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Nexa Resources SA (NEXA) Risk Analysis
Risk Overview Q4, 2020
Source: the company's latest filing for the period ended Dec 31, 2020, filed Mar 23, 2021
Risk Change Over Time
No filing history is available.
- Accounting & Financial Operations - Risk 1Our estimates of mineral reserves and resources may be materially different from the total mineral quantities we actually recover, and changes in metal prices, operating and capital costs, and other assumptions used to calculate these estimates may render certain mineral reserves and resources uneconomical to mine.
There is a degree of uncertainty attributable to the estimation of mineral reserves and resources. Until mineral reserves and resources are actually mined and processed, the quantity of metal and grades must be considered as estimates only and no assurance can be given that the indicated levels of metals will be produced. In making determinations about whether to advance any of our projects to development, we must rely upon estimated calculations for the mineral reserves and mineral resources and grades of mineralization on our properties. The estimation of mineral reserves and resources is a subjective process that is partially dependent upon the judgment of the qualified persons preparing such estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, statistical analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. Our estimates of mineral reserves and resources are based on geological interpretation and statistical inferences or assumptions drawn from drilling and sampling analysis made as of the date of such estimates. We periodically update our mineral reserves and resources estimates based on the conclusions of the relevant qualified persons with respect to new data from exploratory and infill drilling, results from technical studies and the experience acquired during the operation of the mine and metallurgical processing, as well as changes to the assumptions used to calculate these estimates. Several of the assumptions used to calculate these estimates, including the market prices of commodities, operating and capital costs and mining and metallurgical recovery rates, among others, can greatly fluctuate, which may result in significant changes to our current estimates. These changes may also render some or all of our proven and probable mineral reserves and measured and indicated mineral resources uneconomic to exploit and may ultimately result in a reduction of mineral reserves and resources. In addition, inferred mineral resources have a great amount of uncertainty as to their existence and their economic and legal feasibility. You should not assume that any part of an inferred mineral resource will be upgraded to a higher category or that any of the mineral resources not already classified as mineral reserves will be reclassified as mineral reserves.
- Debt & Financing - Risk 2Fluctuations in interest rates could increase the cost of servicing our debt, affect returns on our financial investments and negatively affect our overall financial performance.
Some of our indebtedness bears interest based on variable interest rates, including the London Interbank Offered Rate, or LIBOR. As of December 31, 2020, 28.1% of our debt was variable rate debt. Such variable rates have fluctuated in response to changes in economic growth, monetary policy and governmental regulation. A significant increase in underlying interest rates, particularly in LIBOR, could have a material adverse effect on our financial expenses and materially adversely affect our overall financial performance. In July 2017, the Financial Conduct Authority ("FCA") announced its intention to phase out LIBOR by the end of 2021. However, on March 5 2021, the FCA announced that most tenors of U.S. Dollar LIBOR would continue to be published through June 30, 2023, extending the previously announced deadline of December 2021. The Company is discussing with the financial entities which fallback rate will replace the interest rate for our relevant LIBOR-based debt, and given the extension of most U.S. Dollar LIBOR tenors until June 30, 2023, we do not expect any relevant impacts on our business, financial position and results of operations in the current year.
- Debt & Financing - Risk 3We may engage in hedging activity which may not be successful and may result in losses to us.
We may use foreign exchange and metal commodity non-deliverable forwards to reduce the risk associated with currency and metal price volatility. However, our hedging activities could cause us to lose the benefit of an increase in the prices of the metals we produce if they increase over the price level of hedge positions, or the benefit of an increase in the currency price. The cash flows and the mark-to-market values of our production hedges can be affected by factors such as the volatility of currency and the market price of metals, which are not under our control. Our hedging agreements contain events of default and termination events that could lead to early close-outs of our hedges such as failure to pay, breach of the agreement, misrepresentation, default under our loans or other hedging agreements and bankruptcy. In the event of an early termination of our hedging agreements, the relevant hedge positions would be required to be settled at that time. In that event, there could be a lump sum payment to be made either to or by us. The magnitude and direction of such a payment would depend upon, among other things, the characteristics of the particular hedge instruments that were terminated and the relevant market prices at the time of termination. Any of the factors described above could have a material adverse effect on our financial position, results of operations or cash flows. See "Operating and financial review and prospects-Risk management-Financial risk-Metal price sensitivity."
