October 27, 2017 / 5:11 PM / 2 years ago

UPDATE 1-Brazilian miner Nexa jumps 7 percent in trading debut

(Adds stock gains, comments from CEO, context on IPO size, background on company, plans for proceeds)

By Susan Taylor

TORONTO, Oct 27 (Reuters) - Shares of Brazilian miner Nexa Resources Inc rose 7 percent on their first day of trade in New York and Toronto on Friday, a signal that investors are warming up to the mining sector, its chief executive said.

Nexa, one of the world's top five zinc producers with three underground mines in Peru and two in Brazil, had priced its initial public offering at $16 a share, raising $496 million, after marketing it in a range of $18 to $21 per share. bit.ly/2xquUXH

The dual-listed stock was trading 7 percent higher just after midday at $17.12 on the NYSE and C$21.49 on the Toronto Stock Exchange.

“It’s the first transaction like this, of this size, for many, many years, meaning that the market is perceiving the mining business as a good option again,” Chief Executive Tito Martins said in an interview with Reuters.

“We’ve spent some time actually teaching some of the investors about the mining business again, because most of them were not around in the last decade.”

Nexa’s IPO is the third-biggest in Canada’s mining sector, according to Thomson Reuters data, and comes as IPOs in Canada have been slowing after the strongest first half in 11 years.

Nexa’s strong debut contrasts with the 16 percent slide on the first day of trading of apparel maker Roots Canada this week.

Nexa has no current acquisition plans, Martins said, and will focus on building the Aripuana mine in Brazil and Shalipayco mine in Peru, while improving capacity at existing operations in Peru. Proceeds from the IPO will go toward those projects, which Martins said will cost some $400 million.

The new Brazilian and Peruvian mines are expected to start operating in 2020 and 2021, respectively, adding a combined 150,000 tonnes of production, Martins said.

Zinc prices have doubled since the end of 2015, after several large mines shut down, with prices on Friday at $3,173 a tonne, below a decade-high of $3,308.75 per tonne touched earlier this month. That is encouraging new listings.

“Clearly, we have seen a substantial recovery in the base metals market and we may see in the medium-term some consolidation. It’s natural to assume,” Martins said. “Not necessarily from the majors, but the middle-sized companies may combine operations with others.”

BMI Research forecasts a global refined zinc shortage of 204,000 tonnes this year and 313,000 tonnes by 2019, with prices averaging $2,800 a tonne in 2018 and $2,900 in 2020 and 2021. (Reporting by Susan Taylor; Editing by Chizu Nomiyama and Paul Simao)

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