Mr. Gordon Babcock reports

SIERRA METALS ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT RESULTS FOR A 67% OUTPUT EXPANSION AT ITS BOLIVAR MINE IN MEXICO TO 5,000 TONNES PER DAY YIELDING A RETURN ON INVESTMENT OF 550%

Sierra Metals Inc. has provided the results of a preliminary economic assessment (PEA) regarding the company's Bolivar mine, located in Chihuahua state, Mexico. The PEA is based on technical inputs from various independent consulting groups, including SRK, Redco, Anddes and Transmin.

Based on the technical work from the various independent consultants, the PEA was compiled under National Instrument 43-101 standards by Mining Plus Peru SAC. The full technical report will be filed on SEDAR within 45 days of this news release.

Highlights of the PEA include:

• After-tax net present value (NPV): $214-million at an 8-per-cent discount rate;
• Return on investment (ROI): 550 per cent;
• After-tax payback period: 3.4 years;
• Life-of-mine capital cost: $96-million (U.S.);
• Net after-tax cash flow: $303-million (U.S.);
• Total operating unit cost: $21.18 (U.S.)/tonne;
• Plant processing rate: 5,000 tonnes per day (TPD);
• Average copper recovery rate: 85 per cent;
• Mine life: 11 years based on existing mineral resource estimate;
• Life-of-mine copper payable production: 252,507,942 pounds.

Igor Gonzales, president and chief executive officer of Sierra Metals, commented: "The company is very encouraged by the results of this PEA as they support the plan to profitably develop and grow the Bolivar mine in sustainable and staged steps from 3,000 tpd currently to 3,600 tpd in Q1 2019 and to 5,000 tpd in mid-2020, based on consensus metal pricing.

"The company is incorporating an aggressive capex program into the PEA of $96.0-million (U.S.) over the life of the mine, which includes exploration drilling to increase the mineral resources and convert the existing resources to reserves. Additionally, the PEA reflects an aggressive development program designed to open a minable reserve at depth and on strike. The opex reflects yearly production development, definition drilling programs and other operational costs.

"The current study focuses on the current mineral resource reported in the 43-101 technical report filed on July 5, 2018, and does not include any drilling completed after Oct. 31, 2017. The company is continuing with its successful brownfield exploration programs and expects to continue to grow the mineral resources at the Bolivar mine this year.

"We believe that this expansion not only provides additional value to the company, as the PEA quantifies, but could also leverage the value of future resource additions. Potential new copper pounds discovered could be incorporated into production plans earlier than if the company maintained current capacity levels."

He concluded: "We are continuing with our strategy to increase shareholder value and grow the reserve and resource base at the company. We successfully completed brownfield exploration programs at all three mines and increased the mineral reserves and resources during the past two years. Additionally, we implemented a successful operational improvement program in Peru and have completed an effective turnaround program in Mexico, and we have already seen returns on this well-spent capital. Building upon these successes, we have completed a PEA at Cusi and Bolivar, and scoping studies at the Yauricocha mine expected shortly, which will maximize value and profitability through the implementation of automation and possible throughput increases which will further drive growth and benefit all shareholders in the future."

Mineral reserve and resource estimate

The property is located in the Piedras Verdes district of Chihuahua state, Mexico, approximately 250 kilometres southwest of the city of Chihuahua, and consists of 14 mineral concessions (6,800 hectares). The Bolivar deposit is a copper-zinc skarn and is one of many precious and base metal deposits of the Sierra Madre belt, which trends north-northwest across the states of Chihuahua, Durango and Sonora in northwestern Mexico (Meinert, 2007). Mineralization exhibits strong stratigraphic control and two stratigraphic horizons host the bulk of the mineralization: an upper calcic horizon, which predominantly hosts Zn-rich mineralization, and a lower dolomitic horizon, which predominantly hosts Cu-rich mineralization. In both cases, the highest grades are developed where structures and associated breccia zones cross these favourable horizons near skarn-marble contacts.

This PEA considers depleted measured, indicated and inferred resources reported on 2017 by SRK and effective date as of Oct. 31, 2017. The results of this PEA are indicative of conceptual potential and are not definitive.

   SUMMARY OF RESOURCE REPORTED BY SRK, 2017 (EFFECTIVE OCT. 31, 2017)
  
Class       Tonnes (000s)   Ag (g/t) Au (g/t) Cu (%) Ag (koz)  Au (koz)    Cu (t)

Indicated         13,267       22.5     0.29   1.04    9,616       124   137,537 
Inferred           8,012       22.4     0.42   0.96    5,779       109    76,774 

(1) Mineral resources are not mineral reserves and do not have demonstrated 
    economic viability. All figures are rounded to reflect the relative accuracy of 
    the estimates. Copper, gold and silver assays were capped where appropriate.

(2) Mineral resources are reported at cut-off values based on metal price 
    assumptions*, metallurgical recovery assumptions**, mining/transport costs 
    ($17.59 (U.S.)/t), processing costs ($8.33 (U.S.)/t), and general and administrative 
    costs ($2.41 (U.S.)/t).

(3) The metal value cut-off grade for the Bolivar mine is $29 (U.S.)/t. No mineral 
    resources are reported for the remaining pillars.

