CORRECTING and REPLACING - Sierra Metals Announces Fourth Quarter & Year End 2022 Consolidated Financial Results

 

  Conference Call and Webcast will be held on March 29, 2023 at 11:00am ET  

 

On March 29, 2023, Sierra Metals Inc. refiled its press release for the year ended December 31, 2022 to correct misaligned table figures in the 2023 Production Guidance table.

 

The updated release reads:

 

  Sierra Metals ANNOUNCES FOURTH QUARTER & YEAR END 2022 CONSOLIDATED FINANCIAL RESULTS  

 

  Conference Call and Webcast will be held on March 29, 2023 at 11:00am ET  

 

  Sierra Metals Inc . (TSX: SMT) ("  Sierra Metals  " or the " Company ") announces fourth quarter and year-end 2022 consolidated financial results. All amounts are in US dollars, unless otherwise noted.

 

  Fourth Quarter and Year-End 2022 Operating and Financial Highlights  

 
  • Revenue from metals payable of $46.2 million in Q4 2022 and $192.1 million in 2022.
  •  
  • Adjusted EBITDA (1) of ($0.5) million in Q4 2022 and $13.0 million in 2022.
  •  
  • Net loss attributable to shareholders for Q4 2022 of $26.5 million, or $0.16 per share and $87.5 million, or $0.53 per share in 2022.
  •  
  • Net loss of $88.3 million, or $0.54 in 2022, which includes impairment charges of $25.0 million for the Bolivar mine and $25.0 million for the Cusi mine; and $5.3 million non-cash depletion.
  •  
  • Cash and cash equivalents as at December 31, 2022 was $5.1 million; negative working capital of $84.4 million.
  •  
  • The focus in 2023 is to improve safety practices, reduce costs, improve productivity through increased equipment availability.
  •  

On March 13, 2023, the Company improved short-term liquidity through refinancing $6,250,000 of debt repayments due March 2023, with negotiations ongoing to refinance a total of $18,750,000 of term loan amortization payments due in 2023.

 

Ernesto Balarezo Valdez, Sierra Metals' Interim CEO comments, "Sierra Metals enters 2023 with positive momentum. Since the start of 2023, we have stabilized our operations and begun to implement a program to optimize our operating performance, all with safety as the top priority. The expected operational improvements, alongside the corporate initiatives to improve our balance sheet, which includes the recently announced debt refinancing initiatives, has set the stage for Sierra Metals to increase production, lower costs and improve our financial position."  

 

(1) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A.

 

  Strategic Update  

 

As first announced on October 18, 2022, a special committee comprised of the Company's independent directors (the " Special Committee ") is undertaking a strategic review process. The mandate of the Special Committee includes exploring, reviewing and considering options to optimize the operations of the Company and possible financing, restructuring and strategic options in the best interests of the Company. The Company has engaged CIBC Capital Markets as a financial advisor in this process.

 

The Special Committee continues to evaluate certain strategic alternatives. The Company will report to shareholders upon completion of the Special Committee's review. Concurrently, over the course of the strategic review process the Special Committee and the management team have identified and have implemented a number of opportunities to improve the Company's operational and financial position.

 

Progress made to-date includes the following:

 
  • Successfully implementing a transition of executive level management.
  •  
  • Organizational changes designed to create a shift in the corporate culture and instill a more "hands-on" approach to operations.
  •  
  • Placing a renewed emphasis on safety and employee engagement. The Company has hired a VP of Health and Safety, instituted new safety protocols across all of its operations, increased training and communication efforts, and invested in remote-controlled equipment which is designed to reduce risk of injury.
  •  
  • Streamlining operations to reduce costs, and refinancing debt obligations in order to preserve working capital as production levels improve.
  •  
  • Advancing discussions with secured lenders on refinancing of material short-term obligations, and steps to improve short-term liquidity through ancillary financing arrangements.
  •  
  • Initiatives to increase productivity at the mines, including increasing asset utilization, focused underground development of mine sequencing, and improvements to ventilation and pumping systems.
  •  
  • Prioritizing spending to focus resources on the Company's core assets at Yauricocha and Bolivar.
  •  
  • Initiating activities designed to identify additional mineral resources at the Yauricocha and Bolivar mines to sustain long-term production increases.
  •  
  • Enhancements to internal financial forecasting, reporting and integration of information across functions to ensure timely decision making.
  •  

  2023 Guidance  

 

   Production Guidance   

 

The Bolivar mine exited fourth quarter 2022 with improved operations and expectations of continued improved performance throughout 2023. The Yauricocha mine is expected to gradually and safely ramp up production throughout 2023 at the current depth. Meanwhile, Yauricocha's focus will remain on obtaining the necessary permits to access the deeper, high-grade ore bodies.

 

The table summarizing 2023 production guidance from the Yauricocha and the Bolivar mines is provided below. Management considers the Cusi mine as 'non-core' and it has been excluded from the guidance.

 
                                
    

  2023 Guidance  

 
 

  2022  

 
    

  Low  

 
 

  High  

 
 

  Actual  

 
Silver (000 oz)  

1,500

 
 

1,700

 
 

1,218

 
Copper (000 lbs)  

37,300

 
 

42,400

 
 

27,127

 
Lead (000 lbs)  

14,000

 
 

15,400

 
 

12,216

 
Zinc (000 lbs)  

46,000

 
 

50,500

 
 

38,100

 
Gold (oz)  

13,500

 
 

15,400

 
 

9,361

 
  Copper equivalent pounds (000's) (1)   

  74,300  

 
 

  83,300  

 
 

  56,108  

 
 

  (1) 2023 metal equivalent guidance was calculated using the following prices: $21.03/oz Ag, $3.55/lb Cu, $1.35/lb Zn, $0.93/lb Pb and $1,741/oz Au.

