CONFERENCE CALL NOVEMBER 9, 2021, AT 10:30
AM (EST)
___________________________________________________________________
(All $ figures reported in USD)
- Revenue from metals payable of $60.7 million in Q3 2021
decreased by 17% from $73.2 million in Q3 2020, largely due to the
lower grades at the Yauricocha and Bolivar mines combined with
operational challenges at the Cusi mine
- Adjusted EBITDA(1) of $17.4 million for Q3 2021 decreased by
53% compared to $37.2 million in Q3 2020 due to the decrease in
revenues realized
- Revised EBITDA Guidance for 2021 ($105M-$110M) primarily due
to temporary operating restrictions at Bolivar Mine resulting from
residual effect of COVID-19. Yauricocha and Cusi Mines are
operating at near nameplate capacity levels.
- Operating cash flows before movements in working capital of
$16.5 million in Q3 2021 decreased from $37.9 million in Q3
2020
- $58.3 million of cash and cash equivalents as at September
30, 2021
- $38.1 million of working capital as at September 30,
2021
- A shareholder conference call to be held Tuesday, November
9, 2021, at 10:30 AM (EST)
(1) This is a non-IFRS performance measure, see Non-IFRS
Performance Measures section of the MD&A.
Sierra Metals Inc. (TSX: SMT) (BVL: SMT) (NYSE AMERICAN:
SMTS) ("Sierra Metals" or "the Company") today reported revenue of
$60.7 million and adjusted EBITDA of $17.4 million on the
throughput of 750,208 tonnes and metal production of 21.9 million
copper equivalent pounds, for the quarter ended September 30,
2021.
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Image 1: Exploration Drilling at Bolivar
from Surface
Consolidated production of copper equivalent pounds decreased
38% to 21.9 million pounds. The Company earned revenues of $60.7
million, Adjusted EBITDA of $17.4 million, and operating cash flows
before movements in working capital of $16.5 million. Lower
revenues, despite higher base metal prices compared to Q3 2020, are
primarily attributable to the decrease in throughput and head
grades at our Mexican operations primarily at the Bolivar Mine.
Luis Marchese, CEO of Sierra Metals, commented, “The third
quarter was exceptionally difficult for the Company as we
encountered sequencing issues at our Mexican operations. The
Bolivar Mine has had limitations on mine development, infill
drilling, equipment availability over the last year which have
heavily impacted throughput, head grades and recoveries. While we
believe these issues to be temporary in nature, we are currently
conducting a comprehensive review of all operational processes at
the Bolivar Mine, from Geology to Mine to Mill. We aim to
incorporate the findings into the Bolivar Mine operations to allow
for a return to a normal, steady, and profitable state of
operations at the Mine. The early findings of this review will be
incorporated into the 2022 Bolivar Mine budget, currently being
prepared, to provide an updated projection of the Bolivar Mine’s
capabilities and operations potential going forward. The Cusi Mine
has also experienced operational limitations caused by high
temperatures at the available mineable areas, which have been
overcome by the installation of a new raise bore and upgraded
pumping system. Stronger metal prices have supported revenue. After
reviewing the nature of this limitations moving forward, and issued
revised production guidance, we felt it was prudent to lower EBITDA
and Capex guidance and increase cost guidance for Bolivar to better
reflect the expected outcome for 2021.”
He continued, “Looking ahead at the remainder of 2021 and into
2022, we see normal operations at Yauricocha and Cusi. Bolivar
still has a backlog of development and infill drilling that will
affect its production. This issue is being addressed with
additional internal and external resources. Also, we have
reinitiated work on a backlog of accumulated sustaining
infrastructure projects as well as on exploration from our
brownfield drilling programs which are expected to improve the
quality and tonnage of our mineral resources.”
He concluded, “The Company despite the challenges faced this
year still has a strong balance sheet. We are focused on improving
operations and we continue to push for production growth while
optimizing operations at all three mines, with cost reductions
being a priority. These efforts are expected to benefit all
stakeholders in the Company.”
