Certain definitions

Unless otherwise indicated or the context otherwise requires, the terms below are defined in the following manner.

·                  The “Company,” “we,” “us” and “our” or similar terms refer to Nexa Resources and its consolidated subsidiaries;

·                  “Nexa Resources” refers to Nexa Resources S.A., a Luxembourg public liability company (société anonyme);

·                  “Nexa CJM” refers to our subsidiary Nexa Resources Cajamarquilla S.A. (previously known as Votorantim Metais—Cajamarquilla S.A.), a corporation organized as a sociedad anónima under the laws of Peru;

·                  “Nexa Brazil” refers to our subsidiary Nexa Recursos Minerais S.A. (previously known as Votorantim Metais Zinco S.A.), a corporation organized as a sociedade anônima under the laws of Brazil;

·                  “Nexa Peru” refers to our subsidiary Nexa Resources Peru S.A.A. (previously known as Compañía Minera Milpo S.A.A.), a corporation organized as a sociedad anónima abierta under the laws of Peru and publicly traded on the Lima Stock Exchange;

·                  “VGmbH” refers to our subsidiary Votorantim GmbH, formerly Votorantim Metals GmbH, a corporation organized under the laws of Austria;

·                  “Enercan” refers to our subsidiary Campos Novos Energia S.A., a corporation organized as a sociedade anônima under the laws of Brazil;

·                  “VUS” refers to our subsidiary Votorantim US, Inc., a corporation organized under the laws of Delaware;

·                  “VSA” refers to our shareholder Votorantim S.A., a corporation organized as a sociedade anônima under the laws of Brazil;

·                  the “Votorantim Group” refers to VSA and its subsidiaries;

·                  the “real,” “reais” or “R$” refers to the Brazilian real, the official currency of Brazil; and

·                  “sol,” “soles” or “S/.” refers to the Peruvian sol, the official currency of Peru.

In addition, the meaning of other defined terms used in this report are set out in “Glossary.”

Financial information

Our consolidated financial statements as of December 31, 20172022 and 20162021 and for each of the three years ended December 31, 2017, 2016 and 20152022 are included in this annual report. Our consolidated financial statements wereare prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board or IFRS.(“IASB”). References in this report to “our consolidated financial statements” are to our consolidated financial statements as of December 31, 20172022 and 20162021 and for each of the three years ended December 31, 2017, 2016 and 2015,2022, and the related notes thereto included elsewhere in this report.

The financial information presented in this report should be read in conjunction with our consolidated financial statements, including the related notes, and the section of this report titled “Operating and financial review and prospects.”

The main consolidated companies included in our consolidated financial statements are:

·Nexa CJM is a Peruvian company mainly engaged in smelting zinc contained in concentrate. Nexa CJM’s functional currency is the U.S. dollar.

·Nexa Peru is a Peruvian company mainly engaged in exploring, extracting, producingPresentation of Financial and trading zinc, copper and lead concentrates, extracted from its own three mining sites. Nexa Peru’s functional currency is the U.S. dollar. Nexa Peru is a public company with its shares listed on the Lima Stock Exchange.Other Information

·Nexa Brazil is a Brazilian company mainly engaged in exploring, extracting and producing zinc, copper and lead concentrates, and smelting zinc contained in concentrate with operations in the state of Minas Gerais. Nexa Brazil’s functional currency is the real. In connection with a series of transactions regarding our energy assets, which includes the Enercan, Picada, Amador Aguiar I, Amador Aguiar II and Igarapava electric power plants, VSA transferred its entire participation in Nexa Brazil (11.20%) to us on June 30, 2017. See “Share ownership and trading—Related party transactions—Certain transactions with our shareholders and their affiliates.”

Non-IFRS measures

Our management uses non-IFRS measures such as Adjusted EBITDA and cash cost, among other measures, for internal planning and performance measurement purposes. We believe these measures provide useful information about the financial performance of our operations that facilitates period-to-period comparisons on a consistent basis. Management uses Adjusted EBITDA internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Management believes that Adjusted EBITDA is a useful measure of our performance because it reflects our cash generation potential from our operational activities excluding exceptional items ofdepreciation and amortization and miscellaneous adjustments, if any, for the period. These measures should not be considered individually or as a substitute for profit (loss)net income or operating profit,income, as indicators of operating performance, or as alternatives to cash flow as measures of liquidity.

Additionally, our calculation of Adjusted EBITDA and other non-IFRS measures may be different from the calculation used by other companies, including our competitors in the mining industry, so our measures may not be comparable to those of other companies. See “Selected financial data”“Results of Operations” for a discussion of our use of non-IFRS measures in this report, including the reasons why we believe this information is useful to management and to investors, and a reconciliation to the comparable IFRS measures.

In December 2022, our management revised the Company’s Adjusted EBITDA definition to exclude certain items, aiming to provide a better understanding of its operational and financial performance. For more information, see “Operating and Financial Review and Prospects—Results of Operations—Non-IFRS measures and reconciliation” in this report.

All forward-looking non-IFRS financial measures in this document, including cash cost guidance, are provided only on a non-IFRS basis. This is due to the inherent difficulty of forecasting the timing or number of items that would be included in the most directly comparable forward-looking IFRS financial measures. As a result, reconciliation of the forward-looking non-IFRS financial measures to IFRS financial measures is not available without unreasonable effort and we are unable to assess the probable significance of the unavailable information.

Country, market and industry information

This report contains and refers to information and statistics regarding Brazil, Peruthe countries in which we operate and the markets for the metals we produce. This data is obtained from independent public sources, including publications and materials from participants in the industry, such as Wood Mackenzie and from governmental entities such as the Brazilian Central Bank, Bloomberg Finance L.P., London Metal Exchange (“LME”), London Bullion Market Association (“LBMA”), Brazilian Ministry of TreasuryEconomy (Ministério da FazendaEconomia), Brazilian Ministry of Mines and Energy (Ministério de Minas e Energia, or MME)“MME”), (Center of Custody and Financial Settlement of Securities CETIP S.A.—National Mining Agency (Mercados OrganizadosAgência Nacional de Mineração, or CETIP)“ANM”), Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or IBGE,“IBGE”), the Getulio Vargas Foundation (Fundação Getúlio Vargas,), or FGV, the Peruvian Insurance and Private Pension Funds Supervision Authority (Superintendencia de Banca, Seguros y Administradoras de Fondos de Pensiones—AFP“FGV”), the Peruvian Central Bank, the Peruvian Ministry of Economy and FinanceStock Market Superintendency (Ministerio de Economía y Finanzas) and the Peruvian Ministry of Energy and Mines (Ministerio de Energía y Minas or MINEM). Some data is also based on our estimates, which are derived from our review of internal reports, as well as independent sources.

Volume information

All tonnage information in this report is expressed in metric tonnes, and all references to ounces are to troy ounces, in each case, unless otherwise specified.

RISK FACTORS

Business risks

Our business is highly dependent on the international market prices of the metals we produce, which are both cyclical and volatile.

Our business and financial performance is significantly affected by the market prices of the metals we produce, particularly the market prices of zinc, copper, silver, lead and, to a lesser extent, gold. Historically, prices of such metals have been subject to wide fluctuations and are affected by numerous factors beyond our control, including international economic and political conditions, the cyclicality of consumption, actual or perceived changes in levels of supply and demand, the availability and costs of substitutes, inventory levels maintained by users, actions of participants in the commodities markets and currency exchange rates. We cannot predict whether, and to what extent, metal prices will rise or fall in the future.

