Zinc producer Nexa expects high prices as Europe smelters shut
NEW YORK - South American zinc and copper producer Nexa Resources expects tight supplies of zinc metals globally due to smelter closures in Europe as energy prices skyrocket, a situation that is boosting overall price premiums.
Nexa's CEO Ignacio Rosado told Reuters on Thursday, ahead of a meeting with investors at the New York Stock Exchange (NYSE), that the European situation is opening opportunities to expand zinc sales in the continent at higher prices.
"Smelters in Europe, and also in the United States, are stopping production due to the high price of energy, so there is not much (zinc) metal," Rosado said, adding that the situation is more than offsetting the negative aspect of a possible global recession.
"So, as a producer based in South America that uses a large share of electricity from hydro plants, it is a good moment to be in the business," he said.
Zinc is mostly used to make stainless steel, and in general as an anticorrosion product.
NYSE-listed Nexa is 65% owned by the Votorantim family in Brazil. Peruvian funds hold another 16%, with the rest trading in the market.
Rosado said the company, which owns mines and smelters in Peru and Brazil and is the fifth largest global zinc producer, is in talks to buy a new zinc and copper mine to expand production.
He declined to name potential targets, but said the investment in the new asset would be around $800-million to $1-billion and the location could be in Peru, Brazil, Chile, Mexico or the United States.
The executive said the company would most likely use its own cash and debt to pay for the new mine, rather than raising capital through new shares, despite that being an option particularly due to the need to expand liquidity for its stock.
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