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Nexa Resources SA (NEXA) Q3 2021 Earnings Call Transcript

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NEXA earnings call for the period ending September 30, 2021.

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Nexa Resources SA (NEXA -3.26%)
Q3 2021 Earnings Call
Oct 29, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Nexa Resources Third Quarter 2021 Conference Call. [Operator Instructions]

The presenters on this call are Mr. Tito Martins, CEO of Nexa Resources; Mr. Rodrigo Menck, CFO of Nexa Resources; and Ms. Roberta Varella, Head of Investor Relations. Please also note, this event is being recorded.

I would now like to turn the conference over to Mr. Tito Martins. Please go ahead.

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Tito Botelho Martins -- President and Chief Executive Officer

Thank you. Good morning and good afternoon, everyone. Welcome to Nexa's earnings conference call and thank you for taking the time. Today, we will be talking about our results for the third quarter of 2021.

Please, let's move now to slide 3 where we will begin our presentation. I will start by briefly make some comments about our results. In the third quarter of '21, we have continued to benefit from favorable base metal prices. Our adjusted EBITDA was $155 million, up 141% year-over-year. Note that adjusted EBITDA in the quarter was affected by silver streaming and by the recovery of undue GSF energy costs with a total negative impact of $9 million. Excluding these effects, adjusted EBITDA would be $164 million. Planned and unplanned maintenance shutdowns affected our operational performance, but operations are already at normal levels of optimization rates, and we expect to deliver our guidance.

In terms of zinc production, we estimate we will be closer to the midpoint of the guidance range, while copper is moving toward the upper-end range. In addition, we have revised our cash cost guidance, which we will comment in more detail during this presentation. In the first 9 months of the year, we generate approximately $517 million of adjusted EBITDA, strongly recovering from 2020 and a record high for the 9-months period. This performance not only reflects favorable market conditions, but also the commitment of our team to operational and financial performance. Global demand for our products remains strong and is expected to continue to expand supported by government stimulus packages in the transition for a more green economy. Growing global concern on rising inflation rates, logistics bottlenecks at energy shortage are risk system to the scenario.

We ended the quarter with total cash around $800 million and leverage of 1.2 times, relatively flat to the previous quarter. We continue to monitor our COVID-19 evolution. Our protocols to mitigate the spread of the virus remain in place in our operations, inspirational activities, and projects. And we believe they have been very effective. Most of our employees and contractors have already been vaccinated, at least with one dose. We also continue providing support to our host communities and to the governments in the regions where we operate. We remain fully committed on delivering our first greenfield mining project, Aripuana.

Moving to the next slide, slide 4. I will discuss it in more details. On October 7, the operating license for the Aripuana project was granted. Construction works continue to advance, and overall physical progress has reached at 96.5% at the end of September. In June, it was 89%. Several systems from the beneficiation plant reached at mechanical completion and have started commissioning at the end of the third quarter. These delivered systems allow the cold commissioning of the front-end equipment. We are on track to conclude mechanical completion in the fourth quarter of '21 as well as most of the cold commissioning. Hot commissioning is estimated to start next month, and the first production is estimated to start during the first quarter of '22.

In addition, the qualification program for future mining operators continues to progress. There are currently 161 students in the fourth training class of which 46% are women. Aripuana will be one of the few mines in the world with a strong presence of women in its total workforce. We believe the new mine will start production with at least 35% women units workforce. We are planning to move it up to 50% along the first two years of production. With respect to our exploration program, exploratory drilling has been focused on Northwest extension at Bonsucesso and new drilling continues to confirm a high-grade mineralization area supporting our belief that Aripuana will be a long-life mine.

Moving now to slide 5, please. Mining development activities in Arex and Link mines have continued to progress and reached at and accumulate 13.4000m at the end of September. Approximately 435,000 tonnes of ore has already been a stockpiled which corresponds to roughly two regular months of production. We plan to have three months of ore stockpiled ahead of the start-up of the plant. We have today 443 employees working in the mine, plant, environment, safety and health, and administrative facilities. This number should continue to increase as we are preparing ourselves for the start-up.

Now, I would like to pass to Roberta Varella, our Head of Investor Relations, who will comment on our financial results. Roberta, please?