Future declines in metal prices, and especially zinc, copper, silver and lead prices, could have an adverse impact on our results of operations and financial condition, and we might consider curtailing or modifying certain of our operations. In addition, we may not be able to adjust production volume in a timely or cost-efficient manner in response to changes in metal prices. Lower utilization of capacity during periods of weak prices may expose us to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of mining operations. Conversely, during periods of high prices, our ability to rapidly increase production capacity may be limited, which could prevent us from selling more products. Moreover, we may be unable to complete expansions and greenfield projects in time to take advantage of rising prices for zinc, copper, lead or other products.

Changes in the demand for the metals we produce could adversely affect our sales volume and revenues.

Our revenues depend on the volume of metals we sell (and, to a lesser extent, the volume of metals produced by others that are smelted in our facilities), which in turn depend on the level of industrial and consumer demand for these metals. An increase in the production of zinc, copper, silver and lead worldwide or changes in technology, industrial processes or consumer habits, including increased demand for substitute materials, may decrease the demand for these metals. A fall in demand, resulting from economic slow-downs or other factors, could also decrease the volume of metals we sell and therefore materially and adversely impact our results of operations and financial condition.

Our business, financial condition and results of operations may be adversely affected by inflation.

Brazil has historically experienced high rates of inflation. Inflation rates were 10.5% in 2015, 7.2% in 2016 and 3.0% in 2017, as measured by the General Market Price Index. Brazil may experience high levels of inflation in the future, which may impact domestic demand for our products. Inflationary pressures may also curtail our ability to access international financial markets and may lead to further government intervention in the economy, including the introduction of government policies that may materially and adversely affect the overall performance of the Brazilian economy, which in turn may materially and adversely affect us. In addition, we may not be able to adjust the prices we charge our customers to offset the effects of inflation on our cost structure.

Peru experienced periods of hyperinflation in the 1980s and high inflation in the early 1990s. In recent years, inflation has been relatively low, with an average annual inflation rate between 2012 and 2017 of 2.95% as measured by the Peruvian Consumer Price Index. If Peru experiences significant rates of inflation in the future, the economy could be adversely affected. Although the functional currency for our Peruvian operations is the U.S. dollar, high rates of inflation could increase our operating costs and adversely impact our operating margins if we are not able to pass the increased costs on to consumers.

Our results and financial condition are affected by the cyclicality of global economic activity.

The mining industry has historically been highly volatile largely due to the cyclical nature of the industrial production, which affects the demand for minerals and metals. Demand for minerals and metals thus generally correlates to macroeconomic fluctuations in the global economy. For example, this correlation and the adverse effect

of macroeconomic downturns on metal mining companies were evidenced in the 2008/2009 financial and subsequent economic crisis. Economic growth (and minerals demand) trends have varied across such markets since such period.

Interruptions of energy supply or increases in energy costs may materially and adversely affect our results of operations and financial condition.

We require substantial amounts of electricity for our operations. In Peru, we obtain electric power for our operations from third parties through electricity supply contracts. In the event of any interruption or failure of our sources of electricity or failures or congestion in any part of the SEIN (Sistema Eléctrico Interconectado Nacional) or any failure to renew or extend our existing electricity supply contracts, we cannot assure shareholders that we will have access to other energy sources in Peru at the same prices and conditions.

In Brazil, we obtain electric power for our operations from hydroelectric plants grouped into a single legal entity—which is jointly owned by us, our controlling shareholder and its affiliates—pursuant to long-term power purchase agreements with fixed prices for ten years. Although these hydroelectric plants provide 100.0% of the estimated consumption of electricity, and prices are fixed for the medium term, any unavailability or shortages of electrical power or other energy sources and interruptions of energy supply may have a material adverse impact on our results of operations. Furthermore, our energy costs could increase in the event of differences in the hydrology forecast due to these hydroelectric plants paying additional levies.

The prices for and availability of energy resources for our operations may be subject to change or curtailment due to, among other things, new laws or regulations, the imposition of new taxes or tariffs, supply interruptions, equipment damage, worldwide price levels, market conditions and any inability to renew our existing supply contracts. Disruptions in energy supply or increases in costs of energy resources could have a material adverse effect on our financial condition and results of operations.

The mining industry is highly competitive.

We face competition from other mining, processing, trading and industrial companies in Brazil, Peru and around the world. Competition principally involves the following factors: sales, supply and labor prices; contractual terms and conditions; attracting and retaining qualified personnel; and securing the services, supplies and technologies we need for our operations. In addition, mines have limited lives and, as a result, we must seek to replace and expand our mineral reserves by acquiring new properties. Significant competition exists to acquire mining concessions, land and related assets. We cannot assure shareholders that competition will not adversely affect us in the future.

Potential changes to international trade regulations and agreements, as well as other political and economic arrangements (including direct or indirect subsidies), may benefit competitors operating in countries other than where our mining operations are currently located. These changes could also adversely affect the prices we pay for the supplies we need and our export costs when we engage in international transactions. We cannot assure shareholders that we will be able to compete on the basis of price or other factors with companies that in the future may benefit from favorable regulations, trading or other arrangements or that we will be able to maintain the cost of the supplies that we require as well as our export costs.

Operational risks

The 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, 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. We could incur additional expenses in connection with

preventive and remediating measures related to underground openings, which could materially and adversely affect results of our operations and financial condition.

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 and other hazards as a result of exploration and production) is not generally available or is uneconomical to afford.

We may be materially and 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 and 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 and adversely affect the results of our operations and financial condition, as well as potentially diminish our stated mineral reserves.

Our projects are subject to operational risks that may result in increased costs or delays that prevent their successful implementation.

We invest in increasing our mine and metal production capacity and developing new operations. Our projects are subject to a number of risks that may materially and adversely affect our growth prospects and profitability, including the following:

·                  we may encounter delays or higher than expected costs in obtaining the necessary equipment, machinery, materials, supplies, labor or services and in implementing new technologies to develop and operate a project;

·                  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 are estimates based on the interpretation of limited sampling data and testwork 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.

Certain of our current operations, projects and prospects are located in remote areas, and our production, processing and product delivery rely on adequate and available infrastructure and skilled labor.

Our mining, smelting, processing, development and exploration activities depend to a large degree on adequate infrastructure. The regions where certain of our current operations, projects and prospects are located are sparsely populated and difficult to access. We require reliable roads, bridges, power sources and water supplies to access and properly conduct our operations. As a result, the availability and cost of this infrastructure affects capital and operating costs and our ability to maintain expected levels of production and sales. Unusual weather, such as the excessive rains and flooding that occurred in Peru in 2017, or other natural phenomena, sabotage, government or external interference in the maintenance or provision of such infrastructure could impact the development of a project, reduce mining volumes, increase mining or exploration costs or delay the transportation of raw materials to the mines and projects or concentrates to the customers. See “—Natural disasters, such as floods, mudslides and earthquakes, could damage our facilities.”

In addition, the mining industry is labor-intensive, and our success depends to a significant extent on our ability to attract, hire, train and retain qualified employees, including our ability to attract employees with the necessary skills in the regions in which we operate. We could experience increases in our recruiting and training costs and decreases in our operating efficiency, productivity and profit margins if we are unable to attract, hire and retain a sufficient number of skilled employees to support our operations.

The failure of a tailings dam could negatively impact our business, reputation and results of operations.

