Sierra Metals Reports Consolidated Financial Results for the Second Quarter of 2021 and Provides Revised Guidance for 2021
Sierra Metals reported Q2 2021 revenue of $79.4 million and adjusted EBITDA of $37.7 million, with throughput of 787,534 tonnes and 24.8 million copper equivalent pounds produced. Notably, silver, lead, zinc, and gold output rose by 35%, 22%, 54%, and 23% respectively compared to Q2 2020. Despite challenges from COVID-19, the company has revised its production, cost, and EBITDA outlook for the year, now expecting copper equivalent production to range between 110 to 115 million pounds. The company intends to continue investing in growth, supported by a robust balance sheet.
- Adjusted EBITDA increased 173% to $37.7 million compared to $12.6 million in Q2 2020.
- Net income attributable to shareholders rose to $9.1 million ($0.06 per share) from $0.2 million in Q2 2020.
- Consolidated silver production increased 67% to 1.0 million ounces year-over-year.
- Copper production decreased by 11% compared to the prior quarter.
- Production guidance for 2021 revised down to between 110 to 115 million pounds due to ongoing COVID-19 impacts.
- Unit costs increased significantly due to higher production costs and lower-grade ore extraction.
Sierra Metals Inc. (TSX: SMT) (BVL: SMT) (NYSE AMERICAN: SMTS) ("Sierra Metals" or "the Company") today reported revenue of
Truck being loaded at Bolivar Rom Pad before heading to Concentrate Plant (Photo: Business Wire)
Copper Equivalent Pounds produced = (Ag ounces Produced * Ag$) + (Pb pounds produced * Pb$) + (Zn Pounds Produced *Zn$) + (Au ounces produced *Au$) + (Cu Pounds Produced*Cu$) / Cu$
At the Yauricocha Mine, the higher throughput was partially offset by lower head grades for all metals, resulting in a
The Bolivar Mine processed 385,331 tonnes in Q2 2021, which is a
The Cusi Mine throughput for Q2 2021 was 73,294 tonnes or 838 tpd. There was no production during the same quarter of 2020, as Cusi remained in care and maintenance throughout that quarter due to the government-mandated shutdown to contain the advancement of COVID-19. The silver head grade for Q2 2021 was 138.94 g/t resulting in silver production of 269,000 ounces. Mined tonnage and grade were impacted by the problems related to underground water and high temperatures deemed unsafe to work in the planned mining zones. Additionally, gold production was 142 ounces, and lead production was 129,000 pounds respectively during the quarter.
Consolidated production of silver increased
Luis Marchese, CEO of Sierra Metals, commented, "Despite the challenges we faced in relation to the COVID-19 pandemic in the second quarter, the Company continues to see improvements in consolidated throughput, revenue, EBITDA and net income over the same period in 2020 and over the previous quarter in 2021. Our teams are using best practices to manage the impact of the pandemic. However, in reflecting the ongoing challenges of the COVID-19 pandemic and the impact on operations in the first half of 2021, we saw the need to revise our production, cost, and EBITDA guidance to align with the outlook for the year. While Peru and Mexico are making important improvements on their vaccination efforts, COVID-19 remains an ongoing challenge, adding to our cost base and challenging some of our processes. Overall, our goal continues to be to avoid any mine closures while ensuring that strict protocols remain in place to protect the wellbeing of our employees and the local communities."
He continued, "During the second quarter, we received the final permit required to expand the throughput at Yauricocha to 3,600 tonnes per day. Looking ahead to the remainder of 2021, we are also expanding and diversifying operations at Bolivar with the construction of a 500,000 tonne per year magnetite plant, expected to be fully operational early next year. Furthermore, we continue to work on the completion of a Preliminary Feasibility Study to evaluate a
He concluded, "The Company continues to have a strong balance sheet and strong EBITDA to support the Company's capital expenditures and growth initiatives at all mines, and we continue to work to improve per-share value for all shareholders. Based on our current budgeting process, and current strong metals price environment, this scenario could provide support for an attractive dividend policy."