 
 

   Cost Guidance   

 

A breakdown of 2023 production guidance, cash costs and all-in sustaining costs ("AISC") are included in the table below.

 
                                                  
       Actual for 2022  
    Equivalent Production    Cash costs range    AISC (2) range    Cash costs    AISC (2)  
  Mine     Range (1)    per CuEqLb    per CuEqLb    per CuEqLb    per CuEqLb  
       
Yauricocha Copper Eq Lbs ('000) 40,000 - 44,000 $1.81 - $1.88 $3.09 - $3.19  

$2.23

 
 

$3.69

 
Bolivar Copper Eq Lbs ('000) 34,500 - 39,500 $1.92 - $2.05 $3.02 - $3.25  

$2.99

 
 

$5.07

 
       
  (1) 2023 metal equivalent guidance was calculated using the following prices: $21.03/oz Ag, $3.55/lb Cu, $1.35/lb Zn, $0.93/lb Pb and $1,741/oz Au.
  (2) AISC includes treatment and refining charges, selling costs, G&A costs and sustaining capital expenditure
 

   Capital Expenditures   

 

A breakdown by mine of the throughput and planned capital investments is shown in the following table:

 
                      
   Amounts in $M  
   Sustaining    Growth    Total  
    
Yauricocha  

10

 
 

11

 
 

21

 
Bolivar  

22

 
 

4

 
 

26

 
  Total Capital Expenditure   

  32  

 
 

  15  

 
 

  47  

 
 

Total sustaining capital for 2023, excluding Cusi, is expected to be $32.0 million, mainly comprised of mine development ($3.0 million) and drainage ($2.3 million) in Yauricocha, and mine development ($11.3 million), infill drilling ($5.3 million) and equipment replacement ($3.9 million) at the Bolivar mine.

 

Growth capital for 2023, projected at $15.0 million, includes costs of tailings dam expansion ($5.6 million) and Yauricocha shaft ($3.2 million) in Peru. Growth capital at Bolivar includes costs of the tailings dam and the starter dam.

 

Management will continue to review performance throughout the year, while exploring value enhancing opportunities.

 

  Conference Call & Webcast  

 

The Company will host a conference call on Wednesday, March 29, 2023, at 11:00 AM EDT to discuss the results. Details of the conference call and webcast are as follows:

 
                     
  Date:    

March 29, 2023

 
 

  Time:  

 
  

11:00 am ET

 
 

  Webcast:  

 
  

  https://events.q4inc.com/attendee/111210337  

 
 

  Telephone:  

 
  

Access code: 077974

 
   

Canada: 1 833 950 0062 (toll free)

 
   

USA: 1 844 200 6205 (toll free)

 
   

Other: 1 929 526 1599

 
 

The webcast, presentation slides and 2022 Financial Statements and Management Discussion and Analysis will be available at www.sierrametals.com , with an archive of the webcast available for 180 days.

 

  Summary of Operating and Financial Results  

 

The information provided below are excerpts from the Company's Annual Financial Statements and Management's Discussion and Analysis, which are available on the Company's website ( www.sierrametals.com ) and on SEDAR ( www.sedar.com ) under the Company's profile.

 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
  (In thousands of dollars, except per share and cash cost amounts, consolidated figures unless noted otherwise)    Q4 2022    Q3 2022    Q4 2021   

 

 
 

  2022  

 
 

 

 
 

 

 
 

  2021  

 
 

 

 
  Var%  
  Operating         
Ore Processed / Tonnes Milled   

 

 
 

  494,980  

 
 

 

 
 

 

 
 

561,906

 
 

 

 
 

 

 
 

590,057

 
 

 

 
 

 

 
 

  2,287,797  

 
 

 

 
 

 

 
 

2,902,220

 
 

 

 
 

-21

 
 

%

 
Silver Ounces Produced (000's)   

 

 
 

  570  

 
 

 

 
 

 

 
 

669

 
 

 

 
 

 

 
 

805

 
 

 

 
 

 

 
 

  2,581  

 
 

 

 
 

 

 
 

3,527

 
 

 

 
 

-27

 
 

%

 
Copper Pounds Produced (000's)   

 

 
 

  6,170  

 
 

 

 
 

 

 
 

6,299

 
 

 

 
 

 

 
 

6,071

 
 

 

 
 

 

 
 

  27,127  

 
 

 

 
 

 

 
 

31,757

 
 

 

 
 

-15

 
 

%

 
Lead Pounds Produced (000's)   

 

 
 

  2,071  

 
 

 

 
 

 

 
 

3,878

 
 

 

 
 

 

 
 

6,011

 
 

 

 
 

 

 
 

  13,498  

 
 

 

 
 

 

 
 

30,816

 
 

 

 
 

-56

 
 

%

 
Zinc Pounds Produced (000's)   

 

 
 

  6,367  

 
 

 

 
 

 

 
 

10,815

 
 

 

 
 

 

 
 

14,913

 
 

 

 
 

 

 
 

  38,100  

 
 

 

 
 

 

 
 

79,281

 
 

 

 
 

-52

 
 