Mining companies face inherent risks in their operations of tailings dams, structures built for the containment of the metals and mining waste, known as tailings, which exposes us to certain risks. For example, in November 2015, the tailings dam of a Brazilian mining company not associated with our group failed unexpectedly, releasing muddy tailings downstream, flooding certain communities and causing extensive environmental damage to the surrounding area. The dam failure resulted in the immediate suspension of that company’s mining operations by government authorities and caused that company to incur significant expenses, write off assets and recognize provisions for remediation, which affected its balance sheet and income statement.

The unexpected failure of one of our tailings dams could subject us to any or all of the potential impacts discussed above, among others. If any such risks were to occur, this could materially and adversely affect our reputation, 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 condition and results of operations.

A 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 2017, approximately 39.1% 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 a number of 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 condition.

Inadequate supply of zinc secondary feed materials and zinc calcine could affect the results of our smelters.

Zinc sourced from suppliers of concentrates not extracted directly from our mines, or secondary feed materials, represented approximately 20.2% of the zinc content used by our Juiz de Fora smelter in 2017. The use of

zinc secondary feed material is a comparative 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 condition may be adversely affected.

Shortages of water supply, explosives, critical spare parts, maintenance service and new equipment and machinery may materially and 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 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 and adversely affect our business, results of operations and financial condition. 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 and energy, 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 or new equipment and machinery to replace old ones and cover expansion requirements, or a shortage of supply of explosives, could materially and adversely affect our operations and development projects.

We may be adversely affected by labor disputes.

Mining is a labor-intensive industry. We depend on more than 12,000 workers, including employees and contractors, to carry out our operations. A portion of our employees are unionized. We cannot assure shareholders that we will not experience work slowdowns, work stoppages, strikes or other labor disputes in the future, particularly in the context of the annual renegotiation of our collective bargaining agreements, which could have a material adverse effect on our business, financial condition and results of operations.

We may be liable for certain payments to individuals employed by third-party contractors.

Under Peruvian law, outsourcing of employees from third-party contractors is permitted if certain requirements are met. To the extent that such requirements are not met, we may be jointly liable for all mandatory employment benefits and may be required to pay workers used under an outsourcing scheme with profit-sharing benefits as if they were employed directly by us. Moreover, we may be required to consider such persons employed by third-party contractors as our employees. Although we believe that we are in material compliance with Peruvian labor laws, we cannot assure shareholders that any proceedings initiated by outsourced employees will be resolved in our favor and that we will not be liable for any mandatory employment benefits or for profit-sharing benefits. See “Regulatory matters—Peruvian regulatory framework.”

Under Brazilian law, outsourcing is also permitted if certain requirements are met. In addition, Brazilian law provides that the contractor will be held liable on a secondary basis if the outsourced or subcontracted companies do not fulfill their labor obligations. In cases where the outsourced or subcontracted companies do not pay the workers the labor sums they are entitled to, the contractor is responsible for those payments. These payments may have an adverse effect on our results of operation and financial condition. Recent changes to Brazilian labor laws have affected outsourcing, and we cannot predict how these changes will be further regulated and applied by local authorities and interpreted by Brazilian labor courts. If outsourcing becomes more restrictive or costly because of these new laws, our cash flow may be reduced, affecting our financial condition and results of operations. See “Regulatory matters—Brazilian regulatory framework.”

We may be subject to misconduct by our employees or third-party contractors.

We may be subject to misconduct by our employees or third-party contractors, such as theft, bribery, sabotage, fraud, insider trading, violation of laws, slander or other illegal actions. Any such misconduct may lead to fines or other penalties, slow-downs in production, increased costs, lost revenues, increased liabilities to third parties, impairment of assets or harmed reputation, any of which may have a material adverse effect on our business, results of operations or financial condition.

The nature of our business includes risks related to litigation and administrative proceedings that could materially and adversely affect our business and financial performance in the event of unfavorable rulings.

The nature of our business exposes us to various litigation matters, including civil liability claims, environmental matters, health and safety matters, regulatory and administrative proceedings, governmental investigations, tort claims, contract disputes, labor matters and tax matters, among others. We cannot assure shareholders that these or other legal proceedings will not have a material adverse effect on our ability to conduct our business or on our financial condition and results of operations, through distraction of our management team, diversion of resources or otherwise. In addition, although we establish provisions as we deem necessary in accordance with IFRS, as issued by the IASB, the amount of provisions that we record could vary significantly from any amounts we actually pay, due to the inherent uncertainties and shortcomings in the estimation process.

We could be harmed by a failure or interruption of our information technology systems or automated machinery, including system security breaches or other cybersecurity attacks.

We rely on our information technology systems and automated machinery to effectively manage our production processes and operate our business. Any failure of our information technology systems and automated machinery to perform as we anticipate could disrupt our business and result in production errors, processing inefficiencies and the loss of sales and customers, which in turn could result in decreased revenue, increased overhead costs and excess or out-of-stock inventory levels resulting in a material adverse effect on our business results.

In recent years, cyberattacks and other tactics designed to gain access to and exploit sensitive information by breaching mission critical systems of large organizations have increased in volume sophistication. We are dependent on internal information, and we are vulnerable to failure of these systems, including through system security breaches, data protection breaches or other cybersecurity attacks. We could be exposed to a cyberattack through an internal breach from servers connected to our internal network or an external breach due to disruptions from unauthorized access to our systems, which could impact our ability to operate our existing systems. If these events occur, including a cyberattack causing critical data loss or the disclosure or use of confidential information, the exposure of such information could have a material adverse effect on our reputation and market value, which could adversely impact our results of operations.

In addition, data privacy is subject to frequently changing rules and regulations. The European Union’s General Data Protection Regulation, or GDPR, will take effect on May 25, 2018 and introduce increased regulations relating to personal data security. Any noncompliance with the GDPR or any other cybersecurity and data privacy regulations could result in the imposition of fines or penalties, which could have an adverse effect on us and our business, reputation and results of operations.

Financial risks

Our financial condition and results of operations may be materially and adversely affected by currency exchange rate fluctuations.

Our revenues are primarily denominated in U.S. dollars, and certain portions of our operating costs, principally labor costs, are denominated in reais and soles. Accordingly, when inflation in Brazil and Peru increases without a corresponding devaluation of the real or sol, our financial position, results of operations and cash flows could be materially and adversely affected. For example, for the year ended December 31, 2017, 19.6% of our production costs were denominated in reais and 13.0% of our production costs were denominated in soles.

Given the structure of our operations, a decrease in the value of the U.S. dollar relative to the foreign currencies in which we incur costs generally could have a negative impact on our results of operations or financial condition. Our foreign currency exposures increase the risk of volatility in our financial position, results of operations and cash flows. We cannot assure shareholders that currency fluctuations, or costs associated with our hedging activities (including fluctuations in exchange rates contrary to our expectations), will not have an impact on our financial condition and results of operations.

Fluctuations in interest rates in Brazil could increase the cost of servicing our debt and negatively affect our overall financial performance.

