Sierra Metals Announces Comprehensive New Financing as Part of its Balance Sheet Strengthening Initiatives

Rhea-AI Summary

Sierra Metals has refinanced its $75 million long-term debt facility with a new $95 million facility, featuring revised covenants, payment terms, and a five-year term maturing in June 2029. The new facility includes $85 million bearing interest at 3-month SOFR plus 6.50% and $10 million at a fixed rate of 12%. The additional $20 million will fund high-return capital projects and transaction fees. Key projects include development at the Yauricocha mine in Peru and the Bolivar mine in Mexico. The new facility offers a 12-month grace period and provides covenant relief, enhancing financial flexibility and liquidity for the company.

Positive

• Refinancing of $75 million debt with a new $95 million facility.
• Extended maturity profile with a five-year term ending in June 2029.
• Additional $20 million earmarked for high-return capital projects.
• Interest rates set at 3-month SOFR plus 6.50% for $85 million and 12% fixed rate for $10 million.
• 12-month grace period before quarterly principal instalments.
• Improved liquidity and financial flexibility.
• Covenant headroom during the grace period.
• No penalties for early repayment within the first 18 months.

Negative

• High interest rates: 3-month SOFR plus 6.50% and 12% fixed rate.
• Balloon payment of 35% upon maturity.
• Mandatory repayment under certain covenants related to governance and management changes.
• Increased financial commitments with the new facility.

• Enhanced working capital position
• Increases the Company’s financial flexibility
• Provides covenant headroom during the grace period
• Extends the Company’s maturity profile, providing runway to execute on operational enhancements

All dollar figures are in USD.

TORONTO--(BUSINESS WIRE)-- Sierra Metals Inc. (TSX:SMT | OTCQX:SMTSF) (“Sierra Metals” or the “Company”) is pleased to report the refinancing of its $75 million long-term debt facility and the entering into a new $95 million facility with new covenants, payment terms, and a 5-year term (the “New Facility”).

Ernesto Balarezo, Sierra Metals’ CEO, comments, “The repayment of our long-term debt is a major milestone for Sierra Metals. The upsized amount, covenant relief, payment flexibility, and extended maturity date will provide the Company with the capacity to deliver on its future plans through improved liquidity. This transaction provides Sierra with strong liquidity, sustainable leverage, and a solid financial position on which to deliver its operational objectives. We would like to thank all the financial institutions for their continued support and for partnering with us as we continue to create long-term value for all our stakeholders.”

The New Facility of $95 million will be used to repay the existing $75 million loan and the additional $20 million will be earmarked for high-return capital projects as well as for transaction fees and expenses. Capital expenditures include the development below the 1120 level and the completion of the shaft at the Yauricocha mine in Peru, as well as for mine developments of over 8,000 meters, a new ore pass, and the initial engineering works on a new tailings dam facility at the Bolivar mine in Mexico.

Highlights of the New Facility

• 5-year term with maturity in June 2029
• Bearing interest at 3-month SOFR plus 6.50% for $85 million and 12% fixed rate for $10 million
• 12-month grace period before quarterly principal instalments
• Revised Net Debt to EBITDA and Debt service coverage covenants
• Provides covenant headroom during grace period
• Balloon payment of 35% upon maturity
• Callable at no penalties, but for $10 million for a period of 18 months

The New Facility also includes certain covenants with respect to the governance and management of the Company. Specifically, in the event: (a) of a change of control of the Company; (b) the Company ceases to control Dia Bras Peru S.A.C. (“DBP”), Dia Bras Mexicana S.A. DE C.V. (“DBM”) or Sociedad Minera Corona S.A.; or (c) individuals constituting a majority of the members of the board of Sierra Metals before any general shareholders meeting of Sierra Metals shall cease to constitute the majority of the board of directors of Sierra Metals immediately following such general shareholders meeting, then the Company will have to repay 100% of the outstanding principal amount owing under the New Facility. Additionally, under the New Facility each of the Company, DBP and DBM covenant to consult with the lenders in good faith prior to any replacement, appointment, removal, addition or hiring of any Chief Executive Officer, Chief Financial Officer, Chief Operating Officer (or the equivalent) or any new member to such entity’s board of directors.

The New Facility is led by Banco Santander Peru S.A., together with a syndicate of financial institutions. A copy of the credit agreement evidencing the New Facility will be filed on the Company’s profile on SEDAR+ at www.sedarplus.ca.

About Sierra Metals

Sierra Metals is a Canadian mining company focused on copper production with additional base and precious metals by-product credits at its Yauricocha Mine in Peru and Bolivar Mine in Mexico. The Company is intent on safely 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 in Peru and Mexico that are within close proximity to the existing mines. Additionally, the Company has large land packages at each of its mines with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.

Forward-Looking Statements

This press release contains forward-looking information within the meaning of Canadian securities legislation including with respect to the effects of the New Facility and the use of funds available under the New Facility. 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. 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. 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 described under the heading "Risk Factors" in the Company's annual information form dated March 15, 2024 for its fiscal year ended December 31, 2023 and other risks identified in the Company's filings with Canadian securities regulators, which are available at www.sedarplus.ca.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240604583786/en/

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

Investor Relations

Sierra Metals Inc.

+1 (866) 721-7437

info@sierrametals.com

Source: Sierra Metals Inc.

FAQ

What is Sierra Metals' new debt facility amount?

Sierra Metals' new debt facility amount is $95 million.

When does Sierra Metals' new debt facility mature?

Sierra Metals' new debt facility matures in June 2029.

What are the interest rates on Sierra Metals' new debt facility?

The new debt facility bears interest at 3-month SOFR plus 6.50% for $85 million and a fixed rate of 12% for $10 million.

What will the additional $20 million from Sierra Metals' new facility be used for?

The additional $20 million will be used for high-return capital projects and transaction fees.

What is the significance of the 12-month grace period in Sierra Metals' new facility?

The 12-month grace period provides Sierra Metals with covenant relief and enhanced financial flexibility.

How will the new facility impact Sierra Metals' liquidity?

The new facility will significantly improve Sierra Metals' liquidity and financial flexibility.

What are the key projects funded by Sierra Metals' new facility?

Key projects include development at the Yauricocha mine in Peru and the Bolivar mine in Mexico.

What are the repayment conditions under the new facility if Sierra Metals undergoes a change of control?

The company must repay 100% of the outstanding principal amount if there is a change of control or other specified governance changes.