Roberta Pimphari Varella -- Head of Investor Relations

Thank you, Tito. Good morning and good afternoon, everyone. Please let's move to slide 7. Beginning with the chart on your upper left, consolidated net revenue in third quarter 2021 was $655 million, up 22% compared to the same period a year ago, mainly driven by higher metal prices and by-products contribution, which was partially offset by lower metal sales volume and the silver streaming adjustment.

In the third quarter, Nexa recognized a reduction of $19 million as a remeasurement adjustment in its silver streaming revenues, given forecasted higher long-term prices and the updated mine plan for Cerro Lindo. Also in the quarter, Nexa recognize the recovery energy cost of $10 million related to undo cost paid by our energy power plants in the past. These non-recurring items had a negative net impact of $9 million in our adjusted EBITDA of $155 million. Compared to third quarter 2020, adjusted EBITDA increased by 2%, mostly driven by the mining segment performance.

In the next slide, we will discuss in further details our segment's performance. On slides 8 and 9, I will comment on our mining segment results. Zinc equivalent production reached at 136,000 tonnes, now 1% year-over-year while remaining flat compared to the previous quarter. Zinc production in the quarter decreased by 2% compared to both third quarter 2020 and second quarter 2021, mainly driven by lower zinc head grade and planned and unplanned maintenance shutdowns in Peru during the period. As Tito mentioned earlier, we are already operating net normal levels. In terms of net revenue, we reached $276 million in third quarter 2021, up 34% year-over-year explained by higher average LME prices and lower benchmark treatment charges, which offset the negative impact of the silver streaming adjustment of $19 million in the quarter. Adjusted EBITDA for the mining segment was $92 million compared to $67 million a year ago.

As you can see on slide 9, this performance was mainly explained by the positive net price effect of $46 million due to higher zinc prices, lower treatment charges with a positive variation of $25 million, and higher by-products contribution which were partially offset by the increase in operating costs, driven by increase in maintenance and mine development costs in the period, higher workers' participation provisions due to better results, higher exploration and project evaluation and expenses, and the negative effect of $17 million with respect of silver streaming and energy cost adjustments. In the first 9 months of the year, adjusted EBITDA amounted to $331 million, strongly recovering from a year ago. Consolidated mine cash cost was $0.23/lb in third quarter 2021, down 32% compared to last year. This decrease was primarily driven by higher by-products credits and lower treatment charges, which were partially offset by lower zinc volumes and higher operating costs.

Note that the operating cost is in third quarter 2020 were temporarily reduce it, as operations in Peru, we're still ramping up after the mandatory shutdown due to COVID-19. Compared to second quarter 2021, cash cost increased by $0.09/lb due to lower volumes and increased operating costs. We have revised our full-year cash cost guidance for the mining segment. Although we are starting to see additional inflationary pressure in our mining operations, cash cost at Cerro Lindo and Atacocha mines have been better than expected due to continued higher by-products metal prices. Consequently, cash cost guidance for these two operations has been reduced. Consolidated cash cost guidance is now $0.23/lb compared to our previous guidance of $0.33/lb.

Now, let's turn to the smelting segment results. On slides 10 and 11, we will discuss our smelting segment operational results. In third quarter 2021, metal sales amounted to 156,000 tons, down 2% year-over-year and 1% from second quarter 2021. The decrease in production was partially offset by the increase in resale of metal from third parties. Net revenue in the quarter was $523 million, totaling $1.5 billion in the first 9 months of 2021, positively impacted by higher LME prices and sales volumes. Adjusted EBITDA for the smelting segment in the third quarter 2021 is stood at $65 million compared with $86 million a year ago, driven by lower treatment charges and higher operating costs.

As you can see on slide 11, this performance was mainly explained by lower treatment charges with the negative impact of $21 million and higher operating costs, driven by higher consumption of imported material, inflation, maintenance, and energy costs, which were partially offset by the positive net price effect of $15 million related to higher LME prices and changes in market prices resulting quotation period adjustments and the energy cost adjustment of $8 million.

And before proceeding, I would like to further discuss the treatment charge impact. As you know, for the majority of our third-party contracts, which are renewed during different periods throughout the year, we use the 3-year benchmark TC as a reference. So for this year, the reference price considers the treatment charge of 2021, 2020, and 2019. At the beginning of the year, we tend to receive raw material reference at all these TCs. And as demands evolve, our reference is closer to the treatment charge of the current year. Consequently, we are seeing a higher negative treatment charge impact in the third quarter compared to the previous quarter.

