Nexa; an integrated base-metals platform with real cash-flow torque?

Rating: Speculative Buy / Deep-Value Metals

PlayStyle: Cyclical mining and smelting with zinc leverage and balance-sheet repair

Core debate: Is Nexa just a cheap Latin American zinc name trapped in a volatile commodity cycle, or is it an underappreciated integrated base-metals platform with real cash-flow torque, diversified by-products, and upside if zinc fundamentals tighten further?

Executive view

Nexa is one of the cheaper ways to gain exposure to zinc and related base metals, but the investment case is stronger than a simple commodity beta trade. The company combines mining and smelting, giving it a more integrated operating model than many peers, and its earnings are supported not only by zinc but also by copper, lead, silver, and gold by-products. In 2025, Nexa reported record net revenue of $3.0 billion, adjusted EBITDA of $1.113 billion, and net income of $157 million, while reducing net debt to $1.258 billion. In Q4 2025 alone, net revenue rose 22% year over year and adjusted EBITDA rose 53%.

The bull case is straightforward: the stock is priced as if current earnings are unsustainable, yet Nexa is showing improving operations, stronger cash generation, and declining leverage. If zinc prices stay constructive and the company executes on mine plans and smelter throughput, the equity can re-rate sharply from today’s depressed valuation.

The bear case is equally clear. This is still a cyclical metals business with exposure to volatile prices, cost inflation, jurisdictional risk in Latin America, and execution complexity across mines and smelters. If zinc softens meaningfully, or if projects disappoint, the low multiple can stay low for a long time. That is why I would treat Nexa as a speculative value opportunity, not a core defensive holding.

Why now — cheap exposure to a recovering operating story

The timing is attractive because Nexa is no longer just “cheap on paper.” The company’s actual operating performance improved meaningfully in 2025. Revenue rose to $3.0 billion, adjusted EBITDA to $1.113 billion, and free cash flow generation improved enough for management to cut leverage and continue returning capital. That matters because low-multiple miners often stay cheap when the market doubts sustainability. Nexa is starting to build evidence that its earnings recovery is not purely accidental.

There is also a macro angle. Reuters reported in April 2026 that zinc prices were supported by expectations of supply tightness, with the global zinc market moving toward a concentrate deficit even as refined metal balances remained more mixed. That is exactly the kind of backdrop in which an integrated zinc-heavy producer like Nexa can surprise on margins and cash flow.

The valuation also remains visibly compressed. Nexa’s shares are currently around $8.77. The equity market is still treating it more like a stressed cyclical than a company that just posted over $1.1 billion of adjusted EBITDA and brought net leverage down materially.

What Nexa does

Nexa is one of the largest zinc producers in the world and a major operator in Latin America, with mines and smelters primarily in Peru and Brazil. The company’s model is built around two linked businesses: Mining and Smelting. That structure matters because it gives Nexa exposure not only to upstream metal production but also to downstream smelting margins and by-product economics.

This integrated structure helps smooth volatility somewhat across the cycle. When mining conditions are favorable, Nexa benefits directly from metal output and price. When concentrate markets tighten, its smelting system can also benefit from positioning across the value chain. It is not a perfect hedge, but it is a better structure than a pure single-asset miner.

How they win — integration and by-product resilience

Nexa’s strategic edge is not that it is the lowest-cost producer in every jurisdiction. It wins by combining scale in zinc with diversification across copper, lead, silver, and gold, while operating both mines and smelters. That means its earnings are not entirely hostage to one single metal price line. In 2025, the company highlighted stronger by-product contribution as one of the supports to earnings and cash generation.

The second source of edge is project optionality. Nexa continues to advance exploration and mine-life initiatives, including projects tied to Aripuanã and Cerro Pasco integration, which management sees as contributors to returns and operational continuity. Those projects are not enough to remove the cyclicality of the story, but they do increase the chance that Nexa can sustain production and cash flow better than the market currently assumes.

Business units — where the economics come from

The Mining business is the main driver of metal price sensitivity and resource optionality. It benefits most directly from stronger zinc and copper pricing and from higher by-product credits. The Smelting business contributes a different kind of stability because it can monetize treatment and refining dynamics across the zinc chain. That integrated combination is one of the clearest reasons Nexa deserves a better multiple than a simple single-mine zinc producer.

