(All $ figures reported in USD)
- Adjusted EBITDA of $12.0 million in
Q1 2019 decreased from $27.4 million in Q1 2018
- Operating cash flows before
movements in working capital of $11.8 million in Q1 2019 decreased
from $27.4 million in Q1 2018
- Revenue from metals payable of $49.2
million in Q1 2019 decreased from $61.7 million in Q1 2018 due to
lower throughput and lower realized metal prices
- Q1 2019 consolidated copper
production of 7.7 million pounds, consolidated silver production of
0.7 million ounces, consolidated zinc production of 16.4 million
pounds, consolidated lead production of 7.0 million pounds, and
consolidated gold production of 1,986 ounces; a 4% decrease, 16%
increase, 10% decrease, a 10% increase, and a 2% increase
respectively, compared to Q1 2018, management expects that annual
production guidance will still be met(1)
- Record quarterly throughput at the
Cusi Mine in Mexico
- $23.9 million of cash and cash
equivalents as at March 31, 2019
- Net Debt of $45.0 million as at
March 31, 2019
- The Company through its Normal
Course Issuer Bid has to date repurchased and cancelled a total of
907,266 shares at an average VWAP of C$2.04
- Shareholder conference call to be
held Tuesday, May 14, 2019, at 10:30 AM (EST)
(1) Silver equivalent ounces and copper and
zinc equivalent pounds for Q1 2019 were calculated using the
following realized prices: $15.57/oz Ag, $2.85/lb Cu, $0.94/lb Pb,
$1.23/lb Zn, $1,305/oz Au. Silver equivalent ounces and copper and
zinc equivalent pounds for Q1 2018 were calculated using the
following realized prices: $16.75/oz Ag, $3.14/lb Cu, $1.15/lb Pb,
$1.56/lb Zn, $1,334/oz Au.
Sierra Metals Inc. (TSX:SMT)(BVL:SMT)(NYSE American:SMTS)
(“Sierra Metals” or the “Company”) today reported revenue of $49.2
million and adjusted EBITDA of $12.0 million on throughput of
568,401 tonnes and metal production of 4.0 million silver
equivalent ounces, or 21.8 million copper equivalent pounds, or
50.6 million zinc equivalent pounds for the three month period
ended March 31, 2019.
The Company has continued to be successful in maintaining
positive operating cash flow generation from its existing
operations in order to reduce debt levels, fund required capital
expenditures, and maintain liquidity.
Despite the loss of 12 days of production at the Yauricocha Mine
during March 2019 due to the illegal strike action which has
subsequently been resolved, the mine continued its strong
operational performance during Q1 2019, realizing an increase in
zinc equivalent metal production compared to Q1 2018. The revenues
and Adjusted EBITDA generated during Q1 2019 allowed the Company to
fund its capital expenditure programs and repay some of the
existing debt obligations, despite a challenging metal price
environment.
The Company achieved record quarterly throughput from the Cusi
Mine, and the third highest quarterly throughput from the Bolivar
Mine, continuing the successful production increases realized in
Mexico during 2018. Consolidated production of silver increased 16%
to 0.7 million ounces, copper declined 4% to 7.7 million pounds,
lead increased 10% to 7.0 million pounds, zinc declined 10% to 16.4
million pounds, and gold increased 2% to 1,986 ounces compared to
Q1 2018.
Igor Gonzales, President, and CEO of Sierra Metals stated: “The
first quarter has presented us with several challenges including an
illegal strike at Yauricocha, as well as slower than expected ramp
up of throughput at Bolivar and Cusi with lower head grades and
recoveries. I want to assure shareholders that management remains
focused on the expansions in Mexico and improving tonnage, head
grades, and recovery rates which in turn will help to lower costs.
Also, as noted above, it still bears mentioning that in Q1 2019
Yauricocha saw an increase in zinc equivalent metal production,
Cusi had record throughput and Bolivar had a 1% increase in
throughput over Q1 2018. Subsequent to Q1 2019, throughput rates
continue to improve. At Yauricocha the strike has been settled and
the mine is working to full capacity. In Mexico, production
increases are expected to become more apparent in late Q2 2019 when
we should reach higher throughput rates at both Bolivar and Cusi.