The following table displays selected financial and operational information for the three months ended June 30, 2021:
| MDA Selected Financial Results | ||||||||||
| Three Months Ended | Six Months Ended | |||||||||
| (In thousands of dollars, except per share and cash cost amounts, consolidated figures unless noted otherwise) | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||
| Operating | ||||||||||
| Ore Processed / Tonnes Milled |
|
787,534 |
|
511,485 |
|
1,561,955 |
|
1,252,183 |
|
|
| Silver Ounces Produced (000's) |
|
954 |
|
572 |
|
1,915 |
|
1,520 |
|
|
| Copper Pounds Produced (000's) |
|
9,535 |
|
9,708 |
|
17,430 |
|
21,483 |
|
|
| Lead Pounds Produced (000's) |
|
7,960 |
|
6,406 |
|
16,964 |
|
15,485 |
|
|
| Zinc Pounds Produced (000's) |
|
21,133 |
|
13,741 |
|
45,256 |
|
35,387 |
|
|
| Gold Ounces Produced |
|
2,812 |
|
2,762 |
|
5,448 |
|
6,419 |
|
|
| Copper Equivalent Pounds Produced (000's)1 |
|
24,786 |
|
22,743 |
|
50,157 |
|
54,016 |
|
|
| Zinc Equivalent Pounds Produced (000's)1 |
|
81,114 |
|
61,353 |
|
160,750 |
|
146,032 |
|
|
| Silver Equivalent Ounces Produced (000's)1 |
|
4,043 |
|
3,297 |
|
7,778 |
|
8,028 |
|
|
| Cash Cost per Tonne Processed | $ |
46.54 |
$ |
34.26 |
$ |
47.04 |
$ |
41.62 |
|
|
| Cost of sales per AgEqOz | $ |
9.91 |
$ |
6.93 |
$ |
10.66 |
$ |
8.11 |
|
|
| Cash Cost per AgEqOz2 | $ |
9.17 |
$ |
6.87 |
$ |
10.06 |
$ |
7.79 |
|
|
| AISC per AgEqOz2 | $ |
18.48 |
$ |
12.29 |
$ |
19.04 |
$ |
13.71 |
|
|
| Cost of sales per CuEqLb2 | $ |
1.62 |
$ |
1.00 |
$ |
1.65 |
$ |
1.21 |
|
|
| Cash Cost per CuEqLb2 | $ |
1.49 |
$ |
1.00 |
$ |
1.56 |
$ |
1.16 |
|
|
| AISC per CuEqLb2 | $ |
3.01 |
$ |
1.78 |
$ |
2.95 |
$ |
2.04 |
|
|
| Cost of sales per ZnEqLb2 | $ |
0.50 |
$ |
0.37 |
$ |
0.52 |
$ |
0.45 |
|
|
| Cash Cost per ZnEqLb2 | $ |
0.46 |
$ |
0.37 |
$ |
0.49 |
$ |
0.43 |
|
|
| AISC per ZnEqLb2 | $ |
0.92 |
$ |
0.66 |
$ |
0.92 |
$ |
0.75 |
|
|
Cash Cost per ZnEqLb (Yauricocha)2 |
$ |
0.43 |
$ |
0.34 |
$ |
0.45 |
$ |
0.39 |
|
|
AISC per ZnEqLb (Yauricocha)2 |
$ |
0.79 |
$ |
0.67 |
$ |
0.82 |
$ |
0.76 |
|
|
Cash Cost per CuEqLb (Yauricocha)2 |
$ |
1.41 |
$ |
0.91 |
$ |
1.45 |
$ |
1.06 |
|
|
AISC per CuEqLb (Yauricocha)2 |
$ |
2.57 |
$ |
1.80 |
$ |
2.62 |
$ |
2.05 |
|
|
Cash Cost per CuEqLb (Bolivar)2 |
$ |
1.17 |
$ |
1.02 |
$ |
1.38 |
$ |
1.09 |
|
|
AISC per CuEqLb (Bolivar)2 |
$ |
3.27 |
$ |
1.60 |
$ |
3.09 |
$ |
1.73 |
|
|
Cash Cost per AgEqOz (Cusi)2 |
$ |
21.67 |
$ |
18.66 |
$ |
20.15 |
$ |
21.53 |
|
|
AISC per AgEqOz (Cusi)2 |
$ |
35.73 |
$ |
26.25 |
$ |
32.92 |
$ |
28.96 |
|
|
| Financial | ||||||||||
| Revenues | $ |
79,449 |
$ |
41,901 |
$ |
149,073 |
$ |
97,459 |
|
|
| Adjusted EBITDA2 | $ |
37,689 |
$ |
12,595 |
$ |
62,958 |
$ |
28,669 |