Certain of our indebtedness bears interest based on variable interest rates, including the London Interbank Offered Rate, or LIBOR. Such rate has 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. On the other hand, considering our cash investments, a significant reduction in the Interbank Deposit Certificate (Certificado de Depósito Interbancário), or CDI rate, and/or LIBOR could materially adversely impact the financial revenues that we derive from our investing activities, given that certain of our financial investments bear interest based on these interest rates. The CDI rate has fluctuated significantly in the past due to the impact of changes in Brazilian economic growth, inflation, Brazilian federal government policies and other factors. For example, the CDI rate decreased to 6.90% as of December 31, 2012, increased to 9.77% as of December 31, 2013, increased to 11.57% as of December 31, 2014, increased to 14.14% as of December 31, 2015, and decreased to 13.63% as of December 31, 2016. As of December 31, 2017, the CDI had decreased to 6.89%. In addition, the Brazilian Central Bank periodically establishes the System for Settlement and Custody (Sistema Especial de Liquidação e Custódia), or the SELIC rate, which is the base interest rate for the Brazilian banking system and an important policy instrument for the achievement of Brazilian inflation targets. In recent years, the SELIC rate has fluctuated, and the Brazilian Central Bank has frequently adjusted the SELIC rate in response to economic uncertainties. As of December 31, 2013, 2014, 2015, 2016 and 2017, the SELIC rate was 10.00%, 11.75%, 14.25%, 13.75% and 7.00%, respectively. Any reductions in the SELIC rate could adversely affect us by decreasing the income we earn on our interest-earning assets and could materially adversely impact our business, financial condition and results of operations.

We 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 condition, results of operations or cash flows. See “Operating and financial review and prospects—Risk management—Metal price sensitivity.”

Our business requires substantial capital expenditures and is subject to financing risks.

Our business is capital intensive. Exploration for and exploitation of mineral deposits, maintenance of machinery and equipment and compliance with applicable laws and regulations require substantial capital expenditures. We must continue to invest capital to maintain or to increase the amount of our metal reserves and our production. In 2017, we invested US$197.6 million in capital expenditures. We depend partially on our cash flows for maintenance of capital expenditures. See “Information on the Company—Capital expenditures.”

No assurance can be given that we will be able to maintain our production levels or generate sufficient cash flow, capitalize on a sufficient amount of our profit or have access to sufficient investments, loans or other financing alternatives to finance our capital expenditure program at a level necessary to continue our exploration and exploitation activities at the levels we feel appropriate. Any equity or debt financing, if available, may not be on terms that are favorable to us. If our access to external financing is limited, we may not be able to execute our strategy, which could adversely affect our business, financial condition and results of operations.

We are exposed to credit risk in relation to our contractual and trading counterparties as well as to hedging and derivative counterparty risk.

We are subject to the risk that the counterparties with whom we conduct our business (in particular our customers) and who are required to make payments to us are unable to make such payment in a timely manner or at all. Credit risk is present in our hedging operations, customer operations and cash management operations. If amounts that are due to us are not paid or not paid in a timely manner, this may impact not only our current trading and cash-flow position but also our financial and business position. In addition, our derivatives, metals hedging, and foreign currency and energy risk management activities expose us to the risk of default by the counterparties to such arrangements. Any such default could have a material adverse effect on our business, financial condition and results of operations.

Any acquisitions we make may not be successful or achieve the expected benefits.

We regularly consider and evaluate opportunities to acquire assets, companies and operations. There can be no assurance that we will be able to successfully integrate any acquired assets, companies or operations. In addition, any additional debt we incur to finance an acquisition may materially and adversely affect our financial position and results of operations. If future acquisitions are significant, they could change the scale of our business and expose us to new geographic, political, operating and financial risks.

We may experience goodwill impairment.

Goodwill is initially recorded at fair value and is not amortized but is reviewed at least annually or more frequently if events or changes in circumstances indicate evidence of impairment. If our estimates of goodwill fair value change, we may determine that impairment charges are necessary. Estimates of fair value are determined based on a complex model using discounted cash flows. If our estimates of future cash flows are inaccurate, the fair value determined could be inaccurate and impairment may not be recognized in a timely manner. If the fair value declines, we may need to recognize goodwill impairment in the future which could have a material adverse effect on our results of operations.

We have identified material weaknesses in our internal control over financial reporting and if we fail to establish and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected, which could cause investors to lose confidence in our reported financial information and may lead to a decline in the trading price of our common shares.

We have identified material weaknesses in our internal control over financial reporting. These control deficiencies resulted in revisions of our consolidated annual financial statements as of and for the years ended December 31, 2017 and December 31, 2016. We are taking steps to address these material weaknesses and continue to implement remediation measures, which we believe will address the underlying causes of the control deficiencies that led to our material weaknesses and improve our internal control over financial reporting. For more information, see “Additional information—Internal control over financial reporting—Changes in internal control over financial reporting.”

We cannot be certain that additional material weaknesses and control deficiencies will not develop or be discovered in the future. If other material weaknesses exist, we may be unable to report our financial results accurately on a timely basis, which could cause our reported financial results to be materially misstated. This could result in a loss of investor confidence and cause the market price of our common shares to decline.

Risks related to our mineral reserves

Our estimates of mineral reserves may be materially different from mineral quantities we actually recover, and market price fluctuations and changes in operating and capital costs may render certain mineral reserves uneconomical to mine.

There is a degree of uncertainty attributable to the estimation of mineral reserves. Until reserves are actually mined and processed, the quantity and grades must be considered as estimates only. The mineral reserves described in this report are estimated tonnages and grades that we have determined can be economically mined and processed under present and assumed future conditions. We may be required in the future to revise our mineral reserves estimates based on actual production experience, projects, updated exploration drilling data and other factors, and we cannot assure shareholders that the indicated amount and grade of mined and processed material will be recovered or that it will be recovered at the rates we anticipate. Market prices of our metals, increased production costs, reduced recovery rates, short-term operating factors, royalties, taxes, fees and other factors may render some or all proven and probable mineral reserves uneconomic to exploit and may ultimately result in a reduction of mineral reserves. Two of our five mines do not have estimated mineral reserves under Industry Guide 7.

We depend on our ability to replenish our mineral reserves for our long-term viability.

Mineral reserves data are only indicative of future results of operations at the time the estimates are prepared, and are depleted as we mine. We use several strategies to replenish and increase our mineral reserves, including exploration activities and the acquisition of mining concessions. We cannot assure shareholders that we will be able to continue with our strategy to replenish mineral reserves indefinitely. If we are unable to replenish our mineral reserves, our business, results of operations and prospects would be materially adversely affected.

Our 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 is frequently unsuccessful. It is performed to demonstrate the dimensions, position and mineral characteristics of mineral deposits, estimate mineral reserves, 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 the rights on the land and resources required to develop the mining activities. Therefore, once mineralization is discovered, it may take several years from the initial exploration phases before production is possible, during which time the potential feasibility of the project may change adversely.

Health, safety and environmental risks

Health, safety, and environmental laws and regulations, including regulations pertaining to climate change, may increase our costs of doing business, restrict our operations or result in the imposition of fines or revocation of permits.

Our mining activities are subject to Brazilian and Peruvian laws and regulations, including health and safety and environmental matters. Additional matters subject to legislation include, but are not limited to, transportation, mineral storage, water use and discharge, use of explosives, hazardous and other non-hazardous waste, and reclamation and remediation measures. Our operations are subject to periodic inspections and special inspections in certain circumstances by governmental authorities and consultation with local communities. Compliance with these laws and regulations and new or existing regulations that may be applicable to us in the future could increase our operating costs and adversely affect our financial results of operations and cash flows.

Regulatory and industry response to climate change or other controls on greenhouse gas emissions, including limits on emissions from the combustion of carbon-based fuels, controls on effluents and restrictions on the use of certain materials, could significantly increase our operating costs and affect our customers. Ongoing international efforts to address greenhouse gas emissions consist of controlling activities that may increase the atmospheric concentration of greenhouse gases. International agreements, like the Paris Agreement and Kyoto Protocol, are in different stages of negotiation and implementation. The measures included in such agreements may result in an increase of costs related to the installation of new controls aimed at reducing greenhouse gas emissions,

the purchase of credits or licenses for atmospheric emissions and the monitoring and registration of greenhouse gas emissions generated by our operations. These measures could adversely affect our business, financial condition and results of operations. The potential impact of climate change on our operations is highly uncertain and would be particular to the geographic circumstances of our facilities and operations. It may include changes in rainfall patterns, water shortages, rising sea levels, changing storm patterns and intensities and changing temperatures. These effects may materially and adversely impact the cost, production and financial performance of our operations.