%

 
Gold Ounces Produced   

 

 
 

  3,411  

 
 

 

 
 

 

 
 

2,199

 
 

 

 
 

 

 
 

1,863

 
 

 

 
 

 

 
 

  10,155  

 
 

 

 
 

 

 
 

9,572

 
 

 

 
 

6

 
 

%

 
Copper Equivalent Pounds Produced (000's) 1   

 

 
 

  14,073  

 
 

 

 
 

 

 
 

16,637

 
 

 

 
 

 

 
 

17,841

 
 

 

 
 

 

 
 

  64,218  

 
 

 

 
 

 

 
 

89,926

 
 

 

 
 

-29

 
 

%

 
        
Cash Cost per Tonne Processed   

  $  

 
 

  63.30  

 
 

 

 
 

$

 
 

65.60

 
 

 

 
 

$

 
 

58.21

 
 

 

 
 

  $  

 
 

  63.89  

 
 

 

 
 

$

 
 

48.69

 
 

 

 
 

31

 
 

%

 
Cash Cost per CuEqLb 2   

  $  

 
 

  2.44  

 
 

 

 
 

$

 
 

2.41

 
 

 

 
 

$

 
 

2.29

 
 

 

 
 

  $  

 
 

  2.55  

 
 

 

 
 

$

 
 

1.81

 
 

 

 
 

41

 
 

%

 
AISC per CuEqLb 2   

  $  

 
 

  4.19  

 
 

 

 
 

$

 
 

3.82

 
 

 

 
 

$

 
 

4.13

 
 

 

 
 

  $  

 
 

  4.15  

 
 

 

 
 

$

 
 

3.40

 
 

 

 
 

22

 
 

%

 
        
Cash Cost per CuEqLb (Yauricocha) 2   

  $  

 
 

  3.16  

 
 

 

 
 

$

 
 

2.01

 
 

 

 
 

$

 
 

1.61

 
 

 

 
 

  $  

 
 

  2.23  

 
 

 

 
 

$

 
 

1.46

 
 

 

 
 

53

 
 

%

 
AISC per CuEqLb (Yauricocha) 2   

  $  

 
 

  5.02  

 
 

 

 
 

$

 
 

3.36

 
 

 

 
 

$

 
 

3.09

 
 

 

 
 

  $  

 
 

  3.69  

 
 

 

 
 

$

 
 

2.77

 
 

 

 
 

33

 
 

%

 
Cash Cost per CuEqLb (Bolivar) 2, 3   

  $  

 
 

  1.76  

 
 

 

 
 

$

 
 

3.38

 
 

 

 
 

$

 
 

5.29

 
 

 

 
 

  $  

 
 

  2.99  

 
 

 

 
 

$

 
 

2.18

 
 

 

 
 

37

 
 

%

 
AISC per CuEqLb (Bolivar) 2, 3   

  $  

 
 

  3.69  

 
 

 

 
 

$

 
 

5.12

 
 

 

 
 

$

 
 

8.58

 
 

 

 
 

  $  

 
 

  5.07  

 
 

 

 
 

$

 
 

4.22

 
 

 

 
 

20

 
 

%

 
Cash Cost per AgEqOz (Cusi) 2   

  $  

 
 

  16.35  

 
 

 

 
 

$

 
 

14.58

 
 

 

 
 

$

 
 

11.80

 
 

 

 
 

  $  

 
 

  16.77  

 
 

 

 
 

$

 
 

16.71

 
 

 

 
 

0

 
 

%

 
AISC per AgEqOz (Cusi) 2   

  $  

 
 

  22.14  

 
 

 

 
 

$

 
 

19.23

 
 

 

 
 

$

 
 

21.09

 
 

 

 
 

  $  

 
 

  23.17  

 
 

 

 
 

$

 
 

28.15

 
 

 

 
 

-18

 
 

%

 
  Financial         
Revenues   

  $  

 
 

  46,150  

 
 

 

 
 

$

 
 

38,787

 
 

 

 
 

$

 
 

62,240

 
 

 

 
 

  $  

 
 

  192,119  

 
 

 

 
 

$

 
 

272,014

 
 

 

 
 

-29

 
 

%

 
Adjusted EBITDA 2   

  $  

 
 

  (537  

 
 

  )  

 
 

$

 
 

(3,867

 
 

)

 
 

$

 
 

18,843

 
 

 

 
 

  $  

 
 

  12,997  

 
 

 

 
 

$

 
 

104,732

 
 

 

 
 

-88

 
 

%

 
Operating cash flows before movements in working capital   

  $  

 
 

  2,860  

 
 

 

 
 

$

 
 

(6,768

 
 

)

 
 

$

 
 

15,126

 
 

 

 
 

  $  

 
 

  5,163  

 
 

 

 
 

$

 
 

91,114

 
 

 

 
 

-94

 
 

%

 
Adjusted net income (loss) attributable to shareholders 2   

  $  

 
 

  (6,758  

 
 

  )  

 
 

$

 
 

(10,705

 
 

)

 
 

$

 
 

5,443

 
 

 

 
 

  $  

 
 

  (23,149  

 
 

  )  

 
 

$

 
 

21,571

 
 

 

 
 

-207

 
 

%

 
Net income (loss) attributable to shareholders   

  $  

 
 

  (26,456  

 
 

  )  

 
 

$

 
 

(46,150

 
 

)

 
 

$

 
 

(34,716

 
 

)

 
 

  $  

 
 