|
|
| Operating cash flows before movements in working capital | $ |
35,848 |
$ |
13,184 |
$ |
61,474 |
$ |
28,894 |
|
|
| Adjusted net income (loss) attributable to shareholders2 | $ |
12,681 |
$ |
1,344 |
$ |
17,064 |
$ |
2,554 |
|
|
| Net income (loss) attributable to shareholders | $ |
9,084 |
$ |
154 |
$ |
12,168 |
$ |
(1,715 |
) |
|
| Cash and cash equivalents | $ |
76,102 |
$ |
40,743 |
$ |
76,102 |
$ |
40,743 |
|
|
| Working capital | $ |
62,291 |
$ |
49,351 |
$ |
62,291 |
$ |
49,351 |
|
|
| (1) Silver equivalent ounces and copper and zinc equivalent pounds for Q2 2021 were calculated using the following realized prices: |
|||||
| (2) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A. | |||||
The following table displays average realized metal prices information for the three months ended June 30, 2021, vs June 30, 2020:
| Average Realized Metal Prices | % | |||||
| (In US dollars) | Q2 2021 | Q2 2020 | Increase | |||
| Silver ($/oz) | $ |
26.80 |
$ |
16.59 |
62 |
% |
| Copper ($/lb) | $ |
4.37 |
$ |
2.40 |
82 |
% |
| Lead ($/lb) | $ |
0.97 |
$ |
0.76 |
28 |
% |
| Zinc ($/lb) | $ |
1.34 |
$ |
0.89 |
51 |
% |
| Gold ($/oz) | $ |
1,818 |
$ |
1,722 |
6 |
% |
Q2 2021 Financial Highlights
Revenue from metals payable of
Yauricocha's cost of sales per copper equivalent payable pound was
Bolivar's cost of sales per copper equivalent payable pound was
Cusi's cost of sales per silver equivalent payable ounce was
Adjusted EBITDA(1) increased
Net income attributable to shareholders for Q2 2021 was
Adjusted net income attributable to shareholders(1) of
Cash flow generated from operations before movements in working capital of
Cash and cash equivalents of
(1) This is a non-IFRS performance measure. See the Non-IFRS Performance Measures section of the MD&A.
Exploration Update
Peru:
- During the second quarter, 1,033 meters of surface exploration drilling was completed in the Triada copper porphyry target, reaching a total of 1,479 meters for the year. Additionally, 697 meters of drilling was completed in the Kilkasca zones, for a total of 921 meters for the year 2021.
- Underground exploration drilling continued during Q2 2021 with the aim to replace and increase mineral resources that were depleted during 2020 and the first half of 2021. Approximately 4,976 meters of drilling was completed in Esperanza North, Central Mine, Cachi-cachi and the high-grade cuerpos chicos.
Mexico:
Bolivar
- At Bolivar during Q2 2021, 11,377 meters were drilled in the Bolivar West, Bolivar North-West, La Montura and the Cieneguita zones encountering skarn intersections with mineralization. Additionally, infill drilling of 2,490 meters was completed in the Bolivar West zone and 2,852 meters in El Gallo Inferior.