Going back to our results. In the first 9 months of the year, adjusted EBITDA increased by 29% to $241 million. In terms of cash costs, as you can see on the bottom right, consolidated smelting cash cost of $1.16/lb in third quarter 2021 increased by 47% year-over-year, mainly driven by market-related factors such as higher zinc prices and lower treatment charges. We also updated our full-year smelting cash cost guidance to $1.14/lb compared to our previous guidance of $0.95 per pound, primarily driven by higher zinc prices. Operating costs have also been affected by higher energy prices due to the current Brazilian scenario as well as an increase in maintenance costs, which has also been affected by inflation.

I will now turn over the call to Rodrigo Menck, our CFO, who will provide more detailed information about our balance sheet. Menck, please?

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

Thank you, Roberta. Good morning, good afternoon, everyone.

I am now on slide 12. As we demonstrated in the upper-left graph, our liquidity remained strong and we continue to report a healthy balance sheet with extended debt profile. By the end of the first quarter, our current available liquidity was $1.1 billion, which includes our undrawn revolving credit facility of $300 million. As of September 30, the average maturity of our total debt was 5.5 years with a 4.96% average debt cost.

Our leverage, measured by the net debt to adjusted EBITDA ratio increased to 1.24 times from 1.19 times, mainly driven by higher net debt as a consequence of reduced cash. The debt breakdown by category and currency is shown on the right side of the slide. In the light of our strong balance sheet, during the quarter, we continue to advance with our liability management program and have prepaid additional existing financial debt reducing our gross debt by $177 million.

Now moving on to slide 13. On this slide, we present Nexa's free cash flow generation. During the quarter, our free cash flow generation was negative in $260 million. Describing it further and starting from our $155 million EBITDA, we had a $21 million loss in working capital, $57 million of sustaining CapEx, and $30 million from interest paid and taxes. Still, Nexa has generated $39 million of cash before expansion projects during the annualized period. After that, we invested $80 million in nonsustaining CapEx, which includes mainly our Aripuana development projects with $79 million. We also had a negative net effect of $172 million as we have prepaid, as mentioned, debt during this quarter. Finally, dividends payment of $9 million in our energy subsidiary parties and other non-operational impacts, including foreign exchange effects of $38 million concluded the free cash flow of negative $260 million.

Now I turn to the next slide, slide 14. As previously disclosed, our 2021 CapEx guidance remains unchanged at $510 million. In the second quarter, we have invested $144 million in CapEx been $79 million directly to the Aripuana project. In the period of 9 months in 2021, we have invested a total amount of $344 million in 52% directly to Aripuana and the remaining 48% to other projects including sustaining and HSE. As projects advance, we estimate we will have a higher disbursement in the fourth quarter of '21 compared to the previous quarters due to mine development, mine equipment purchase, planned maintenance shutdown at the Tres Marias smelter among other less material events.

With regard to mineral exploration and project evolution, we have invested a total of $18 million in the quarter, totaling $49 million in the period of 9 months of 2021. For the whole year, we expect to continue our mineral exploration and project evaluation investments as we will maintain our efforts to replace and increase mineral reserves and resources supporting our business growth. On October 21, we published our exploration report for the third quarter of 2021. We hope it could provide further clarity over our results and exploration program strategy.

I will now hand over the call back to Tito. Tito, please?

Tito Botelho Martins -- President and Chief Executive Officer

Thank you, Menck. We are now at slide 16. Here, we will make some comments about the market fundamentals. Zinc price maintained its upward trend and increased by 28% when compared to the third quarter of '20 and 3% when you compare to the second quarter of '21, despite price volatility during the quarter. The planned stimulus package in infrastructure in the United States, in the positive signs for the Fed to maintain economic funding, boosted sentiment in the equity and commodity markets and supported the zinc price at higher levels.

