Good morning everyone, welcome to Nexa Resources fourth quarter and full year 2022 conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. This event is being recorded and also being broadcast via webcast, and may be accessed through Nexa's Investor Relations website, where the presentation is also available. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star and then 1 on your telephone keypad. To withdraw your questions, you may press Star and 2. Remember that the participants of the webcast will be able to register via web-website questions. Simply type your question in the box and click Send, that will be answered soon.
I would now like to turn the floor over to Miss Roberta Varella, Head of Investor Relations for opening remarks. Please go ahead.
Good day and good afternoon, everyone, and welcome to Nexa Resources 4th quarter and full year 2022 earnings conference call. Thanks for joining us today. During the call, we'll be discussing the company's performance as per the earnings release that we issued yesterday. We encourage you to follow along with this on-screen presentation through the webcast. Before we begin, I'd like to draw your attention to slide number 2, as we will be making forward-looking statements about our business, and we just ask that you refer to the disclaimer and the conditions surrounding those statements. It's now my pleasure to introduce you our speakers. Joining us today is Ignacio Rosado, our CEO, Jose Carlos del Valle, our CFO, and Leonardo Coelho, our Senior Vice President of Mining. Now I will turn the call over to Ignacio for his comments. Ignacio, please go ahead.
Thank you, Roberta. Thanks to everyone for joining us this morning. Please, let's move now to slide number 3, where we will begin our presentation. Let me begin by saying that despite a very challenging environment with significant volatility in commodity prices and ongoing inflationary cost pressures, we are pleased with our fourth quarter and full year operational performance. I am closing my first year as CEO of Nexa, and I am very proud of the important work we have done throughout 2022. I would like to reflect on some of the key accomplishments of the year. We deployed a set of initiatives and new ways of working that streamlined our corporate structure and supported our strategic priorities. We achieved our operational guidance in all metrics. Mining production was close to the upper range, while metal sales were at the high end, exceeding the guidance range.
Mining cash cost was in line with guidance. Smelting cash cost was slightly below guidance. Aripuanã ramp-up has continued to progress. The fourth quarter marked Aripuanã's first revenue. We are also pleased to inform that we processed zinc in concentrate from Aripuanã at our Juiz de Fora smelter in Brazil. The average capacity of the plant at the beginning of February is above 60%. Our exploratory drilling activities in this mine also indicated a potential increase in mineral reserves and resources. Another important milestone here is the adjusted EBITDA achieved by our operations, which was $120 million in the fourth quarter and a record high of $760 million for the year. Cash flow generated from operations in 2022 before expansion was $285 million.
I would also like to emphasize our strong balance sheet with a solid cash position, almost $120 million and a net debt-to-EBITDA ratio of 1.5 times. All these achievements reaffirm our commitment to discipline, capital allocation and positive cash flow generation. Moving to slide number 4. In slide number 4, regarding the operating performance of the mining segment, you can see that zinc production in the fourth quarter decreased to 75,000 tons, down 8% year-over-year and 2% quarter-over-quarter. This decrease was mainly explained by the consolidated lower zinc head grade in our mines.
In 2022, zinc production totaled 296,000 tons, 7% lower than in 2021 due to lower ore throughput in Cerro Lindo that was impacted by COVID at the beginning of the year, and also lower throughput in our Vazante mine, impacted by heavy rainfalls levels also at the beginning of the year. In relation to cash costs, mining cash costs in the fourth quarter of 22 decreased to $0.20 per pound, compared to $0.25 per pound in the fourth quarter of 21 and $0.57 per pound in the third quarter of 22. In both cases, the decrease is mainly explained by higher by-products contribution.
For 2022, cash costs achieved guidance, but increased to $0.28 per pound compared to the $0.21 per pound in 2021. This was mainly driven by lower zinc volumes and higher TCs, which were partially offset by higher by-product grades. Moving to slide 5. In slide 5, regarding the operating performance of the smelting segment, metal sales total 167,000 tons in the Q4 2022, up 6% from the Q4 2021, and up 3% from the Q3 2022. This increase was mainly driven by higher production volumes and solid demand in our markets. In 2022, metal sales totaled 616,000 tons, down 0.4% compared to 2021.
