Mr. Ernesto Balarezo reports

SIERRA METALS REPORTS CONTINUED IMPROVED FINANCIAL RESULTS FOR THE FIRST QUARTER OF 2023

Sierra Metals Inc. has released financial results for the three-month period ended March 31, 2023, including revenue of $58.5-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $15.2-million on throughput of 577,284 tonnes and metal production of 18 million copper equivalent pounds. All figures are reported in U.S. dollars.

Ernesto Balarezo, interim chief executive officer of Sierra Metals, commented: "Our financial performance improved significantly in Q1 2023 compared to Q4 2022, consistent with the operating gains we announced last month. The scale of the turnaround is highlighted by sequential improvements of $12.4-million in revenue, $10-million in operating cash flows before movements in working capital, $15.7-million in adjusted EBITDA and $11.5-million in adjusted net income attributable to shareholders. While we still have work to do, maintaining and improving upon these performance levels throughout the year, as we anticipate, would position us very well to move beyond the challenges of last year and build a platform for long-term growth.

"We view the strong Q1 2023 production and financial results as evidence that our plan is working. Our focus over the past six months began with stabilizing our operations by making safety our top priority, and investing in key infrastructure, such as pumping and ventilation systems. We then shifted to optimizing operations, and we are now seeing the initial results including increased production.

"The next stage of our plan is growing our business. Our 2023 guidance calls for production levels to increase throughout the year while we actively pursue the permit to mine below the 1120 level at Yauricocha, a major growth catalyst that should significantly improve our throughput and profitability."

Q1 2023 consolidated financial summary

The information provided below are excerpts from the company's Q1 2023 financial statements and management's discussion and analysis, which are available on the company's website and on SEDAR under the company's profile.

Revenue from metals payable of $58.5-million in Q1 2023 increased by 2 per cent from $57.2-million in Q1 2022, as the 19-per-cent increase in the copper equivalent payable pounds was partially offset by lower metal prices as compared with Q1 2022. However, metal prices were higher than Q4 2022, and combined with the 23-per-cent increase in the copper equivalent payable pounds, boosted revenues by 27 per cent quarter-over-quarter.

Yauricocha's cash cost per copper equivalent payable pound was $2.05 (Q1 2022 -- $2.19), and AISC per copper equivalent payable pound was $3.12 (Q1 2022 -- $3.73). Despite a 6-per-cent decrease in copper equivalent payable pounds, unit costs were lower due to the reduction in cash cost and other elements of AISC such as treatment and refining charges, selling costs, and sustaining capital.

Bolivar's cash cost per copper equivalent payable pound was $1.85 (Q1 2022 -- $4.55), and AISC per copper equivalent payable pound was $3.10 (Q1 2022 -- $7.33) for Q1 2023. The decrease in unit costs at Bolivar was driven mainly by the 143-per-cent increase in copper equivalent payable pounds.

Cusi's cash cost per silver equivalent payable ounce was $23.02 (Q1 2022 -- $13.48), and AISC per silver equivalent payable ounce was $29.80 (Q1 2022 -- $19.94) for Q1 2023. Unit costs for Q1 2023 increased at Cusi as the lower cost of sales and sustaining costs could not offset the impact of a 45-per-cent decrease in the silver equivalent payable ounces.

Adjusted EBITDA of $15.2-million for Q1 2023 decreased 5 per cent compared with $16-million in Q1 2022, mainly due to lower metal prices.

Net income attributable to shareholders for Q1 2023 was $2.1-million (Q1 2022 -- $400,000) or one cent per share (basic and diluted) (Q1 2022 -- nil).

Adjusted net income attributable to shareholders of $4.7-million, or three cents per share for Q1 2023 as compared with the adjusted net income attributable to shareholders of $5.9-million, or four cents per share for Q1 2022.

Cash flow generated from operations before movements in working capital of $12.9-million for Q1 2023 increased compared with $10.7-million in Q1 2022.

Cash and cash equivalents of $3.9-million and working capital of $(83-million) as at March 31, 2023, compared with $5.1-million and $(84.4-million), respectively, at the end of 2022. Cash and cash equivalents decreased during Q1 2023 as cash used in investing activities of $7.4-million and cash used in financing activities of $500,000 exceeded $6.7-million of cash generated from operating activities.

Outlook 2023

Stabilizing operations with a focus on health and safety remains the key short- to medium-term priority for management. The company's long-term objective is to expand the resources at its core operating mines. The company is working on its revised life-of-mines plans, which are expected to be released later during the year.

As announced earlier, the company has hired a vice-president of health and safety, a newly created position, and has initiated plans to continually improve safety of its employees and the communities in which it operates. The company is working closely with regulatory bodies to expedite additional permitting at Yauricocha without compromising on safety and environmental regulations.