Cusi
- During Q2 2021, the Company completed 6,518 meters of infill drilling to support the development of the Santa Rosa de Lima vein and NE Trend. In addition, 2,020 meters of surface drilling was completed to support the "San Nicolas Vein" exploration and the "Gallo vein."
Covid-19 Update
Protecting our employees and the communities in which we operate is extremely important to us. The COVID-19 situation in Peru and Mexico remains serious and is an important factor in the daily operations. The Company continues to take proactive and reactive mitigation measures adhering to strict health protocols to minimize the potential impacts from COVID-19.
The pandemic has impacted operations as we adhere to the public health restrictions. Testing and quarantining have helped identify and keep active cases from occurring in the mines, but as a result, we are operating with a reduced workforce. This results in ongoing and residual operational issues on the Company’s ability to function effectively. These issues include delayed capital expenditures, mine development and preparation of areas for mining, maintenance and replacement of equipment, staffing, specialized technical oversight, and exploration drilling, among others.
The Peruvian and Mexican governments vaccination efforts are bringing vaccines to the population in our areas of influence, starting with the most at risk in the communities. The situation is not yet under control yet and remains a significant risk for our personnel, communities, and our business. The Company has engaged proactively with the local authorities to support their efforts and to facilitate vaccination efforts nearby our operations.
Revised Guidance
The production and financial results of the Company in the first half of 2021 were impacted by COVID-19 and operational challenges. Some of the COVID-19 issues are still ongoing or are a residual effect from previous quarters on current operations. Direct impact issues have included lower workforce availability and additional costs related to management and prevention of COVID-19. Residual effect includes delays on Mine development, which has forced production to come from lower grade, higher tonnage areas in order to reach throughput targets.
Operational challenges include Permitting delays in Yauricocha, higher treatment charges due to price participation escalators from off takers, larger than normal high temperature water flows in planned mining area at Cusi, among others. Unit costs have been negatively impacted by indirect fixed costs, which must be incurred, despite lower production.
Management believes that these issues are temporary and will not affect the Company’s results in the medium to longer term time frame. Appropriate actions are being taken to return to full operational efficiency, while continuing to manage the outstanding risks related to COVID-19.
The Company has reviewed the impact of these setbacks and has lowered its production, cost, and EBITDA guidance for 2021, as per the charts below. Copper equivalent production is now expected to fall between 110 to 115 million pounds, as summarized in the table below:
| Production | ||||
| Revised 2021 guidance | Original guidance | |||
| Low | High | Low | High | |
| Silver (000 oz) | 3,700 |
4,000 |
4,298 |
4,628 |
| Copper (000 lbs) | 36,500 |
39,000 |
44,090 |
48,380 |
| Lead (000 lbs) | 30,500 |
33,000 |
31,871 |
34,322 |
| Zinc (000 lbs) | 76,500 |
84,000 |
101,409 |
109,240 |
| Gold (oz) | 10,500 |
11,000 |
10,691 |
11,720 |
| Copper equivalent |
110,000 |
115,000 |
129,988 |
141,018 |
| Silver equivalent ounces (000's) (1) | 13,500 |
14,500 |
16,126 |
17,494 |
| (1) 2021 metal equivalent guidance was calculated using the following prices: |
||||
The table below summarizes the equivalent production, cash costs and AISC ranges for each of the sites:
| Equivalent Production Range (1) | Cash costs range | AISC(2) range | ||
| Mine | per CuEqLb or AgEqOz | per CuEqLb or AgEqOz | ||
| Revised 2021 guidance | ||||
| Yauricocha | Copper Eq Lbs ('000) | 67,000 - 69,000 | ||
| Bolivar | Copper Eq Lbs ('000) | 31,000 - 33,000 | ||
| Cusi | Silver Eq Oz ('000) | 1,270 - 1,400 | ||
| Original guidance | ||||
| Yauricocha | Copper Eq Lbs ('000) | 79,300 - 85,600 | ||
| Bolivar | Copper Eq Lbs ('000) | 37,500 - 41,500 | ||
| Cusi | Silver Eq Oz ('000) | 1,650 - 1,725 |
| (1) 2021 metal equivalent guidance was calculated using the following prices: |