Pursuant to applicable environmental regulations and laws, we could be found liable for all or substantially all the damages caused by mining activities at our current or former facilities or those of our predecessors at disposal sites. We could also be found liable for all incidental damages due to the exposure of individuals to hazardous substances or other environmental damage. We cannot assure shareholders that our costs of complying with current and future environmental and health and safety laws and regulations, including decommissioning and remediation requirements, and any liabilities arising from past or future releases of, or exposure to, hazardous substances will not materially and adversely affect our business, financial condition and results of operations.

Natural disasters, such as floods, mudslides and earthquakes, could damage our facilities.

Natural disasters could significantly damage our mining and production facilities and infrastructure and may cause a contraction in sales to countries adversely affected due to, among other factors, power outages and the destruction of industrial facilities and infrastructure. In particular, the Central Andean region, where two of our mines are located, is prone to mudslides and earthquakes of varying magnitudes. Due to the El Niño weather phenomenon, Peru recently experienced extreme weather conditions that led to flooding and mudslides and which adversely affected our operations. From March 17 to March 24, 2017, extreme flooding and mudslides in Peru interrupted the supply of metal concentrates from our El Porvenir and Atacocha mines to our customers as well as the supply of zinc products to our Cajamarquilla smelter due to the shutdown of the main roads and railways used to transport our products and raw materials, including the Peruvian central railway. Although we have insurance covering damages caused by natural disasters, extensive damage to our facilities and staff casualties due to natural disasters could materially and adversely affect our ability to conduct our operations and, as a result, reduce our future operating results.

Political, economic, social and regulatory risks

Recent changes in Brazil’s mining laws may significantly impact our mining operations.

On July 26, 2017, the Brazilian federal government enacted measures that provided for significant changes to the regulatory framework of the Brazilian mining industry. The measures modified relevant aspects of the regulatory framework, including the terms of certain mining royalties, and created a new mining agency, the ANM (Agência Nacional de Mineração). The Brazilian congress approved the provisional measures. These and other changes to the Brazilian regulatory framework that could be enacted in the future may result in an increase in our expenses, particularly mining royalties. In addition, any changes in the interpretation of any Brazilian mining laws and regulations, including changes to our concession agreement, may increase our compliance, operational or other costs. For additional information, see “Information on the Company—Regulatory matters—Brazilian regulatory framework—Mining rights and regulation of mining activities.”

Our mineral rights may be terminated or not renewed by governmental authorities.

Our business is subject to extensive regulation in Brazil and Peru, including with respect to acquiring and renewing the required authorizations, permits, concessions and/or licenses from the relevant governmental regulatory bodies. We have obtained, or are in the process of obtaining, all material authorizations, permits, concessions and licenses required to conduct our mining and mining-related operations. However, we may need to renew exploration authorizations related to our Brazilian mining operations 60 days prior to their expiration date if we determine that we continue to have an economic or business interest in the area. With respect to mining concessions, there is no renewal requirement once we have obtained such concession. These authorizations, permits, concessions and environmental licenses are subject to our compliance with conditions imposed and regulations promulgated by the relevant governmental authorities. While we anticipate that all required authorizations, permits, concessions and environmental licenses or their renewals will be granted as and when sought, there is no assurance

that these items will be granted as a matter of course, and there is no assurance that new conditions will not be imposed in connection with such renewals.

We must continue to assess the mineral potential of each mining concession to determine if the costs of maintaining the related exploration authorizations and mining concessions are justified by the results of operations to date. If such costs are not justified and we abandon the mine or suspend the mining activities without the formal consent of the regulatory authority for a period more than six months, we may lose the respective mining concessions. Alternatively, we may elect to withdraw or assign some of our exploration authorizations or mining concessions. In Brazil, if we fail to demonstrate the existence of technical and economically viable mineral deposits in an area covered by an exploration authorization, we may be required to return it to the federal government. The federal government may then grant exploration authorizations to other parties that may conduct other mineral prospecting activities at said area. Mining concessions in Peru may be terminated if the concessionaire does not comply with its obligations.

If we were to violate any of the foregoing laws and regulations or the conditions of our concessions, authorizations and environmental licenses, we may be subjected to substantial fines or criminal sanctions, revocations of operating permits or licenses and possible closings of certain of our facilities.

Our operations depend on our relations and agreements with local communities, and new projects require carrying out a prior consultation procedure.

There are several local communities that surround our operations in Brazil and Peru, most of which we have entered into agreements with that provide for the use of their land for our operations. We also interact with regional and local governments and depend on our close relations with local communities and such governments to carry out our operations. If our relations with the local communities and such governments were to deteriorate in the future, or the local communities do not comply with the existing agreements or renew them upon expiration, it could have a material adverse effect on our business, properties, operating results, financial condition or prospects.

Furthermore, to develop new projects in the countries in which we operate on land owned by, or in the possession of, third parties, we need to reach an agreement with such third parties to use that land. See “Regulatory matters—Brazilian regulatory framework.” For example, Brazilian law requires us to obtain social and environmental licenses for projects in areas with indigenous populations. Any delay or failure to reach such agreements or obtain governmental approvals for our new projects could result in a material adverse effect on our business, properties, operating results, financial condition or prospects.

Changes in tax laws may increase our tax burden and, as a result, could adversely affect our business, financial condition and results of operations.

The Brazilian, Peruvian and Luxembourg governments from time to time implement changes to tax laws and regulations. Any such changes, as well as changes in the interpretation of such laws and regulations, may result in increases to our overall tax burden, which would negatively affect our profitability. For example, in December 2016, the corporate tax rate in Peru for 2017 increased from 27.0% to 29.5% for Peruvian companies. Moreover, some tax laws may be subject to controversial interpretation by tax authorities, including, but not limited to, the regulation applicable to corporate restructurings. In the event an interpretation different than the one on which we based our transactions prevails, we may be adversely affected. We cannot assure shareholders that the Peruvian, Brazilian or Luxembourg governments will not implement additional changes to tax regulations in the future, which could adversely affect our business, financial condition and results of operations.

We are subject to anti-corruption, anti-bribery and anti-money laundering laws and regulations in Brazil, Peru, Luxembourg, Canada and the United States. Any violations of any such laws or regulations could have a material adverse impact on our reputation and results of operations and financial condition.

We are subject to anti-corruption, anti-bribery, anti-money laundering and other international laws and regulations and are required to comply with the applicable laws and regulations of Brazil, Peru, Luxembourg Canada and the United States. In addition, we are subject to economic sanctions regulations that restrict our dealings with certain sanctioned countries, individuals and entities. There can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of such laws,

regulations and requirements by our affiliates, employees, directors, officers, partners, agents and service providers or that any such persons will not take actions in violation of our policies and procedures. Any violations by us of anti-bribery and anti-corruption laws or sanctions regulations could have a material adverse effect on our business, reputation, results of operations and financial condition.

Corruption investigations and media reports of alleged corruption in Brazil and Peru could materially adversely affect Brazilian and Peruvian markets, us, our industry and the trading price of our securities.