In the short-term, we expect the zinc price remain at the levels they are today. Mostly because the tight balance between supply and demand. And then in the long-terms, zinc fundamentals also remain attractive. As you can see on the chart on the upper right, despite this to meet increasing supply, there is unbalance between supply and demand. With respect to copper, price volatility was driven by some signs of slowdown in the Chinese economy, which was intensified by a potential bolt-on in the real estate sector as well as concerns about the delta variant of COVID-19. In the mid-to-long-term, the outlook foreseeing copper also remains positive, given their role in the energy transition.

Moving now to our last slide. As many of you may know, we will start my transition process during this quarter. First of all, I would like that's still my sincere gratitude to our employees for the constant education and professional is that allow us to innovate our business, transform our culture and achieve our goals. Has been an honor and a pleasure to be part of this outstanding team. And I also want to thank our Board for its incentive and support, new initiatives, and decisions along these years. I have witnessed the remarkable evolution of the company in the expansion of its operations in mine and the smelter.

In 2019, we launched the Nexa Way Program implementing a continuous improvement program that has resulted in operational efficiency, cost optimization, and culture transformation. That's the way helped us to navigate during this pandemic scenario, while generating value for our shareholders. We have closely monitored the progress of the Nexa Way and we believe this is now part of our DNA. It's our day-to-day work.

Another milestone for us is Aripuana. As I mentioned earlier, we are close to the leader of our first world-class greenfield project. Last but not least, we continuing to be able to create shared value through pursue ESG initiatives. That don't align with community needs, our business strategies, and our customers' priorities. We are also finalizing our property ESG goals in that business, which will be presented soon. I'm very proud of what our company has become today and I believe we are on the right track to build the mining of the future. It was a privilege to lead this company as CEO for nearly a decade.

Thank you all for your time and let's move to the Q&A session.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Orest Wowkodaw -- Scotiabank -- Analyst

Hi, good morning. And firstly, Tito, want to wish you best of luck in your next endeavors. We'll be missing you here. But wanted to get a better understanding of what's happening at the Aripuana mine? It sounds like you've already started commissioning some parts of it and you expect to finish mechanical completion by year-end. And then I'm confused. So why you do not anticipate first production until the end of the first quarter? Can you maybe give us some color on what's happening there?

Tito Botelho Martins -- President and Chief Executive Officer

Hi, Orest. Thank you very much for your words. I hope we can. This will get us sometime in the future. About Aripuana, what's happening? We've been very cautious. You're right, we have already started commissioning part of the plant. Actually, the mine is on track, on schedule. So development of the mine is according to the regional schedule. So we would be ready to start production as soon as the plant is completed condition. While we've been cautious, you have to see. We are answering right now in the rainy season. So the make ahead of when the holidays as well, there'll be the holidays at the end of the year. Based on our experience about what happened last year during this period time, we decide that to be more conservative in our plans. When we state that we should see production start sometime by the second half of the quarter, let's put this way, it's because we may see good things happen even before that, but we didn't want actually to pass the idea that everything is going to be fine in developing that. I don't know if Menck has another thing to say about this. But clearly, it's a conservative approach.

Orest Wowkodaw -- Scotiabank -- Analyst

Okay. And Tito, just as a follow-up, your disclosure seems to reference that you plan to revise your Aripuana guidance, I guess, in January. Should we be interpreting? So, does that suggest that you plan to lower the Aripuana guidance for 2023?

Tito Botelho Martins -- President and Chief Executive Officer

Yeah. If we have these delays that we are mentioning about the ramping up, of course, it will be affecting the production. The reason why we are not seeing anything right now is exactly because of the level of uncertainty. We have about how the end of construction and the commissioning will behave in the next two to three months. We are going to be more and more assurance of how the ramp-up will perform where we end this period of time, this last quarter of the year, I should say.

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

Just to say, we will as always provide guidance probably in the second half of January. Until then, we will have more certainty of what Tito is mentioning. We'll be able to compound our full-year guidance in our 2022 guidance with [Indecipherable].

Orest Wowkodaw -- Scotiabank -- Analyst

Okay. And just finally, do you see any knock-on impact here on '23 at Aripuana? Or should just -- or is there only [Indecipherable] impact?

Tito Botelho Martins -- President and Chief Executive Officer

No, no. We have not seen any impact in '23, not at all. [Indecipherable] not changed it. We should be operating in full capacity sometime along '22. The concerns we are having today are much more related with capacity to start commissioning. At the time, we believe that we should start. But based on the plans we are running right now, we are still working with the full capacity production sometime in the second half of the year. For '22, it should be 100%. No problem at all.