Production is also expected to be higher in the latter half of 2019
when the mines are running at the higher throughput rates. Cash
flow continues to be strong and with continued efforts, we expect
to see further improvements in cash flow and good returns on the
capital being invested. Management expects that the Company will
still be within the annual production guidance provided.
We continue to modernize and improve all our Mines, implementing
best operational practices. These improvements are expected to
allow for the Company to increase metal production over the course
of the coming year. Our Company-wide ongoing brownfield exploration
programs should also lead to further significant growth in reserves
and resources, which will add to the value of our assets during the
year ahead.”
He continued, “Sierra Metals’ balance sheet remains strong with
the liquidity needed to meet our operational and growth expenditure
requirements. The Company is on-track for further growth in 2019
based upon positive PEA studies which demonstrates robust growth
opportunities for the Company at all Mines. We continue working on
Life of Mine plans which are expected to be completed in mid-2019.
Furthermore, NI 43-101 Technical Reports are expected to be
completed for the Yauricocha Mine by the end of Q2 2019 and for
Bolivar and Cusi Mines by the end of Q4 2019. We are very
optimistic that these updated reports will provide for additional
reserves and resources at all Mines.”
The following table displays selected financial and operational
information for the three months ended March 31, 2019:
MDA Selected Financial Results
Three Months Ended
(In thousands of dollars, except per share
and cash cost amounts, consolidated figures unless noted
otherwise)
March 31, 2019
March 31, 2018
Operating
Ore Processed / Tonnes Milled
568,401
557,710 Silver Ounces Produced (000's)
691 594
Copper Pounds Produced (000's)
7,732 8,090 Lead Pounds
Produced (000's)
6,954 6,312 Zinc Pounds Produced (000's)
16,421 18,214 Gold Ounces Produced
1,986 1,952 Copper
Equivalent Pounds Produced (000's)1
21,767 23,445 Zinc
Equivalent Pounds Produced (000's)1
50,562 47,209
Silver Equivalent Ounces Produced
(000's)1
3,988
4,394 Cash Cost per Tonne Processed
$ 51.77 $
46.66 Cost of sales per AgEqOz
$ 8.48 $ 7.15
Cash Cost per AgEqOz2
$ 8.30 $ 6.77 AISC per AgEqOz2
$ 13.71
$ 9.85 Cost of sales per CuEqLb2
$ 1.55 $ 1.34 Cash
Cost per CuEqLb2
$ 1.52 $ 1.27 AISC per CuEqLb2
$ 2.51 $ 1.85 Cost of sales per ZnEqLb2
$
0.67 $ 0.67 Cash Cost per ZnEqLb2
$ 0.66 $
0.63 AISC per ZnEqLb2
$ 1.08 $ 0.92 Cash Cost
per ZnEqLb (Yauricocha)2
$ 0.54
$
0.57 AISC per ZnEqLb (Yauricocha)2
$ 0.85 $ 0.82
Cash Cost per CuEqLb (Bolivar)2
$ 2.04 $ 1.29 AISC per CuEqLb (Bolivar)2
$
3.59 $ 1.94 Cash Cost per AgEqOz (Cusi)2
$
16.53 $ 18.34 AISC per AgEqOz (Cusi)2
$
30.57 $ 28.33
Financial
Revenues
$
49,180 $ 61,675 Adjusted EBITDA2
$ 12,041 $
27,403 Operating cash flows before movements in working capital
$ 11,804 $ 27,348 Adjusted net income attributable to
shareholders2
$ 886 $ 11,187 Net income (loss)
attributable to shareholders
$ (1,724 ) $
8,703 Cash and cash equivalents
$ 23,937 $ 25,514
Working capital(3)
$ (19,795 )
$ (1,576 )
(1) Silver equivalent ounces and copper
and zinc equivalent pounds for Q1 2019 were calculated using the
following realized prices: $15.57/oz Ag, $2.85/lb Cu, $0.94/lb Pb,
$1.23/lb Zn, $1,305/oz Au. Silver equivalent ounces and copper and
zinc equivalent pounds for Q1 2018 were calculated using the
following realized prices: $16.75/oz Ag, $3.14/lb Cu, $1.15/lb Pb,
$1.56/lb Zn, $1,334/oz Au.