  (87,503  

 
 

  )  

 
 

$

 
 

(27,363

 
 

)

 
 

220

 
 

%

 
Cash and cash equivalents   

  $  

 
 

  5,074  

 
 

 

 
 

$

 
 

13,690

 
 

 

 
 

$

 
 

34,929

 
 

 

 
 

  $  

 
 

  5,074  

 
 

 

 
 

$

 
 

34,949

 
 

 

 
 

-85

 
 

%

 
Working capital 3   

  $  

 
 

  (84,401  

 
 

  )  

 
 

$

 
 

(52,345

 
 

)

 
 

$

 
 

17,321

 
 

 

 
 

  $  

 
 

  (84,401  

 
 

  )  

 
 

$

 
 

17,321

 
 

 

 
 

-587

 
 

%

 
 

  (1) Copper equivalent pounds and Silver equivalent ounces were calculated using the following realized prices:
Q4 2022 - $21.21/oz Ag, $3.63/lb Cu, $1.37/lb Zn, $0.95/lb Pb, $1,730/oz Au.
Q3 2022 - $19.26/oz Ag, $3.51/lb Cu, $1.49/lb Zn, $0.90/lb Pb, $1,730/oz Au.
Q4 2021 - $23.41/oz Ag, $4.40/lb Cu, $1.55/lb Zn, $1.06/lb Pb, $1,795/oz Au.
FY 2022 - $21.77/oz Ag, $3.99/lb Cu, $1.59/lb Zn, $0.98/lb Pb, $1,802/oz Au.
FY 2021 - $25.21/oz Ag, $4.23/lb Cu, $1.37/lb Zn, $1.00/lb Pb, $1,796/oz Au."

 

  (2) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A.

 

  (3) The negative working capital is largely the result of the reclassification of the long-term portion of the corporate facility and term loan to current, as the Company defaulted on its debt covenants. The Company has received accommodation from the banks for non- compliance of the corporate facility as at December 31, 2022.

 

   2022 Operational Highlights   

 

At the Bolivar mine, throughput increased by 19% year-over-year in Q4 2022, due primarily to investments in pumping and ventilation systems. For the full year, however, throughput was 30% lower due to delays in installation of critical infrastructure during the first half of the year and unexpected flooding during Q3 2022.

 

Throughput from the Yauricocha mine was severely impacted in Q4 2022 by the mudslide incident that occurred at the end of Q3 2022 followed by a road blockade by the local communities. As compared to Q4 2021, Yauricocha throughput was 45% lower, while on an annual basis, throughput was 16% lower as compared to 2021.

 

Consolidated annual ore throughput was 2,287,797 tonnes, a decrease of 21% from 2021. Consolidated annual copper equivalent production dropped 29% compared to 2021, largely due to lower throughput and lower grades. For Q4 2022, consolidated copper equivalent production decreased 21% year-over-year due primarily to the issues experienced at Yauricocha.

 

   2022 Consolidated Financial Summary   

 
  • Revenue from metals payable of $192.1 million in 2022, a decrease of 29% from 2021 annual revenue of $272.0 million. Lower revenue resulted from the decrease in throughput and grades at the Yauricocha and Bolivar mines;
  •  
  • Yauricocha's cash cost per copper equivalent payable pound (1) was $2.23 (2021 - $1.46), and AISC per copper equivalent payable pound (1) of $3.69 (2021 - $2.77);
  •  
  • Bolivar's cash cost per copper equivalent payable pound (1) was $2.99 (2021 - $2.18), and AISC per copper equivalent payable pound (1) was $5.07 (2021 - $4.22);
  •  
  • Cusi's cash cost per silver equivalent payable ounce (1) was $16.77 (2021 - $16.71), and AISC per silver equivalent payable ounce (1) was $23.17 (2021 - $28.15);
  •  
  • Adjusted EBITDA (1) of $13.0 million for 2022, a decrease from the adjusted EBITDA (1) of $104.7 million for 2021;
  •  
  • Net loss attributable to shareholders for 2022 was $87.5 million or $0.53 per share (2021: net loss of $27.4 million, $0.17 per share). Net loss for the year ended 2022 includes an impairment charge of $25.0 million on the Bolivar mine and $25.0 million on the Cusi mine (2021: impairment of $35.0 million on the Cusi mine);
  •  
  • Adjusted net loss attributable to shareholders (1) of $23.1 million, or $0.14 per share, for 2022 compared to the adjusted net income (1) of $21.6 million, or $0.13 per share for 2021;
  •  
  • A large component of the net income (loss) for every period is the non-cash depletion charge in Peru, which was $5.3 million for 2022 (2021: $9.3 million). The non-cash depletion charge is based on the aggregate fair value of the Yauricocha mineral property at the date of acquisition of Sociedad Minera Corona S.A. de C.V. ("Corona") of $371.0 million amortized over the life of the mine;
  •  
  • Cash flow generated from operations before movements in working capital of $5.2 million for 2022 was lower than the $91.1 million in 2021, mainly due to lower revenues and higher operating costs; and
  •  
  • Cash and cash equivalents of $5.1 million and working capital of $(84.4) million as at December 31, 2022 compared to $34.9 million and $17.3 million, respectively, at the end of 2021. Cash and cash equivalents decreased during 2022 as the $38.3 million used in investing activities exceeded the $1.1 million generated from financing activities and $7.3 million generated from operating activities.
  •  

(1) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A.