With respect to cash costs in the fourth quarter of 2022, smelting cash costs decreased to $1.20 per pound compared to the $1.28 per pound in the fourth quarter of 2021. This decrease was mainly driven by lower LME prices, higher TCs, and higher by-products contribution. When we compare the fourth quarter of 2022 with the third quarter of 2022, cash costs decreased by $0.16 per pound due to lower LME prices. The full year cash cost in 2022 was $1.34 per pound compared to the $1.13 per pound in 2021. This increase was due to higher LME prices, which affected our raw material costs, higher operating costs explained by inflation and negative effects in Brazil, and these two factors were partially offset by higher by-products contribution.
For 2022, cash cost was below our annual guidance of $1.37 per pound. Now, please, let's move to slide number 6. Ramp-up activities at the Aripuanã mine are progressing, and we have continued to focus on increasing the plant throughput rate, increasing asset reliability, and improving concentrate grades. The milling capacity utilization reached 53% in December 2022, compared to 32% at the end of the 3rd quarter of the same year. At the end of December, there were approximately 600,000 tons of ore available in stockpiles, which will help with the ramp-up activities. Underground activities continue to focus on developing and preparing new areas for mining operations. In March 2023, you should see an increase in reserves and resources where we will publish our new inventory.
In relation to CapEx during the last quarter of 2022, we invested $6 million in Aripuanã, totaling $66 million in CapEx in 2022 for a cumulative CapEx of $632 million since the beginning of the project. It is worth mentioning that in 2022, FX had a negative impact of $5.5 million. Now moving to the next slide. In slide number 7, we are pleased to inform you that at Aripuanã, we started to sell concentrates within market specifications, and we achieved our first revenue at the end of the fourth quarter of 22, with an increase in sales plan for the first quarter of 23. Sinking concentrate from Aripuanã has been processed at our Juiz de Fora smelter in Brazil.
The capacity utilization rate at the beginning of February is over 60%. We expect to achieve full capacity in the second half of 2023. Moving to slide number 8. In 2022, we executed over 115,000 meters of exploratory drilling in all of our mines and projects and over 140,000 meters in operational infill drilling. At Cerro Lindo, the Pucasaya mineralized body continued to be extended to the southeast with good results. At Vazante, the brownfield exploration focused on expanding existing mineralized zones in a northern extension of the mine. At Aripuanã, we achieved outstanding results in our brownfield program, with infill drilling confirming thick and high-grade mineralization, which is supporting the increase in mineral reserves and resources.
Regarding the Pasco complex, the results at the Porvenir mine and at the San Gerardo pit mine confirmed the continuity of mineralization, which has the potential to extend the life of both mines. The drilling campaigns in our greenfield projects, Hilarion and Namibia, also presented solid results. Now, I would like to turn over the call to Jose Carlos del Valle, our CFO, who will present our financial results. Jose, please go ahead.
Thank you, Ignacio. Good morning and good afternoon to everyone. I will continue on slide 9. I am pleased to report solid financial results for the full year 2022. As you can see, beginning with the chart on your upper left, total consolidated net revenue for the fourth quarter increased by 15% year-over-year, due mainly to higher metal sales. Compared to third quarter of 2022, net revenues increased by 11%, mainly driven by the mining sector. Looking at the full year, in 2022, consolidated net revenues reached $3 billion versus $2.6 billion in the same period last year, an increase of 16%, primarily due to higher prices.
In terms of adjusted EBITDA, consolidated adjusted EBITDA in the fourth quarter of 2022 was $120 million, compared to $153 million in the fourth quarter of 2021, and $121 million in the third quarter of 2022. For the full year, consolidated adjusted EBITDA increased by 2% to $760 million, the highest annual adjusted EBITDA ever achieved by Nexa. In relation to these figures, it is important to mention that in December 2022, Nexa revised its adjusted EBITDA definition, aiming to provide a better understanding of its operational and financial performance. Prior period comparatives have also been adjusted based on the updated definition. We now move to slide 10, where I will explain our results in further detail.