(2) This is a non-IFRS performance
measure, see Non-IFRS Performance Measures section of the
MD&A.
(3) The decrease in working capital was due to the Corona
Acquisition Facility with BCP being classified as a current
liability, as it was repaid in full during May 2019.
Q1 2019 Financial
Highlights
Revenue from metals payable of $49.2 million in Q1 2019
decreased by 20% from $61.7 million in Q1 2018. The decrease in
revenues was partially due to a 14% decrease in tonnes processed at
the Yauricocha Mine due to the illegal strike action initiated by
members of the Union of the Mine and Metallurgical Workers of
Minera Corona on March 19, 2019; which was partially offset by
higher head grades and recoveries for all metals, except gold head
grades at Yauricocha. Lower revenues were also affected by the
decreases in the prices of silver (7%), copper (9%), zinc (21%),
lead (18%), and gold (2%). Additionally, lower copper head grades
and silver and gold recoveries realized at the Bolivar Mine
resulted in a 15% decrease in revenues, while Cusi’s revenues
increased by 61% due to the 165% increase in throughput, quarter
over quarter.
Yauricocha’s cash cost per zinc equivalent payable pound was
$0.54 (Q1 2018 - $0.57), and AISC per zinc equivalent payable pound
of $0.85 (Q1 2018 - $0.82). The increase in the AISC per zinc
equivalent payable pound for Q1 2019 compared to Q1 2018 was due to
the increase in treatment and refining charges for the zinc
concentrate sold. This was partially offset by the increase in zinc
equivalent payable pounds as the Company realized higher head
grades and recoveries for all metals, except gold head grades.
Bolivar’s cash cost per copper equivalent payable pound was
$2.04 (Q1 2018 - $1.29), and AISC per copper equivalent payable
pound was $3.59 (Q1 2018 - $1.94) for Q1 2019 compared to Q1 2018.
The increase in the AISC per copper equivalent payable pound during
Q1 2019 compared to Q1 2018 due to higher labour and contractor
costs incurred related to stope and ramp development within the
mine required to increase throughput to the 3,600 tpd and 4,000 tpd
level. The majority of these costs are included in opex.
Additionally, sustaining capital expenditures were $3.6 million
higher in Q1 2019 compared to Q1 2018 and related to the purchase
of mining equipment, mine development costs, exploration drilling
within the mine, and plant improvements required to produce 3,600
to 4,000 tpd.
Cusi’s cash cost per silver equivalent payable ounce was $16.53
(Q1 2018 - $18.34), and AISC per silver equivalent payable ounce
was $30.57 (Q1 2018 - $28.32) for Q1 2019 compared to Q1 2018. AISC
per silver equivalent payable ounce increased due to higher
sustaining capital expenditures incurred due to investments made in
the concentrator plant in order to increase throughput to 1,200 tpd
during Q2 2019.
Adjusted EBITDA(1) of $12.0 million for Q1 2019 decreased
compared to $27.4 million in Q1 2018. The decrease in adjusted
EBITDA in Q1 2019 was due to the decrease in revenues realized at
Yauricocha and Bolivar, mainly due to the illegal strike action at
Yauricocha and a decrease in the prices of all metals.
Cash flow generated from operations before movements in working
capital of $11.8 million for Q1 2019 decreased compared to $27.3
million in Q1 2018. The decrease in operating cash flow is mainly
the result of lower revenues generated and lower gross margins
realized.
Net income (loss) attributable to shareholders for Q1 2019 was
$(1.7) million (Q1 2018: $8.7 million) or $(0.01) per share (basic
and diluted) (Q1 2018: $0.05).