Brazilian markets have experienced heightened volatility due to the uncertainties generated from, and the effects on, the local economy and political environment, from the ongoing corruption and bribery investigations by federal Brazilian prosecutors. The matters that have, and may continue to, come to light because of or in connection with the investigations have adversely affected, and are expected to continue to adversely affect, the Brazilian markets and trading prices of securities issued by certain Brazilian companies. In addition, print, online and social media, posts and reports have made allegations that certain Brazilian industries and conglomerates have been involved in conduct targeted by some of these investigations. Relatedly, Peruvian authorities are investigating corruption associated with past actions involving certain Brazilian construction companies with operations in Peru. Consequently, Peruvian lawmakers passed legislation that restricts payments made by, or to be made to, such Brazilian construction conglomerates. To the extent that any such reports, or further developments or allegations related to them or the above investigations, relate to us or to any of our affiliates, executives or directors, our public perception, reputation and the trading price of our common shares may be materially adversely affected.

Peru may experience political or economic problems that could affect our business, financial condition and results of operations.

The operations of Nexa CJM and Nexa Peru are conducted in Peru and are dependent upon the performance of the Peruvian economy. As a result, our business, financial position and results of operations may be affected by the general conditions of the Peruvian economy, price instability, inflation, interest rates, regulation, taxation, social instability, political unrest and other developments in or affecting Peru over which we have no control. In 2017, our sales in Peru represented 28.4% of our consolidated net revenue. Our results of operations and general financial condition depend in part on Peruvian markets for labor and certain services, materials, supplies, machinery and equipment, and on factors relating to Peruvian economic, social and political stability generally, and may be materially and adversely affected by economic downturns, currency depreciation, inflation, interest rate fluctuation, government policies, regulation, taxation, social instability, political unrest, terrorism and other developments in or affecting the country.

Our financial condition and results of operations may also be adversely affected by changes in Peru’s political climate to the extent that such changes affect the nation’s economic policies, growth, stability, outlook or regulatory environment. In December 2017, then-President Pedro Pablo Kuczynski faced accusations of lying about receiving bribes from the Brazilian construction company Odebrecht. He ultimately admitted to receiving such payments, despite initial denials. Following additional scandals, on March 21, 2018, President Kuczynski submitted his resignation as president of Peru. He was succeeded by Martín Vizcarra, the former Vice President of Peru, on March 23, 2018.

The uncertainty of the political climate in Peru could lead to changes in the Peruvian economy or economic policies, which may have a negative effect on our business, financial condition and results of operations. Therefore, the risk of political and economic change should be carefully considered. There can be no assurance that Peru will not face political, economic or social problems in the future or that these problems will not interfere with our ability to service our indebtedness.

General economic and political conditions in Brazil may materially adversely affect our business, financial condition and results of operations.

The operations of Nexa Brazil are conducted in Brazil and are dependent upon the performance of the Brazilian economy. As a result, general economic conditions in Brazil may have a material adverse impact on our business, financial condition and results of operations. In 2017, our sales in Brazil represented 29.5% of our consolidated net revenue.

In 2017, Brazil faced an economic recession, adverse fiscal developments and political instability, which may continue in 2018. An economic slowdown in Brazil, coupled with the ongoing effects of the global economic crisis, may result in greater economic and financial volatility and continued stagnation in terms of GDP growth, all of which could negatively affect the demand for and pricing of our products and, consequently, our business and results of operations. In addition, Brazil lost its investment grade rating for long-term debt from Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., Fitch Ratings Inc., and Moody’s Investor Service, Inc. in September 2015, December 2015 and February 2016, respectively. Due to our dependence on revenues from our Brazilian operations, we can be downgraded, which could limit our ability to obtain financing and increase our borrowing costs, and make it costlier to refinance maturing obligations, which would materially and adversely impact our business and results of operations. Any further downgrade of Brazil’s credit rating could also heighten investors’ perception of risk and, as a result, adversely affect the price of our common shares.

Actions taken by the Brazilian federal government and the Brazilian Central Bank may not promote the expected recovery of the Brazilian economy. The Brazilian government’s actions in response to exchange rate movement, monetary policies, inflation control, energy shortages and economic instability, among other matters, may have important effects on Brazilian companies, including us, and on market conditions and the competitiveness of Brazilian products abroad. Prior actions taken by the Brazilian federal government have involved wage and price controls, the implementation of new taxes and fluctuations of base interest rates. In addition, actions taken by Brazilian state and local governments with respect to labor and other laws affecting our operations may have an effect on us. Uncertainty over whether the Brazilian federal government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the market value of securities issued by Brazilian companies.

Currently, the Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures. We cannot predict whether the Brazilian Central Bank or the Brazilian government will continue to permit the real to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad.

In addition, the political situation in Brazil has influenced the performance of the Brazilian economy; in particular, political crises have adversely affected investors’ confidence and public sentiment, which has adversely affected economic development in Brazil, the credit rating of the Brazilian government and the operations and financial performance of Brazilian businesses. In August 2016, the Brazilian Congress approved the impeachment of the Brazilian president. Also, ongoing corruption investigations have led to charges against public officials, members of several political parties and directors and officers of many Brazilian companies. Political instability may aggravate economic uncertainties in Brazil and increase volatility of securities of issuers with significant Brazilian operations like us.

Peru has a history of domestic terrorism that could affect our business, financial condition and results of operations.

Peru was subject to a series of domestic terrorist attacks from groups like the Shining Path between the late 1970s and 1990s that caused thousands of casualties and affected normal political, economic and social activities in many parts of the country, including Lima, the capital. Since then, terrorist activity in Peru is mostly confined to small-scale operations in the Huallaga Valley and the Valleys of the Rivers Apurimac, Ene and Mantaro, or VRAEM, areas, both in the eastern part of the country. In 2012, the Peruvian government captured Florindo Flores, one of the last remaining leaders of Shining Path, and thus gravely weakened the organization’s activities in the Huallaga Valley. Despite these efforts, terrorist activity and the illegal drug trade continue to be key challenges for Peruvian authorities. The Huallaga Valley and VRAEM constitute the largest areas of coca cultivation in the country and thus serve as a hub for the illegal drug trade. Any violence derived from the drug trade or a resumption of large-scale terrorist activities could hurt our operations.

Political and social opposition to mining activities generally in the regions where we operate could adversely impact our business and reputation.

Disputes with communities where we operate in Brazil and Peru may arise from time to time. In some instances, our operations and mineral reserves are located on or near lands owned or used by indigenous people or other groups of stakeholders. Some of our mining and other operations are in territories where title may be subject to disputes or uncertainties, or in areas claimed for agriculture or land reform purposes, which may lead to disagreements with organized social movements, local communities and the government. We may be required to consult and negotiate with these groups as part of the process to obtain licenses required to operate, to mitigate impact on our operations or to obtain access to their lands. Disagreements or disputes with local groups, including indigenous groups, organized social movements and local communities, could cause delays or interruptions to our operations, adversely affect our reputation or otherwise hamper our ability to develop our reserves and conduct our operations. Protesters have taken actions to disrupt our operations and projects, and they may continue to do so in the future, which may harm our operations and could adversely affect our business. In recent years, Peru has experienced protests against mining projects in several regions. On several occasions, local communities have opposed these operations and accused them of polluting the environment and hurting agricultural and other traditional economic activities. Recently, mounting opposition by the neighboring communities led to the suspension of the Tia Maria mining project in the southern region of Arequipa. Social demands and conflicts could have an effect on our business and results of operations and the Peruvian or Brazilian economy in general.

Uncertainty in governmental agency interpretation or court interpretation and the application of such laws and regulations could result in unintended non-compliance.