Risk Highlights Q4, 2020
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 49
- Manufacturing - Risk 1A disruption in zinc concentrate supply could have a material adverse effect on our production levels and financial results.
A portion of the zinc concentrate used by our smelters is obtained from third parties, and we may be adversely affected if we are not able to source adequate supplies of zinc for such operations. In 2020, 46.4% of the zinc concentrate used by our smelters was obtained from third parties, with the remainder supplied by our own mining operations. The availability and price of zinc concentrate used by our smelters may be negatively affected by several factors largely beyond our control, including interruptions in production in our mines or by our suppliers, decisions by suppliers to allocate supplies of concentrate to other purchasers, price fluctuations and increasing transport cost. In addition, the efficiency of a smelter's production over time is affected by the mix of the zinc concentrate qualities it processes. In circumstances where we cannot source adequate supplies of the zinc concentrate qualities that comprise the most efficient mix for our smelters, alternative types of concentrate may be available, but the use thereof may increase our costs of production or reduce the productivity of our smelters and adversely affect our business, results of operations and financial position.
- Manufacturing - Risk 2The failure of a tailings dam could negatively impact our business, reputation and results of operations, and the implementation of associated regulations and decommissioning processes may be expensive.
Mining companies face inherent risks in their operations of tailings dams-structures built for the containment of the mining waste, known as tailings-that exposes us to certain risks. Our tailings dams include, in some cases, materials that could increase the hazard potential in the event of unexpected failure. If any such risks were to occur, this could materially adversely affect our reputation and our ability to conduct our operations and could make us subject to liability and, as a result, have a material adverse effect on our business, financial position and results of operations. In addition, the changes in regulation that may occur as a result of recent dam failures, like those that have occurred in Brazil, could increase the time and costs to build, operate, inspect, maintain and decommission tailings dams, obtain new licenses or renew existing licenses to build or expand tailings dams, or require the use of new technologies. New regulations, such as those enacted in Brazil during 2020, may also impose more restrictive requirements that may exceed our current standards, including mandated compliance with emergency plans and increased insurance requirements, or require us to pay additional fees or royalties to operate tailings dams. We may also be required to provide for and facilitate the relocation of communities and facilities impacted by tailings dam failures. Moreover, insurance coverage for damages resulting from tailings dams' failure may not be available. For more information see "Information on the Company-Mining operations-Tailings disposal."
- Manufacturing - Risk 3Our projects are subject to operational risks that may result in increased costs or delays that prevent their successful implementation.
We invest in sustaining and increasing our mine and metal production capacity and developing new operations. Our projects are subject to several risks that may materially adversely affect our growth prospects and profitability, including the following: - we may encounter delays or higher than expected costs in completing technical and engineering studies and obtaining the necessary equipment, machinery, materials, supplies, labor or services, in project execution by third-party contractors and in implementing new technologies to develop and operate a project;- we may experience delays in commencing the operations of a new project or the expansion of an existing operation;- our efforts to develop projects according to schedule may be hampered by a lack of infrastructure, including a reliable power supply;- we may fail to obtain, or experience delays or higher than expected costs in obtaining, the required agreements, authorizations, licenses, approvals and permits to develop a project, including the prior consultation procedure and agreements with local communities;- changes in market conditions or regulations may make a project less profitable than expected at the time we initiated work on it;- accidents, natural disasters, labor disputes and equipment failures;- adverse mining conditions may delay and hamper our ability to produce the expected quantities and qualities of minerals upon which the project was budgeted;- mineral reserves and resources are estimates based on the interpretation of limited sampling data and test work that may not be representative of the deposits as a whole, or the technical and economic assumptions used in the estimates may prove to be materially different when the deposits are mined, that could result in materially different economic outcomes; and - conflicts with local communities and/or strikes or other labor disputes may delay the implementation or the development of projects.
