Conference Call Tuesday November 15, 2022 at
11:00 AM (EST)
(All $ figures reported in USD)
- Revenue from metals payable of $38.8 million in Q3 2022, a 36%
decrease from $60.7 million in Q3 2021 and a 22% decrease from the
previous quarter, due to lower throughput at Yauricocha and slower
ramp up at Bolivar as a result of a flooding event and operational
restrictions due to limited ventilation in the Bolivar NorthWest
zone.
- Adjusted EBITDA of $(3.9) million in Q3 2022, compared to $17.4
million in Q3 2021 and $1.4 million in Q2 2022.
- Net loss attributable to shareholders for Q3 2022 of $46.2
million, or $(0.28) per share (basic and diluted), compared to a
net loss of $4.8 million, or ($0.03) per share in Q3 2021, and a
net loss of $15.3 million or $(0.09) per share in Q2 2022.
- Net loss for Q3 2022 and 9M 2022 includes an impairment charge
of $25.0 million ($nil for Q3 2021 and 9M 2021) for the Bolivar
mine and $7.0 million ($nil for Q3 2021 and 9M 2021) for the Cusi
mine.
- Adjusted net loss attributable to shareholders(1) of $10.7
million, or $(0.07) per share for Q3 2022, compared to adjusted net
loss of $1.7 million or $(0.01) per share for Q3 2021 and an
adjusted net loss of $11.6 million, or $0.07 per share for Q2
2022.
- $13.7 million of cash and cash equivalents and working capital
of $(52.3) million1 as at September 30, 2022.
- Net Debt of $73.6 million as at September 30, 2022.
- Suspension of production and financial guidance remains in
effect.
1 The negative working capital is largely due to the
reclassification of the long-term portion of the credit facility as
current, resulting from the breach of certain debt covenants as at
September 30, 2022. The Company is seeking accommodation from the
lending banks in the form of waivers for this non-compliance.
A shareholder conference call will be held Tuesday, November
15, 2022, at 11:00 AM (EST). Click here to register.
Sierra Metals Inc. (TSX: SMT) (BVL or Bolsa de Valores de
Lima: SMT) (NYSE AMERICAN: SMTS) (“Sierra Metals” or “the Company”)
today reported revenue of $38.8 million, a 36% decline from Q3 2021
and a 22% decline from Q2 2022, and adjusted EBITDA of $(3.9)
million, a 122% decrease from Q3 2021 and a 379% decrease from Q2
2022 on throughput of 561,906 tonnes and metal production of 16.6
million copper equivalent pounds for the three-month period ended
September 30, 2022.
Luis Marchese, CEO of Sierra Metals, commented, "the unexpected
events during our latest quarter have made for another challenging
period at Sierra Metals.
We have all been deeply impacted by the tragic mudslide incident
at Yauricocha. As our primary objective remains the safety and
well-being of all employees and contractors, a rigorous safety
assurance process continues at the mine. Although production is
ramping up, full production can only be reached once this process
is complete.
In the coming months, we will continue to incorporate ore from
the high-grade Fortuna zone and work towards recovery of tonnage at
the Yauricocha Mine. In addition, exploration efforts will
continue, both inside the mine for near term reach and in
brownfield locations in close proximity to operations, in order to
generate new exploration targets.”
He continued, “at Bolivar, unexpected flooding during most of
the quarter in addition to the operational restrictions due to
limited ventilation at the Bolivar NorthWest zone, negatively
impacted throughput and grades.
On a consolidated basis, the Company’s revenues and EBITDA
decreased 36% and 122%, respectively due to a 24% decrease in
copper equivalent production when compared to the same quarter last
year, coupled with a reduction in all metals prices, except
zinc.”
He concluded, “Recent setbacks at both the Yauricocha and
Bolivar Mines have prevented us from achieving full production and
our turnaround goals within the initially proposed timeline,
leading to suspended 2022 operating guidance. These unexpected
challenges have culminated in the liquidity issues facing the
Company. The Special Committee of our Board diligently continues
its strategic review process. In the meantime, we remain
disciplined in our approach to day-to-day operations.”