The courts in some of the jurisdictions in which we operate may offer less certainty as to the judicial outcome of legal proceedings or a more protracted judicial process than is the case in more established economies. Businesses can become involved in lengthy court cases over simple issues when rulings are not clearly defined, and the poor drafting of laws and excessive delays in the legal process for resolving issues or disputes compound such problems. In addition, there may be limited or no relevant case law providing guidance on how courts would interpret such laws and the application of such laws to our contracts, joint ventures, licenses, license applications or other legal arrangements. Accordingly, there can be no assurance that contracts, joint ventures, licenses, license applications or other legal arrangements will not be adversely affected by the actions of government authorities and the effectiveness of and enforcement of such arrangements in these jurisdictions. Moreover, the commitment of local businesses, government officials and agencies and the judicial system in these jurisdictions to abide by legal requirements and negotiated agreements may be more uncertain and may be susceptible to revision or cancellation, and legal redress may be uncertain or delayed. These uncertainties and delays could have a material adverse effect on our business and results of operations.

Risks relating to our corporate structure

VSA owns approximately 64.25% of our outstanding common shares and has substantial control over us, which could limit our shareholders’ ability to influence the outcome of important corporate decisions.

VSA owns 64.25% of our outstanding common shares. As a result, VSA can influence or control matters requiring approval by our shareholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. VSA may also have interests that differ from our other investors and may vote in a way with which our other shareholders disagree, and which may be adverse to the interests of our other investors.

Dividends or other distributions paid by us on our common shares will generally be subject to Luxembourg withholding tax.

Any dividends or other distributions paid by us on our common shares will be subject to a Luxembourg withholding tax at a rate of 15.0% unless an exemption or reduction in rate applies. The withholding tax must be withheld from the gross distribution and paid to the Luxembourg tax authorities. Under certain circumstances, distributions as share capital reductions or share premium reimbursements may not be subject to withholding tax, but there are no assurances that we will be able to make such distributions in the future. See “Taxation—Luxembourg Tax Considerations—Shareholders.”

Our shareholders’ rights and responsibilities as shareholders are governed by Luxembourg law and differ in some respects from the rights and responsibilities of shareholders under the laws of other jurisdictions, including the United States and Canada, and shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. or Canadian corporation.

Our corporate affairs are governed by our articles of association and by the laws governing limited liability companies organized under the laws of Luxembourg, as well as such other applicable local law, rules and regulations. The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States. There may be less publicly available information about us than is regularly published by or about U.S. or Canadian issuers. Also, Luxembourg regulations governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States or Canada, and Luxembourg law and regulations in respect of corporate governance matters may not be as protective of non-controlling shareholders as corporation laws in the United States or Canada. Therefore, shareholders may have more difficulty protecting their interests in connection with actions taken by us, our directors and officers or our principal shareholders than they would as shareholders of a corporation incorporated in the United States or Canada.

Luxembourg insolvency laws may offer our shareholders less protection than they would have under U.S. and Canadian insolvency laws.

As a company organized under the laws of Luxembourg and with its registered office in Luxembourg, we are subject to Luxembourg insolvency laws in the event any insolvency proceedings are initiated against us including, among other things, Regulation (EU) 2015/848 of the European Parliament and of the Council of May 20, 2015 on insolvency proceedings (recast). Should courts in another European country determine that the insolvency laws of that country apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against us. Insolvency laws in Luxembourg or the relevant other European country, if any, may offer our shareholders less protection than they would have under U.S. insolvency laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency laws.

While we currently intend to make distributions on our common shares annually, our ability to do so may be constrained by regulatory constraints and our holding company structure.

We intend to pay dividends or other distributions on our common shares in accordance with our dividend policy. See “Share ownership and trading—Distributions.” However, any determination to pay dividends or other distributions (including reimbursements of share premium) will be subject to the approval of our board of directors or our shareholders, as applicable, and will depend on a number of factors, including, but not limited to, our cash balance, cash flow, earnings, capital investment plans, expected future cash flows from operations and our strategic plans, as well as restrictions imposed by applicable law and contractual restrictions (although as of the date of this report there are no contractual restrictions on our ability to pay dividends or other distributions to our shareholders).

Luxembourg law requires at least 5.0% of our net profits per year to be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10.0% of our issued share capital. The legal reserve is not available for distribution. Luxembourg law also provides that distributions (including in the form of dividends or reimbursement of share premium) may only be declared out of net profits and/or distributable reserves, as set forth in our standalone statutory accounts prepared under Luxembourg Generally Accepted Accounting Principles (or Luxembourg GAAP). The amount of a distribution to shareholders (including in the form of a dividend or reimbursement of share premium) may not exceed the amount of profits at the end of the last financial year plus any profits carried forward and any amounts drawn from reserves available for that purpose, less any losses carried forward and sums to be allocated to non-distributable reserves in accordance with Luxembourg law or the articles of association. Furthermore, no distributions (including in the form of dividends or reimbursement of share premium) may be made if at the end of the last financial year the net assets as set out in the standalone statutory accounts prepared under Luxembourg GAAP are, or following such a distribution would become, less than the amount of the subscribed share capital plus the non-distributable reserves. Distributions in the form of dividends may only be made out of net profits and profits carried forward, whereas distributions in the form of share premium reimbursements may only be made out of available share premium. See “Share ownership and trading—Distributions.”

Our legal reserve was zero as of December 31, 2017, but we had amounts available for distribution to shareholders in the form of share premium reimbursements as of such date. There can be no assurance, however, that we will have sufficient net profits or distributable reserves in the future to pay dividends or other distributions, including as share premium reimbursements.

We are a holding company and have no material assets other than our ownership of shares in our subsidiaries. When we pay a dividend or other distribution on our common shares in the future, we generally cause our operating subsidiaries to make distributions to us in an amount sufficient to fund any such dividends or distributions. Although as of December 31, 2017, there are no material contractual restrictions on our subsidiaries’ ability to make distributions to us, their ability to do so is subject to their capacity to generate sufficient earnings and cash flow and may also be affected by statutory accounting and tax rules in Brazil and Peru.

It could be difficult for investors to enforce any judgment obtained outside Luxembourg against us or any of our associates.

We are organized under the laws of Luxembourg. Furthermore, certain of our directors and officers reside outside the United States and Canada and most of their assets are located outside the United States and Canada. Most of our assets are located outside the United States. As a result, it may not be possible for investors to effect service of process upon us or our directors and officers within the United States, Canada or other jurisdictions outside Luxembourg or to enforce against us or our directors and officers judgments obtained in the United States, Canada or other jurisdictions outside Luxembourg. Because judgments of U.S. or Canadian courts for civil liabilities based upon the U.S. federal securities laws or Canadian securities laws may only be enforced in Luxembourg if certain requirements are met, investors may face greater difficulties in protecting their interest in actions against us or our directors and officers than would investors in a corporation incorporated in a state or other jurisdiction of the United States or Canada.

SELECTED FINANCIAL DATA

The following tables present our selected consolidated financial data for each of the periods and the dates indicated below.

The selected consolidated financial data should be read in conjunction with the consolidated financial statements included elsewhere in this report. Our consolidated financial statements have been prepared in accordance with IFRS.

We have not included selected consolidated financial data as of and for the year ended December 31, 2013 because such information is not available and cannot be provided without unreasonable effort or expense.

(1)                                 Earnings per share information has been retroactively adjusted for reductions in the number of shares outstanding arising from transfers from capital to share premium, which resulted in the cancellation of 350,000,000 shares in April 2016, 200,000,000 shares in June 2017, 300,000,000 shares in September 2017 and 428,595,552 shares in October 2017, for a total of 1,278,595,552 shares.

