Mr. Gordon Babcock reports

SIERRA METALS REPORTS STRONG Q4-2018 FINANCIAL RESULTS AT ITS SOCIEDAD MINERA CORONA SUBSIDIARY IN PERU

Sierra Metals Inc. has filed Sociedad Minera Corona SA's audited financial statements and the management discussion and analysis (MD&A) for the fourth quarter of 2018.

The company holds an 81.8-per-cent interest in Corona. All amounts are presented in U.S. dollars unless otherwise stated, and have not been adjusted for the 18.2-per-cent non-controlling interest.

Corona's highlights for the three months ended Dec. 31, 2018

• Revenues of $39.2-million (U.S.) versus $38.2-million (U.S.) in Q4 2017;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $17.4-million (U.S.) versus $17.5-million (U.S.) in Q4 2017;
• Total tonnes processed of 268,363 versus 254,933 in Q4 2017;
• Net production revenue per tonne of ore milled increased by 2 per cent to $144.11 (U.S.);
• Cash cost per zinc equivalent payable pound lower by 7 per cent to 52 U.S. cents;
• All-in sustaining cost (AISC) per zinc equivalent payable pound lower by 19 per cent to 73 U.S. cents;
• Zinc equivalent production of 40.6 million pounds versus 35.8 million pounds in Q4 2017;
• $17.9-million (U.S.) of cash and cash equivalents as at Dec. 31, 2018;
• $41.1-million of working capital as at Dec. 31, 2018.

The Yauricocha mine continued its strong operational and financial performance during Q4 2018, realizing increases in metal production and revenues compared with Q4 2017, despite a challenging metal price environment. Cash cost and AISC per zinc equivalent payable pound were both lower in Q4 2018 compared with Q4 2017 due to the higher metal production, and despite a $2.0-million increase in labour costs, due to the company's union agreement and a salary adjustment to bring the 2018 salaries in line with the current market rates. The payment was made during November and December, 2018, but retroactive to the entire year's salaries. Going forward these costs will be amortized over the entire year for 2019. The union was formed in July, 2017, and has grown to 406 workers at the end of 2018, equivalent to approximately 60 per cent of the company's work force, representing the majority of the mine employees.

Igor Gonzales, president and chief executive officer of Sierra Metals, commented: "I am pleased with Yauricocha's performance in the fourth quarter which saw increased revenue and consistent adjusted EBITDA compared to the same quarter in 2017 and both stronger revenue and adjusted EBITDA on a year-over-year basis. We also continue to reap the benefits of investments made at the mine through increased net production revenue per tonne of ore milled as well as through lower cash costs and all-in sustaining costs.

"The company continues to make progress on projects at the mine and during the fourth quarter we completed the refurbishment of the lower part of the Mascota shaft as well as the infrastructure and tie-ins for the Yauricocha tunnel, allowing for faster turnaround in the cycle time of the trolley locomotives, and providing for increased capacity and handling of larger volumes of ore and waste.

"Looking ahead 2019 represents a critical year at Yauricocha for projects, improvements and exploration. While we have recently received our environmental impact assessment permit for the mine for the completion of the next level of the tailings deposition facility, we must now apply for our construction permit and begin planning on additional waste rock facilities to support future growth. Additionally the Yauricocha shaft will continue to be sunk to the 1270 level this year to provide access to further reserves and resources at the mine and loading pockets will be added on the 1210 level. Work will also commence on a ramp connecting the 920 level with the 720 level of the Yauricocha mine providing for an additional 10,000 tonnes per month of increased capacity to move ore and waste from the mine. We have the right team in place to manage these projects to completion as well as manage the permitting and planning needed to see projects and exploration programs move ahead as planned and on schedule at the mine."

He concluded: "Corona continues to have a solid balance sheet and strong liquidity. Management remains optimistic that continued operational efficiencies and future operational and resource growth are possible at Yauricocha."

The attached table displays selected audited financial information for the three months and year ended Dec. 31, 2018.

  
(In thousands of US dollars, except cash cost and revenue and per tonne metrics) 

                                                        Three months ended                 Twelve months ended
                                           Dec. 31, 2018     Dec. 31, 2017     Dec. 31, 2018     Dec. 31, 2017

Revenue                                          $39,183           $38,227          $168,657          $154,153
Adjusted EBITDA                                   17,385            17,534            82,771            75,779
Cash flow from operations                         17,711            18,022            83,178            76,269
Gross profit                                      17,895            18,357            86,605            73,828
Income tax expense                                (5,435)           (5,717)          (27,138)          (20,682)
Net income                                         7,848            10,624            46,131            41,621
Net production revenue per tonne
of ore milled                                     144.11            141.10            152.02            149.63
Cash cost per tonne of ore milled                  69.37             64.90             63.23             62.42
Cash cost per zinc equivalent                       0.52              0.57              0.52              0.50
payable pound 
All-in sustaining cost per zinc
equivalent payable pound                           $0.73             $0.90             $0.73             $0.78

Corona's financial highlights for the three months and year ended Dec. 31, 2018

Revenues of $39.2-million for Q4 2018 compared with $38.2-million in Q4 2017 and revenues of $168.7-million for the year ended Dec. 31, 2018, compared with $154.2-million for the same period in 2017. The increase in revenues for Q4 2018 compared with Q4 2017 was due to a 5-per-cent increase in tonnes processed, higher head grades for all metals, except zinc, and higher recoveries for lead and gold. Increased revenues were realized due to the higher metal production, despite decreases in the prices of silver (13 per cent), copper (12 per cent), zinc (20 per cent), lead (20 per cent) and gold (3 per cent). The 9-per-cent increase in revenues for the year ended Dec. 31, 2018, compared with the same period in 2017 was due to an 8-per-cent increase in tonnes processed, higher head grades and recoveries for copper and gold, and a 5-per-cent increase in the price of copper.