The following table displays selected financial and operational
information for the three months and nine months ended September
30, 2022 compared to the corresponding periods for 2021 and the
three months ended June 30, 2022:
Nine Months Ended September
30,
(In thousands of dollars, except per share and cash cost amounts,
consolidated figures unless noted otherwise)
Q3 2022
Q2 2022
Q3 2021
2022
2021
Operating Ore Processed / Tonnes Milled
561,906
640,181
750,208
1,792,817
2,312,163
Silver Ounces Produced (000's)
669
608
807
2,011
2,722
Copper Pounds Produced (000's)
6,299
8,334
8,256
20,957
25,686
Lead Pounds Produced (000's)
3,878
3,333
7,841
11,427
24,805
Zinc Pounds Produced (000's)
10,815
10,426
19,112
31,733
64,368
Gold Ounces Produced
2,199
2,622
2,261
6,744
7,709
Copper Equivalent Pounds Produced (000's)1
16,637
17,794
21,870
50,202
71,966
Cash Cost per Tonne Processed
$
65.60
$
65.21
$
44.63
$
64.05
$
46.25
Cash Cost per CuEqLb2
$
2.41
$
2.47
$
1.65
$
2.58
$
1.65
AISC per CuEqLb2
$
3.82
$
3.94
$
3.35
$
4.14
$
3.14
Cash Cost per CuEqLb (Yauricocha)2
$
2.01
$
2.06
$
1.37
$
2.09
$
1.42
AISC per CuEqLb (Yauricocha)2
$
3.36
$
3.39
$
2.83
$
3.49
$
2.69
Cash Cost per CuEqLb (Bolivar)2, 3
$
3.38
$
3.39
$
2.02
$
3.71
$
1.76
AISC per CuEqLb (Bolivar)2, 3
$
5.12
$
5.49
$
4.34
$
5.88
$
3.63
Cash Cost per AgEqOz (Cusi)2
$
14.58
$
24.84
$
17.06
$
16.92
$
19.15
AISC per AgEqOz (Cusi)2
$
19.23
$
33.83
$
28.93
$
23.58
$
31.65
Financial Revenues
$
38,787
$
49,941
$
60,701
$
145,969
$
209,774
Adjusted EBITDA2
$
(3,867
)
$
1,413
$
17,444
$
13,534
$
85,889
Operating cash flows before movements in working capital
$
(6,768
)
$
(1,630
)
$
15,126
$
2,303
$
75,859
Adjusted net income (loss) attributable to shareholders2
$
(10,705
)
$
(11,631
)
$
(1,677
)
$
(16,391
)
$
14,001
Net income (loss) attributable to shareholders
$
(46,150
)
$
(15,266
)
$
(4,815
)
$
(61,047
)
$
7,353
Cash and cash equivalents
$
13,690
$
16,404
$
58,288
$
13,690
$
58,288
Working capital 3
$
(52,345
)
$
(6,426
)
$
38,096
$
(52,345
)
$
38,096
(1) Copper equivalent pounds and
Silver equivalent ounces were calculated using the following
realized prices:
Q3 2022 - $19.26/oz Ag, $3.51/lb
Cu, $1.49/lb Zn, $0.90/lb Pb, $1,730/oz Au.
Q2 2022 - $22.65/oz Ag, $4.30/lb
Cu, $1.79/lb Zn, $1.00/lb Pb, $1,872/oz Au
Q3 2021 - $24.20/oz Ag, $4.25/lb
Cu, $1.36/lb Zn, $1.07/lb Pb, $1,790/oz Au.
9M 2022 - $21.95/oz Ag, $4.12/lb
Cu, $1.66/lb Zn, $0.99/lb Pb, $1,826/oz Au.
9M 2021 - $25.81/oz Ag, $4.17/lb
Cu, $1.31/lb Zn, $0.99/lb Pb, $1,796/oz Au.
(2) This is a non-IFRS
performance measure, see Non-IFRS Performance Measures section of
the Company’s management discussion and analysis for the three and
nine months ended September 30, 2022 (“MD&A”).
(3) The negative working capital
is largely the result of the reclassification of the long-term
portion of the credit facility to current, as the Company defaulted
on certain debt covenants. After the end of the Q3 2022, the
Company has received waivers from the lending banks for this
non-compliance.