- Manufacturing - Risk 4Smelting operations
Cash cost, net of by-product credits: For our smelting operations, cash cost, net of by-product credits includes all the costs of smelting, including costs associated with labor, net energy, maintenance, materials, consumables and other on-site costs, as well as raw material costs. Cash cost is calculated on a contained zinc sold basis after the deduction of by-product credits attributable to smelting operations. Sustaining cash cost, net of by-product credits: Sustaining cash cost, net of by-product credits is defined as the cash cost, after by-product credits plus non-expansion capital expenditure, including sustaining health, safety and environment, modernization and other non-expansion-related capital expenditures. All-in sustaining cost, net of by-product credits: All-in sustaining cost is defined as sustaining cash cost, net of by-product credits plus general and administrative expenses and workers' participation. Our cash cost and AISC net of by-products credits are measured with respect to zinc sold. For our smelting operations, we present below cash cost, net of by-product credits, sustaining cash cost, net of by-product credits and all-in sustaining cost and a reconciliation to our consolidated financial statements. Selected Financial Data Três Marias Juiz de Fora Cajamarquilla Consolidation of Operations Corporate and Others(1) Smelting Operations (in millions of US$, unless otherwise indicated) Sales Volume (Zinc Contained in Products) Tonnes 196,327 77,965 302,495 576,788 0 576,788 Cost of goods sold 363.9 187.3 739.8 1,291.0 (3.2) 1,287.9 Cost of services rendered (10.1) (2.8) (34.9) (47.8) 0 (47.8) On-site G&A 4.8 4.0 18.5 27.4 0 27.4 Depreciation and amortization (14.5) (11.7) (56.4) (82.7) 0 (82.7) By-product credits (14.6) (18.0) (83.9) (116.5) 2.4 (114.1) Workers' participation & Bonus (1.2) (1.0) (7.6) (9.7) 0 (9.7) Others (12.1) (8.5) (8.0) (28.6) 0 (28.6) Cash cost, net of by-product credits (sold) 316.2 149.3 567.6 1,033.1 (0.8) 1,032.3 Cash cost, net of by-product credits (sold) (per tonne) 1,610.4 1,915.4 1,876.4 1,791.1 0 1,789.8 Non-expansion capital expenditure 18.1 9.8 15.6 43.5 (5.8) 37.7 Sustaining cash cost, net of by-product credits 334.3 159.1 583.2 1,076.6 (6.6) 1,070.0 Sustaining cash cost net of by-product credits (sold) (per tonne) 1,702.6 2,041.0 1,927.9 1,866.5 0 1,855.1 Workers' participation 1.2 1.0 7.6 9.7 0 9.7 Corporate G&A 0 0 0 0 32.8 32.8 AISC net of by-product credits (sold) 0 0 0 0 0 1,112.5 AISC net of by-product credits (sold) (per tonne) 0 0 0 0 0 1,928.7 Selected Financial Data Três Marias Juiz de Fora Cajamarquilla Consolidation of Operations Corporate and Others(1) Smelting Operations (in millions of US$, unless otherwise indicated) Sales Volume (Zinc Contained in Products) Tonnes 186,482 85,411 340,293 612,185 - 612,185 Cost of goods sold 456.5 242.3 956.3 1,655.1 - 1,655.1 Cost of services rendered (11.0) (4.0) (40.4) (55.4) - (55.4) On-site G&A 5.3 5.0 16.0 26.3 0.2 26.5 Depreciation and amortization (19.1) (15.1) (63.8) (98.0) - (98.0) By-product credits (12.6) (19.1) (108.9) (140.6) - (140.6) Workers' participation & Bonus (1.7) (1.2) (3.8) (6.6) (0.0) (6.6) Others (8.0) (4.5) 0.0 (12.5) 0.0 (12.5) Cash cost, net of by-product credits (sold) 409.4 203.5 755.4 1.368,3 0.2 1,368.5 Cash cost, net of by-product credits (sold) (per tonne) 2,195.6 2,382.1 2,219.9 2,235.1 - 2,235.4 Non-expansion capital expenditure 26.9 18.7 18.2 63.8 3.8 67.6 Sustaining cash cost, net of by-product credits 436.3 222.1 773.6 1.432,1 4.0 1,436.1 Sustaining cash cost net of by-product credits (sold) (per tonne) 2,339.8 2,600.9 2.273,4 2,339.3 - 2,345.9 Workers' participation 1.7 1.2 3.8 6.6 0.0 6.6 Corporate G&A 0,0 0.0 0.0 0.0 58.5 58.5 AISC net of by-product credits (sold) 0.0 0.0 0.0 0.0 - 1,501.2 AISC net of by-product credits (sold) (per tonne) - - - - - 2,452.2 For the year ended December 31, 2018 Três Marias Juiz de Fora Cajamarquilla Consolidation of Operations Corporate and Others(1) Smelting Operations (in millions of US$, unless otherwise indicated) Sales Volume (Zinc Contained in Products) Tonnes 197,372 78,106 332,036 607,514 - 607,514 Cost of goods sold 587.7 240.6 1,067.3 1,895.6 (16.9) 1,878.8 Cost of services rendered (11.5) (3.5) (35.9) (50.8) - (50.8) On-site G&A 4.3 6.6 15.4 26.3 2.2 28.4 Depreciation and amortization (15.6) (13.1) (64.8) (93.6) (1.2) (94.8) By-product credits (14.4) (23.0) (75.6) (113.1) 3.8 (109.3) Workers' participation & Bonus (0.9) (1.0) (1.5) (3.4) (0.0) (3.4) Others - - - - - - Cash cost net of by-product credits (sold) 549.6 206.5 905.0 1,661.0 (12.1) 1,648.9 Cash cost net of by-product credits (sold) (per tonne) 2,784.6 2,643.4 2,725.5 2,734.1 - 2,714.2 Non-expansion capital expenditure 38.7 20.6 19.3 78.6 6.8 85.5 Sustaining cash cost net of by-product credits 588.3 227.1 924.3 1,739.7 (5.3) 1,734.4 Sustaining cash cost net of by-product credits (sold) (per tonne) 2,980.7 2,907.5 2,783.6 2,863.6 - 2,854.8 Workers' participation 0.9 1.0 1.5 3.4 0.2 3.6 Corporate G&A - - - - 52.8 52.8 AISC net of by-product credits (sold)(2) - - - - - 1,790.7 AISC net of by-product credits (sold) (per tonne) - - - - - 2,947.6 (1) "Others" includes Enercan, inactive operations and non-operational provisions and reversals. (2) Starting in 2018, certain expenses that were previously presented as General and administrative expenses and Other income and expenses, net in our income statement were reclassified as mineral exploration and project evaluation expenses. As a result of this change, we have adjusted our calculations of AISC. Business Overview
- Manufacturing - Risk 5Mining operations
Cash cost, net of by-product credits: For our mining operations, cash cost, net of by-product credits includes all direct costs associated with mining, concentrating, leaching, solvent extraction, on-site administration and general expenses, any off-site services essential to the operation, concentrate freight costs, marketing costs and property and severance taxes paid to state or federal agencies that are not profit-related. Treatment and refining charges on metal sales, which are typically recognized as a deduction component of sales revenues, are added to cash cost. Cash cost is calculated on a contained zinc sold basis, which indicates the percentage of zinc in metal sold, after the deduction of by-product credits attributable to mining operations, such as copper, silver, gold, and lead, which are deducted from total cash cost. Sustaining cash cost, net of by-product credits: Sustaining cash cost, net of by-product credits is defined as the cash cost, net of by-product credits plus non-expansion capital expenditure, including sustaining health, safety and environment, modernization and other non-expansion-related capital expenditures. All-in sustaining cost, net of by-product credits: All-in sustaining cost ("AISC") is defined as sustaining cash cost, net of by-product credits plus corporate general and administrative expenses, royalties and workers' participation. Our cash cost and AISC net of by-products credits are measured with respect to zinc sold. For mining operations, we present below cash cost, net of by-product credits, sustaining cash cost, net