Cash cost per zinc equivalent pound sold at the Yauricocha mine of 52 cents for Q4 2018 compared with 57 cents for Q4 2017 and 52 cents for the year ended Dec. 31, 2018, compared with 50 cents for the same period in 2017. All-in sustaining cost (AISC) per zinc equivalent pound sold of 73 cents for Q4 2018 compared with 90 cents for Q4 2017 and 73 cents for the year ended Dec. 31, 2018, compared with 78 cents for the same period in 2017. The decrease in the AISC per zinc equivalent payable pound for Q4 2018 and the year ended Dec. 31, 2018, compared with the same periods in 2017, were a result of higher zinc equivalent payable pounds due to higher throughput, and higher copper and gold head grades and recoveries. These cost decreases were realized in spite of the $2.0-million payment made to the company's union of mining employees made during Q4 2018, which was discussed previously.

Adjusted EBITDA of $17.4-million for Q4 2018 compared with $17.5-million for Q4 2017 and $82.8-million for the year ended Dec. 31, 2018, compared with $75.8-million for the same period in 2017. The consistent adjusted EBITDA for Q4 2018 and the increased adjusted EBITDA for year ended Dec. 31, 2018, compared with the same periods in 2017, was due to the increase in revenues discussed previously.

Operating cash flows before movements in working capital of $17.7-million for Q4 2018, compared with $18.0-million (U.S.) for Q4 2017, and $83.2-million for the year ended Dec. 31, 2018, compared with $76.3-million for the same period in 2017. The consistent operating cash flows before movements in working capital for Q4 2018 and the increased operating cash flows before movements in working capital year ended Dec. 31, 2018, compared with the same periods in 2017 was primarily due to the increase in revenues, discussed previously.

Cash and cash equivalents of $17.9-million as at Dec. 31, 2018, compared with $19.9-million as at Dec. 31, 2017. Cash and cash equivalents decreased by $2.0-million which was driven by operating cash flows of $53.2-million, short-term loans received of $10.0-million, offset by capital expenditures of $25.2-million, debt and interest payments of $11.6-million, intercompany loans of $12.5-million, and dividends paid of $15.9-million.

Net income of $7.8-million, or 22 cents per share for Q4 2018 compared with net income of $10.6-million, or 30 cents per share for Q4 2017. Net income of $46.1-million, or $1.28 per share, for the year ended Dec. 31, 2018, compared with $41.6-million, or $1.16 per share, for the same period in 2017.

Corona's operational highlights for the three months and year ended Dec. 31, 2018

The attached table displays the production results for the three months and year ended Dec. 31, 2018.

  
                             YAURICOCHA PRODUCTION

                                           Three months ended       12 months ended
                                             Q4 2018  Q4 2017    Q4 2018    Q4 2017

Tonnes processed (mt)                        268,363  254,933  1,106,649  1,023,491
Daily throughput                               3,067    2,914      3,162      2,924
Silver grade (g/t)                             64.06    53.57      60.32      67.13
Copper grade                                   1.06%    0.80%      0.97%      0.79%
Lead grade                                     1.51%    1.19%      1.30%      1.48%
Zinc grade                                     3.41%    3.91%      3.55%      3.74%
Gold grade (g/t)                                0.57     0.55       0.58       0.54
Silver recovery                               72.66%   75.13%     72.85%     74.82%
Copper recovery                               74.89%   78.86%     70.84%     65.45%
Lead recovery                                 84.42%   81.32%     83.75%     83.64%
Zinc recovery                                 87.07%   88.25%     88.74%     89.14%
Gold recovery                                 17.20%   16.02%     16.63%     16.30%
Silver ounces (000s)                             402      330      1,563      1,653
Copper pounds (000s)                           4,702    3,567     16,741     11,719
Lead pounds (000s)                             7,528    5,431     26,520     27,934
Zinc pounds (000s)                            17,545   19,393     76,761     75,151
Gold ounces                                      850      723      3,403      2,894
Zinc equivalent pounds (000s) (1)             40,640   35,758    157,151    146,816

(1) Silver equivalent ounces and copper and zinc equivalent pounds for Q4 2018 were 
    calculated using the following realized prices: $14.63/ounce Ag, $2.77/pound Cu, 
    89 cents/lb lead, $1.16/lb Zn, $1,238/oz Au. Silver equivalent ounces and copper 
    and zinc equivalent pounds for Q4 2017 were calculated using the following 
    realized prices: $16.77/oz Ag, $3.13/lb Cu, $1.11/lb Pb, $1.45/lb Zn, $1,282/oz 
    Au. Silver equivalent ounces and copper and zinc equivalent pounds for the 12
    months ended 2018 were calculated using the following realized prices: $15.65/oz 
    Ag, $2.96/lb Cu, $1.02/lb Pb, $1.31/lb Zn, $1,269/oz Au. Silver equivalent ounces 
    and copper and zinc equivalent pounds for the 12 months ended 2017 were calculated 
    using the following realized prices: $17.14/oz Ag, $2.82/lb Cu, $1.06/lb Pb, 
    $1.32/lb Zn, $1,265/oz Au. 


  

Qualified persons

All technical production 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 vice-president of special projects and metallurgy and a 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 remains focused on increasing production volume and growing mineral resources. Sierra Metals has recently had several discoveries and still has additional brownfield exploration opportunities at all three mines in Peru and Mexico that are within close proximity to the existing mines. Additionally, the company 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.