The following table shows the Company’s realized selling prices
for the three months ended September 30, 2022, and each of the last
six quarters:
Realized Metal Prices
2022
2021
(In US dollars)
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Silver (oz)
$
19.26
$
22.65
$
23.95
$
23.41
$
24.20
$
26.80
$
26.44
Copper (lb)
$
3.51
$
4.30
$
4.53
$
4.40
$
4.25
$
4.37
$
3.88
Lead (lb)
$
0.90
$
1.00
$
1.06
$
1.06
$
1.07
$
0.97
$
0.92
Zinc (lb)
$
1.49
$
1.79
$
1.69
$
1.55
$
1.36
$
1.34
$
1.24
Gold (oz)
$
1,730
$
1,872
$
1,875
$
1,795
$
1,790
$
1,818
$
1,778
Q3 2022 Consolidated Operating
Highlights
Copper equivalent production of 16.6 million pounds; a 24%
decrease from Q3 2021 and a 7% decrease from Q2 2022.
Consolidated Q3 2022 throughput of 561,906 tonnes was a 25%
decrease over the Q3 2021 throughput of 750,208 tonnes. As compared
to Q2 2022, consolidated throughput was 12% lower for Q3 2022.
Throughput from the Yauricocha Mine during Q3 2022 was 269,057
tonnes, a 17% decline when compared to Q3 2021 due to the
suspension of mining activity and work stoppages during the
quarter, which resulted in a 31% decrease in copper equivalent
pounds produced. Declining grades due to restricted access to
non-permitted areas of the mine also affected production. When
compared to the previous quarter, throughput declined by 15%.
At the Bolivar Mine, throughput was 227,669 tonnes during Q3
2022. When compared to Q3 2021, throughput at Bolivar was 38% lower
and while grades were higher for silver and gold, they were not
enough to offset the lower throughput, resulting in a 16% decrease
in copper equivalent pounds produced. Operational ramp up has been
slower than expected due to unforeseen flooding in the Bolivar
NorthWest zone during the quarter. When compared to Q2 2022, an 11%
decrease in throughput, along with lower grades in copper and
silver, resulted in a 10% decrease in copper equivalent pound
production.
At Cusi, throughput was 65,180 tonnes during Q3 2022. When
compared to Q3 2021, a 7% increase in throughput, combined with
higher head grades for all metals except lead, resulted in a 22%
increase in silver equivalent ounces production. Cusi suffered from
an unexpected flooding event that restricted access to the lower
areas of the mine during the second quarter. At the beginning of
Q3, access to the lower levels of the mine was still limited. While
throughput was 2% lower, it was offset by higher grades in all
metals, resulting in a 32% increase in silver equivalent ounces
produced.
Q3 2022 Consolidated Financial
Highlights
Revenues Declined Due to Decrease in Metal Sales and a Drop
in Metals Prices
Revenue from metals payable of $38.8 million in Q3 2022 or a
decrease of 36% over the revenue of $60.7 million in Q3 2021 due to
the decrease in metal sales and the drop in average realized prices
for all metals, except zinc, as compared to Q3 2021.
Revenues for Q3 2022 were 22% lower than the revenue of $49.9
million in Q2 2022, as lower production from the Yauricocha and
Bolivar Mines impacted metal sales quantities. The average realized
prices for Q3 2022 decreased for copper (18%), zinc (17%), lead
(10%), silver (15%) and gold (8%) as compared to the same during Q2
2022.
Cost of Operations Increased at Yauricocha and Bolivar Due to
Lower Throughput
Yauricocha’s cash cost per copper equivalent payable pound was
$2.01 (Q3 2021 - $1.37), and AISC (as defined herein) per copper
equivalent payable pound of $3.36 (Q3 2021 - $2.83) for Q3 2022.
The increase in cash costs and AISC was mainly a result of the 25%
decrease in copper equivalent payable pounds as compared to Q3
2021. Despite 14% fewer copper equivalent payable pounds in Q3 2022
as compared to Q2 2022, cash cost and AISC per copper equivalent
pound decreased from $2.06 and $3.39 respectively in Q2 2022, due
to lower cost of sales and sustaining costs.
Bolivar’s cash cost per copper equivalent payable pound was
$3.38 (Q3 2021 - $2.02), and AISC per copper equivalent payable
pound was $5.12 (Q3 2021 - $4.34) for Q3 2022 due to higher
operating costs per tonne and an 8% decrease in the copper
equivalent payable pounds compared to Q3 2021. Bolivar’s Q3 2022
cash cost and AISC per copper equivalent pound decreased however
from $3.39 and $5.49 respectively in Q2 2022.
Cusi’s Q3 2022 cash cost per silver equivalent payable ounce
decreased to $14.58 from $17.06 in Q3 2021 as a result of higher
grades. AISC per silver equivalent payable ounce decreased to
$19.23 (Q3 2021 - $28.93). Unit costs decreased during Q3 2022,
despite fewer silver equivalent payable ounces, as a result of
lower operating costs per tonne and lower sustaining costs during
Q3 2022 as compared to Q3 2021.