Quarterly revenues at Yauricocha were in line with the third
quarter of 2020, as the increase in average realized sale prices
and lower treatment and refining costs were offset by lower payable
metals, except zinc and silver, as compared to Q3 2020. Operating
at an average daily throughput rate of 3,705 tpd, the Yauricocha
Mine processed 324,196 tonnes during Q3 2021, representing a 2%
increase compared to Q3 2020, despite continuing to face various
operational challenges related to COVID-19. The negative variances
in the head grades from the polymetallic zones are due to
regulatory limitations. The negative variances in the copper
sulfide head grades were mainly due to the delay in the
contribution of the Esperanza zone due to ground conditions, which
have since been corrected. Metal production in the third quarter of
2021 was 25%, 23%, 14% and 13% lower for lead, zinc, copper, and
silver, respectively, while gold production was 9% higher compared
to the third quarter of 2020
Revenue from the Bolivar mine declined 52% as compared to Q3
2020 as the increase in copper price was not enough to offset the
decrease in production attributable to lower throughput and grades.
The Bolivar Mine processed 364,941 tonnes in Q3 2021, or a decrease
of 11% from the 410,468 tonnes processed in Q3 2020, due to the low
availability of equipment, including mining scoops during the
quarter. The average daily ore throughput realized during the
quarter was approximately 4,171 tpd. Head grades were impacted by a
COVID-induced lag on development and infill drilling, which
resulted in changes of the mining sequence, as well as dilution
issues, which are being corrected.
Revenue from the Cusi mine were 5% lower due to a decline in
average realized prices for gold and silver, and higher treatment
and refining costs for the quarter as compared to Q3 2020. The Cusi
mine processed 61,071 tonnes during Q3 2021, which is a 13%
decrease as compared to Q3 2020. Silver equivalent production for
Q3 2021 was 306 thousand ounces or a 7% decline from Q3 2020,
resulting from lower throughput and 5% lower silver head grades
partially offset by 3% higher recoveries as compared to Q3 2020.
The decline in silver grades resulted from the inability to operate
in some of the targeted higher-grade zones due to issues related to
excessive underground water and heat. A newly driven raise bore and
upgraded pumping system were installed during the quarter allowing
access to these areas.
The following table displays selected unaudited financial
information for the three months and nine months (“9M 2021”) ended
September 30, 2021:
Three Months Ended Nine Months Ended (In thousands of
dollars, except per share and cash cost amounts, consolidated
figures unless noted otherwise)
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Operating Ore Processed / Tonnes Milled
750,208
798,458
2,312,163
2,050,641
Silver Ounces Produced (000's)
807
1,023
2,722
2,543
Copper Pounds Produced (000's)
8,256
12,153
25,686
33,636
Lead Pounds Produced (000's)
7,841
9,855
24,805
25,340
Zinc Pounds Produced (000's)
19,112
24,869
64,368
60,256
Gold Ounces Produced
2,261
3,989
7,709
10,408
Copper Equivalent Pounds Produced (000's)1
21,870
35,170
71,966
89,100
Zinc Equivalent Pounds Produced (000's)1
68,489
96,867
228,824
242,563
Silver Equivalent Ounces Produced (000's)1
3,842
4,193
11,622
12,119
Cash Cost per Tonne Processed
$
44.63
$
36.02
$
46.25
$
39.44
Cost of sales per AgEqOz
$
11.22
$
8.35
$
10.84
$
8.29
Cash Cost per AgEqOz2
$
9.41
$
7.68
$
10.22
$
7.84
AISC per AgEqOz2
$
19.08
$
15.67
$
19.42
$
14.51
Cost of sales per CuEqLb2
$
1.97
$
1.00
$
1.75
$
1.13
Cash Cost per CuEqLb2
$
1.65
$
0.92
$
1.65
$
1.07
AISC per CuEqLb2
$
3.35
$
1.87
$
3.14
$
1.97
Cost of sales per ZnEqLb2
$
0.63
$
0.36