Orest Wowkodaw -- Scotiabank -- Analyst

Thank you, Tito.

Tito Botelho Martins -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question today comes from Jackie Przybylowski with BMO Capital. Please go ahead.

Jackie Przybylowski -- BMO Capital -- Analyst

Thanks. Thanks very much for taking my question, and I'll echo Orest's comments. Tito, we'll miss you, and that's the work as you move on. Maybe if I can ask about the zinc market because it's been experiencing a roller coaster lately. I know you are in a bit of a different situation for things like power. Just given your smelters are located in South America. Does that provide you with an advantage? Are you able to capitalize on the current shortages and closures that we're seeing in the rest of the world and how do you guys approach that?

Tito Botelho Martins -- President and Chief Executive Officer

Thank you, Jack, for your question and for your words. It's interesting you've mentioned that -- our dream would be to be more able to capitalize this shortage we are seeing in other places. The problem is we cannot produce more. If we were able to produce more, probably would be selling more. No doubt about that. What we are seeing is clearly the announcements made in Europe about the cut in production, they help the price. That's why we saw that with the volatility prices moving up so aggressively.

But demand in Latin America and North America is still very strong. So if we could be able to produce more, for sure we would be selling more. We saw some reflects that will impact in premiums, mostly both in Europe and Asia witching some ways may favor us along the next few months. It's a marginal gain, of course. And talking about the problems with the energy we are seeing in Asia and in Europe. Fortunately, in our case, there is a slight impact in Brazil because of the hydro generation was suffering along the last few months. But in general, we have not seen the impact we were seeing before. But the reservoirs in Brazil, they were lower levels. That's why the energy cost increase.

But once more, it's not comparable with what we're seeing in Europe and Asia, not at all. Seems that in energy probably the word is affecting everybody. But fortunately, our impact has been lower than the ones we see in other places. I would say, in general, we're still very optimist about the market. I mean, we are already working with the first quarter of next year and it seems that the demand -- even when we say old China, we may see a reduction in the demand in China probably, but given other factors. But demand for zinc is still very high, very strong and it doesn't look like it's going to change.

If I had to bet to [Indecipherable] '23, it's going to be a similar year to '22 -- Sorry, '22 will be a similar year to '21 in terms of supply and demand. And there is one additional information. We are not seeing additional concentrate being supply in China. We can move that and I think we've been saying along the last few years is proven to be right. I mean, most of the additional constantly being shipped -- being -- in the Chinese market is coming from abroad. So if we have a lack of metal, today, we may see a lack of concentrate sometimes in the near future.

Jackie Przybylowski -- BMO Capital -- Analyst

And does that help on your smelter side with treatment charges? I know, obviously, some of that's going to be entered company, but the stuff that you're buying from third-parties. Are you able to get it better terms on?

Tito Botelho Martins -- President and Chief Executive Officer

Probably, probably. If it to happen, it's probably going to have a better conditions to negotiate with our suppliers. It's interesting. We haven't seen yet. The impact in the concentrate market given the announcement was made in Europe for the production cuts. Actually, some of the commodity analysts were saying that -- some of them were not believing that the producers in Europe actually would cut production. The only way we will see it, it's when we see more concentrated availability into, right? If it happens, we will benefit from that for sure in the next -- we'll see negotiation.

Jackie Przybylowski -- BMO Capital -- Analyst

Okay, thank you. And if I could just ask a separate question on the management transition, it's unfortunate, I guess we're not able to speak with the incoming CEO. I guess, he starts the role -- I guess, starts working for Nexa next week. So this may not be a fair question, but since it's the only time, we'll have an opportunity to talk to this before you leave? I guess it's -- I'm going to ask anyways, do you have any sense, Tito, when the new incoming CEO joins if there is going to be any strategic shift of the company or in terms of the new projects pecking order, I guess if there's going to be any change to the way he move things forward? Are you able to give any color at all on what we can expect?