EBITDA, Net Income and Cash Flow Generation Impacted by Lower
Revenues and Higher Operating Costs
Adjusted EBITDA(1) decreased 122% to $(3.9) million for Q3 2022
compared to $17.4 million in Q3 2021 and a 379% decrease compared
to $1.4 million in the previous quarter. The decrease in EBITDA is
related to drop in revenues attributable to lower production and
higher operating costs during Q3 2022.
Net loss attributable to shareholders for Q3 2022 was $46.2
million or $(0.28) per share (basic and diluted), compared to net
loss of $4.8 million or $(0.03) per share (basic and diluted) in Q3
2021 and net loss of $15.3 million or $(0.09) per share (basic and
diluted) in Q2 2022.
Adjusted net loss attributable to shareholders(1) of $10.7
million, or $(0.07) per share for Q3 2022, compared to adjusted net
loss of $1.7 million or $(0.01) per share for Q3 2021 and adjusted
net loss of $11.6 million, or $0.0 per share for Q2 2022.
Operating cash flow before movements in working capital of
$(6.8) million for Q3 2022 as compared to $15.1 million of cash
generated from operating activities in Q3 2021 and $(1.6) million
in Q2 2022. The decrease resulted from lower revenue and higher
costs during the quarter.
Cash and cash equivalents of $13.7 million and working capital
of $(52.3) million as at September 30, 2022 compared to $34.9
million and $17.3 million, respectively, at the end of 2021. The
negative working capital is largely the result of the
reclassification of the long-term portion of the credit facility to
current, as the Company defaulted on certain debt covenants as of
September 30, 2022. The Company is seeking accommodation from the
lending banks in the form of waivers for this non-compliance. If
the Company is unable to obtain such waivers for the current and
any potential future breaches of its debt covenants, it could
materially and adversely affect the Company’s future operations,
cash flows, earnings, results of operations, financial condition
and the economic viability of its projects.
Cash and cash equivalents decreased during the nine-month period
ended September 30, 2022 due to $31.2 million used in investing
activities offset by $6.1 million of cash generated from operating
activities and $3.8 million of cash generated from financing
activities.
Financing activities included $25.0 million received from Banco
de Credito del Peru (“BCP”) and Banco Santander by the Company’s
subsidiary, Sociedad Minera Corona, to finance the repayment of the
installments of $18.8 million on the original credit facility
received from BCP.
1 This is a non-IFRS performance measure. See the Non-IFRS
Performance Measures section of the MD&A.
Project Development
- Mine development at Bolivar during Q3 2022 totaled 2,080
meters, which included 1,265 meters of development to prepare
stopes for mine production, and 815 meters to development of ramps;
and
- Mine development at Cusi during Q3 2022 totaled 631
meters.
Exploration Update
Peru:
- Approximately 2,532 meters of diamond drilling was completed
during Q3 2022 in the Fortuna North, Katty and Violeta zones with
the aim to replace and increase the depleted mineral resources.
Additionally, approximately 2,000 meters of greenfield exploration
drilling was completed in the Tucumachay prospect.
Mexico:
Bolivar
- At Bolivar during Q3 2022, 18,318 meters were drilled in the
Bolivar West, Bolivar NorthWest, the Cieneguita zones and El Gallo
Superior encountering skarn intersections with mineralization.
Additionally, infill drilling of 4,479 meters was completed in the
Bolivar West, El Gallo Inferior and Bolivar NorthWest zones;
Cusi
- During Q3 2022, the Company completed 2,196 meters of infill
drilling to support the development of the Santa Rosa de Lima vein
and NE Trend.
Covid-19 Update And
Outlook
The COVID-19 pandemic has impacted the Company’s operations over
the past two years. While there are still concerns regarding the
newer variants of the virus, there is reduced pressure on the
operations due to relaxed measures as the Company has achieved
almost 100% vaccination rate for its employees at all locations.
The additional costs related to COVID dropped to $1.7 million
during the nine-month period ended September 30, 2022 as compared
to $8.0 million spent during the comparative nine-month period of
2021.
