Sierra Metals Reports 29-percent Rise in Silver Production

Sierra Metals Inc. (TSX:SMT) announced its financial and operating results for Q4 2014 as well as 2014 as a whole, noting that its silver, lead, zinc and gold production came in over the high end of guidance. Meanwhile, copper production was within guidance.

Specifically, silver production for the year was 3,148,145 ounces, an increase of 29 percent from the previous year. That rise came on the back of higher plant throughput at all three of the company’s mines, along with higher recoveries at the Yauricocha and Cusi mines.

Other production highlights include:

• Annual copper production of 22.6 million pounds (‘lb’f) in 2014 increased by 42% compared to 15.9 million lb in 2013. The increase in copper production was due to the ramp up from 1,000 tonnes per day (‘tpd’) to 2,000 tpd at Bolivar during Q4 2013, which resulted in higher throughput during 2014;
• Annual lead production of 48.8 million lb in 2014 increased by 29% compared to 38.0 million lb in 2013. Higher lead head grades at Yauricocha contributed to the increase in lead production in 2014;
• Annual zinc production of 54.3 million lb in 2014 increased by 5% compared to 51.7 million lb in 2013. The increase in zinc production was due to the increase in throughput at Yauricocha as the zinc head grades and recoveries in 2014 were consistent with those achieved in 2013; and
• Annual gold production of 9,457 oz in 2014 increased by 40% compared to 6,736 oz in 2013. The increase in gold production during 2014 was due to higher head grades and recoveries realized at the Bolivar and Cusi mines.

Financial highlights are as follows:

• Revenue from metals payable of $172.6 million in 2014, increased by 20% from $143.5 million in 2013. The increase in revenues was due to higher head grades and recoveries for silver, lead and copper at Yauricocha and higher plant throughput at the Yauricocha, Bolivar and Cusi Mines;
• Cash costs (recovery) per silver payable ounce was $(21.25) (2013: $(12.04)) at Yauricocha, cash cost per copper payable pound was $1.65 (2013: $1.70) at Bolivar and cash cost per silver payable ounce was $8.92 (2013: $15.70) at Cusi for the year ended December 31, 2014. The decrease at Yauricocha was due to higher plant throughput, an increase in by-product credits and continued success with the cost reduction measures implemented in Q3 2013. Bolivar’s cash costs remained consistent with 2013 as the increase in the copper payable pounds offset the decrease in by-product credits due to the decline in silver prices. The decrease in cash costs at Cusi was due to higher silver payable ounces and by-product credits due to higher plant throughput;
• Net income attributable to shareholders of $9.3 million or $0.06 per share for the year ended December 31, 2014 compared to a net loss of $(34.0) million ($(0.22) per share) in 2013. The increase in net income attributable to shareholders is due to the increase in revenues and decrease in costs described above, as well as the decrease in the non-cash depletion charge on the Yauricocha mineral property arising from the original acquisition of Sociedad Minera Corona S.A. (‘Corona’);
• Adjusted EBITDA of $72.6 million for the year ended December 31, 2014 increased 33% compared to $54.5 million in 2013. The increase in adjusted EBITDA in 2014 is due to the increase in revenues and decrease in costs described above;
• Adjusted net income attributable to shareholders of $30.5 million or $0.21 per share for the year ended December 31, 2014 increased 87% compared to $16.3 million or $0.10 per share for 2013;
• A large component of the net income (loss) for every period is the non-cash depletion charge in Peru, which was $33.9 million (2013: $57.3 million) for the year ended December 31, 2014. The non-cash depletion charge is based on the aggregate fair value of the Yauricocha mineral property at the date of acquisition of Corona of $371.0 million amortized over the total proven and probable reserves and measured and indicated resources of the mine. The Company has been successful in reducing the depletion expense year over year as a result of the 54% increase in the mineral reserves at Yauricocha based on the NI 43-101 reports dated October 2012 and November 2013;
• Cash flow generated from operations of $60.1 million for the year ended December 31, 2014 compared to $26.7 million in 2013. The increase in cash flow is mainly the result of higher revenues generated and higher gross margins achieved; and
• Cash and cash equivalents of $41.3 million as at December 31, 2014 compared to $44.9 million at the end of 2013. Cash and cash equivalents have decreased by $3.6 million during 2014 due to the capital expenditures incurred in Mexico and Peru of $(40.0) million, repayment of loans and credit facilities of $(14.8) million, and dividends paid to shareholders of $(1.5) million and non-controlling interests of $(7.1) million, offset by $60.1 million of operating cash flow.

Click here to read the full Sierra Metals Inc. (TSX:SMT) press release.