The company is streamlining operations, reducing costs and deferring growth-related capital expenditure for cash preservation, while continuing to advance on the refinancing of its debt amortization payment obligations with its lenders. The refinancing process for those amortization payments remains on track and is expected to lead to a formal contract with the lenders in the coming weeks.

The company remains on track to achieve previously announced production, cost and capital expenditure guidance for 2023.

Special committee update

The special committee of independent directors formed in October, 2022, continues to evaluate opportunities and improvements for the company in accordance with its mandate. That mandate included reviewing strategic transactions as well as the development of initiatives and objectives to improve operations and financial conditions of the company.

Over the course of the strategic review process, the special committee and the company's management team have identified and implemented a number of operational and financial improvements described in more detail in the company's news releases dated March 29, 2023, and May 2, 2023.

The review of strategic transactions is approaching completion. Once the special committee work is completed and all recommendations are received, the company will provide an update on any material developments and objectives. The special committee's evaluation of the proposed Kolpa transaction reached an impasse when a recent request for material information from Kolpa regarding the Kolpa operations and mine plans was substantively ignored by Kolpa. Kolpa refused to provide this important information, leaving no reasonable way for the company to advance discussions with Kolpa. Those discussions are not continuing.

Q1 2023 operating highlights

The company reported Q1 2023 production results on April 25, 2023. A summary follows:

Yauricocha mine, Peru

Throughput from the Yauricocha mine during Q1 2023 was 219,145 tonnes, a 44-per-cent sequential increase over Q4 2022, and as anticipated, a 30-per-cent decrease compared with Q1 2022, after the implementation of measures to safeguard against similar occurrences to last year's mudslide incident. Mining activity at Yauricocha continues to focus on smaller orebodies located within the permitted minable areas above the 1120 level. These smaller orebodies provided improved head grades in all metals during Q1 2023 when compared with the previous quarter, whereas, in Q1 2022, there was a greater contribution to production from larger orebodies with lower grades. There was also a notable improvement in the recovery of silver, copper and gold by 18 per cent, 4 per cent and 8 per cent, respectively, when compared with the previous quarter, while zinc and lead recoveries remained in line with Q4 2022.

Head grades in silver, lead and zinc, when compared with Q1 2022, improved by 18 per cent, 6 per cent and 39 per cent, respectively. Copper grades were in line with Q1 2022 and gold grades decreased by 12 per cent. Production of all metals, except for zinc, declined, and copper equivalent production at the mine decreased by 17 per cent when compared with Q1 2022, as the improved head grades and stronger recoveries during the quarter could not compensate for the reduced throughput at Yauricocha when compared with Q1 2022.

Bolivar mine, Mexico

The Bolivar mine processed 299,017 tonnes during Q1 2023, an 11-per-cent increase over Q4 2022 and a 59-per-cent increase compared with Q1 2022, due to improvements in ventilation and advancement in the mine's development and preparation which allowed for increased mining activity during the quarter. As a result, the Bolivar mine saw improved productivity and higher grades in copper and silver by 6 per cent and 31 per cent, respectively, with a decrease of 10 per cent in gold grades when compared with Q4 2022. When comparing the quarter with Q1 2022, there were significantly higher grades in copper, silver and gold by 50 per cent, 59 per cent and 181 per cent, respectively, as well as an 11-per-cent and 9-per-cent improvement in copper and gold recovery rates. Bolivar generated 7.6 million pounds in copper equivalent production during Q1 2023, an 18-per-cent increase over the previous quarter and a 192-per-cent increase when compared with Q1 2022.

Cusi mine, Mexico

The Cusi mine processed 59,122 tonnes of ore during Q1 2023, an 18-per-cent decrease when compared with Q4 2022 and a 33-per-cent decrease from Q1 2022. The decrease in throughput, combined with lower grades in silver, gold and lead by 17 per cent, 24 per cent and 4 per cent, respectively, resulted in a 31-per-cent decrease in silver equivalent production when compared with Q4 2022. When compared with Q1 2022, decreases in grades for the same metals of 18 per cent, 32 per cent and 8 per cent, respectively, resulted in a 44-per-cent decrease in silver equivalent production.

The decrease in throughput during Q1 2023 was attributed to a general decline in mining activity, and a greater focus on recovery of production sites from several issues that arose during the quarter, including flooding at depth, contractor performance and the lack of availability of mining equipment. Head grades were also impacted by the reduction in active mining sites during the quarter.

Conference call and webcast

Sierra Metals' senior management will host a conference call and webcast to discuss the company's financial and operating results for the three months ended March 31, 2023. Details are as follows:

Date: May 15, 2023

Time: 11 a.m. (Eastern Time)

Telephone: Canada/United States (toll-free): 1-800-319-4610

Other: 1-416-915-3239

The webcast, along with presentation slides, will be archived for 180 days on Sierra Metals' website.

Qualified person

Ricardo Salazar Milla, corporate manager of mineral resources, is a member of the Australian Institute of Geoscientist and is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.

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.