Nexa Resources NEXA divulged its strategic move to halt mining activities at the Morro Agudo Complex in Minas Gerais, Brazil, from May 1, 2024, onwards. This initiative aligns with their goal to optimize their portfolio, elevate free cash flow, maintain a disciplined capital allocation approach, and ultimately, amplify long-term value for shareholders.
Containing an underground and open pit polymetallic mine along with three deposits within the Ambrosia Trend (Ambrosia Sul, Ambrosia Norte, and Bonsucesso), the Morro Agudo Complex stands as a crucial asset situated approximately 15-20 km northeast of Paracatu.
Following the conclusion of the Ambrósia mine’s operational life in Q4 of 2020, activities at the Complex came to a standstill. Producing around 1,650t of zinc and 390t of lead per month, the Complex contributes 5% and 6% to Nexa’s zinc and lead output, correspondingly. During 2023, the mine generated 23 kt of zinc, 8.3 kt of lead, with a sustaining cash cost net of by-products at $0.87 per pound. However, the mine does not presently hold any estimated mineral reserves.
Up until April 30, mining undertakings at the Morro Agudo Complex will be gradually reduced, while limestone production shall continue unhampered. Nexa plans to execute a structured process directed at minimizing adverse effects on its operation, specifically on employees and local communities. Concurrently, they will actively explore risk-return options for the future of the Morro Agudo Complex in Brazil. Despite the adjustment, the company affirms its consolidated guidance for 2024, as issued on February 1, 2024.
Anticipating a shift in zinc production to a range of 323 kt-381 kt in 2024, an increase from the 333 kt in 2023, Nexa attributes this growth to higher anticipated volumes at Aripuanã as the ongoing ramp-up progresses according to plan, slated to conclude mid-year.
The outlook for copper output stands at 30-35 kt for the year, surpassing the 33 kt of copper produced in 2023. Similarly, lead production is forecasted between 66 kt and 82 kt, up from the 65 kt in 2023. The company also aims for silver production to reach 11-13 million ounces in comparison to 10 million ounces produced in 2023.
Stock Performance and Analysis
Over the past year, Nexa shares have risen by 20.6%, overshadowing the industry’s mere 3.2% growth.
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Insights and Recommendations for Investors
Presently carrying a Zacks Rank #4 (Sell), Nexa prompts investors to consider better-rated stocks within the basic materials sector such as Ecolab Inc. ECL, Carpenter Technology Corporation CRS, and Hawkins, Inc. HWKN. Ecolab and Carpenter both hold a Zacks Rank #1 (Strong Buy), while Hawkins exhibits a Zacks Rank #2 (Buy).
According to the Zacks Consensus Estimate, Ecolab is predicted to witness a 22.7% increase in earnings for 2024, with an average trailing four-quarter earnings surprise of 1.7%, amidst a 45% surge in share value over a year. Carpenter Technology foresees 2024 earnings at $4.00 per share, marked by a 1% upward revision in the previous 60 days, with an average trailing four-quarter earnings surprise of 14.3% and a 64% year-over-year share gain.
Conversely, Hawkins anticipates a 26.2% rise in fiscal 2024 earnings per share, reflecting a 4.3% upward estimation in the last 60 days, maintaining an outstanding average trailing four-quarter earnings surprise of 30.6% alongside an impressive 84% stock appreciation within the last year.
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