Brazil’s Nexa Resources (TSX, NYSE: NEXA) expects to begin commercial production at its recently acquired Aripuanã zinc project, in the country’s Mato Grosso state, by 2021, as the company seeks to maximize benefits of current market conditions for the base metal.
The company, led by former Vale Canada’s chief Tito Martins, consolidated ownership of the low-cost underground zinc polymetallic mine project in August this year, through the acquisition of Canadian junior Karmin Explorations.
Moving forward construction of Aripuanã is part of Nexa’s ongoing efforts to grow and expand its presence on the global zinc and copper markets.
“We are optimistic about zinc. Current prices have reflected the turmoil caused by the trade war, but progressive negotiation between US and China may rapidly boost quotations,” Martins said.
“The fundamentals of the market are solid, with the lowest inventory levels in 10 years and a shortage of large new projects. In China and India, zinc consumption is still very low, and there are great opportunities for consumption in galvanizing,” Martins noted.
Once in operations, the $354-million project will become the world’s second biggest zinc mine.
“Our expectation is that the refined zinc market will remain in deficit in 2019, which, added to low inventories, maintains the strength of zinc fundamentals,” Martins said.
Nexa’s ambitions has led the company to invest in projects that can extend the life of current operating mines and increase production through brownfield expansions.
The results, so far, are positive. Not only it operates five low-cost mines in Brazil and Peru, but the Sao Paulo-based firm has also become the world’s fourth largest zinc producer.
Additionally, Nexa is Brazil’s top miner of the metal, and the only integrated zinc producer and smelter in Latin America.
From an innovation standpoint, Nexa is focused on transformational innovations, which search for technologies that eliminate dams or minimize the risks inherent in tailings storage; and incremental innovations, which are focused on optimization and cost reduction.
To achieve such ambitious goal, the company has set partnerships with universities, research centres, start-ups and companies around the world that are focused on the use of advanced technology and automation.
Nexa launched a Mining Lab Challenge four years ago, aiming at supporting initiatives of entrepreneurs developing technological innovation projects for the mining and metallurgy industry. To date, the company has signed 15 contracts with start-ups participating in the program.
According to information available on the miner’s web site, Nexa is continuously working to reduce its impact in local communities and to create socio-environmental value by implementing sustainable practices, such as the use of electric vehicles in its mines and the ongoing implementation of recirculation/recycling initiatives.
In Aripuanã, for example, there are no tailing dams and 100% of water is recirculated. At its Cerro Lindo polymetallic underground mine, located in the Peruvian Andes Mountains, 98% of water is recirculated.
Nexa also has a 10-year automation and digitalization plan in place, affecting all of its assets, including long-life mines such as Atacocha and El Porvenir in Peru, in operations since mid 1900s, and the Vazante mine in Brazil, which began production in 1969.
Prices for zinc, one the company’s main focus, has languished since its decade-high rally to $1.63 per pound ($3,595 per tonne) in early 2018, struggling since to break above $1.36 per pound, or $3,000 per tonne. As per this week, the corrosion-inhibiting metal was trading on the London Metal Exchange (LME) at $2,432 per tonne.
According to Scotiabank research, global zinc demand averaged 2.3% growth annually from 2012 to 2017, but saw negative 0.3% growth in 2018. The bank also forecasts negative demand growth of 0.5% this year, followed by modestly increasing consumption of 1% in 2020, and 1.5% in 2021.
Tito Martins and his team, however, believe the medium and long-term outlook for zinc and copper are positive, particularly as the later is essential in developing an electrical network.
Copper prices, he says, must be supported by a good primary consumption during the second half of the year, especially by Chinese investments in infrastructure. “In addition, there is limited availability of copper scrap in the Chinese market (…) In this context, our strategy remains focused on the growth of both metals in the Americas.”