In the mining segment, net revenues for the fourth quarter of 2022 total $315 million, down 3% versus the same period of last year. This is explained mainly by higher TCs and lower LME-based metal prices. These negative effects were partially offset by higher copper, lead, and silver volumes. For 2022 as a whole, net revenue for the mining segment totaled $1.25 billion, compared to $1.16 billion a year ago, mainly due to higher zinc LME prices and the increase in copper, lead, and silver volumes. Regarding adjusted EBITDA on your upper right, fourth quarter adjusted EBITDA for the mining segment was $78 million, a reduction of 36% year-over-year, mainly driven by lower prices and higher TCs. We also started recording the sales of Aripuanã in our results, which still have a higher unit cost.
This resulted in a negative impact of $14 million. Compared to the third quarter of 2022, adjusted EBITDA increased by 22%, mainly driven by higher prices and higher by-product contributions. Finally, adjusted EBITDA for the mining segment in 2022 was $440 million, compared to $477 million last year, mainly due to increases in operational costs and also the Aripuanã effect. Switching over to the smelting segment, net revenues in the fourth quarter totaled $606 million, an increase of 19% versus the fourth quarter of 2021. This improvement is due mainly to higher sales volumes. Compared to third quarter of 2022, net revenues decreased 1%, mainly due to lower metal prices.
For the full year 2022, net revenue for the smelting segment totaled $2.5 billion, compared to $2 billion in the same period of last year, mainly due to the increase in zinc metal prices. When we look at adjusted EBITDA for the fourth quarter of 2022, we see that the smelting segment reported $46 million, up 44% from the fourth quarter of 2021. This is explained mainly by higher TCs and an increase in by-product contribution of $19 million. Compared to the third quarter, adjusted EBITDA for the smelting segment decreased by 21%, mainly explained by a non-cash impact of $40 million related to the update of environmental liabilities and their related provisions in Brazil.
Finally, the smelting segment's adjusted EBITDA for the full year 2022 totaled $326 million, compared to $271 million a year ago. This is an increase of 20%. Let's move on to slide number 11. For 2022, starting from our $760 million of adjusted EBITDA without Aripuanã expenses and investments, we can see that cash flow provided by operations before working capital changes was $806 million. We paid $229 million related to interest and taxes and $234 million in sustaining CapEx for our current operations. We also paid dividends of $75 million, including the amount distributed by our subsidiary, Pollarix. Additionally, we invested $41 million in non-sustaining CapEx.
In relation to Aripuanã, we invested approximately $226 million, including CapEx, pre-operating expenses, and working capital. It is important to mention that in 2022, we had a negative net effect of $70 million due to the early redemption of our 2023 notes, which was partially offset by a new export credit facility. Foreign exchange effects on cash and cash equivalents was a positive $60 million. Finally, there was a working capital variation of $136 million, mainly due to higher LME prices on inventories and lower outstanding amounts of accounts payable. With all the effects presented in this slide, 2022 free cash flow was negative in $246 million.
Now, for 2023, we are confident that with the completion of Aripuanã's ramp-up and a number of cash optimization initiatives, we will make a strong contribution to the company's free cash flow generation. Now let's move to Slide 12. In this slide, you can see that our liquidity remains strong and that we continue to report a healthy balance sheet with an extended debt profile. By the end of 2022, our current available liquidity was approximately $816 million, including our undrawn revolving credit facility of $300 million.
It is important to mention that as of December 31st, the average maturity of our total debt was 4.6 years, with a 5.3% average cost of debt. Finally, our leverage measured by the net debt-to-EBITDA ratio was 1.5 times compared to 1.4 times at the end of the third quarter and to 1.3 times a year ago. Now moving to slide 13 to discuss market fundamentals. As you all know, we had high volatility in base metal prices during the year due to a number of macroeconomic factors. Despite this, during 2022, zinc was one of the most resilient metals, registering a price increase of 16% compared to 2021. Although we expect zinc prices to remain relatively high in 2023, we expect that prices will be lower compared to 2022.
Zinc demand should continue to be driven by investments in the infrastructure and construction sectors. Regarding copper, prices in 2022 decreased by 6% compared to 2021, partly affected by the expectation of a potential slowdown in global economy growth and of a higher supply in the short term. Going forward, electric vehicle production and renewable energy projects are the main drivers for copper demand. Overall, the outlook for zinc and copper in the mid to long term remains positive and is supported by solid market fundamentals. Now moving to slide 15, we're gonna talk about the mining segment. As we show here for 2023, zinc production at the mid-range of the guidance is estimated to increase by 11% from 2022, mainly driven by additional production from Aripuanã.