Impairment Charge
Lower market capitalization due to the drop in the Company’s
share price, declining metal prices, lower production and
consequent decrease in profitability were considered as indicators
of impairment as on September 30, 2022. The Company performed an
impairment analysis for each of its cash generating units (“CGU”)
using Life of Mine (“LOM”), which incorporate current operational
practices, long term metal prices based on recent analyst consensus
and productivity assumptions, based on recent operating experience
at the mines.
The Company updated the Bolivar LOM using updated information
from the mine performance, required capex, metal prices and
discount rate, and concluded that an impairment of $25.0 million
was required for the Bolivar CGU.
The Cusi LOM was updated for the latest metal prices and
discount rate. Following this analysis, management concluded that
an impairment of $7.0 million was needed for the Cusi CGU as on
September 30, 2022.
The updated Yauricocha LOM did not indicate any impairment as at
September 30, 2022.
Suspended Guidance
In addition to the delays in the anticipated turnaround at the
Bolivar mine due to the unexpected flooding in the Bolivar NW zone
during the quarter, the Company also experienced production delays
at the Yauricocha mine as a result of the mudslide incident and
ensuing community blockade in September. Although mining restarted
in parts of Yauricocha in October, the Company is following due
assurance processes to ensure safe operations in the remaining
sections of the mine. In view of these delays, the Company has
suspended its production and financial guidance for 2022.
Strategic Review Process
In response to liquidity challenges from an accumulation of
operational losses and negative cashflows, primarily from its
Mexican operations, the Company announced, on October 18, 2022, the
formation of a Special Committee and the initiation of a strategic
review process.
The mandate of the Special Committee, comprised of its
independent directors, 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. Financial and legal advisors with
particular expertise in turnaround and restructuring matters have
been engaged to advise on this process.
The Company has engaged CIBC Capital Markets as a financial
advisor in this process.
Delisting
As previously announced, the Company will voluntarily delist its
common shares from the New York Stock Exchange American (“NYSE”)
and the Bolsa de Valores de Lima (“BVL”). The final day of trading
on the NYSE was today, November 14, 2022 with shares to be
suspended from trading before market open on November 15, 2022.
The Company is continuing to pursue its BVL delisting and
suspension from trading is anticipated later during the year. An
update will be provided once a final trading date of the common
shares on the BVL has been confirmed.
The Company’s common shares will continue to be listed and
traded in Canadian dollars on the Toronto Stock Exchange.
Conference Call and
Webcast
Sierra Metals' senior management will host a conference call on
Tuesday, November 15, 2022, at 11:00 AM (EDT) to discuss the
Company's financial and operating results for the three months
ended September 30, 2022.
Via Webcast:
A live audio webcast of the meeting will be available on the
Company's website:
https://events.q4inc.com/attendee/756129326
The webcast, along with presentation slides, will be archived
for 180 days on www.sierrametals.com.
Via phone:
For those who prefer to listen by phone, dial-in instructions
are below. To ensure your participation, please call approximately
five minutes prior to the scheduled start time of the call.
Canada dial-in number (Toll Free): 1 833 950 0062 Canada dial-in
number (Local): 1 226 828 7575 US dial-in number (Toll Free): 1 844
200 6205 US dial-in number (Local): 1 646 904 5544 All other
locations: +1 929 526 1599
Access code: 991150
Press *1 to ask a question, *2 to withdraw your question, or *0
for operator assistance
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 condensed interim consolidated financial statements for the
three and nine months ended September 30, 2022 and 2021:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income (loss)
$
(47,114
)
$
(3,727
)
$
(60,724
)
$
11,112
Adjusted for: Depletion and depreciation
9,765
11,739
28,381
35,548
Interest expense and other finance costs
1,381
1,016
3,098
2,759
NRV adjustments on inventory
2,295
1,386
7,513
2,127
Share-based payments
253
315
579
1,039
Derivative gains
-
-
-
(451
)
Costs related to COVID
109
2,505
1,693
7,992
Foreign currency exchange and other provisions
(147
)
(800
)
1,415
(303
)
Impairment charges
32,000
-
32,000
-
Legal settlement and related charges
-
951
-
1,665
Income taxes
(2,409
)
4,059
(421
)
24,401
Adjusted EBITDA
$
(3,867
)
$
17,444
$
13,534
$
85,889
Non-IFRS reconciliation of adjusted net income
The Company has included the non-IFRS financial performance
measure of adjusted net income, defined by management as the net
income attributable to shareholders shown in the statement of
earnings plus the non-cash depletion charge due to the acquisition
of Corona and the corresponding deferred tax recovery and certain
non-recurring or non-cash items such as share-based compensation
and foreign currency exchange (gains) losses. 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 to the condensed interim consolidated financial statements
for the three and nine months ended September 30, 2022 and
2021:
Three Months Ended September
30,
Nine Months Ended September
30,
(In thousands of United States dollars)
2022
2021
2022
2021
Net income (loss) attributable to shareholders
$
(46,150
)
$
(4,815
)
$
(61,047
)
$
7,353
Non-cash depletion charge on Corona's acquisition
1,428
2,347
4,528
7,245
Deferred tax recovery on Corona's acquisition depletion charge
(384
)
(1,061
)
(1,379
)
(2,547
)
NRV adjustments on inventory
2,295
1,386
7,513
2,127
Share-based compensation
253
315
579
1,039
Legal settlement and related charges
-
951
-
1,665
Derivative gains
-
-
-
(451
)
Foreign currency exchange loss (gain)
(147
)
(800
)
1,415
(303
)
Asset impairment
32,000
-
32,000
-
Adjusted net income (loss) attributable to shareholders
$
(10,705
)
$
(1,677
)
$
(16,391
)
$
16,128
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.