 

  Non-IFRS Performance Measures  

 

The non-IFRS performance measures presented do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be directly comparable to similar measures presented by other issuers.

 

  Non-IFRS reconciliation of adjusted EBITDA  

 

EBITDA is a non-IFRS measure that represents an indication of the Company's continuing capacity to generate earnings from operations before taking into account management's financing decisions and costs of consuming capital assets, which vary according to their vintage, technological currency, and management's estimate of their useful life. EBITDA comprises revenue less operating expenses before interest expense (income), property, plant and equipment amortization and depletion, and income taxes. Adjusted EBITDA has been included in this document. Under IFRS, entities must reflect in compensation expense the cost of share-based payments. In the Company's circumstances, share-based payments involve a significant accrual of amounts that will not be settled in cash but are settled by the issuance of shares in exchange for cash. As such, the Company has made an entity specific adjustment to EBITDA for these expenses. The Company has also made an entity-specific adjustment to the foreign currency exchange (gain)/loss. The Company considers cash flow before movements in working capital to be the IFRS performance measure that is most closely comparable to adjusted EBITDA.

 

The following table provides a reconciliation of adjusted EBITDA to the consolidated financial statements for the three months and years ended December 31, 2022 and 2021:

 
                                                                                   
   Three Months Ended December 31,    Years Ended December 31,  
  

  2022  

 
 

  2021  

 
 

  2022  

 
 

  2021  

 
     
Net income (loss)  

  $ (27,582)  

 
 

$ (33,220)

 
 

  $ (88,306)  

 
 

$ (22,108)

 
     
  Adjusted for:      
Depletion and depreciation  

  7,068  

 
 

10,526

 
 

  35,449  

 
 

46,074

 
Interest expense and other finance costs  

  1,865  

 
 

886

 
 

  4,963  

 
 

3,645

 
NRV adjustments on inventory  

  366  

 
 

3,619

 
 

  7,879  

 
 

5,746

 
Share-based payments  

  (112)  

 
 

20

 
 

  467  

 
 

1,059

 
Derivative gains  

  -  

 
 

-

 
 

  -  

 
 

(451)

 
Costs related to COVID  

  -  

 
 

1,590

 
 

  1,693  

 
 

9,582

 
Foreign currency exchange and other provisions  

  907  

 
 

(280)

 
 

  2,322  

 
 

(583)

 
Impairment charges  

  18,000  

 
 

35,000

 
 

  50,000  

 
 

35,000

 
Legal settlement and related charges  

  -  

 
 

-

 
 

  -  

 
 

1,665

 
Income taxes  

  (1,049)  

 
 

702

 
 

  (1,470)  

 
 

25,103

 
  Adjusted EBITDA   

  $ (537)  

 
 

$ 18,843

 
 

  $ 12,997  

 
 

$ 104,732

 
 

  Non-IFRS Reconciliation of Adjusted Net Income (Loss)  

 

Adjusted net income (loss) attributable to shareholders represents net income (loss) attributable to shareholders excluding certain impacts, net of taxes, such as non-cash depletion charge due to the acquisition of Corona, impairment charges and reversal of impairment charges, write-down of assets, and certain non-cash and non-recurring items including but not limited to share-based compensation and foreign exchange (gain) loss.The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may want to use this information to evaluate the Company's performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance in accordance with IFRS.

 

The following table provides a reconciliation of adjusted net income (loss) to the consolidated financial statements for the three months and years ended December 31, 2022 and 2021:

 
                                                                                                                                                            
   Three Months Ended December 31,    Years Ended December 31,  
  (In thousands of United States dollars)   

 

 
 

  2022  

 
 

 

 
 

 

 
 

  2021  

 
 

 

 
 

 

 
 

  2022  

 
 

 

 
 

 

 
 

  2021  

 
 

 

 
     
Net income (loss) attributable to shareholders  

  $  

 
 

  (26,456  

 
 

  )  

 
 

$

 
 

(34,716

 
 

)

 
 

  $  

 
 

  (87,503  

 
 

  )  

 
 

$

 
 

(27,363

 
 

)

 
Non-cash depletion charge on Corona's acquisition  

 

 
 

  772  

 
 

 

 
 

 

 
 

2,084

 
 

 

 
 

 

 
 

  5,300  

 
 

 

 
 

 

 
 

9,329

 
 

 

 
Deferred tax recovery on Corona's acquisition depletion charge  

 

 
 

  (235  

 
 

  )  

 
 

 

 
 

(284

 
 

)

 
 

 

 
 

  (1,614  

 
 

  )  

 
 

 

 
 

(2,831

 
 

)

 
NRV adjustments on inventory  

 

 
 

  366  

 
 

 

 
 

 

 
 

3,619

 
 

 

 
 

 

 
 

  7,879  

 
 

 

 
 

 

 
 

5,746

 
 

 

 
Share-based compensation  

 

 
 

  (112  

 
 

  )  

 
 

 

 
 

20

 
 

 

 
 

 

 
 

  467  

 
 

 

 
 

 

 
 

1,059

 
 

 

 
Legal settlement and related charges  

 

 
 

  -  

 
 

 

 
 

 

 
 

-

 
 

 

 
 

 

 
 

  -  

 
 

 

 
 

 

 
 

1,665

 
 

 

 
Derivative gains  

 

 
 

  -  

 
 

 

 
 

 

 
 

-

 
 

 

 
 

 

 
 

  -  

 
 

 

 
 

 

 
 