In general, zinc production is expected to increase in all of our mines except for Cerrolindo due to lower head grades. For 2024, zinc production is estimated to increase 6% with a further 2% in 2025 over 2024. In 2023, copper production at the midpoint of the guidance range is forecasted to increase by 1% on average compared to 2022, also mostly driven by Aripuanã before decreasing in 2024 as we expect to access lower grade copper areas. This is in line with the mine plan. Lead production follows a similar outward trend and is expected to increase by 10% in 2023 versus 2022, with further increases of 10% and 8% in 2024 and 2025 respectively.
Consolidated 2023 run-of-mine mining costs at the mid-range of the guidance are estimated to increase 2% year-over-year, primarily driven by Vazante due to a scheduled trunnion maintenance in addition to expected higher energy prices and inflationary pressures on costs. In terms of cash cost, which does not include Aripuanã, we estimate mining cash costs between $0.49 per pound and $0.54 per pound in 2023, compared to $0.28 per pound in 2022. The main reasons for this are, on one hand, ongoing inflationary cost pressures, and on the other factors like higher TCs, lower by-product rates as we assume lower base metal prices compared to 2022, and also a decrease in zinc volumes from our current operations without Aripuanã. Turning now to slide 16 to discuss 3-year guidance for our smelting segment.
For 2023, it is important to mention that metal sales at the midpoint of the guidance range are estimated to decrease by 4% compared to 2022, as these estimates do not assume the resale of material from third parties. For the forecasted periods, the smelters are expected to operate at normal levels, and sales are expected to be similar to production levels. In terms of conversion costs, we estimate smelting consolidated conversion costs to increase slightly, mainly due to inflationary cost pressures and higher energy costs in Brazil. On the other hand, consolidated smelting cash costs in 2023 are expected to decrease year-over-year, primarily due to an estimated decrease in zinc prices and higher TCs, which should be partially offset by lower by-product credits. Next, before moving forward, I would like to discuss energy in some more detail.
As most of you are aware, we consolidate our Pollarix subsidiary in our results. Pollarix is responsible to supply energy for our operations. It has an equity interest in several power plants in Brazil, one of them being Enercon. In November, Enercon capital structure changed. As a result, we lost the joint control we had in the past. Consequently, we have stopped recognizing Enercon's proportional results in our numbers. We will still receive dividends. This will have no impact on our final result, but it will have an impact on our mining and smelting costs, which will increase in comparison to 2022. Finally, turning over to my last slide on investment guidance. For 2023, we expect CapEx of $310 million.
Sustaining investments are expected to total $268 million, with mining accounting for $194 million, including $52 million from Aripuanã and smelting accounting for $64 million. In the mining segment, the majority of sustaining capital expenditures, around $79 million, are for underground mine development and $54 million for tailings storage facility. In terms of mineral exploration in 2023, we estimate a total investment of $55 million, also down compared to 2022. Project evaluation investments are estimated at $55 million, mainly driven by the Tres Marias facility project of $20 million and $28 million related to corporate IT, potential growth projects, and various other projects across our business units. I will now hand the call back to Ignacio for his final remarks. Ignacio, please.
Thank you, José Carlos. I would like to close this presentation by briefly reinforcing our priorities. This year, we have been able to consistently perform and deliver strong results with operational flexibility and a rigorous discipline in costs and investments. Nonetheless, we are aware that uncertainty of today's economic landscape is likely to extend into the entire of 2023, affecting the demand for our products, as well as putting pressure on our costs. In Nexa, we will remain focused on optimizing costs, OpEx and CapEx, to properly navigate in the current environment. With respect to Peru, despite the current political instability, we believe we have strong relationships with our host communities, which will continue to support our operational objectives. We also go into 2023 with a strong balance sheet.
We will keep delivering based on our purpose, executing on our ESG strategy, and advancing the many initiatives we have underway throughout 2023. Finally, I would like to emphasize that we remain confident that the long-term dynamics of our industry are promising, as the fundamental value for zinc and other base metals is robust. Thank you all for attending the presentation. With that, we will be happy to take your questions.
Ladies and gentlemen, at this time we'll begin the question-and-answer session. To ask a question, you may press star and then one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star then two. You also may send questions via chat at the webcast platform.