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 condensed interim
consolidated statement of income for the three and nine months
ended September 30, 2022 and 2021:
Three months ended
Three months ended
(In thousand of US dollars, unless stated)
September 30, 2022
September 30, 2021
Yauricocha
Bolivar
Cusi
Consolidated
Yauricocha
Bolivar
Cusi
Consolidated
Cash Cost per Tonne of Processed
Ore Cost of Sales
25,084
16,633
4,770
46,487
25,240
12,819
7,698
45,757
Reverse: Workers Profit Sharing
103
-
-
103
(877
)
-
-
(877
)
Reverse: D&A/Other adjustments
(5,348
)
(3,958
)
(1,052
)
(10,358
)
(6,203
)
(4,550
)
(2,846
)
(13,599
)
Reverse: Variation in Finished Inventory
271
(296
)
653
628
1,351
1,067
(220
)
2,198
Total Cash Cost
20,110
12,379
4,371
36,860
19,511
9,336
4,632
33,479
Tonnes Processed
269,057
227,669
65,181
561,907
324,196
364,941
61,071
750,208
Cash Cost per Tonne Processed $
74.75
54.37
67.07
65.60
60.18
25.58
75.85
44.63
Bolivar cost of sales for the three-month ended September 30,
2021 exclude inventory adjustments of $3.8 million, which were
indicated as prior period adjustments in Q3 2021.
Nine months ended
Nine months ended
(In thousand of US dollars, unless stated)
September 30, 2022
September 30, 2021
Yauricocha
Bolivar
Cusi
Consolidated
Yauricocha
Bolivar
Cusi
Consolidated
Cash Cost per Tonne of Processed
Ore Cost of Sales
78,793
49,350
18,880
147,023
80,970
42,022
21,250
144,242
Reverse: Workers Profit Sharing
(514
)
-
-
(514
)
(3,518
)
-
-
(3,518
)
Reverse: D&A/Other adjustments
(15,792
)
(10,485
)
(3,142
)
(29,419
)
(19,335
)
(12,173
)
(5,561
)
(37,069
)
Reverse: Variation in Finished Inventory
(1,742
)
(879
)
361
(2,260
)
1,285
1,887
122
3,294
Total Cash Cost
60,745
37,986
16,099
114,830
59,402
31,736
15,811
106,949
Tonnes Processed
901,394
671,597
219,826
1,792,817
979,316
1,121,880
210,967
2,312,163
Cash Cost per Tonne Processed $
67.39
56.56
73.23
64.05
60.66
28.29
74.95
46.25
The following table provides detailed information on
Yauricocha’s cash cost, and AISC per copper equivalent payable
pound for the three and nine months ended September 30, 2022 and
2021:
YAURICOCHA
Three months ended
Nine months ended
(In thousand of US dollars, unless stated)
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Cash Cost per zinc equivalent
payable pound Total Cash Cost
20,110
19,511
60,745
59,402
Variation in Finished inventory
(271
)
(1,351
)
1,742
(1,285
)
Total Cash Cost of Sales
19,839
18,160
62,487
58,117
Treatment and Refining Charges
6,495
8,343
21,024
27,100
Selling Costs
841
1,071
2,471
3,644
G&A Costs
2,495
2,341
7,018
7,178
Sustaining Capital Expenditures
3,476
7,550
11,194
13,608
All-In Sustaining Cash Costs
33,146
37,465
104,194
109,647
Copper Equivalent Payable Pounds (000's)
9,856
13,215
29,887
40,804
Cash Cost per Copper Equivalent Payable Pound (US$)
2.01
1.37
2.09
1.42
All-In Sustaining Cash Cost per Copper Equivalent Payable
Pound (US$)
3.36
2.83
3.49
2.69
The following table provides detailed information on Bolivar’s
cash cost, and AISC per copper equivalent payable pound for the
three and nine months ended September 30, 2022 and 2021:
BOLIVAR
Three months ended
Nine months ended
(In thousand of US dollars, unless stated)
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Cash Cost per copper equivalent
payable pound Total Cash Cost
12,379
9,336
37,986
31,736
Variation in Finished inventory
296
(1,067
)
879
(1,887
)
Total Cash Cost of Sales
12,675
8,269
38,865
29,849
Treatment and Refining Charges
1,303
3,392
5,888
11,805
Selling Costs