$
0.55
$
0.41
Cash Cost per ZnEqLb2
$
0.53
$
0.33
$
0.52
$
0.39
AISC per ZnEqLb2
$
1.07
$
0.68
$
0.99
$
0.73
Cash Cost per ZnEqLb (Yauricocha)2
$
0.44
$
0.30
$
0.45
$
0.36
AISC per ZnEqLb (Yauricocha)2
$
0.91
$
0.70
$
0.84
$
0.73
Cash Cost per CuEqLb (Yauricocha)2
$
1.37
$
0.82
$
1.42
$
0.97
AISC per CuEqLb (Yauricocha)2
$
2.83
$
1.93
$
2.69
$
2.00
Cash Cost per CuEqLb (Bolivar)2 3
$
2.02
$
1.01
$
1.76
$
1.06
AISC per CuEqLb (Bolivar)2 3
$
4.34
$
1.72
$
3.63
$
1.72
Cash Cost per AgEqOz (Cusi)2
$
17.06
$
11.56
$
19.15
$
17.20
AISC per AgEqOz (Cusi)2
$
28.93
$
16.47
$
31.65
$
23.54
Financial Revenues
$
60,701
$
73,211
$
209,774
$
170,670
Adjusted EBITDA2
$
17,444
$
37,186
$
85,889
$
65,855
Operating cash flows before movements in working capital
$
16,512
$
37,852
$
77,986
$
66,746
Adjusted net income (loss) attributable to shareholders2
$
(3,063
)
$
18,377
$
14,001
$
20,931
Net income (loss) attributable to shareholders
$
(4,815
)
$
17,531
$
7,353
$
15,816
Cash and cash equivalents
$
58,288
$
63,846
$
58,288
$
63,846
Working capital
$
38,096
$
62,931
$
38,096
$
62,931
(1) Silver equivalent ounces and copper and zinc equivalent pounds
for Q3 2021 were calculated using the following realized prices:
$24.20/oz Ag, $4.25/lb Cu, $1.36/lb Zn, $1.07/lb Pb, $1,790/oz Au.
Silver equivalent ounces and copper and zinc equivalent pounds for
Q3 2020 were calculated using the following realized prices:
$24.89/oz Ag, $2.97/lb Cu, $1.08/lb Zn, $0.85/lb Pb, $1,916/oz Au.
Silver equivalent ounces and copper and zinc equivalent pounds for
9M 2021 were calculated using the following realized prices:
$25.81/oz Ag, $4.17/lb Cu, $1.31/lb Zn, $0.99/lb Pb, $1,796/oz Au.
Silver equivalent ounces and copper and zinc equivalent pounds for
9M 2020 were calculated using the following realized prices:
$19.35/oz Ag, $2.63/lb Cu, $0.97/lb Zn, $0.80/lb Pb, $1,742/oz Au.
(2) This is a non-IFRS performance measure, see Non-IFRS
Performance Measures section of the MD&A. (3) Cash costs and
AISC for the three month ended September 30, 2021 exclude prior
period inventory adjustments of $3.8 million, which are not
considered as costs for Q3 2021. These adjustments have no impact
on the cash costs and AISC for the nine-month period ended
September 30, 2021
Q3 2021 Financial
Highlights
Revenue from metals payable of $60.7 million in Q3 2021
decreased by 17% from $73.2 million in Q3 2020. Revenues in Q3 2021
from the Yauricocha Mine in Peru were $44.4 million, in line with
$44.6 million in Q3 2020, as the increase in average realized sale
prices and lower treatment and refining costs were offset by lower
payable metals, except zinc and silver, as compared to Q3 2020.
Revenue from the Bolivar mine was $11.3 million or a decline of 52%
as compared to Q3 2020 as the increase in copper price was not
enough to offset the decrease in production attributable to lower
throughput and grades. Revenue from the Cusi mine were 5% lower due
to a decline in average realized prices for gold and silver, and
higher treatment and refining costs for the quarter as compared to
Q3 2020.
Yauricocha’s cost of sales per copper equivalent payable pound
was $1.44 (Q3 2020 - $0.92), cash cost per copper equivalent
payable pound was $1.37 (Q3 2020 - $0.82), and AISC per copper
equivalent payable pound of $2.83 (Q3 2020 - $1.93). Cash costs per
pound were driven higher by the combined impact of 16% higher
operating costs per tonne and 30% lower copper equivalent payable
pounds during Q3 2021 as compared to Q3 2020. The increase in the
AISC per copper equivalent payable pound for Q3 2021 compared to Q3
2020 was mainly due to the lower copper equivalent payable pounds
as the increase in operating costs and sustaining capital was
partially offset by the decrease in treatment and refining
costs.
