Mr. Igor Gonzales reports
SIERRA METALS REPORTS Q2-2019 FINANCIAL RESULTS AT ITS SOCIEDAD MINERA CORONA SUBSIDIARY IN PERU
Sierra Metals Inc. has filed Sociedad Minera Corona SA's unaudited financial statements and the management discussion and analysis (MD&A) for the second quarter of 2019.
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 June 30, 2019
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Revenues of $34.0-million versus $44.8-million in Q2 2018;
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Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $11.9-million versus $23.5-million in Q2 2018;
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Total tonnes processed of 254,165 versus 283,450 in Q2 2018;
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Net production revenue per tonne of ore milled decreased by 17 per cent to $132.13;
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Cash cost per zinc equivalent payable pound consistent at 50 cents;
- All-in sustaining cost (AISC) per zinc equivalent payable pound higher by 19 per cent to 86 cents;
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Zinc equivalent production of 38.4 million pounds versus 39.8 million pounds in Q2 2018;
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$25.1-million of cash and cash equivalents as at June 30, 2019;
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$50.1-million of working capital as at June 30, 2019.
Despite the loss of 12 days of production at the Yauricocha mine during April due to the illegal strike action which has subsequently been resolved, the mine continued its strong operational performance during Q2 2019, realizing an increase in zinc equivalent metal production compared with Q1 2019, which was also partly affected by the strike. The revenues and adjusted EBITDA generated during Q2 2019 allowed the company to finance its capital expenditure programs despite a challenging metal price environment. Cash costs remained consistent quarter over quarter, while there was a slight increase in AISC during Q2 2019 due to the increase in treatment and refining charges related to the zinc concentrate produced, as well as higher general and administrative costs incurred from higher labour costs.
Igor Gonzales, president and chief executive officer of Sierra Metals, commented: "The Yauricocha mine continued to have a strong operational performance in the second quarter despite the illegal strike which took place for the first two weeks of the quarter. Although the strike did result in lower quarterly tonnage, we are working to try and recover as much lost tonnage from the strike through the remaining part of the year and we expect to stay within our published guidance for the year. Realizing lower metal prices, we did see zinc equivalent payable production drop, but it was constrained to a 3.6-per-cent drop. Over all, the company still saw relatively strong revenue and adjusted EBITDA for the quarter albeit lower than the same quarter in 2018. We also continue to reap the benefit of improvements made at the mine and plant and expect these improvements to continue to benefit us through the remainder of the year.
"The second half of the year still represents a critical time for projects, improvements, and exploration at Yauricocha. We have received permits and begun surface drilling on several high-value exploration targets such as the areas of Don Leona and Kilkaska. Additionally, we have also received our environmental impact assessment and construction permits and are in the midst of completing the next level of the tailings deposition facility. Furthermore, we continue to sink the Yauricocha shaft toward the 1270 level this year, providing access to further reserves and resources at the mine with loading and spill pockets to be added on the 1210 level. Work will also commence on the 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. Also, it is important to note that the management team has revised the release date for the Yauricocha NI 43-101 reserve and resource update to now coincide with Bolivar and Cusi 43-101s which are expected in Q4 closer to year-end. The reason for the revised date is to allow the company to like to include the results from additional drilling currently taking place at key, high-priority targets at the Yauricocha property, including those for which we have just recently received drilling permits."
He concluded: "Despite the strike setback, Yauricocha continues to be a strong performing mine for the company and 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 associated table displays selected unaudited financial information for the three months and six months ended June 30, 2019.
FINANCIAL HIGHLIGHTS
(in thousands of dollars, except cash cost and revenue-per-tonne metrics)
Three months ended Six months ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Revenue $33,987 44,790 69,325 91,353
Adjusted EBITDA 11,908 23,514 25,640 47,739
Cash flow from operations 11,932 23,495 25,104 47,576
Gross profit 13,213 24,961 27,700 50,181
Income tax (expense) (3,136) (8,343) (6,156) (15,757)
Net income 6,455 13,319 14,446 28,420
Net production revenue per tonne of ore milled 132.13 158.40 139.61 163.46
Cash cost per tonne of ore milled 66.01 60.51 69.66 61.75
Cash cost per zinc equivalent payable pound 0.50 0.50 0.52 0.54
All-in sustaining cost per zinc
equivalent payable pound $0.86 0.72 0.86 0.77
Corona's financial highlights for the three and six months ended June 30, 2019:
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Revenues of $34.0-million for Q2 2019 compared with $44.8-million in Q2 2018 and revenues of $69.3-million in the first half of 2019 compared with $91.4-million in H1 2018. The decrease in revenues for Q2 and H1 2019 compared with the same periods in 2018 was due to a 10-per-cent decrease in tonnes processed due to the illegal strike action initiated by members of the Union of the Mine and Metallurgical Workers of Minera Corona on March 19, 2019. This illegal strike was resolved on April 12, 2019; however, resulted in a total of 24 days of lost production during March and April, 2019. Lower revenues were also affected by the decreases in the prices of silver (8 per cent), copper (11 per cent), zinc (17 per cent) and lead (20 per cent), and higher treatment and refining charges incurred on the company's zinc concentrate. This was partially offset by higher head grades and recoveries for all metals, except zinc head grades.