757
872
2,846
3,258
G&A Costs
856
1,751
2,786
4,816
Sustaining Capital Expenditures
3,626
3,428
11,183
11,681
All-In Sustaining Cash Costs
19,217
17,712
61,568
61,409
Copper Equivalent Payable Pounds (000's)
3,752
4,085
10,476
16,918
Cash Cost per Copper Equivalent Payable Pound (US$)
3.38
2.02
3.71
1.76
All-In Sustaining Cash Cost per Copper Equivalent Payable
Pound (US$)
5.12
4.34
5.88
3.63
The following table provides detailed information on Cusi’s cash
cost, and AISC per silver equivalent payable ounce for the three
and nine months ended September 30, 2022 and 2021:
CUSI
Three months ended
Nine months ended
(In thousand of US dollars, unless stated)
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Cash Cost per silver equivalent
payable ounce Total Cash Cost
4,373
4,632
16,099
15,811
Variation in Finished inventory
(653
)
220
(361
)
(122
)
Total Cash Cost of Sales
3,720
4,852
15,738
15,689
Treatment and Refining Charges
332
770
1,177
2,838
Selling Costs
154
266
770
885
G&A Costs
312
937
1,557
1,521
Sustaining Capital Expenditures
388
1,402
2,685
5,001
All-In Sustaining Cash Costs
4,905
8,227
21,926
25,934
Silver Equivalent Payable Ounces (000's)
255
284
930
819
Cash Cost per Silver Equivalent Payable Ounce (US$)
14.58
17.06
16.92
19.15
All-In Sustaining Cash Cost per Silver Equivalent Payable
Ounce (US$)
19.24
28.93
23.58
31.65
Consolidated:
CONSOLIDATED
Three months ended
Nine months ended
(In thousand of US dollars, unless stated)
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Total Cash Cost of Sales
36,234
31,281
117,090
103,655
All-In Sustaining Cash Costs
57,268
63,404
187,688
196,990
Copper Equivalent Payable Pounds (000's)
15,005
18,920
45,317
62,792
Cash Cost per Copper Equivalent Payable Pound (US$)
2.41
1.65
2.58
1.65
All-In Sustaining Cash Cost per Copper Equivalent Payable
Pound (US$)
3.82
3.35
4.14
3.14
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. This includes:
- 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.
This term does not have a standardized meaning prescribed by
IFRS, and therefore the Company’s definition is 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
is 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.
Qualified Persons
Américo Zuzunaga, FAusIMM (Mining Engineer) Vice President,
Technical 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 with
Green Metal exposure including increasing copper production and
base metal production with precious metals byproduct credits,
focused on the production and development of its 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 Bolsa de Valores de
Lima and on the Toronto Stock Exchange 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 within
the meaning of Canadian and United States securities legislation,
including with respect to timing of the conference call,
exploration and production plans and the delisting of the Company’s
common shares. 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 16,
2022 for its fiscal year ended December 31, 2021 and other risks
identified in the Company's filings with Canadian securities
regulators and the United States Securities and Exchange
Commission, which filings are available at www.sedar.com and
www.sec.gov, respectively.
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.
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Investor Relations Sierra Metals Inc. +1 (416) 366-7777
Email: info@sierrametals.com
Luis Marchese CEO Sierra Metals Inc. +1(416) 366-7777
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