of by-product credits and all-in sustaining cost and a reconciliation to our consolidated financial statements. Selected Financial Data Vazante Morro Agudo Cerro Lindo El Porvenir Atacocha Consolidation of Operations Corporate and Others(1) Mining Operations (in millions of US$, unless otherwise indicated) Sales Volume (Zinc Contained in Concentrate) Tonnes 147,990 25,177 96,198 35,734 10,389 315,488 0 315,488 Cost of goods sold 80.2 50.2 311.1 135.9 58.7 636.2 (10.8) 625.4 On-site G&A 5.0 4.2 0 0 0 9.2 0 9.2 By-product credits (9.5) (15.0) (246.5) (67.4) (42.6) (381.0) 15.9 (365.1) Treatment and refining charges 122.1 15.6 56.0 25.4 7.0 226.2 0 226.2 Selling expenses 0.7 1.9 3.0 0.4 0.3 6.3 0 6.3 Depreciation and amortization (15.8) (10.0) (94.6) (27.8) (10.5) (158.7) (1.3) (160.0) Royalties (2.0) (1.6) 0 (0.7) (0.3) (4.6) 0 (4.6) Workers' participation & bonus (1.3) (0.8) (6.0) (0.7) (0.5) (9.3) 0 (9.3) Others (4.7) (1.2) (23.9) (17.2) (11.9) (58.9) 0 (58.9) Cash cost net of by-product credits (sold) 174.7 43.5 (0.8) 47.8 0.2 265.4 3.8 269.2 Cash cost net of by-product credits (sold) (US$/tonne) 1,180.6 1,726.9 (8.7) 1,338.0 17.8 841.1 0 853.2 Non-expansion capital expenditure 24.6 7.4 27.7 12.9 15.3 87.9 (10.8) 77.1 Sustaining cash cost net of by-product credits 199.4 50.9 26.8 60.8 15.5 353.3 (7.0) 346.2 Sustaining cash cost net of by-product credits (sold) (per tonne) 1,347.1 2,020.2 279.0 1,700.3 1,487.9 1,119.8 0 1,097.5 Workers' participation & bonus 1.3 0.8 6.0 0.7 0.5 9.3 0 9.3 Royalties 2.0 1.6 0 1.2 0.4 5.1 0 5.1 Corporate G&A - - - - - - 52.4 52.4 AISC net of by-product credits (sold) - - - - - - - 413.1 AISC net of by-product credits (sold) (per tonne) - - - - - - - 1,309.5 Vazante Morro Agudo Cerro Lindo El Porvenir Atacocha Consolidation of Operations Corporate and Others(1) Mining Operations (in millions of US$, unless otherwise indicated) Sales Volume (Zinc Contained in Concentrate) Tonnes 139,041 24,354 125,153 54,725 16,360 359,633 - 359,633 Cost of goods sold 90.9 62.6 369.3 171.6 112.3 806.7 (1.7) 805.1 On-site G&A 8.6 7.3 0.0 0.0 0.0 15.9 0.0 15.9 By-product credits (6.4) (19.2) (270.5) (84.6) (70.8) (451.5) (0.3) (451.7) Treatment and refining charges 93.7 12.9 60.5 31.7 9.4 208.2 0.0 208.2 Selling expenses 0.3 1.7 3.0 0.7 0.5 6.1 0.0 6.1 Depreciation and amortization (22.6) (11.7) (107.7) (43.9) (30.4) (216.4) (1.4) (217.9) Royalties (1.7) (1.5) 0.0 0.0 0.0 (3.2) (3.1) (6.3) Workers' participation & bonus (1.8) (0.9) (8.5) (1.9) (0.5) (13.6) - (13.6) Others (2.6) (0.7) (1.5) 1.5 (3.2) (6.5) - (6.5) Cash cost net of by-product credits (sold) 158.3 50.6 44.6 75.1 17.2 345.8 (6.5) 339.3 Cash cost net of by-product credits (sold) (US$/tonne) 1,138.5 2,076.7 356.0 1,372.9 1,052.0 961.5 0.0 943.5 Non-expansion capital expenditure 42.7 12.8 50.5 32.9 11.8 150.8 3.7 154.5 Sustaining cash cost net of by-product credits 201.0 63.4 95.1 108.1 29.0 496.5 (2.8) 493.8 Sustaining cash cost net of by-product credits (sold) (per tonne) 1,445.7 2,604.1 759.5 1,975.0 1,770.3 1,380.7 0.0 1,373.0 Workers' participation & bonus 1.8 0.9 8.5 1.9 0.5 13.6 - 13.6 Royalties 1.7 1.5 0.0 1.7 1.0 5.9 - 5.9 Corporate G&A - - - - - - 90.5 90.5 AISC net of by-product credits (sold) - - - - - - - 603.8 AISC net of by-product credits (sold) (per tonne) - - - - - - - 1,678.8 For the year ended December 31, 2018 Vazante Morro Agudo Cerro Lindo El Porvenir Atacocha Consolidation of Operations Corporate and Others(1) Mining Operations (in millions of US$, unless otherwise indicated) Sales Volume (Zinc Contained in Concentrate) Tonnes 140,776 26,408 129,656 59,510 17,066 373,416 - 373,416 