(451

 
 

)

 
Foreign currency exchange loss (gain)  

 

 
 

  907  

 
 

 

 
 

 

 
 

(280

 
 

)

 
 

 

 
 

  2,322  

 
 

 

 
 

 

 
 

(583

 
 

)

 
Asset impairment  

 

 
 

  18,000  

 
 

 

 
 

 

 
 

35,000

 
 

 

 
 

 

 
 

  50,000  

 
 

 

 
 

 

 
 

35,000

 
 

 

 
  Adjusted net income (loss) attributable to shareholders   

  $  

 
 

  (6,758  

 
 

  )  

 
 

$

 
 

5,443

 
 

 

 
 

  $  

 
 

  (23,149  

 
 

  )  

 
 

$

 
 

21,571

 
 

 

 
     
 

  Cash Cost per Silver Equivalent Payable Ounce and Copper Equivalent Payable Pound  

 

The Company uses the non-IFRS measure of cash cost per silver equivalent ounce and copper equivalent payable pound to manage and evaluate operating performance. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company considers cost of sales per silver equivalent payable ounce and copper equivalent payable pound to be the most comparable IFRS measure to cash cost per silver equivalent payable ounce, copper equivalent payable pound, and zinc equivalent payable pound, and has included calculations of this metric in the reconciliations within the applicable tables to follow.

 

  All-in Sustaining Cost per Silver Equivalent Payable Ounce and Copper Equivalent Payable Pound  

 

All‐In Sustaining Cost ("AISC") is a non‐IFRS measure and was calculated based on guidance provided by the World Gold Council ("WGC") in June 2013. WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as differences in definitions of sustaining versus development capital expenditures.

 

AISC is a more comprehensive measure than cash cost per ounce/pound for the Company's consolidated operating performance by providing greater visibility, comparability and representation of the total costs associated with producing silver and copper from its current operations.

 

The Company defines sustaining capital expenditures as, "costs incurred to sustain and maintain existing assets at current productive capacity and constant planned levels of productive output without resulting in an increase in the life of assets, future earnings, or improvements in recovery or grade. Sustaining capital includes costs required to improve/enhance assets to minimum standards for reliability, environmental or safety requirements. Sustaining capital expenditures excludes all expenditures at the Company's new projects and certain expenditures at current operations which are deemed expansionary in nature."  

 

Consolidated AISC includes total production cash costs incurred at the Company's mining operations, including treatment and refining charges and selling costs, which forms the basis of the Company's total cash costs. Additionally, the Company includes sustaining capital expenditures and corporate general and administrative expenses. AISC by mine does not include certain corporate and non‐cash items such as general and administrative expense and share-based payments. The Company believes that this measure represents the total sustainable costs of producing silver and copper from current operations and provides the Company and other stakeholders of the Company with additional information of the Company's operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of silver and copper production from current operations, new project capital and expansionary capital at current operations are not included. Certain other cash expenditures, including tax payments, dividends and financing costs are also not included.

 

The following table provides a reconciliation of cash costs to cost of sales, as reported in the Company's consolidated statement of income for the three months and years ended December 31, 2022 and 2021:

 
                                                                                                                      
          
    Three months ended    Three months ended  
  (In thousand of US dollars, unless stated)     December 31, 2022    December 31, 2021  
    Yauricocha    Bolivar    Cusi    Consolidated    Yauricocha    Bolivar    Cusi    Consolidated  
          
   Cash Cost per Tonne of Processed Ore            
Cost of Sales   

18,670

 
 

13,981

 
 

6,973

 
 

39,624

 
 

24,695

 
 

15,393

 
 

6,465

 
 

46,553

 
Reverse: Workers Profit Sharing   

514

 
 

-

 
 

-

 
 

514

 
 

(748)

 
 

-

 
 

-

 
 

(748)

 
Reverse: D&A/Other adjustments   

(3,946)

 
 

(2,854)

 
 

(1,033)

 
 

(7,833)

 
 

(5,564)

 
 

(3,790)

 
 

(1,549)

 
 

(10,903)

 
Reverse: Variation in Finished Inventory   

(29)

 
 

(31)

 
 

(914)

 
 

(974)

 
 

(471)

 
 

(151)

 
 

68

 
 

(554)

 
  Total Cash Cost    

  15,209  

 
 

  11,096  

 
 

  5,026  

 
 

  31,331  

 
 

  17,912  

 
 

  11,452  

 
 

  4,984  

 
 

  34,348  

 
Tonnes Processed   

152,586

 
 

270,313

 
 

72,081

 
 

494,980

 
 

277,531

 
 

227,722

 
 

84,804

 
 

590,057

 
  Cash Cost per Tonne Processed    $   

  99.67  

 
 

  41.05  

 
 

  69.74  

 
 

  63.30  

 
 

  64.54  

 
 

  50.29  

 
 

  58.77  

 
 

  58.21  

 
 
 
                                                                                                                      
          
    Twelve months ended    Twelve months ended  
  (In thousand of US dollars, unless stated)     December 31, 2022    December 31, 2021  
    Yauricocha    Bolivar    Cusi    Consolidated    Yauricocha    Bolivar    Cusi    Consolidated  
          
   Cash Cost per Tonne of Processed Ore            
Cost of Sales   

97,463

 
 

63,331

 
 

25,853

 
 

186,647

 
 

105,665

 
 

57,415

 
 

27,715

 
 

190,795

 
Reverse: Workers Profit Sharing   

-

 
 