We have one question here from the web, from Fiorella Mendonça. When is the commercial production of Aripuanã expected to begin?
Okay. Thank you, Roberta. This is Ignacio Rosado. As we said in doing our presentation, Aripuanã reached a 53% capacity in December, 60% capacity in January, and more than 60% in February. We start transporting commercial concentrate from Aripuanã in January. So officially, Aripuanã is in commercial production in January. We are expecting, as we said in the call, that in the second half of this year, we will be at full capacity and we can commit more during the coming months.
The next question from the web is from Hernan Kisluk from MetLife. The cost guidance for 2023 includes a 2% increase in ROM, but 84% increase in cash costs. Is the difference attributed to lower by-product prices, or are there other factors?
Thank you, Roberta. In relation to this question, I would first say that obviously our focus is to control costs in all the aspects that are under our control, and that is reflected in the 2% increase in the mining cost of ROM. That's what we can control. In terms of the mining cash costs, it's mainly related to our assumptions related to by-product contributions, the credits, and slightly lowers production in zinc, not including Aripuanã, no, from the existing mines. The focus continues to be on controlling our costs, the ones that we can control. The other ones are based on assumptions.
Continuing from the web. What is the expected contribution to EBITDA from Aripuanã in 2023 and 2024?
Ignacio, again, Aripuanã is its ramp-up is going really well. However, as you may know, in the ramp-up period, things move forward, and it's difficult for us to predict what's gonna be the EBITDA for the rest of this year and 2024. As I said, Aripuanã will be at full capacity in the second half of this year. In the coming months, we can give you more guidance on the progress of Aripuanã. Today, I would say it's early to project an EBITDA for this year and the following one.
Everyone, we do have a question from the audio side from Jens Spiess from Morgan Stanley. Please go ahead with your question.
Hello. Thanks for taking my question. Yes, along those lines, I just wanted to ask, why didn't you include Aripuanã in your cash cost guidance and run-of-mine cost guidance for 2023, considering that you will have considerable volumes coming from that mine? Secondly, looking at your cash flow statement, you had around $80 million of accruals and impairment add backs. Could you maybe elaborate on what those are related to and how much are accruals and how much are impairments? Thank you.
Yeah. Aripuanã is not included in the cash cost guidance because as I was saying, during the ramp-up period, we are adjusting our concentrator plants. This is a process, as I was saying, we are at 60% today. In the coming months, it's gonna go up. It's very difficult to predict what's gonna be the cash cost of Aripuanã, and because it's in the ramp-up period. In the coming months when we stabilize the plants and we reduce all the costs that we are including right now because of the ramp up, we can give you more flavor on Aripuanã. That's why we couldn't include that in the guidance.
Regarding the second question, I'm gonna turn it to José Carlos to answer that question. Yes. I didn't hear it. I didn't hear you very well. Could you please repeat? I know you were referring to the cash flow, right?
Exactly. To the cash flow from operations where you reported cash outback, detour accruals, and impairments of, I think it was $82 million. Just want to understand what that's related to and how much is actually accruals and how much is impairment.
From what I can remember, in terms of impairments, there are a number of things, mainly two factors. There's an impairment reversal related to Cerro de Pasco based on the new scenario that we use to evaluate the assets. This has to do with something that we have mentioned before related to the future of Cerro de Pasco and the potential integration of El Porvenir and Atacocha. In terms of impairments, we did a write down of Shalipayco and Pukaqaqa at the end of this year, which had a net effect combined with the impairment reversal related to Cerro de Pasco. I'm not sure if that answers your question.
Yes. I mean, you have two lines. One says impairment loss of long-lived assets. It's $32.5 million. I guess.
Yes. Shalipayco and Pukaqaqa.
-that's the one you're saying. There's a second line that says, "Changes in accruals and other asset impairments." That's $84 million. Just want to try and understand.
Yeah. It's.
Difference, right? Mm-hmm.
Yeah, yeah. Cerro de Pasco it's an impairment reversal of about $82 million, if I remember correctly.
Okay.
Yeah.
All right. Thank you.
Thank you.
Once again, if you would like to ask a question, you may press star and then 1 using a touch tone telephone. Please note that you may also submit your questions via the chat on the webcast platform. Once again, if you would like to ask a question, please press star and 1. We do have an additional question from Alejandra Andrade from JP Morgan. Please go ahead with your question.