Cost of goods sold 77.3 45.1 336.9 158.8 92.9 711.1 (0.0) 711.1 On-site G&A 5.9 5.7 - - 0.4 12.0 - 12.0 By-product credits (7.4) (17.7) (290.0) (73.3) (57.2) (445.7) 0.7 (444.9) Treatment and refining charges 62.1 9.9 47.0 25.4 7.2 151.6 - 151.6 Selling expenses - 0.9 0.8 0.9 0.3 3.0 - 3.0 Depreciation and amortization (17.6) (5.6) (87.5) (36.5) (24.3) (171.5) (0.9) (172.4) Royalties (1.7) (1.5) - - - (3.2) (3.3) (6.5) Workers' participation & Bonus (1.2) (0.7) (8.4) (4.0) (0.4) (14.7) 0.0 (14.7) Others - - (5.4) (0.3) - (5.7) - (5.7) Cash cost net of by-product credits (sold) 117.5 36.0 (6.5) 71.0 19.0 237.0 (3.5) 233.5 Cash cost net of by-product credits (sold) (US$/tonne) 834.5 1,363.8 (50.4) 1,192.9 1,115.5 634.7 - 625.3 Non-expansion capital expenditure 42.4 12.3 25.3 25.6 16.9 122.4 1.3 123.7 Sustaining cash cost, after by-product credits 159.8 48.3 18.7 96.6 35.9 359.4 (2.2) 357.2 Sustaining cash cost net of by-product credits (sold) (per tonne) 1,135.5 1,829.5 144.3 1,623.2 2,105.5 962.5 - 956.7 Workers' participation & bonus 1.2 0.7 8.4 4.0 0.4 14.7 (0.1) 14.5 Royalties 1.7 1.5 - 1.9 0.9 6.0 0.0 6.1 Corporate G&A - - - - - - 31.4 31.4 AISC net of by-product credits (sold)(2) - - - - - - - 409.3 AISC net of by-product credits (sold) (per tonne) - - - - - - - 1,096.0 (1) "Others" includes Enercan, inactive operations and non-operational provisions and reversals. (2) Starting in 2018, certain expenses that were previously presented as General and administrative expenses and other income and expenses, net in our income statement were reclassified as mineral exploration and project evaluation expenses. As a result of this change, we have adjusted our calculations of AISC. Selected Financial Data
- Manufacturing - Risk 6Shortages of water supply, explosives, critical spare parts, maintenance service and new equipment and machinery may materially adversely affect our operations and development projects.
Our mining operations require the use of significant quantities of water for extraction activities, processing and related auxiliary facilities. Water usage, including extraction, containment, and recycling requires appropriate permits, which are granted by regulatory authorities in Brazil and Peru. The available water supply may be adversely affected by shortages or changes in governmental regulations. We cannot assure shareholders that water will be available in sufficient quantities to meet our future production needs or will prove sufficient to meet our water supply needs. In addition, we cannot assure shareholders that we will maintain our existing licenses related to water rights. A reduction in our water supply could materially adversely affect our business, results of operations and financial position. In addition, we have not yet obtained the water rights to support some of our expansion projects, and our inability to obtain those rights could prevent us from pursuing those expansions. In addition to water, our mining operations require intensive use of equipment and machinery as well as explosives. To be able to acquire and use explosives, we must first obtain the corresponding authorizations, which are granted by the relevant regulatory authorities in Brazil and Peru. A shortage in the supply of key spare parts, adequate maintenance service, new equipment and machinery to replace old ones and cover expansion requirements, or explosives, including due to the inability to deliver such water, energy, supplies, critical spare parts, explosives, or equipment and machinery to our operations, could materially adversely affect our operations and development projects.
