and maintaining robust liquidity

Management highlighted the silver stream step-down as a material EBITDA catalyst, and confirmed that balance sheet strength will enable more active evaluation of copper growth opportunities in the second half of 2026.

• Aripuana filter commissioning and throughput ramp
• Cerro de Pasco drilling and integration milestones

Takeaways

Nexa’s Q4 2025 marks a turning point, with mining margin leadership, asset stabilization, and a pending silver stream step-down positioning the company for structurally higher cash generation in 2026 and beyond.

• Mining Margin Leadership: Negative cash costs and robust byproduct credits underpin sector-leading profitability, with operational discipline sustaining outperformance.
• Balance Sheet and Optionality: Improved leverage and liquidity enable a pivot from debt reduction to copper M&A as market conditions allow.
• Silver Upside Watch: The Q2 2026 silver stream step-down will be a critical earnings event, with direct exposure to silver price upside.

Conclusion

Nexa enters 2026 with operational momentum, a strengthened balance sheet, and a clear path to unlocking value from both existing assets and market catalysts. Investors should focus on Aripuana’s ramp, Cerro de Pasco’s ongoing integration, and the transformative impact of the silver stream step-down as the next phase of Nexa’s earnings power unfolds.

Industry Read-Through

Nexa’s results reinforce the value of integrated mine-to-smelter models in volatile commodity environments, highlighting how byproduct leverage and disciplined capex can buffer margin swings. The structural shift from silver streaming to direct market exposure is a key theme for diversified miners, as precious metals pricing remains robust. Margin pressure in smelting segments is likely to persist across the industry until concentrate supply normalizes and treatment charges rebound. Asset-level operational stability and capital discipline are emerging as critical differentiators as miners prepare for the next cycle of copper and precious metal demand.

NEXA Materials Mining Base Metals Silver EBITDA Margin Capital Allocation Mine Life Extension