Hi. Thank you so much for taking my question. Just a quick one from me. Would you be interested at all in looking at M&A possibilities in Peru to increase your zinc production there? There's obviously been headlines of a new asset that will be for sale, so just curious to see what you think there. Thanks. Thank you, Alejandra.
Actually, we are very active looking for opportunities in zinc and copper in all jurisdictions, in many countries. Peru is going through a difficult situation today. As you know, we have a very good project called Magistral, for example. We assess the projects and the operating mines there. In Peru today, as you know, we have to be cautious about the country.
Given that our concentration, we have spent a lot of CapEx in Aripuanã, and our concentration today is to make sure that Aripuanã's ramp up continues to progress very well. We are concentrating our efforts today in making sure that this happens and also in making sure that we can increase the production, especially in our Pasco complex. Today, even if we are active looking for opportunities, today, we are cautious about Peru.
Great. Thank you.
To continue the questions from the web. We have here one from Victor Vidal. Hi, Ignacio. Thanks for the opportunity and congratulations for the results. I have 2 questions. The first one with regard to Aripuanã volumes. The guidance for 2022 were not achieved, and compared to the technical report, I have the impression that metal volumes in the new guidance for 2023, 2025 are below the potential and also below the last guidance. Are you being more conservative or there was something significant change in the mine exploration plan? If you are being more conservative, what's the main motive? If there are changes in the mine exploration plan, these are related to a slower ramp up with less ore being treated or related to lower grades?
Yeah. No, I would say that, you know that during the period of ramp up, we are always facing with some problems. As I was saying, the Aripuanã is progressing, towards being in full production, towards the end of, I mean, during the second half of this year. However, we have to be conservative, in our projections for this year. We are being conservative. Again, it's advancing in a solid way. As we inform in our earnings release, Aripuanã is increasing its type of mine. The Ambrex body, they show that we can increase reserves of more or less 35%.
With this and the potential that we see in Baú and in other deposits, we believe that in 2024, we can potentially increase the capacity or the production of Aripuanã. However, this is early days, and we rather comply with what we see today, and that's why we are trying to be conservative. Again, Aripuanã is going through a period that is very solid in its advancing towards a full production.
If I may also ask about CapEx with regard to Aripuanã. I'd like to understand better is sustaining CapEx needs. I notice an expected increase in sustaining CapEx in 2020 through 2023 related to this mine. Could you provide more details on this matter and your view on this line going forward?
Yeah. We publish a number of $54 million in Aripuanã. Part of it is sustaining. Today is almost 40, and $14 million was related to some issues around the tailings, okay? However, it's early again to say what's gonna be the sustaining CapEx of Aripuanã, because today, given that we are in the ramp up period, we have a lot of contractors. We are trying to make sure that the plant and the mine is ready for full production. We have some additional costs and additional CapEx that we are incurring to make sure that Aripuanã is in full production during the second half of the year. Having said that, this 54 is a number that is gonna be optimized in 2024.
I believe that during the second half of the year, we can give you more flavor around what's gonna be the sustaining CapEx, on a, on a yearly basis going forward.
Next question comes from Isabella Vasconcelos from Bradesco. Thank you for all the detail. Three questions: Could you remind us, please, the TC level expected for 2023? How has the ramp up of Aripuanã been versus initial expectations? Have there been larger challenges, positive surprises? Regarding capital allocation, is expanding copper production still a strategic focus?
I will start with the last one. The copper production is still strategically important for us. We said that we want to diversify more from zinc. Zinc is growing and it's growing in a solid way going forward. But we believe that a mix of copper production in our total production is very important. And for that, we are looking for many, many opportunities in different countries. Regarding the TCs, we normally don't publish TCs. What we can say is that at the end of last year and the beginning of this year, the TCs were going up because of this bottleneck in production in Europe because of the energy crisis in Europe. So most smelters, some of Glencore and some of Trafigura were not producing.
Today, energy prices are going down, and today, China is sort of opening right now to the world. The TC levels, we don't know what will happen with them. I would say that they were a little bit higher towards the end of the year and this year, and it might go down. We don't know at which level during the rest of 2023. Regarding the third question, I don't know. Could you repeat?