Bolivar’s cost of sales per copper equivalent payable pound was
$2.90 (Q3 2020 - $1.02), cash cost per copper equivalent payable
pound was $2.02 (Q3 2020 - $1.01), and AISC per copper equivalent
payable pound was $4.34 (Q3 2020 - $1.72) for Q3 2021. The increase
in the AISC per copper equivalent payable pound was due to higher
operating costs per tonne, sustaining capital, general and
administrative costs and treatment and refining costs as compared
to Q3 2020. Additionally, copper equivalent payable pounds declined
52% during Q3 2021 as compared to the same quarter of 2020.
Cusi’s cost of sales per silver equivalent payable ounce was
$22.49 (Q3 2020 - $13.53), cash cost per silver equivalent payable
ounce was $17.06 (Q3 2020 - $11.56), and AISC per silver equivalent
payable ounce was $28.93 (Q3 2020 - $16.47) for Q3 2021. AISC per
silver equivalent payable ounce increased despite 19% higher silver
equivalent ounces payable due to higher operating cost per tonne
combined with the increase in treatment and refining costs during
Q3 2021 as compared to Q3 2020. Sustaining capital increased as
compared to Q3 2020 due to timing of development activities.
Adjusted EBITDA(1) of $17.4 million for Q3 2021 decreased by 53%
compared to $37.2 million in Q3 2020. Adjusted EBITDA declined in
Q3 2021 due to the decrease in revenues realized and increase in
operating costs at all three mines.
Cash flow generated from operations before movements in working
capital of $16.5 million for Q3 2021 decreased compared to $37.9
million in Q3 2020. The decrease in operating cash flow is mainly
the result of lower revenues generated.
Net loss attributable to Shareholders of the Company for Q3 2021
was $(4.8) million (Q3 2020: net income of $17.5 million) or
$(0.03) per share (basic and diluted) (Q3 2020: $0.11).
Cash and cash equivalents of $58.3 million and working capital
of $38.1 million as at September 30, 2021 compared to $71.5 million
and $70.1 million, respectively, at the end of 2020. Cash and cash
equivalents decreased during 9M 2021 as the cash used in investing
activities of $53.9 million and cash used in financing activities
($15.0 million used for repayment of the credit facility and
interest, and $6.4 million of dividends to minority shareholders)
exceeded the cash generated from operating activities of $62.2
million. The decrease in working capital resulted from lower cash
and cash equivalents combined with the increase in current
liabilities.
(1) This is a non-IFRS performance measure, see Non-IFRS
Performance Measures section of the MD&A.
Project Development
Mine development at Bolivar during Q3 2021 totaled 2,550 meters,
which included 1,162 meters of development to prepare stopes for
mine production. Of the remainder, 588 meters were related to the
integration tunnel connecting Bolivar West and the Piedras Verdes
plant, and 800 meters to development of ramps. During Q3 2021, at
the Cusi property, mine development totaled 1,541 meters, which was
targeted towards achieving the planned throughput of 1,100 tpd.
Exploration Update
Peru:
During Q3 2021, surface exploration using diamond drills
continued in the Kilkasca, El Estacion and Yauricocha Medio zones.
A total of 2,341 meters were drilled during the quarter. Further,
3,306 meters of underground exploration was completed with the aim
of replacing and increasing the mineral resources exploited during
the year.
Mexico:
Bolivar At Bolívar during Q3 2021,
9,768 meters were drilled, including 3,151 meters of brownfield
exploration and 6,617 meters of infill drilling, with the objective
of converting inferred and indicated resources to reserves. Major
exploration targets include Bolivar West and Mina de Fierro
zones.
Cusi During Q3 2021, a total of 7,262
meters of infill drilling was completed in Cusi to support the
definition of San Antonio, San Nicolas, Gallo, Bajo Promontorio and
the high-grade NE-SW veins.
Revised Guidance
The production and financial results of the Company in the first
9 months of 2021 were impacted by COVID-19 and operational
challenges. While the Company has tried to manage the COVID related
challenges and achieve normal production levels, our sites have
faced other operational challenges particularly during Q3 2021. At
Yauricocha, regulatory restrictions have limited production to come
from lower grade, higher tonnage areas to reach production targets.
Bolivar is impacted by delays in mine development, infill drilling
and high personnel turnover. Further, excessive underground water
and heat conditions at Cusi impacted its ability to mine some of
the targeted high-grade zones, hence reduced throughput and head
grade.
While the Management believes that these issues are temporary in
nature and will not affect the Company’s results in the medium to
longer term time frame, these require an adjustment to the 2021
EBITDA and cost guidance primarily related to the Bolivar Mine.