Cash and cash equivalents of $23.9 million and working capital
of $(19.8) million as at March 31, 2019 compared to $21.8 million
and $(8.3) million, respectively, at the end of 2018. The decrease
in working capital was due to the Corona Acquisition Facility with
BCP being classified as a current liability, as it was repaid in
full during May 2019. Cash and cash equivalents have increased by
$2.1 million during Q1 2019 due to $1.5 million of operating cash
flows, and $20.7 million drawn down from the new Senior Secured
Corporate Facility, being partially offset by capital expenditures
incurred in Mexico and Peru of $(11.3) million, $(0.1) million of
share repurchases, and repayments of loans, credit facilities and
interest of $(8.7) million.
(1) This is a non-IFRS performance measure, see Non-IFRS
Performance Measures section of the MD&A.
Debt Refinancing Update
During Q1 2019 the Company announced the Closing of a $100
million Senior Secured Corporate Credit Facility in March. The
facility has a 6-year term with a 2-year grace period and has a
rate of Libor +3.15%. This facility will provide the Company with
additional liquidity and will offer financial flexibility to fund
future capital projects in Mexico as well as working capital
requirements. The Company will also use the proceeds of the
Corporate Facility to repay existing debt in the near term.
Subsequent to end of the first quarter, on May 9th, the Company
repaid the remaining $33.2 million existing on the Corona
Acquisition Facility with BCP and the $15.0 million existing on the
Revolving Credit Facility with BCP, after drawing funds from the
Senior Secured Corporate Credit Facility.
Project Development
The Company reported the resolution of the illegal strike action
at the Yauricocha Mine that ran from March 19 – April 13, 2019.
During the strike there were no material situations that took place
and an agreement was been reached whereby no contractors dismissed
as part of the contractor change will be reinstated, which was the
initial reason for the strike.
Mine development at Bolívar during Q1 2019 totaled 1,454 meters.
A portion of the meters (1,070m) were developed to prepare stopes
for mine production. The remainder of the meters (384m) were
related to the deepening of ramps and developing service ramps to
be used for ventilation and pumping in the Lower El Gallo Inferior
orebody and Bolivar West orebody.
During Q1 2019, at the Cusi property, mine development totaled
1,251 meters, which included 100 meters of ramp development at the
Santa Rosa de Lima Zone; the rest of the development related to
stope preparation in various zones within the mines.
Exploration Update
Peru:
During Q1 2019, the Company drilled 59 holes totaling 9,345
meters at Yauricocha. The drilling included the following:
Exploration Drilling:
- Copper Porphyry Mineralization (Central
Mine Zone Level 720): 2 holes totaling 1,849 meters were drilled to
continue to test the priority anomaly located in the monzonite
intrusive zone, where a copper molybdenum mineralized porphyry was
discovered earlier in the year; drill results continue to display
the presence of a copper molybdenum porphyry orebody, where we have
observed typical alterations, as well as copper mineralization
disseminated in the encased rock, as veinlets with quartz and
copper are present with molybdenum;
- Antacaca Orebody (Level 1070 Central
Mine Zone): 2 holes totaling 1,029 meters to explore the continuity
of mineralization of the orebody at depth; the hole confirmed the
continuity of this mineralized orebody at depth, with magnetite
mineralization with nodules of chalcopyrite;
- Contacto Occidental Orebody (Level 1070
Central Mine Zone): 11 holes totaling 1,644 meters to explore the
continuity of this high-grade orebody at depth; six of the drill
holes had positive results and allowed us to confirm and define the
irregularities of the gaps within the orebody;
Definition Drilling:
- Esperanza (Level 1020 Central Mine
Zone): 5 holes totaling 639 meters which confirmed the continuity
of mineralization of the orebody; holes were executed between the
sublevel development level 8 meters above the 1020 level;
- Esperanza Distal (Level 1020 Central
Mine Zone): 15 holes totaling 1,661 meters to further define the
continuity of this mineralized orebody in order to bring it into
production during Q3 2019;
- Catas (1070 Level Central Mine Zone):
13 holes totaling 1,440 meters to define and provide greater
certainty for the continuity of the orebody down to the 16th floor
of the 1120 level;
- Karlita (870 Level Cachi Cachi Mine):
11 holes totaling 1,083 meters to provide more certainty to the
resources existing on the 16th floor of the 920 level of the
mine.