Tito Botelho Martins -- President and Chief Executive Officer

What I can tell you is the following. Our Board has been very concerned about the strategy -- we have strategic discussions on a regular basis. Actually, '21 is the year when we had a chance to promote what we call our internal strategic dialog. Every three years we do it. Okay? So every three years, we check the strategies and revise what needed to be revised, and we validate or not the regional plans. Every three years, we do it and we just finished that. In the last call we had, you read the questions about if we would look for new geographies from mitigation, things like that. And I said, yes, we are doing that. We are not leaving our projects aside, but we have the obligation to look at other opportunities in the market. If you ask me today, do you think it's going to change dramatically? No, I don't think it will. I mean, the Nexa has been very consistent. We may have some setbacks above those projects, but we have been very consistent in telling the market that we would pursue the result of our projects. Ignacio coming in. It doesn't mean that this is going to change. I don't think it's going to change at all. But it's my point of view. And I'm sure, Ignacio, when he steps in here, we have a chance to speak with you even before the next quarter release, the results release. So, he will be with you sometime at beginning of the year, probably.

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

[Indecipherable] going to be sometime at the beginning of the year, you can revert to meet on that with the promise.

Jackie Przybylowski -- BMO Capital -- Analyst

Okay, thank you very much. I think that's all my questions. Thanks very much. Congrats on the quarter.

Tito Botelho Martins -- President and Chief Executive Officer

Thank you.

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

Thank you.

Operator

Thank you. And our next question today comes from Alex Hacking with Citi. Please go ahead.

Alexander Hacking -- Citibank -- Analyst

Yeah, good morning. And let me be the third to add my thanks, Tito, and wish you best of luck in your new endeavors.

Tito Botelho Martins -- President and Chief Executive Officer

Thank you.

Alexander Hacking -- Citibank -- Analyst

You're welcome. My question let's say is come back to Aripuana. Any update on how you're thinking about the operating cost there. I mean, I think since the technical report, obviously, cost of something's consumables have gone up, there's also been movements in exchange rates. So, any update on the cost guidance will be helpful. Thank you.

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

Hi, Alex, it's Rodrigo here. We haven't this type of information so far in detail. That's part of let's say the -- what we included in the earnings release and that we will revise [Indecipherable], there is also cash costs changes as you mentioned. But in any case, Aripuana is really well placed within the cash cost curve and will remain being so with some impact here and there, but I wouldn't expect -- thinking about it, I wouldn't expect a major shift on that. As you said, consumables are more expensive, FX has gone a bit wider than anticipated which offsets part of this impact. So, although you will see at our annual guidance probably for the year of 2022, especially considering this slight potential delay that Tito has described. I would be thinking about having it in the same range that you were considered.

Alexander Hacking -- Citibank -- Analyst

Okay, thank you very much. And then just one follow-up question. Has the new Peruvian government provided any sort of framework yet in terms of how they're thinking about changes to mining taxation? Thank you.

Tito Botelho Martins -- President and Chief Executive Officer

It's the interesting question. Actually, this week -- the new guidance, the process to get the confidence vote from the Parliament from the Congress. But this week, there were some I would not say announcements, but the government released some information about potential plans to increase taxes in general and those tax increase. Of course, it would also affect the mining industry there. But the big question mark is the government actually will be able to do anything, given its position and the Congress -- they don't have the Congress majority. And the Congress has been very tough on the government. The government is already in place for the last three months, almost four months. And they haven't got yet the vote of confidence. I mean, the government needs the vote to allow the ministry to work and they haven't got that yet. So we don't think that the life of the new government will be very easy, seems to us that probably will see pretty much what it has seen there along the last 10 to 15 years when Congress had a very strong position and presence was supposed to negotiate on a case-by-case basis. And we don't believe the tax increase will be favorable by the Congress. So, we're still looking at that and being skeptical about any major change happening during this period of time. I mean, in the next month or in the next few years. So it's still trying to pay attention.

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

[Indecipherable] complement what Tito saying, there is a process there. So they need the vote of confidence and need to discuss, fully discuss the proposal that was sent this week, and let's remind that they have to approve anything until the cemetery first to have it valid for 2022. Ultimately, it's going to be an additional year of discussions to make it valid for 2023. So it doesn't necessarily goes on the urgent, the size of the Congress matters that you could potentially follow the Chile [Indecipherable]. These are all possibilities that are on the table with that.

Tito Botelho Martins -- President and Chief Executive Officer

I would pay attention to what's going on in Chile. And pleased to try to guess what may happen in Peru later on with that point.

