Sierra Metals Inc. Enters Into a Binding Agreement With Silverco Mining Corp. to Sell Its Cusi Project in Mexico

Rhea-AI Summary

Sierra Metals has announced a binding agreement with Silverco Mining Corp. to sell its Cusi Mine in Chihuahua, Mexico. The sale includes mining concessions, land, equipment, and environmental permits. The deal is valued at $2.5 million in cash, along with a 2% net smelter royalty on Cusi's future production. Silverco can buy 1% of this royalty for $5 million. This divestment, expected to complete in Q2 2024, allows Sierra to focus on its core assets in Peru and Mexico. The transaction is subject to regulatory approvals and definitive agreements. Advisors for the deal include SCP Resource Finance, Mintz LLP, and RB Abogados.

Positive

• Sierra Metals to receive $2.5 million in cash upon closing the transaction.
• Agreement includes a 2% net smelter royalty on the Cusi Mine.
• Allows the company to focus resources on its core assets in Yauricocha and Bolivar.
• Potential $5 million from Silverco if they buy back 1% of the royalty.
• Completion expected in Q2 2024, providing a clear timeline for stakeholders.

Negative

• The transaction is subject to regulatory approvals and other conditions, introducing uncertainty.
• No guarantee that the transaction will be completed as planned.
• Cusi Mine placed on care and maintenance, indicating it's currently non-productive.

TORONTO--(BUSINESS WIRE)-- Sierra Metals Inc. (TSX:SMT | OTCQX: SMTSF) (“Sierra Metals” or the “Company”) is pleased to announce that the Company has entered into a binding agreement (the "Agreement") with Silverco Mining Corp. ("SMC") in respect of the proposed purchase (the “Transaction”) by SMC of the mining concessions comprising the Cusi Mine located in Chihuahua State, Mexico (the “Cusi Mine”), and related assets including, among other things, land and land agreements, equipment and environmental permits (collectively with the Cusi Mine, the “Property”).

In accordance with the terms of the Agreement, the Company will sell the Property to SMC in exchange for:

• US$2,500,000 in cash consideration at closing; and
• A 2.0% net smelter royalty in respect of the Cusi Mine granted in favour of Sierra Metals (the “Royalty”). SMC will have the right to purchase half of the Royalty (being 1.0%) at any time in exchange for a cash payment to Sierra Metals of US$5,000,000.

As previously announced, the non-core Cusi Mine was placed on care and maintenance and the Company initiated a sales process on September 20, 2023. Placing the Cusi Mine on care and maintenance and the completion of the Transaction allows Sierra Metals to direct its full effort and resources to optimize the Company’s two core assets at Yauricocha and Bolivar.

Completion of the Transaction is currently expected in the second quarter of 2024. The completion of the Transaction is subject to the Company and SMC entering into a definitive agreement in respect of the Transaction and the satisfaction or waiver of all conditions thereunder and the receipt of any applicable regulatory approvals. There is no certainty that the Transaction will be completed on the terms set out in this press release or at all.

Advisors

Sierra Metals has engaged SCP Resource Finance as its financial advisor, Mintz LLP as its Canadian legal advisors and RB Abogados as its Mexican legal advisors.

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. 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", "will allow", "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 in this press release includes, but is not limited to, statements in respect of the Transaction, including the entering into of a definitive agreement in respect of the Transaction and the proposed terms and closing thereof.

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 lings 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.

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

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Investor Relations

Sierra Metals Inc.

+1 (866) 721-7437

info@sierrametals.com

Source: Sierra Metals Inc.

FAQ

What is the value of Sierra Metals' agreement with Silverco Mining Corp. for the Cusi Mine?

The agreement is valued at $2.5 million in cash plus a 2% net smelter royalty.

When is the completion of the Sierra Metals and Silverco Mining Corp. transaction expected?

The transaction is expected to complete in the second quarter of 2024.

What are the terms of the royalty agreement in the Sierra Metals and Silverco Mining Corp. deal?

Sierra Metals will receive a 2% net smelter royalty, with Silverco having the option to buy 1% of it for $5 million.

Why did Sierra Metals place the Cusi Mine on care and maintenance?

The Cusi Mine was deemed non-core, allowing Sierra Metals to focus on optimizing its core assets.

What are the core assets Sierra Metals plans to focus on after selling the Cusi Mine?

Sierra Metals plans to focus on its Yauricocha Mine in Peru and Bolivar Mine in Mexico.