(2)                                 Reflects restated earnings (loss) per share for the years ended December 31, 2016 and 2015. For more information, see Notes 2.2.2 and 24(f) to our consolidated financial statements.

(1)                                 Includes assets held for sale.

(1)                                 See discussion below.

(2)                                 The line item “Other” represents the residual component of Adjusted EBITDA either not pertaining to the mining or smelting segments, or, represents items that, because of their nature, are not being allocated to a specific segment.

Non-IFRS measures and reconciliation

Our management uses non-IFRS measures such as Adjusted EBITDA, among other measures, for internal planning and performance measurement purposes. We believe these measures provide useful information about the financial performance of our operations that facilitates period-to-period comparisons on a consistent basis. Management uses Adjusted EBITDA internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Management believes that Adjusted EBITDA is a useful measure of our performance because it reflects our cash generation potential from our operational activities excluding exceptional items of the period. These measures should not be considered individually or as a substitute for profit (loss) or operating profit, as indicators of operating performance, or as alternatives to cash flow as measures of liquidity. Additionally, our calculation of Adjusted EBITDA and other non-IFRS measures may be different from the calculation used by other companies, including our competitors in the mining industry, so our measures may not be comparable to those of other companies.

In this report, we present Adjusted EBITDA, which we define as (i) profit (loss) for the year, plus (ii) profit (loss) from results of associates, plus (iii) profit (loss) from results of associates — discontinued, plus (iv) depreciation and amortization, plus/less (v) net financial results, plus/less (vi) income tax, less (vii) gain on sale of investment (loss), plus (viii) impairment of other assets, plus/less (ix) (reversion) impairment — property, plant, equipment. In addition, management may exclude non-cash items considered exceptional from the measurement of Adjusted EBITDA.

A reconciliation of Adjusted EBITDA to our profit (loss) for the periods indicated is presented below.

We calculate Adjusted EBITDA by region on the same basis as Adjusted EBITDA using information from the financial statements of Nexa Brazil and Enercan (for Brazil) and Nexa Peru and Nexa CJM (for Peru), plus the allocation of Nexa Resources and VUS trading revenues and costs pertaining to Brazil and Peru, as applicable, less the elimination of inter-segment operations between our subsidiaries. Selling, general and administrative expenses and the depreciation and amortization of Nexa Resources and VUS are allocated to Brazil and Peru based on their respective participation in our total cost of products sold. The line item “Other” represents the residual component of Adjusted EBITDA either not pertaining to the Brazil or Peru regions, or, represents items that, because of their nature, are not allocated to a specific region.

A reconciliation of Adjusted EBITDA by region to Adjusted EBITDA for the periods indicated is presented below.

(1)                                 The line item “Other” represents the residual component of Adjusted EBITDA either not pertaining to the Brazil or Peru regions or, represents items that, because of their nature, are not being allocated to a specific region.

We define Adjusted EBITDA by segment as (i) profit (loss) for the year, plus (ii) profit (loss) from results of associates, plus (iii) depreciation and amortization, plus/less (iv) net financial results, plus/less (v) income tax, plus/less (vi) components of Adjusted EBITDA by segment either not pertaining to the mining or smelting segment, or, represents items that, because of their nature, are not allocated to specific segment. See Note 30 to the consolidated financial statements.

A reconciliation of Adjusted EBITDA by segment to Adjusted EBITDA for the periods indicated is presented below.

(1)           Represents the residual component of Adjusted EBITDA either not pertaining to the mining or smelting segments, or, represents items that, because of their nature, are not being allocated to a specific segment.

We also present herein our net debt, which we define as (i) loans and financing less (ii) cash and cash equivalents, less (iii) financial investments, plus/less (iv) the fair value of derivative financial instruments. Our management believes that net debt is an important figure because it indicates our ability to repay outstanding debts that become due simultaneously using available cash and highly liquid assets.

A reconciliation of net debt to loans and financing as of December 31, 2017, 2016 and 2015 is presented below.

We define net debt to Adjusted EBITDA ratio as net debt divided by Adjusted EBITDA.

The calculation of our net debt to Adjusted EBITDA ratio for the periods indicated is presented below.

We define Adjusted EBITDA margin as Adjusted EBITDA divided by net revenue from products sold. The calculation of our Adjusted EBITDA margin for the periods indicated is presented below.

We calculate adjusted working capital as (i) trade accounts receivable, plus (ii) inventory, plus (iii) other taxes recoverable, plus (iv) other assets, less (v) trade payables, less (vi) confirming payable, less (vii) salaries and payroll charges, less (viii) taxes payable, less (ix) other liabilities. Our management believes that adjusted working capital is an important figure because it provides a relevant metric for the efficiency and liquidity of our operating activities.

The calculation of our adjusted working capital derived from our consolidated financial statements as of December 31, 2017, 2016 and 2015 is presented below.

Cash cost, after by-product credits and related measures

In this report, we also present measures of costs that are widely used by peer companies operating in the mining and smelting industries. These performance measures are not IFRS measures, and they do not have a standard meaning and therefore may not be comparable to similar data presented by other mining and smelting companies. They should not be considered as a substitute for costs of sales, costs of selling and administrative expenses, or as an indicator of costs. Similar measures are also calculated by Wood Mackenzie for many market participants, but Wood Mackenzie’s methodology differs from the methodology we use below.

Our management uses cash cost, after by-product credits and related measures, among other measures, for internal planning and performance measurement purposes. We believe these measures provide useful information about the operational performance of our operations that facilitates period-to-period comparisons on a consistent basis.

In calculating cash cost, after by-product credits, we account for transactions between our mining operations and our smelting operations using the same methodology we use to evaluate the performance of our mining and smelting segments. See Note 30 to our consolidated financial statements. We prepare an internal calculation based on transfer-pricing adjustments made on an arm’s length principle basis. All information disclosed for cash cost, after by-product credits is consistent with this methodology.

Mining operations

Cash cost, after by-product credits: For our mining operations, cash cost, after by-product credits includes all direct cash cost, after by-product credits of mining, including costs associated with mining, concentrating, leaching, solvent extraction and electrowinning, 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, after by-product credits. Cash cost, after by-product credits is calculated on a byproduct basis, in which byproducts sales are deducted from total cash cost, after by-product credits directly attributable to mining operations.

Sustaining cash cost, after by-product credits: Sustaining cash cost, after by-product credits is defined as the cash cost, after by-product credits plus non-expansion capital expenditure, including sustaining health, safety and snvironment, modernization and other non-expansion-related capital expenditures.

All-in sustaining cost, after by-product credits: All-in sustaining cost (or AISC) is defined as sustaining cash cost, after by-product credits plus corporate general and administrative expenses, royalties and workers’ participation.

Smelting operations

Cash cost, after by-product credits: For our smelting operations, cash cost, after by-product credits includes all the costs of smelting, such as costs associated with labor, net energy, maintenance materials, consumables and other on-site costs, as well as raw material costs. Byproduct sales are deducted from total cash cost, after by-product credits directly attributable to smelting operations.

Sustaining cash cost, after by-product credits: Sustaining cash cost, after 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, after by-product credits: All-in sustaining cost is defined as sustaining cash cost, after by-product credits plus general and administrative expenses and workers’ participation.

For mining operations, we present below cash cost, after by-product credits, sustaining cash cost, after by-product credits and all-in sustaining cost and a reconciliation to our consolidated financial statements.

For the year ended December 31, 2017