Growth

Along the axis of growth, our priority is to expand our mining operations in the Americas, with a focus on zinc and copper mineral exploration, thus ensuring the replenishment of our reserves. To achieve this, we have defined four growth avenues:

1. Extend the useful life of existing mines (brownfield projects);

2. Develop new projects (greenfields);

3. Explore new areas to sustain long-term production; and

4. Develop new business, including strategic alliances in existing assets or projects, which support the growth plan.

Investments are aimed at extending the lives of our current mines and expanding the mineral resources of new projects, while relatively smaller investments are dedicated to new areas with the intention of identifying future projects.

To manage our project portfolio with greater precision and effectiveness, in 2017, we implemented a new model for governance, design, process, and leadership, which is based in five areas – the Executive Committee; the Engineering Division; Project Leadership; Corporate and Operational divisions; and Project Teams. With this improvement, all areas can deepen their knowledge about our projects and the current stages of each, thereby allowing them to participate more actively in the entire process. As part of this initiative, all company projects were re-analyzed. This included development stage assessments, as well as appraisals of goals and targets, among other issues. The projects were then included as part of the new governance model.

Greenfield Projects

In the spotlight among our greenfield projects already approved and in development are Magistral, Shalipayco, and Pukaqaqa in Peru, and Aripuanã and Caçapava do Sul in Brazil. These are high production potential initiatives, which envisage the use of automated technologies to, among other things, increase operational safety and achieve gains in efficiency. In addition, they feature advanced systems to increase water recirculation, to reduce volumes of resource capture, and to control for the non-discharge of effluents into water bodies. In addition, the social design of these projects includes local development activities.

Greenfield Projects in Development

Note 8: Feasibility Study
Note 9: Preliminary Economic Assessment

Aripuanã

This mining expansion project is considered one of the ten largest in the world. It is in an advanced stage of development, with operations anticipated to start in 2020. Polymetallic underground mine project located in Mato Grosso state (in Brazil’s Central- West region), it will operate as an integrated underground mine forecast to produce 1.8 million tonnes of crude ore per year (especially zinc, lead, and copper), with an anticipated useful life of 24 years. In 2017, US$ 12.2 million was spent on Aripuanã’s development.

The project was designed to minimize environmental impacts. An example of this is the objective of recirculating up to 70% of the water used in the production process. The region offers adequate infrastructure, including availability of energy, water, and human resources.

In 2017, we submitted our environmental impact study and revised our minimum total costs study. In 2018, an environmental license must be obtained for the ore processing unit. Concentrate will be transported by truck from Aripuanã to Rondonópolis, Mato Grosso, and then by train to the Port of Santos, São Paulo or to the Nexa refineries in Minas Gerais.

Magistral

This open pit copper project and mineral processing unit is located in Peru’s Ancash region. When fully developed and operating, it is estimated that it will produce an annual average of 40 thousand tonnes of contained copper concentrate; 3 thousand tonnes of molybdenum; and 600 thousand ounces of silver (17 tonnes). It will have an anticipated useful life of 16 years. In 2017, environmental and social licenses were maintained; exploration and drilling phases are expected to begin in 2018, as well as the pre-feasibility study (FEL2).

Shalipayco

Located in Peru’s Junín region, this mine contains deposits of zinc, lead, and silver, with an underground mining operation foreseen. The project is expected to produce an average annual output of 43 thousand tonnes of zinc contained in concentrate; 3 thousand tonnes of lead concentrate; and 700 thousand ounces of silver (19.8 tonnes) per year, with a useful life of 15 years. Operations are anticipated to start in 2021. In 2017, we conducted approximately 40 thousand meters of soundings. Additional geological mapping is planned for 2018 to determine the potential for expansion of mineral resources, besides the development of the conceptual study (FEL1).

Pukaqaqa

This project contemplates the development of a copper, silver and gold open pit mine. We are identifying possible operational synergies between this project and similar assets in the vicinity. The project is located in Peru’s Huancavelica region (approximately 400 km south of Lima).

Florida Canyon

This mineral exploration project, in Peru’s Amazonas region, consists of 16 contiguous mining concessions, covering approximately 12.6 thousand hectares. It has the potential to produce an annual average of 60 thousand tonnes of contained zinc concentrate; 6 thousand tonnes of lead contained in concentrate; and 200 thousand ounces of silver (5.7 tonnes), with a useful life of 12.5 years. In 2017, the preliminary economic assessment for the zinc deposit was completed and 30 km of access roads were built (of a total of 42 planned) for drilling purposes, thus reducing logistical costs.

Hilarión

Located in Peru’s Ancash region (230 km from Lima), this mine contains a mineral deposit of skarn (metamorphic rock), which contains deposits of zinc, lead, silver, and copper sulphide. The project provides for an underground mine that can make use of its own processing plant or use one of several others in the area. In 2017, an Environmental Impact Study license was sought to construct exploration tunnels from the El Padrino deposit to Hilarión and explore the continuity.