-

 
 

-

 
 

-

 
 

(4,266)

 
 

-

 
 

-

 
 

(4,266)

 
Reverse: D&A/Other adjustments   

(19,738)

 
 

(13,339)

 
 

(4,175)

 
 

(37,252)

 
 

(24,899)

 
 

(15,963)

 
 

(7,110)

 
 

(47,972)

 
Reverse: Variation in Finished Inventory   

(1,771)

 
 

(910)

 
 

(553)

 
 

(3,234)

 
 

814

 
 

1,736

 
 

190

 
 

2,740

 
  Total Cash Cost    

  75,954  

 
 

  49,082  

 
 

  21,125  

 
 

  146,161  

 
 

  77,314  

 
 

  43,188  

 
 

  20,795  

 
 

  141,297  

 
Tonnes Processed   

1,053,980

 
 

941,910

 
 

291,907

 
 

2,287,797

 
 

1,256,847

 
 

1,349,602

 
 

295,771

 
 

2,902,220

 
  Cash Cost per Tonne Processed    $   

  72.06  

 
 

  52.11  

 
 

  72.36  

 
 

  63.89  

 
 

  61.51  

 
 

  32.00  

 
 

  70.31  

 
 

  48.69  

 
 

The following table provides detailed information on Yauricocha's cash cost, and all-in sustaining cost per copper equivalent payable pound for the three months and years ended December 31, 2022 and 2021:

 
                                                                                        
  YAURICOCHA     Three months ended    Years ended  
  (In thousand of US dollars, unless stated)     December 31, 2022    December 31, 2021    December 31, 2022    December 31, 2021  
      
   Cash Cost per zinc equivalent payable pound        
Total Cash Cost   

15,209

 
 

17,912

 
 

75,954

 
 

77,314

 
Variation in Finished inventory   

29

 
 

471

 
 

1,771

 
 

(814)

 
Total Cash Cost of Sales   

15,238

 
 

18,383

 
 

77,725

 
 

76,500

 
Treatment and Refining Charges   

2,868

 
 

8,534

 
 

23,892

 
 

35,634

 
Selling Costs   

438

 
 

1,026

 
 

2,909

 
 

4,670

 
G&A Costs   

2,949

 
 

2,166

 
 

9,967

 
 

9,344

 
Sustaining Capital Expenditures   

2,709

 
 

5,235

 
 

13,903

 
 

18,843

 
  All-In Sustaining Cash Costs    

  24,202  

 
 

  35,344  

 
 

  128,396  

 
 

  144,991  

 
Copper Equivalent Payable Pounds (000's)   

4,819

 
 

11,427

 
 

34,782

 
 

52,251

 
  Cash Cost per Copper Equivalent Payable Pound    (US$)   

  3.16  

 
 

  1.61  

 
 

  2.23  

 
 

  1.46  

 
  All-In Sustaining Cash Cost per Copper Equivalent Payable Pound    (US$)   

  5.02  

 
 

  3.09  

 
 

  3.69  

 
 

  2.77  

 
 

The following table provides detailed information on Bolivar's cash cost, and all-in sustaining cost per copper equivalent payable pound for the three months and years ended December 31, 2022 and 2021:

 
                                                                                        
  BOLIVAR     Three months ended    Years ended  
  (In thousand of US dollars, unless stated)     December 31, 2022    December 31, 2021    December 31, 2022    December 31, 2021  
      
   Cash Cost per copper equivalent payable pound        
Total Cash Cost   

11,096

 
 

11,452

 
 

49,082

 
 

43,188

 
Variation in Finished inventory   

31

 
 

151

 
 

910

 
 

(1,736)

 
Total Cash Cost of Sales   

11,127

 
 

11,603

 
 

49,992

 
 

41,452

 
Treatment and Refining Charges   

2,977

 
 

2,435

 
 

8,865

 
 

14,240

 
Selling Costs   

1,596

 
 

728

 
 

4,443

 
 

3,986

 
G&A Costs   

1,994

 
 

1,181

 
 

4,780

 
 

5,997

 
Sustaining Capital Expenditures   

5,601

 
 

2,870

 
 

16,783

 
 

14,551

 
  All-In Sustaining Cash Costs    

  23,295  

 
 

  18,817  

 
 

  84,863  

 
 

  80,226  

 
Copper Equivalent Payable Pounds (000's)   

6,321

 
 

2,194

 
 

16,745

 
 

19,033

 
  Cash Cost per Copper Equivalent Payable Pound    (US$)   

  1.76  

 
 

  5.29  

 
 

  2.99  

 
 

  2.18  

 
  All-In Sustaining Cash Cost per Copper Equivalent Payable Pound    (US$)   

  3.69  

 
 

  8.58  

 
 

  5.07  

 
 

  4.22  

 
 

The following table provides detailed information on Cusi's cash cost, and all-in sustaining cost per silver equivalent payable ounce for the three months and years ended December 31, 2022 and 2021:

 
                                                                                        
  CUSI     Three months ended    Years ended  
  (In thousand of US dollars, unless stated)     December 31, 2022    December 31, 2021    December 31, 2022    December 31, 2021  
      
   Cash Cost per silver equivalent payable ounce        
Total Cash Cost   

5,026

 
 

4,984

 
 

21,125

 
 

20,795

 
Variation in Finished inventory   

914

 
 

(68)

 
 

553

 
 

(190)

