Brazilian conglomerate Votorantim is on the prowl for copper assets as demand for the metal used in wiring is set to take off in the clean energy transition.
The group’s Nexa Resources unit -- the world’s fourth-largest zinc producer -- wants to increase exposure to copper and is evaluating expansions of its existing mines, as well as potential new projects and acquisitions, CFO Rodrigo Menck said.
“We have a primary interest in copper, a metal most pursued by investors in the wake of electrification,” he said in an interview.
The Sao Paulo-based company that trades in New York is targeting smaller assets that could fit its financial capacity and add value. With mines and smelters in Brazil and Peru, it’s eying projects in the Americas and Africa in a bet that the push toward renewable power and electric vehicles will boost demand for one of the most conductive metals.
Nexa is exploring in Namibia, with an horizon of five years, and just opened a subsidiary in Ecuador, which Menck calls “the new mineral exploration frontier.”
Pandemic lockdowns disrupted Nexa’s mines in Peru last year while reduced demand slowed its Juiz de Fora smelter in Brazil. A year later, production volumes are rebounding, although Covid-19 remains a concern, he said.
Coronavirus-related costs and impacts have lifted the company’s 2021 capital expenditure budget by about 13% to $510-million, mainly at the Aripuana project in Brazil. Nexa’s first greenfield development is on track to start output early next year at an annual rate of 120 000 t zinc equivalent.
Besides the high level of short-term uncertainty, Nexa has a positive long-term view for both zinc and copper amid a post-pandemic economic recovery, the limited impact of China’s efforts to cool prices and a lack of significant new supply entering the market.
In the second half of this year, Menck expects zinc to average $2 700 to $3 000 a ton and copper to average $8 500 to $9 700 a ton. The metals are trading at about $3 000 and $9 700 currently.
Surging prices and higher production last quarter helped Nexa bring down its debt ratio to 1.19 times earnings before items, creating space for new investments.
Nexa’s pipeline of potential projects includes the Magistral copper openpit in Peru and an underground development to extend the life of the Morro Agudo mine in Minas Gerais, Brazil.