Operations

The Magistral mining project is located in the Ancash region of Peru, approximately 450 km northeast of the capital of Lima and approximately 140 km east of the port city of Trujillo. The Magistral property can be reached by vehicle by driving a total of 272 km from Trujillo, much of which consists of poorly maintained roads that traverse steep topography. The Magistral Project consists of a large, irregularly shaped block of contiguous concessions and two smaller, non-contiguous single concessions. The Magistral Project comprises 36 granted concessions, totaling 16,254.2 hectares. The project is an open pit copper mine with molybdenum concentrate as a byproduct. In 2016, ProInversión approved an initial feasibility study, which set forth production rates starting at 10 thousand tonnes per day and achieving 30 thousand tonnes per day. In 2016, the MINEM approved an environmental impact assessment (“EIA”), to process up to 30 ktpd. An EIA modification is currently in progress to adjust the location of some facilities. Nexa Peru was awarded the contract to develop the Magistral mining project in 2011, which has been amended from time to time. Nexa made an initial payment of US$8.0 million to acquire the Magistral concessions, subject to a 2.0% NSR royalty upon production. Under the terms of the contract in 2016, Nexa Peru exercised the option by committing to invest a minimum 70% of declared initial capital expenditures by September 2024 and has previously extended this period. Pursuant to the terms of this commitment, Nexa Peru would be required to pay a penalty in the event it fails to invest the specified amounts during this period. Nexa Peru currently holds a 100.0% interest in 15 of the 36 concessions, Nexa holds 21 concessions by way of a lease agreement entered into with Companía Magistral S.A.C., a company also controlled by Nexa Peru. We spent approximately US$5.4 million on the project in 2021. The Magistral project is in the feasibility study phase and engineering studies continue to progress. In 2022, we expect to advance further detailed engineering and optimization opportunities to mitigate the risk of project execution, and to approve the EIA amendment (“mEIA”), which was submitted in 4Q21. The application for an amendment of the environmental impact study (“mEIA”) for Magistral was admitted by the Ministry of the Environment (“SENACE”) in 1Q22. We continue to evaluate potential partnerships for the next steps of the project.

The Hilarión project is in exploration stage, it is located in the Department of Ancash, approximately 230 km north of Lima, the capital of Peru, and approximately 80 km south of the city of Huaraz and is accessible by paved road from Lima. It consists of 71 mineral concessions covering an area of approximately 15,408.3 hectares and one mineral claim in process totaling 209.7 hectares. Hilarión is a skarn mineral deposit made of vertical tabular ore bodies containing sulfide zinc, lead, silver and copper deposits. Hilarión and El Padrino and other occurrences in proximity to them (Mia, Eureka and others) constitute a large mineralized system, open in several directions for a potential increase in resources, extended mine life and increased production capacity in the future. The conceptual plan for the project includes the development of an underground mine that could either use its own processing plant or use one of the several existing plants in the area, such as Pachapaqui, Huanzala and Atalaya plants. In 2022, we plan to drill 5,500 meters within three targets: El Padrino area, San Martin (two kilometers east of Hilarión deposit) and at the Yanashallash fault trend located 1,500 meters west of Hilarión.

The Pukaqaqa project contemplates the development of an open pit copper and molybdenum mine, with gold credits, and is located in the Huancavelica region of Peru. The Pukaqaqa project has a total of 34 concessions covering approximately 11,131.3 hectares. In 2015, the MINEM approved Pukaqaqa’s EIA, which allowed a treatment capacity of up to 30 ktpd. In 2017, a scoping study was developed by JRI, a Chilean engineering firm, enabling the start of a drilling campaign in 2018 to obtain samples for metallurgical testing. The pre-feasibility study progressed until the end of FEL2-A phase (equivalent to the trade-offs phase). Metallurgical results indicated the need to further explore copper and molybdenum recoveries prior to progressing with the pre-feasibility study. During 2019 and 2020 a new laboratory campaign was initiated in Chile, which was temporarily suspended due to COVID-19 restrictions. The first part was concluded in December 2020, demonstrating better results than previous campaigns, including improved recoveries and grades. During 2021, metallurgical tests were concluded. New mine studies are ongoing and project evaluation is expected to be updated in 2022. The project remains on hold.

The Shalipayco project, located in the Central Andes of Peru, is a joint venture between Nexa Peru (which holds a 75.0% interest) and Pan American Silver Perú S.A.C. (which holds a 25.0% interest). It is a potential underground polymetallic project containing zinc, lead and silver deposits. This project consists of mining concessions with evidence of MVT mineralization, which is a deposit type similar to our Morro Agudo mine. The Shalipayco mineralization is mainly located within the Chambará formation that is part of the Pucará Group, considered the most important Peruvian location for MVT mineralization. The Shalipayco project has a total of 52 concessions covering approximately 22,510 hectares and one mineral claim in process totaling 740.6 hectares. The project remains on hold.

The Florida Canyon Zinc project, a potential underground project containing high grade zinc and lead sulfide with advanced mineral exploration project comprised of 16 contiguous mining concessions, covering approximately 12,600.0 hectares, is owned by Minera Bongará S.A. and operated by Nexa Peru, a joint venture between Nexa Peru, Solitario Exploration and Royalty Corp. and Minera Solitario Peru S.A.C. (collectively, Solitario) in existence since 2006. As of December 31, 2021, Nexa Peru owns a 61.0% interest in this joint venture, which may increase up to 70.0% upon Nexa Peru’s satisfaction of certain conditions. Although a pre-feasibility study relating to the Florida Canyon Zinc was released in 2017, the project continues to be treated as an advanced mineral exploration project. In 2021, field work was focus on mapping access road from 0 km up to 19.5 km, and mapping, sampling and topographic survey of Teodolfo, Matias, Berny, and Pizarro targets, in addition to a new mineral occurrence named Aron. Also, initial metallurgical testing using historic drill core material is ongoing. Further metallurgical test will be performed in 2022 depending on the results of the aforementioned tests. The most recent environmental study is the STI of the Fourth Modification EIS of the Florida Canyon project, which was approved in 2021 and is valid until 2024.