||||
| (2) AISC includes treatment and refining charges, selling costs, G&A costs and sustaining capital expenditure | ||||
Based on the new production and cost guidance ranges, Management has also revised its EBITDA guidance, which is now expected to range between
| Revised 2021 Guidance | Original guidance | |||
| EBITDA Range ($'000) (1) (2) | EBITDA Range ($'000) (1) | |||
| Mine | Low | High | Low | High |
| Yauricocha | 87,000 |
91,000 |
93,400 |
100,200 |
| Bolivar | 44,000 |
48,000 |
47,200 |
54,500 |
| Cusi | 4,000 |
6,000 |
19,100 |
20,000 |
| Corporate | (5,000) |
(5,000) |
(4,700) |
(4,700) |
| Total | 130,000 |
140,000 |
155,000 |
170,000 |
| (1) Calculated using the following analyst consensus prices: |
||||
| (2) Using the spot prices |
||||
Revised capital expenditure guidance
In April 2021, the Company announced its plan to invest in constructing an iron-ore processing plant at its Bolivar Mine to produce an iron ore concentrate. With the inclusion of this project, management are now revising capital expenditure guidance for the year from
Management will continue to monitor the COVID-19 situation and its impact on the production and metal prices and will provide any further updates as required.
| Amounts in $M | |||
| Revised 2021 Capital Expenditure guidance | Sustaining | Growth | Total |
| Yauricocha | 26 |
20 |
46 |
| Bolivar | 12 |
30 |
42 |
| Cusi | 6 |
5 |
11 |
| Greenfield Exploration | - |
1 |
1 |
| Total Capital Expenditure | 44 |
56 |
100 |
Strategic Review Process Update
The company has strong foundations for a solid valuation in the market and return for its shareholders. Despite current challenges, the company benefits from a strong EBITDA performance at current metal prices and a solid financial position to build additional value into the future. It has a current number of exciting actionable organic growth opportunities, particularly at Bolivar and Yauricocha, and a large land package for growth in the future, both near mine and further afield.
The process is still ongoing and considering all options. We expect to be able to provide a more detailed report on the process in the coming weeks.
Conference Call and Webcast
Sierra Metals' Senior Management will host a conference call on Tuesday, August 10, 2021, at 10:30 AM (EDT) to discuss the Company's financial and operating results for the three months ended June 30, 2021.
Via Webcast:
A live audio webcast of the meeting will be available on the Company's website:
https://event.on24.com/wcc/r/3193745/DC7EA7F3C83E666235B780E1DAD14D0A
The webcast along with presentation slides will be archived for 180 days on www.sierrametals.com.
Via phone:
To register for this conference call, please use the link provided below. After registering, a confirmation will be sent through email, including dial-in details and unique conference call codes for entry. As well, reminders will be sent to registered participants in advance of the call. If you experience difficulty registering, please dial: (888) 869-1189 or (706) 643-5902 for extra assistance.
Registration is open throughout the live call. However, to ensure you are connected for the full call, we suggest registering a day in advance or at minimum 10 minutes before the start of the call.
Conference Call Registration Link:
http://www.directeventreg.com/registration/event/7308198
Qualified Persons
Américo Zuzunaga, FAusIMM CP (Mining Engineer) and Vice President of Corporate Planning, 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 focused on the production and development of precious and base metals from its polymetallic 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 Toronto Stock Exchange and the Bolsa de Valores de Lima 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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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 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, the risks described under the heading "Risk Factors" in our Annual Information Form dated March 30, 2021 in respect of the year ended December 31, 2020 and other risks identified in the Company's filings with Canadian securities regulators and the U.S. Securities and Exchange Commission, which filings are available at www.sedar.com and www.sec.gov, respectively.
The risk factors referred to above 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.
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