It was about the capital allocation.
Uh-
Expanding. Sorry. The ramp up of Aripuanã, because you started with the third one also.
Yeah. Yeah. It's very close to what we expected. I guess some factor that is important to mention in Aripuanã is the rainy season. January and February and part of March in Aripuanã, the rainy season is very strong, so sometimes it's difficult for us to project a progress curve that is similar to what we have or achieve. We had in our plans to reach 70% in February. We are close to that. We are more than 60%. As I was saying, we don't see any fatal flaw going forward. We are very confident that during the second half of this year, we will be at full capacity.
Next question comes from Isidro Arrieta from Scotiabank. Can you please update us on the situation of Peruvian operations and if you are seeing any impact of road blockage and protests?
Yeah. Peru is going through a very difficult situation. In the last two, three months, this political situation has created a lot of noise and a lot of protests in the country. What I can say is that for our operations and with the relationships that we have with our communities, we don't see any problems in production interruption in the coming months. Having said that, blockages in the main highways in the country could affect production of some of the important miners in Peru. In our case, this hasn't been the case.
Only I would say, it could be the case, but given the context of where the government is managing all these conflicts and given the context of what has happened in the country, if there are some blockages, I would say that they shouldn't be material in the projection of our production for 2023. We don't expect any material changes in that. As I was saying, we are very close to our communities, and we are trying to make sure that that is the case in the rest of 2023.
Our next question is a follow-up question from Jens Spiess from Morgan Stanley. Please go ahead with your follow-up. Jens, is it possible your phone is on mute?
Correct. Yes. Thank you. Yes. Just on Arequipa, considering that you already are reached commercial production, should we still expect ramp up and non-operating expenses in the first quarter, or will that drop to zero and be fully reflected in costs because you already will have sales there? Secondly, do you foresee any impact on your tax rate due to the provisional measure on transfer price in Brazil?
Yes. Hi. José Carlos here. The first part of your question, going forward, obviously, we will monitor how the ramp-up continues to roll. We will continue to monitor the cost of the concentrates as we have done in the past, and we will be adjusting to net realizable value if needed. We expect that the cost, the unit cost, will continue to go down as capacity utilization increases over time. We will keep track of that. In terms of the mining tax, we have no additional news. We know there's an impact for our operations in 2023, that's based on the current information.
It's not so material, but we don't have any information on anything additional than that.
Okay. Thank you.
Thank you.
We have another question from the web, from Cesar BTG Pactual. Good morning. Has your Cerrolindo operation has been impacted by ongoing blockades in some locations in Peru? Can you please explain how logistics work around the area, how material is transported, and how consumables enter and exit the area?
Hi, José Carlos here again. No, luckily, we have not been affected directly. Cerrolindo location has not been impacted. There have been some blockades in the highway south of where Cerrolindo is located. Transportation takes place basically by trucks that usually go and come back by from the north. No impact whatsoever to Cerrolindo right now. We continue to that. We expect that to continue. We have good relationships with the communities around the operation as well.
Another question from the web from Rodrigo SP Integra. What mine life do you feel comfortable with in Cerrolindo?
The life of mine of Cerrolindo today, as you can see in the presentation, is seven years. We have been replacing a year-over-year Cerrolindo in terms of reserves. As I was saying, we are exploring Pucasaya Norte in Arequipa. In Cerrolindo, sorry. We are having good results. So far with this life of mine and the, let's say, the findings that we are having in Pucasaya Norte, we are comfortable with what we have. However, the plan for all of our mines is that put some priorities in more infill drilling in most mines so we can extend the life of the mines in all of them.
This is something that is reflected in the CapEx that we are investing of almost $11 million in related to this.
Ladies and gentlemen, with that, we'll be closing today's question and answer session. I'd like to turn the floor back over to Ignacio for final remarks. Please go ahead.
Thank you. Thank you everyone for attending. We look forward to release our quarterly results in April. We are very confident that all of our mines and smelters are running in the right direction. We hopefully achieve the guidance through 2023. Thank you again for participating, and if you need to contact us later on with some questions, you can do so by reaching Roberta or José Carlos. Thank you again, and have a good day.
Ladies and gentlemen, that will conclude today's conference call. We thank you for attending today's presentation. You may now disconnect your lines.