Mr. Raj Vyas reports

SIERRA METALS RESPONDS TO LATEST MISLEADING STATEMENTS BY SHAREHOLDER

Sierra Metals Inc. is issuing a statement in response to recent communications materials issued by its shareholder Arias Resource Capital (ARC), including a news release ARC issued on May 9, 2023. The company acknowledges that it has also seen the circular issued by ARC on May 12, 2023, and plans to consider the contents and respond in due course.

The company places a high value on the integrity of public disclosure, and as such, wishes to correct false or misleading statements made by ARC so that the company's shareholders have access to accurate information.

ARC continues to publish graphics of the Sierra Metals share price with an arbitrary start date of March, 2021. Had the share price data started in Jan., 2021, the timeline could have made note of two additional events:

• The company announced a strategic review on Jan. 8, 2021, at a time when ARC chairman Alberto Arias was chair of the company's board of directors; this announcement suggested that a sale of the company would be considered, which presumably created expectations of a potential sale, increasing the share price. On Jan. 11, 2021 (the following trading day), the common shares of Sierra Metals closed at $4.87.

• On Jan. 20, 2021, Arias Resource Capital Fund LP (a fund over which Mr. Arias was the sole director of the general partner) announced that it had distributed 52,721,964 shares to its underlying limited partners. By Jan. 29, 2021, the shares were trading at $4.00. The decline of the share price started that month as the limited partners presumably began to sell off a portion of their shares. At the time the company announced Mr. Arias ceasing to be on the board in July, 2021, the shares were trading at $3.58. The strategic review concluded in October, 2021, without having identified a buyer for the company or other strategic alternatives, even after the company's valuation had fallen significantly from its peak at the start of the review process.

The ARC news release indicates that, "ARC's representatives left the board in mid-2021." This statement insinuates that Mr. Arias voluntarily resigned from the board. Like many statements from ARC, this is misleading.

At the company's 2021 annual shareholders meeting which took place on June 10, 2021, Mr. Arias -- with minimal notice to or engagement with the board -- attempted to unseat the then current board by utilizing his significant voting power against all members of the board unaffiliated with the ARC funds. Despite Mr. Arias having direction and/or control over approximately 27 per cent of the outstanding shares, the shareholders rallied against Mr. Arias's efforts. Excluding votes cast by Mr. Arias and the ARC funds (assuming all such shares held by the foregoing were voted at the 2021 meeting in favour of Mr. Arias), Mr. Arias received less than 18-per-cent support from the shareholders who voted at the 2021 meeting and was ultimately forced to resign from the board.

The company believes that Mr. Arias's tactics at the 2021 meeting are indicative of what Sierra shareholders may expect from Mr. Arias going forward. He did not engage with the company or the board to discuss his intention to vote off the non-ARC-affiliated board members at the 2021 meeting until his votes were received shortly before such meeting. Had he been successful, Mr. Arias would have been in a position to replace those unaffiliated board members with his own hand-picked nominees and to effectively take over the company without paying a premium to shareholders.

The self-motivation of these actions is only further exemplified by Mr. Arias serving as chair of the board's nomination committee at that time -- a committee specifically responsible for reviewing the appropriate experience, skills and characteristics required of each existing and new board member. Mr. Arias did not communicate to the nomination committee or the board any reservations about the qualifications of the proposed slate of directors that he intended to vote against. Instead, he attempted to surprise the board and leave the company without an appropriate slate of directors following the 2021 meeting. These efforts were shortsighted and Mr. Arias was either in dereliction of his duty as chair of the nomination committee or his desire to vote off the unaffiliated directors was motivated by something other than acting in the best interests of the company (a theme that, despite recent news releases from ARC to the contrary, the company continues to see from Mr. Arias).

The company believes today, as its shareholders affirmed in 2021, that control of 27 per cent of the outstanding shares does not entitle any individual to control of the board.

ARC has referred to a "revolving suite of executives and directors" at Sierra Metals. However, since Mr. Arias was voted off the board in 2021, the company has made a single change to the chief executive officer position with the appointment of Ernesto Balarezo as interim CEO on Nov. 28, 2022. In contrast, the company had five different CEOs during the eight years Mr. Arias chaired the board. The company believes the regular turnover at the CEO position prior to 2021, at times sudden and unplanned, was disruptive to operations and the implementation of an effective long-term vision.

The ARC news release continues to misrepresent the company's financial situation, including the use of such inflammatory terms as "distress" and "bleeding." ARC once again fails to make any reference to the positive operational achievements and outlook disclosed in the company's 2022 operating and financial results announced on March 29, 2023, or the first quarter 2023 production results announced on April 25, 2023 -- presumably because the favourable news does not support ARC's mischaracterizations. The company looks forward to reporting its Q1 2023 financial results on May 15, 2023.

The company is now working diligently to remedy decisions made and performance of the company when it was under Mr. Arias's guidance. It is those decisions that are largely responsible for the current circumstances of the company.

The only reference the ARC news release makes to the recent operational improvements is a suggestion that these should not be considered an outcome of the strategic review, purportedly because they have been achieved by the company itself rather than an outside financial adviser. To the contrary, operational improvements are fully within the mandate of the special committee of independent directors announced on Oct. 18, 2022. As disclosed at that time, the special committee's mandate included, among other things, "exploring, reviewing and considering options to optimize the operations of the company." As Mr. Arias knows or ought to know, optimizing operations is a core responsibility of the management team and board of any mining company.

ARC's decision to pursue a proxy contest coincides with Mr. Arias's attempts to quickly realize value from ARC's investment in Compania Minera Kolpa S.A. by having Sierra Metals merge with Kolpa. Mr. Arias's criticism of the company's requirement to diligently and carefully consider the proposed Kolpa transaction and not rush the transaction through without due consideration is a clear indication of his desire to create value for ARC and Kolpa at the expense of the company's due consideration of the transaction.

About Sierra Metals Inc.

Sierra Metals is a diversified Canadian mining company with green metal exposure including copper, zinc and lead production with precious metals byproduct credits, focused on the production and development of its Yauricocha mine in Peru and its Bolivar mine in Mexico. The company is focused on the safety and productivity of its producing mines. The company also has large land packages with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.

We seek Safe Harbor.