Caçapava do Sul

This zinc, lead, and copper extraction project is located in Rio Grande do Sul state (in Brazil’s South region). It stands out because it will not use dams for tailings or water, as all waste will be dry deposited. One hundred percent of water that will come in contact with the process and be used in industrial areas will be recirculated, without industrial effluent disposal in the region’s rivers.

The project is in the licensing initial phase. The Environmental Impact Study (EIA-RIMA), filed in 2016, is in the phase for implementing supplemental requirements requested by the FEPAM environmental agency.

Brownfield Projects

In recent years, we have achieved significant success in initiatives to expand the capacity and useful life of our mines, aiming to guarantee 15 years of mineral resources for current operations, with five years in reserves.

To achieve this, we have several brownfield initiatives underway in Brazil and Peru. The most important are:

Extension of the Life of the Vazante Mine

The project aims to extend the Vazante mine’s useful life to 2027, compared to 2021 as previously planned. Implementation began in 2013 and is expected to be completed in 2023, with a total investment estimated at US$ 184.3 million, with US$ 108.0 million being the amount required to conclude the project. We expect that this undertaking to maintain the production of the Vazante mine at 135 thousand ton/zinc/year. As part of this project, we plan to invest in ongoing exploration activities, infrastructure, including expansions of underground pumping stations, raising the capacity of the ventilation system, emergency pathways, dry cutting tailings, access ramps, power grids and substations.

Ambrosia Trend

This project aims at the additional production of zinc concentrate. Total capital investments are estimated at US$ 19.2 million, almost entirely earmarked for the construction an administrative support area and the Ambrósia Sul deposit’s pre-extraction.

Pasco Complex

Merger of the Atacocha and El Porvenir operations to form the Pasco mining complex. The project’s objective is to capture the synergies between the two operations, resulting from their proximity and operational similarities, to achieve cost savings and investments and reduce our environmental footprint. The project is being developed in four stages. The first phase involved the administrative integration of both mines, completed in 2014. The second phase, completed in 2015, merged tailings disposal operations, which consolidated the operations of the two mines with a single tailings disposal system. The third phase, completed in 2016, involved the construction of a new power transmission line that supplies both mines, replacing the old transmission lines. The fourth and final step is the integration of mine operations and underground facilities, expected to be completed by 2018.

Conversion to Jarosite Process

The project’s goal is to convert our Cajamarquilla foundry to the Jarosita process, which will permit improved zinc recovery. The feasibility study by Amec Foster Wheeler combined with a positive zinc market outlook has led us to progress the project’s construction phase. The total capital investment is estimated at US$ 44.9 million, and the project should be completed in September 2019. Zinc recovery at Cajamarquilla is expected to increase from the current rate from 93.8% to 97.0% after project completion (for more information about conversion see the section entitled “Operational Excellence/Smelter”).

New Areas for Mineral Exploration

A highlight among the other initiatives that we maintain to satisfy growth axis objectives and to ensure long-term production sustainability is our Central-West Zinc project. Studies conducted for this effort, in 2016 and 2017, revealed positive intersections of mineralization. Additional projects underway in Brazil include Borborema, Cinturão Rio-grandense, Arco Magmático de Goiás, Sedex Vazante, and Bacia de Tucano. In Peru, our initiatives are Chapi, Guadeloupe, Alpamarca, and Generativos.

The adoption of the Fusion Project is a highlight of our management of the company’s mineral exploration division in partnership with Datamine, to store all of the Mineral Exploration area’s sounding and sampling databases to support the discovery of new mines and declarations of mineral resources and reserves. The initiative was launched to meet the need for a more robust system capable of handling a large volume of information and to adopt an integrated data management process among our projects. Fusion includes, on a single platform, geological information, as well as all data related to exploration, surface sample collection, drilling, and chemical analyses. In 2017, the project was fully installed at all units located in Peru, which included training for operational teams. Fusion was also implemented in all Brazilian units. The project has brought more reliability and security to stored information.

New Business

Our growth strategy also anticipates potential joint ventures and acquisitions involving the existing projects of other companies. This alternative, which generally involves the exploration of nearby deposits, is an efficient way to identify additional opportunities and thus reduce investment risks.

Resources and Reserves

In 2017, we designed a detailed process for the preparation of technical reports required for the declaration of our resources and mineral reserves in all of our mines and greenfield projects, which are in accordance with the standards set forth in Canada’s National Instrument (NI) 43-101 – Standards of Disclosure and the U.S. Securities and Exchange Commission (SEC) Industrial Guide (IG) 07. These company reports are updated annually.

Resources and Reserves10

Obs: Estimating reserves and mineral resources involves assumptions about future commodity prices and technical mining issues. The presented ttatement of Resources and Reserves follows the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves.
Note 10: The amounts shown in this table have not been adjusted to reflect our proprietary interests. The information presented in this table includes 100% of the estimates of mineral reserves and resources of our consolidated subsidiaries and our joint ventures, some of which are not wholly owned, as set forth in this participation column.
Note 11: Mineral resources are reported exclusively from mineral reserves and have the effective dates described in 6-K mining report and 20-F of 2018.