That said, the company is still fundamentally leveraged to zinc. Diversification helps, but it does not fully immunize the business from a weaker zinc cycle. Investors should not confuse earnings diversification with earnings defensiveness.

How Nexa makes money

Nexa makes money by extracting ore, processing concentrate, smelting refined metal, and capturing by-product value across silver, gold, copper, and lead. The profitability of the model depends on a mix of metal prices, treatment charges, production volumes, operating costs, and execution. In 2025, the combination worked in Nexa’s favor: stronger metal prices, improved operational performance, and by-product support all contributed to the jump in EBITDA.

That is why the stock can move so sharply. When commodity markets cooperate and execution holds, incremental revenue tends to fall through to EBITDA quickly. The flip side is that this same operating leverage works in reverse when prices weaken.

By the numbers

The latest numbers are strong enough to support the thesis:

• 2025 net revenue: $3.0 billion
• 2025 adjusted EBITDA: $1.113 billion
• 2025 net income: $157 million
• Year-end 2025 net debt: $1.258 billion
• Q4 2025 net revenue growth: +22% year over year
• Q4 2025 adjusted EBITDA growth: +53% year over year.

That is the most important fact pattern in the story. Nexa is not being valued against weak or distressed current earnings. It is being valued against a year of very strong profitability.

Key drivers — what can move the stock higher

The first driver is zinc market tightness. If concentrate deficits deepen or inventories remain constrained, Nexa’s earnings power can stay elevated longer than the market expects. Reuters’ recent reporting on zinc supply concerns supports that possibility.

The second driver is operational execution. A cheap miner only rerates if investors believe the company can repeatedly convert metal prices into EBITDA and cash flow. Nexa’s 2025 performance was a step in that direction, but consistency is what will matter.

The third driver is balance-sheet improvement. Net debt of $1.258 billion is manageable relative to 2025 EBITDA, and further deleveraging would make the equity more investable to a broader set of investors. Lower leverage also increases the chance that more cash can be returned to shareholders.

The fourth driver is project execution and reserve life. If Aripuanã and Cerro Pasco-related initiatives extend productive life or improve returns, Nexa gets some re-rating support from better duration, not just better spot prices.

Risks — what could go wrong

The biggest risk is commodity exposure, especially to zinc. If zinc prices weaken due to slower global industrial activity, stronger supply, or a stronger U.S. dollar, Nexa’s EBITDA can come down quickly. Diversification helps, but zinc still matters most.

The second risk is operational complexity. Running both mines and smelters in multiple countries adds resilience, but it also adds execution difficulty. Cost overruns, production interruptions, lower grades, or project delays can all hit cash flow.

The third risk is jurisdictional and regulatory exposure. Peru and Brazil are important mining jurisdictions, but they are not risk-free. Changes in regulation, royalties, environmental requirements, or social licensing can affect costs and project timing.

The fourth risk is that cheap can stay cheap. The market often refuses to rerate metals names until it sees several quarters of durable cash generation, not just one strong year.

Valuation frame

This is where the story becomes interesting. Nexa’s shares are around $8.77, giving the company a market capitalization of about $1.16 billion. Against $1.113 billion of 2025 adjusted EBITDA and $1.258 billion of net debt, the stock is trading at a very low enterprise-value-to-EBITDA multiple by normal industrial or metals standards.

I would be careful not to anchor on peak-cycle earnings alone, but even with that caution, the current valuation suggests the market is pricing in a sharp normalization. If that normalization is milder than feared, the upside can be substantial.

Bottom line

Bull case: Nexa is a deeply discounted, integrated zinc-heavy metals platform with improving operations, falling leverage, and real torque to zinc and by-product markets. If zinc fundamentals stay constructive and execution remains disciplined, the stock does not need perfection to rally meaningfully.

Bear case: it is still a cyclical miner and smelter. Metal prices, operational issues, and jurisdictional risk can all reverse sentiment quickly. This is not a “sleep well at night” stock.

Investment conclusion: I would frame Nexa as a Speculative Buy. The reason is simple: the valuation is low enough that investors are being paid to underwrite a fair amount of risk, and the company’s 2025 performance shows the upside if the cycle and execution hold together.

My opportunistic fair value estimate for Nexa is $15 per share.