Record EBITDA and a downgrade to BB+ tell two sides of the same story: the assets are finally working, but the balance sheet no longer carries Votorantim’s umbrella.
NEXA · Earnings Call · 2026-10-30
The quarter that finally looked like the thesis
For three years Nexa’s story was a promise: fix Aripuanã, finish Cerro Pasco, deleverage. Q3 2026 is the first quarter where the promise and the P&L met. Adjusted EBITDA hit $301 million, up 62% year over year and 5% sequentially, at a 32% margin; free cash flow was $73 million; net leverage fell to 1.24x from 2.21x a year earlier. The headline net loss of $47 million was a $124 million non-cash impairment at Juiz de Fora and Três Marias, not an operating miss. “Adjusted EBITDA reached $301 million, our highest of the year, up 62% from a year ago and 5% from the second quarter, with a 32% margin.” — Ignacio Rosado, Executive · 2026-10-30
What drove it: high zinc prices, a much stronger byproduct contribution from silver and copper, and the recovery at Cajamarquilla after the May fire. Zinc averaged $3,825 per tonne, up 35% year over year; silver averaged $62.6 per ounce, up 59%. The twist is that smelters are being squeezed by negative treatment charges — spot TCs in China ended the quarter at negative $236 per tonne — so sulfuric acid and silver recovery are doing the margin work. Nexa is a net producer of both. That is the integrated model finally paying off.
What actually changed: the rating, not the ore
The operational improvement is real, but the most important new fact is corporate. S&P cut Nexa to BB+ from BBB- this week, citing the pending sale of Votorantim’s controlling stake to Boliden. The change-of-control provisions on the 2028 notes become applicable at closing. Fitch had already put the BBB- rating on watch negative after the August announcement. This is the first time in the provided record that Nexa has been discussed as a fallen angel rather than a deleveraging story.
Earlier this week, S&P lowered Nexa's long-term issuer and senior unsecured notes rating to BB+ from BBB-, removing them from CreditWatch Negative... the change of control provisions of the 2028 Notes will become applicable upon closing of the transaction.
That matters because the prior calls sold an investment-grade credit rating as a strategic asset. Management repeatedly framed debt reduction as a path to keep that rating. Now the rating has moved for a reason the company cannot fix with free cash flow: perceived support from the controlling shareholder. The balance sheet is still solid — $735 million of liquidity, only 8% of debt maturing through 2027, average maturity 6.8 years, average cost 6.7%. But the cost of capital and the covenant map changed.
Aripuanã: the ramp is real, the timeline slipped again
The fourth filter is working. Treated ore at Aripuanã hit a record 471,000 tonnes, up 18% quarter over quarter; zinc production rose 48% to 13,000 tonnes; plant utilization averaged 84% and reached 90% in September. That is a genuine operational milestone. But the timeline has moved. In February management said “we should be able to reach full capacity in the second half of this year” — Ignacio Rosado, COO · 2026-02-27. On this call: “Coming months, first quarter, we are going to be at full capacity.” — Ignacio Rosado, Executive · 2026-10-30 That is a slippage from H2 2026 to Q1 2027, and it is not the first Aripuanã deadline to move.
Costs are the other half. Management says Aripuanã’s cost base is still above the other Brazilian operations because of remote logistics and turnover, and expects costs to start falling in Q3 2027. The fourth filter solves the tailings bottleneck; it does not solve the labor and freight bottleneck. Until unit costs normalize, the ramp is a volume story, not yet a margin story.
Cerro Pasco and the market backdrop
Cerro Pasco phase one is on track for mechanical completion in December, with pumping expected in early Q3 2027 and permits in March/April 2027. That is consistent with the May call, when management said “we have more than a year of life of mine of our tailings capacity” — Ignacio Rosado, CFO · 2026-05-07 as a cushion. The difference now is that the market is cooperating: concentrate market tightness is the central bullish argument for zinc, and LME Week sentiment was constructive. The market section was explicit: “Zinc prices reached their highest level since 2022, driven primarily by a deepening shortage of concentrate.” — Rodrigo Cammarosano, Executive · 2026-10-30
But the same tightness that helps Nexa’s mines hurts its smelters through negative TCs. That is why the impairment at Juiz de Fora and Três Marias is not random: it reflects lower long-term treatment-charge assumptions in a tighter concentrate market, plus a stronger Brazilian real. The company is integrated, so the mine and smelter effects partly offset — but not fully, and not smoothly. Add lower grades at Cerro Lindo and copper guidance at the low end, and the operating picture is better but not clean.
The story from here
Nexa is entering the Boliden handoff with the best operating quarter it has produced in years and a lower rating than it had a year ago. That is the tension. The deleveraging target is essentially met — net leverage at 1.24x is close to the level management described in late 2025 — but the rating agency is looking through the balance sheet to the controlling shareholder. The inventory buildup at Cajamarquilla should unwind in Q4, and the company expects Q4 to be the strongest quarter of the year. If zinc holds above roughly $3,700 per tonne and byproducts stay elevated, the cash-flow math works. If zinc rolls over, the smelter’s negative TCs and Aripuanã’s cost base become the story again.
This is a small-cap ($1.47 billion) with a binary corporate event in Q1 2027 and a commodity tailwind doing most of the heavy lifting. The quarter deserves credit; the rating cut deserves attention. That combination — operating momentum plus a weaker credit umbrella — is the real Nexa story today.