Alexander Hacking -- Citibank -- Analyst

By that comment, do you mean that the tax framework that eventually emerges out of Chile could be a benchmark for Peru? Or are you talking more on the procedure of...

Tito Botelho Martins -- President and Chief Executive Officer

Yeah. They may try to do a similar thing. That's what I'm saying.

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

My comment was rather on the process, Alex, because it's fine and Chile was really hot. And then the reality check was that this was not so easy to do. But also, of course, they are neighbors and they are some of the practices they might be for.

Tito Botelho Martins -- President and Chief Executive Officer

There is a good example. The Chileans who want to have a new constitution, there were some pools in Peru asking about that. But they don't want to change the constitution. This is just an example. Okay. But in terms of tax increase, the Peruvian government may pursue something seems that we were to Chile who's want to do. That's what I'm saying.

Alexander Hacking -- Citibank -- Analyst

Okay, thank you. And good luck with...

Tito Botelho Martins -- President and Chief Executive Officer

Thank you very much.

Operator

Thank you, this concludes our question-and-answer session. Now we will hand over to Tito for his final remarks. Mr. Martins, please go ahead.

Tito Botelho Martins -- President and Chief Executive Officer

Thank you. Before I make my last statement, Roberta and Menck, do you want to say something else or something that we are missing here or something that should be?

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

I think we've covered everything, maybe Roberta has something.

Roberta Pimphari Varella -- Head of Investor Relations

So what I'd like to add in terms of highlight that we included some information in our earnings release in terms of the outstanding metal. So, we believe it will help you in order to update your models and thinking forward. So one thing that I'd like to pay attention, for example, with the outstanding price adjustment that we have, for example, in our mining segment. When we compare the second quarter of 2021 with the third quarter, then we have a net price effect. It was negative in $24 million. So it will depend in terms of the pricing movement for the current prices. So only like to pay attention to you guys on that topic, because we believe with the information that we are now providing with the table of how much metal we have outstanding both mining segments. It will help in the future evaluation.

Tito Botelho Martins -- President and Chief Executive Officer

Thanks, Roberta. And besides that, there was a draft that -- we have increasing costs in the smelters along the last quarter, but you should pay attention that the margins are still very high. I mean, margins in the smelters, traditionally, they're varying between 8% and 12% in the up right now around 12%, which is still will -- Besides that, I know that the quarter was a disappointment for most of the analysts. I think that you should look at the big picture. The 9 months of '21 have been very good, despite a lot of problems we face. Of course, price are helping us. No doubt about that.

But in terms of performance, we have blockages in the first half of the year. We have the issue of not having available business [Indecipherable] in the Aripuana market because those run was shut down. We had a blockages on the third quarter. The price were good, that's why we decided to move to keep up the level of production in the first half in order to enjoy prices. Of course, in doing so, we had to replan some maintenance shutdowns, which happened in the third quarter. But looking at the big picture, I would say that we tend to have a very good year. I mean, it must become the best year of Nexa's ever, given the prices and given the performance we foresee for the last quarter of the year. So I ask you to pay attention to that because we may see again the analysts not very happy with us because the models will forecast the fourth quarter looking like the third quarter. I would ask you to get the answer to that.

Having said that, that's my last call. I thank you all for your attention, your support along these years. I'm not sure what I'm going to do, but hope we can meet in the future. And I'm really confident that the Nexa can deliver. I have no doubt about that. We have a very strong team which knows where they want to be in the future and what they need to do in order to get there. The company's very well structure, has a very good strategic plan with a very knowledgeable Board, which has been very supportive to us and a very energetic management team. So, I'm really confident that Nexa will be able to deliver what its intend to deliver. And I all wish you all the best for all of you and once more thank you very much. Have a good day. Have a good weekend. [Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Tito Botelho Martins -- President and Chief Executive Officer

Roberta Pimphari Varella -- Head of Investor Relations

Rodrigo Nazareth Menck -- Senior VP of Finance, Group CFO & Treasurer and Member of Executive Board

Orest Wowkodaw -- Scotiabank -- Analyst

Jackie Przybylowski -- BMO Capital -- Analyst

Alexander Hacking -- Citibank -- Analyst

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