Appropriate actions are being taken to return to full operational
efficiency at Bolivar, while continuing to manage the outstanding
risks related to COVID-19 at all Mines.
The Company had previously lowered its production guidance for
2021 copper equivalent production to fall between 110 - 115 million
pounds. However, EBITDA guidance is now being lowered primarily due
to operational issues at our Mexican operations and is now expected
to range between $105 - $110M this year (previously $130M - $140M).
The lower range is largely because of lower EBITDA projected at
Bolivar which is now expected to range between $22M - $26M for that
Mine (previously $44M - $48M). Capex guidance for 2021 is also
being lowered and is now expected to range between $75M - $80M
(previously $100M). The lower Capex guidance is primarily due to
the deferral of the magnetite iron ore project at the Bolivar Mine
until 2022 as detailed engineering on the project is completed and
the bulk freight market normalizes. Cost guidance at Bolivar is
also being revised to include higher than previously guided costs
for the 2021 year as seen in the table below:
Cash costs range AISC(1) range Mine per
CuEqLb per CuEqLb Revised 2021 guidance
Bolivar Copper Eq Lbs ('000) $1.67 - $1.75 $3.30 - 3.47
Previous guidance Bolivar Copper Eq Lbs ('000) $1.32 - $1.40
$2.60 - 2.74 (1) AISC includes treatment and refining
charges, selling costs, G&A costs and sustaining capital
expenditure
Conference Call Webcast
Sierra Metals’ senior management will host a conference call on
Tuesday, November 9, 2021, at 10:30 AM (EST) to discuss the
Company’s financial and operating results for the three and nine
months ended September 30, 2021.
Due to the expected number or participants on the call, and in
the interest of timing, callers are asked to limit their questions
to two each. Additional questions will be answered through Investor
Relations after the completion of the call.
Via Webcast:
A live audio webcast of the meeting will be available on the
Company’s website:
https://event.on24.com/wcc/r/3408832/5D1D447434FB0425E6DE1CDA1E5662AF
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 prior to the scheduled start time of the call.
Canada dial-in number (Toll Free): 1 833 950 0062 Canada dial-in
number (Local): 1 226 828 7575 United States: 1 844 200 6205 United
States (Local): 1 646 904 5544 All other locations: +1 929 526
1599
Access code: 049437
Press *1 to ask a question, *2 to withdraw your question, or *0
for operator assistance.
Quality Control
The contents of this press release have been reviewed by Américo
Zuzunaga, FAusIMM CP (Mining Engineer) and Vice President of
Corporate Planning, who is a Qualified Person under National
Instrument 43-101 – Standards of Disclosure for Mineral
Projects.
About Sierra Metals
Sierra Metals Inc. is a diversified Canadian mining company with
Green Metal exposure including increasing copper production and
base metal production with precious metals byproduct credits,
focused on the production and development of its Yauricocha Mine in
Peru, and 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 key discoveries and
still has many more exciting brownfield exploration opportunities
at all three Mines in Peru and Mexico that are within close
proximity to the existing mines. Additionally, the Company also 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.”
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Forward-Looking
Statements
This press release contains "forward-looking information" and
"forward-looking statements" within the meaning of Canadian and
U.S. securities laws (collectively, "forward-looking
information"). Forward-looking information includes, but is not
limited to, statements with respect to the date of the 2020
Shareholders' Meeting and the anticipated filing of the
Compensation Disclosure. 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, the risks described under the heading "Risk
Factors" in the Company's annual information form dated March 18,
2021 for its fiscal year ended December 31, 2020 and other risks
identified in the Company's filings with Canadian securities
regulators and the United States Securities and Exchange
Commission, which filings are available at www.sedar.com and
www.sec.gov, respectively.
The risk factors referred to above are not an exhaustive list of
the factors that may affect any of the Company's forward-looking
information. Forward-looking information includes statements about
the future and is 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 such 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.
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For further information regarding Sierra Metals, please visit
www.sierrametals.com.
Mike McAllister VP, Investor Relations Sierra Metals Inc.
+1 (416) 366-7777 info@sierrametals.com
Ed Guimaraes CFO Sierra Metals Inc. +1 (416) 366-7777
Luis Marchese CEO Sierra Metals Inc. +1 (416)
366-7777
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