Mexico:
Bolivar
- At Bolívar during Q1 2019, 8,240 meters
were drilled from surface as well as diamond drilling within the
mine. 1,794 meters were drilled within the mine in the El Gallo
zone to the northwest and southeast to determine the continuity of
the skarn orebody. Surface exploration drilling was performed in
the Bolívar West, South extension, area with 1,234 meters drilled,
and 2,748 meters in the Bolivar West/Lylli area, encountering skarn
intersections with some mineralization. Exploration drilling was
started to determine the potential of the Lower Gallo zone to the
southeast, which included 708 meters drilled which encountered
intersections of skarn with some mineralization. 1,756 meters of
geotechnical holes were drilled to determine the type of rock that
exists near the potential Bolivar West/Piedras Verdes plant tunnel
project.
Cusi
- During Q1 2019 the Company drilled
1,261 meters to support the development of the Santa Rosa de Lima
vein in Promontorio to further verify the size and continuity of
the orezone. In addition, 3,656 meters of surface diamond drilling
was performed to explore the depth of the mineralized structure of
San Nicolas, San Rafael and Santa Rosa de Lima.
Conference Call Webcast
Sierra Metals’ senior management will host a conference call on
Tuesday, May 14, 2019, at 10:30 AM (EDT) to discuss the Company’s
financial and operating results for the three months ended March
31, 2019.
Via Webcast:
A live audio webcast of the meeting will be available on the
Company’s website:
https://event.on24.com/wcc/r/1956428/CAFED0BBE1AF315572FFBCA7456DFCF6
The webcast along with presentation slides will be archived for
180 days on www.sierrametals.com.
Via phone:
For those who prefer to listen by phone, dial-in instructions
are below. To ensure your participation, please call approximately
five minutes before the scheduled start time of the call.
Participant Number (Toll-Free North America): (833)
245-9659Participant Number (Toll-Free Peru): 0800-71-476Participant
Number (International): +1 (647) 689-4231Conference ID: 6988769
Quality Control
All technical production data contained in this news release has
been reviewed and approved by Gordon Babcock, P.Eng., Chief
Operating Officer and a Qualified Person under National Instrument
43-101 – Standards of Disclosure for Mineral Projects.
Americo Zuzunaga, FAusIMM CP (Mining Engineer) and Vice
President of Corporate Planning is a Qualified Person and chartered
professional qualifying as a Competent Person under the Joint Ore
Reserves Committee (JORC) Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves.
Augusto Chung, FAusIMM CP (Metallurgist) and Vice President
Special Projects and Metallurgy and a chartered professional
qualifying as a Competent Person on metallurgical processes.
About Sierra Metals
Sierra Metals Inc. is Canadian based growing polymetallic mining
company with production from its Yauricocha Mine in Peru, and its
Bolivar and Cusi Mines in Mexico. The Company is focused on
increasing production volume and growing mineral resources. Sierra
Metals has recently had several new discoveries and still has
additional brownfield exploration opportunities at all three Mines
in Peru and Mexico that are within or close proximity to the
existing Mines. Additionally, the Company has large land packages
at all three Mines with several prospective regional targets
providing longer term exploration upside and mineral resource
growth potential.
The Company’s Common Shares trade on the Bolsa de Valores de
Lima and on the Toronto Stock Exchange under the symbol “SMT” and
on the NYSE American Exchange under the symbol “SMTS”.
For further information regarding Sierra Metals, please visit
www.sierrametals.com.