- Manufacturing - Risk 7The mining business is subject to inherent risks, some of which are not insurable.
The business of mining zinc, copper, silver, lead and other minerals is generally subject to numerous risks and hazards. Hazards associated with underground mining operations include underground fires and explosions, including those caused by flammable gas, gas and coal outbursts, cave-ins or falls of ground, rock falls, openings collapse, lack of oxygen, air pollution, tailings dam failures or other discharges of tailings, hazardous substances and materials, gases and toxic chemicals, water ingress and flooding, sinkhole formation, ground subsidence, and other accidents and conditions resulting from underground mining activities, such as drilling, blasting, removing and processing material. In addition, we may encounter geotechnical challenges as we continue with and expand our mining activities, including the possibility of failure of underground openings. For example, see "Mining Operations-Vazante-Operations and infrastructure". We could incur additional expenses in connection with preventive and remediating measures related to underground openings, which could materially adversely affect results of our operations and financial position. Such occurrences could result in damage to, or destruction of, our properties or production facilities,?third-party property, human exposure to pollution, personal injury or death, environmental and natural resource damage or contamination, delays in mining, monetary losses and legal liability. In addition, any such occurrences could adversely affect our reputation. Damages to our reputation could result in additional environmental and health and safety legal oversight, and authorities could impose more stringent conditions in connection with the licensing process of our projects and operations. In addition, our customers may be less willing to buy metals from us if we have been subject to significant adverse publicity. We maintain insurance typical in the mining industry, and in amounts that we believe to be adequate, but which may not provide complete coverage in certain circumstances. Insurance against certain risks (including certain liabilities for environmental contamination, tailings dam failures and other hazards as a result of exploration and production) may not be generally available or is uneconomical to afford. We could also incur additional expenses due to failures in our industrial drainage system or other environmental control equipment.
- Manufacturing - Risk 8We may be materially adversely affected by challenges relating to slope and stability of underground openings.
Our underground mines get deeper and our waste and tailings deposits increase in size as we continue with and expand our mining activities. This presents certain geotechnical challenges, including the possibility of failure of underground openings. If we are required to reinforce such openings or take additional actions to prevent such a failure, we could incur additional expenses, and our operations and stated mineral reserves could be negatively affected. We have taken actions we consider appropriate to maintain the stability of underground openings, but additional actions may be required in the future. Unexpected failures or additional requirements to prevent such failures may materially adversely affect our costs and expose us to health, safety and other liabilities in the event of an accident. These developments may in turn materially adversely affect the results of our operations and financial position, as well as potentially diminish our stated mineral reserves.
- Manufacturing - Risk 9Inadequate supply of zinc secondary feed materials and zinc calcine could affect the results of our smelters.
Zinc sourced from suppliers of secondary feed materials represented approximately 17.6% of the zinc content used by our Juiz de Fora smelter in 2020. The use of zinc secondary feed material is a competitive advantage in relation to the use of zinc concentrate, mainly due to lower acquisition costs and, to a lesser extent, operational gains. In addition, we have recently incorporated zinc calcine processed by third parties into our operations to increase the production in our smelters. Our smelters then use this zinc calcine processed by third parties to produce additional refined zinc products that they would not produce were they to rely solely on other inputs. To the extent we are unable to obtain adequate supplies of zinc secondary feeds or zinc calcine, or if we must pay higher than anticipated prices of these inputs, our business, results of operations and financial position may be adversely affected.
- Manufacturing - Risk 10Our mineral exploration efforts are highly speculative in nature and may be unsuccessful.
Mineral exploration is highly speculative in nature, involves many uncertainties and risks and may be unsuccessful. It is performed to demonstrate the dimensions, position and mineral characteristics of mineral deposits, estimate mineral reserves and resources, assess amenability of the deposit to mining and processing scenarios and estimate potential deposit value. Substantial expenditures are required to establish proven and probable mineral reserves, to determine processes to extract the metals and, if required, to construct mining and processing facilities and obtain permits to carry on mining activities. Therefore, once the mineralization is discovered, it may take several years from the initial exploration phases and mineral resources determination before production is possible, during which time the project's feasibility may change adversely. Health, safety and environmental risks
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.