 
Total Cash Cost of Sales   

5,940

 
 

4,916

 
 

21,678

 
 

20,605

 
Treatment and Refining Charges   

466

 
 

1,061

 
 

1,643

 
 

3,899

 
Selling Costs   

358

 
 

342

 
 

1,128

 
 

1,227

 
G&A Costs   

710

 
 

928

 
 

2,267

 
 

2,449

 
Sustaining Capital Expenditures   

564

 
 

1,536

 
 

3,248

 
 

6,537

 
  All-In Sustaining Cash Costs    

  8,038  

 
 

  8,783  

 
 

  29,964  

 
 

  34,717  

 
Silver Equivalent Payable Ounces (000's)   

363

 
 

416

 
 

1,293

 
 

1,233

 
  Cash Cost per Silver Equivalent Payable Ounce    (US$)   

  16.35  

 
 

  11.80  

 
 

  16.77  

 
 

  16.71  

 
  All-In Sustaining Cash Cost per Silver Equivalent Payable Ounce    (US$)   

  22.14  

 
 

  21.09  

 
 

  23.17  

 
 

  28.15  

 
 
                                            
    
  CONSOLIDATED     Three months ended    Years ended  
  (In thousand of US dollars, unless stated)     December 31, 2022    December 31, 2021    December 31, 2022    December 31, 2021  
  Total Cash Cost of Sales    

32,305

 
 

34,902

 
 

149,395

 
 

138,557

 
  All-In Sustaining Cash Costs    

  55,534  

 
 

  62,944  

 
 

  243,223  

 
 

  259,934  

 
Copper Equivalent Payable Pounds (000's)   

13,260

 
 

15,240

 
 

58,581

 
 

76,355

 
  Cash Cost per Copper Equivalent Payable Pound    (US$)   

  2.44  

 
 

  2.29  

 
 

  2.55  

 
 

  1.81  

 
  All-In Sustaining Cash Cost per Copper Equivalent Payable Pound    (US$)   

  4.19  

 
 

  4.13  

 
 

  4.15  

 
 

  3.40  

 
 

  Additional Non-IFRS Measures  

 

The Company uses other financial measures, the presentation of which is not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following other financial measures are used:

 
  • Operating cash flows before movements in working capital - excludes the movement from period-to-period in working capital items including trade and other receivables, prepaid expenses, deposits, inventories, trade and other payables and the effects of foreign exchange rates on these items.
  •  

The terms described above do not have a standardized meaning prescribed by IFRS, and therefore the Company's definitions are unlikely to be comparable to similar measures presented by other companies. The Company's management believes that their presentation provides useful information to investors because cash flows generated from operations before changes in working capital excludes the movement in working capital items. This, in management's view, provides useful information of the Company's cash flows from operations and are considered to be meaningful in evaluating the Company's past financial performance or its future prospects. The most comparable IFRS measure is cash flows from operating activities.

 

  About Sierra Metals  

 

 Sierra Metals is a diversified Canadian mining company with green metal exposure including copper, zinc and lead production with precious metals byproduct credits, focused on the production and development of its Yauricocha Mine in Peru and its Bolivar Mine in Mexico. The Company is focused on the safety and productivity of its producing mines. The Company also has large land packages with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.

 

For further information regarding Sierra Metals, please visit www.sierrametals.com .

 

  Continue to Follow, Like and Watch our progress:  

 

  Web:    www.sierrametals.com    | Twitter : sierrametals | Facebook : SierraMetalsInc | LinkedIn:  Sierra Metals Inc | Instagram : sierrametals

 

  Forward-Looking Statements  

 

This press release contains forward-looking information within the meaning of Canadian securities legislation. Forward-looking information relates to future events or the anticipated performance of Sierra and reflect management's expectations or beliefs regarding such future events and anticipated performance based on an assumed set of economic conditions and courses of action, including the accuracy of the Company's current mineral resource estimates; that the Company's activities will be conducted in accordance with the Company's public statements and stated goals; that there will be no material adverse change affecting the Company, its properties or its production estimates (which assume accuracy of projected ore grade, mining rates, recovery timing, and recovery rate estimates and may be impacted by unscheduled maintenance, labour and contractor availability and other operating or geo-political uncertainties on the Company's production, workforce, business, operations and financial condition); the expected trends in mineral prices, inflation and currency exchange rates; that all required approvals will be obtained for the Company's business and operations on acceptable terms; that there will be no significant disruptions affecting the Company's operations. In certain cases, statements that contain forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur" or "be achieved" or the negative of these words or comparable terminology. Forward-looking statements include those relating to the Company's guidance on the timing and amount of future production and its expectations regarding the results of operations; expected costs; permitting requirements and timelines; anticipated market prices of metals; the Company's ability to comply with contractual and permitting or other regulatory requirements; formalizing the refinancing contract and the timeline related thereto and the timing of senior management's conference call to discuss the Company's financial and operating results for the year ended December 31, 2022. By its very nature forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual performance of Sierra to be materially different from any anticipated performance expressed or implied by such 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 of not meeting the expectations contemplated herein and the risks described under the heading "Risk Factors" in the Company's annual information form dated March 28, 2023 for its fiscal year ended December 31, 2022 and other risks identified in the Company's filings with Canadian securities regulators, which filings are available at www.sedar.com .

 

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.

 

  

  

  Investor Relations  
Sierra Metals Inc. 
Tel: +1 (416) 366-7777
Email: info@sierrametals.com  

 

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