* Metal price assumptions considered for the calculation of metal value are: copper (Cu): 
  $3 (U.S.) per pound, silver (Ag): $18.25 (U.S.) per ounce and gold (Au): $1,291 (U.S.)
  per ounce.

** Metallurgical recovery assumptions are 83 per cent Cu, 78 per cent Ag and 64 per cent 
   Au. 

The resources were estimated by David Keller of SRK Consulting (Canada) using ordinary 
kriging (OK) and reviewed and validated by Giovanny Ortiz, BSc, PGeo, FAusIMM No. 304612 
of SRK, a qualified person.

Note: Mining has continued since the publication of this resource and resources have not 
      been subsequently depleted.

Sierra Metals commissioned various specialist groups (see attached table) to evaluate how, on a conceptual level, mining, mineral processing and tailings management could be adapted at the property to achieve a sustainable and staged increase in mine production and mill throughput from 3,000 tonnes per day to 3,600 tpd in Q1 2019, to 5,000 tpd by mid-2020.

          GROUPS INVOLVED IN DEVELOPMENT FOR CONCEPTUAL PLAN CONSIDERED IN THE PEA
  
Group                              Concept                                                 Report        

SRK Consulting (U.S.) Inc.         Resource estimation                                     SRK, 2018     
Redco Mining Consultants           Increase mine output to 5,000 tpd                       Redco, 2018   
Sierra Metals (SM)                 Increase Piedras Verdes plant capacity to 5,000 tpd     Sierra, 2018  
Transmin Metallurgical Consultants Engineering associated with increased Plantas Verdes 
                                   plant capacity                                          Transmin, 2018
Anddes Asociados                   Executive summary -- tailings expansion design          Andess, 2018  

Mining methodology

To determine how mine output could be increased, Sierra Metals commissioned Redco Mining Consultants to undertake a scoping study, considering existing development and infrastructure, geotechnical characteristics, geological controls, and mineralization style. The study (Redco, 2018) determined that long hole stoping could be used to achieve sustainable production of 5,000 tpd.

As part of its scoping study, Redco considered plans for ventilation on a general scale. Sierra Metals recognizes that further and more detailed ventilation plans are required to support a deeper conceptual mine design.

Mineral processing

The Piedras Verdes plant, located 5.1 kilometres from the Bolivar mine, uses a conventional crushing-milling-flotation circuit to recover mineral and to produce commercial quality copper concentrates with silver and gold byproduct credits. Mineral is delivered from the mine to the plant in 18-tonne trucks.

Mineral processing and the recovery of the mineral are demonstrated, and copper, silver and gold recoveries are established at 85.0 per cent, 78.2 per cent and 63.7 per cent respectively.

The Piedras Verdes plant current throughput is 3,000 tpd. In line with proposed increases in mine output, the processing capacity at Piedras Verdes will increase to 3,600 tpd in Q1 2019, and to 5,000 tpd by mid-2020.

The current tailings storage facility has an in situ capacity to store tailings until year-end 2019.

A plan is currently under way to construct a much larger capacity facility which will include the installation of a starter dam followed by deposition of filtered-dewatered tailings in a facility which will accommodate 14 million tonnes of filtered tailings providing capacity for future plant expansion. Engineering for this program is provided by Anddes Engineers from Peru.

Economic analysis

The PEA calculates a base case after-tax NPV of $214-million (U.S.), with an after-tax return on investment of 550 per cent using a discount rate of 8 per cent. The total life-of-mine capital cost of the project is estimated to total $96.0-million (U.S.). The payback period for the life-of-mine (LOM) capital is estimated at 3.4 years. Operating costs of the life of mine total $359-million (U.S.), equating to an operating cost of $21.18 (U.S.) per tonne milled.

  
                                    PEA HIGHLIGHTS    

Base case of $1,291/oz gold, $18.25/oz silver, $3/lb copper         Unit        Value  

Net present value (after-tax 8% discount rate)                     US$ M          214   
Return on investment                                              ROI (%)         550   
Mill feed                                                     tonnes (Mt)        16.9   
Peak mining production rate                                       t/year    1,800,000
LOM project operating period                                       years           11    
Total life-of-mine (LOM) capital costs                             US$ M           96    
Net after-tax cash flow                                            US$ M          303   
Total operating unit costs                                         US$/t        21.18  
LOM gold production (payable)                                         oz       86,472  
LOM silver production (payable)                                       oz    7,013,157
LOM copper production (payable)                                        t      114,537 


  

Quality control

All technical data contained in this news release have been reviewed and approved by:

• Gordon Babcock, PEng, chief operating officer and a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects;
• Americo Zuzunaga, MAusIMM, CP (mining engineer), and vice-president of corporate planning, is a qualified person and chartered professional qualifying as a competent person under the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves;
• Augusto Chung, FAusIMM, CP (metallurgist), and consultant to Sierra Metals, is a qualified person and chartered professional qualifying as a competent person on metallurgical processes.

About Sierra Metals Inc.

Sierra Metals is a Canadian-based growing polymetallic mining company with production from its Yauricocha mine in Peru, and its 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.

We seek Safe Harbor.