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Inc
Forward-Looking
Statements
This press release contains “forward-looking information” and
“forward-looking statements” within the meaning of Canadian and
U.S. securities laws related to the Company (collectively,
“forward-looking information”). Forward-looking information
includes, but is not limited to, statements with respect to the
Company’s operations, including the anticipated developments in the
Company’s operations in future periods, the Company’s planned
exploration activities, the adequacy of the Company’s financial
resources, and other events or conditions that may occur in the
future. Statements concerning mineral reserve and resource
estimates may also be considered to constitute forward-looking
statements to the extent that they involve estimates of the
mineralization that will be encountered if and when the properties
are developed or further developed. These statements relate to
analyses and other information that are based on forecasts of
future results, estimates of amounts not yet determinable and
assumptions of management. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as
“expects”, “anticipates”, “plans”, “projects”, “estimates”,
“assumes”, “intends”, “strategy”, “goals”, “objectives”,
“potential” or variations thereof, or stating that certain actions,
events or results “may”, “could”, “would”, “might” or “will” be
taken, occur or be achieved, or the negative of any of these terms
and similar expressions) are not statements of historical fact and
may be forward-looking information.
Forward-looking information is subject to a variety of risks and
uncertainties, which could cause actual events or results to differ
from those reflected in the forward-looking information, including,
without limitation, risks inherent in the mining industry including
environmental hazards, industrial accidents, unusual or unexpected
geological formations, floods, labour disruptions, explosions,
cave-ins, weather conditions and criminal activity; commodity price
fluctuations; higher operating and/or capital costs; lack of
available infrastructure; the possibility that future exploration,
development or mining results will not be consistent with the
Company's expectations; risks associated with the estimation of
mineral resources and the geology, grade and continuity of mineral
deposits and the inability to replace reserves; fluctuations in the
price of commodities used in the Company's operations; risks
related to foreign operations; changes in laws or policies, foreign
taxation, delays or the inability to obtain necessary governmental
permits; risks relating to outstanding borrowings; issues regarding
title to the Company's properties; risks related to environmental
regulation; litigation risks; risks related to uninsured hazards;
the impact of competition; volatility in the price of the Company's
securities; global financial risks; inability to attract or retain
qualified employees; potential conflicts of interest; risks related
to a controlling group of shareholders; dependence on third
parties; differences in U.S. and Canadian reporting of mineral
reserves and resources; potential dilutive transactions; foreign
currency risks; risks related to business cycles; liquidity risks;
reliance on internal control systems; credit risks, including risks
related to the Company's compliance with covenants with respect to
its Corporate Facility; uncertainty of production and cost
estimates for the Yauricocha Mine, the Bolivar Mine and the Cusi
Mine; and other risks identified in the Company's filings with
Canadian securities regulators and the U.S. Securities and Exchange
Commission ("SEC"), which filings are available at www.sedar.com
and www.sec.gov, respectively.
This list is not exhaustive of the factors that may affect any
of the Company's forward-looking information. Forward-looking
information includes statements about the future and are inherently
uncertain, and the Company's actual achievements or other future
events or conditions may differ materially from those reflected in
the forward-looking information due to a variety of risks,
uncertainties and other factors. The Company's statements
containing forward-looking information are based on the beliefs,
expectations, and opinions of management on the date the statements
are made, and the Company does not assume any obligation to update
forward-looking information if circumstances or management's
beliefs, expectations or opinions should change, other than as
required by applicable law. For the reasons set forth above, one
should not place undue reliance on forward-looking information.
Note Regarding Reserve and Resource
Estimates
All reserve and resource estimates reported by the Company are
calculated in accordance with the Canadian National Instrument
43-101 - Standards of Disclosure for Mineral Projects and the
Canadian Institute of Mining and Metallurgy Classification system.
These standards differ significantly from the requirements of the
SEC. The differences between these standards are discussed in our
SEC filings. Mineral resources which are not mineral reserves do
not have demonstrated economic viability.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190513005868/en/
Mike McAllisterVP, Investor RelationsSierra Metals Inc.+1
(416) 366-7777info@sierrametals.com
Ed GuimaraesCFOSierra Metals Inc.+1 (416) 366-7777
Igor GonzalesPresident & CEOSierra Metals Inc.+1
(416) 366-7777
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