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Cash cost per zinc equivalent pound sold at the Yauricocha mine of 50 cents for Q2 2019 compared with 50 cents for Q2 2018 and 52 cents for H1 2019 compared with 54 cents for H1 2018. All-in sustaining cost (AISC) per zinc equivalent pound sold of 86 cents for Q2 2019 compared with 72 cents for Q2 2018 and 86 cents for H1 2019 compared with 77 cents for H1 2018. The increase in the AISC per zinc equivalent payable pound for Q2 and H1 2019 compared with the same periods in 2018 was due to the increase in treatment and refining charges for the zinc concentrate produced, and higher general and administrative costs. These cost increases were partially offset by the increase in zinc equivalent payable pounds as the company realized higher head grades and recoveries for all metals, except zinc head grades.
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Adjusted EBITDA of $11.9-million for Q2 2019 compared with $23.5-million for Q2 2018 and $25.6-million for H1 2019 compared with $47.7-million for H1 2018. The decrease in adjusted EBITDA was due to lower metal prices, and lower metal production which resulted in lower revenues, as a result of the illegal strike action initiated at the Yauricocha mine.
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Operating cash flows before movements in working capital of $11.9-million for Q2 2019, compared with $23.5-million for Q2 2018 and $25.1-million for H1 2019 compared with $47.6-million for H1 2018. The decrease in operating cash flows before movements in working capital was primarily due to the decrease in revenues, discussed previously.
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Cash and cash equivalents of $25.1-million as at June 30, 2019, compared with $17.9-million as at Dec. 31, 2018. Cash and cash equivalents increased by $7.2-million, driven by operating cash flows of $10.0-million, $11.9-million of net intercompany loan repayments received, partially offset by capital expenditures of $9.8-million, and debt and interest payments of $5.0-million.
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Net income of $6.5-million, or 18 cents per share for Q2 2019 compared with net income of $13.3-million, or 37 cents per share for Q2 2018. Net income of $14.4-million, or 40 cents per share for H1 2019 compared with net income of $28.4-million, or 79 cents per share for H1 2018.
Corona's operational highlights for the three and six months ended June 30, 2019
PRODUCTION RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019
Yauricocha production Three months ended Six months ended
Q2 2019 Q2 2018 Q2 2019 Q2 2018
Tonnes processed (mt) 254,165 283,450 487,980 554,839
Daily throughput 2,905 3,239 2,788 3,171
Silver grade (g/t) 63.13 59.19 63.31 59.35
Copper grade 1.04% 0.95% 1.02% 0.92%
Lead grade 1.57% 1.28% 1.51% 1.27%
Zinc grade 3.36% 3.66% 3.46% 3.56%
Gold grade (g/t) 0.60 0.54 0.58 0.57
Silver recovery 77.82% 72.71% 77.54% 72.71%
Copper recovery 78.04% 65.37% 76.52% 65.37%
Lead recovery 89.96% 84.82% 89.15% 84.82%
Zinc recovery 88.08% 88.73% 88.78% 88.73%
Gold recovery 16.47% 16.48% 17.21% 16.48%
Silver ounces (000) 401 392 770 758
Copper pounds (000) 4,536 3,884 8,399 7,611
Lead pounds (000) 7,911 6,809 14,516 12,878
Zinc pounds (000) 16,593 20,300 33,014 38,443
Gold ounces 809 807 1,562 1,642
Zinc equivalent pounds (000) 38,394 39,844 74,365 74,468
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, FAusIMM CP (mining engineer), 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), vice-president, special projects and metallurgy, and a chartered professional qualifying as a competent person on metallurgical processes.
About Sierra Metals
Inc.
Sierra Metals is a Canada-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.
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