Mr. Andrew Sidnell reports

REPEAT - ARIAS RESOURCE CAPITAL CORRECTS RECORD ON SIERRA METALS' FAILED 2021 STRATEGIC REVIEW PROCESS AND KOLPA TRANSACTION DISCUSSIONS

Arias Resource Capital Fund II LP and Arias Resource Capital Fund II (Mexico) LP, together with other affiliates of Arias Resource Capital and its principal (ARC), have responded to the misleading and inaccurate statements made by the board of directors of Sierra Metals Inc. following the close of business on Friday, May 12, 2023, and earlier this morning, May 15, 2023. ARC holds approximately 27 per cent of the outstanding shares of Sierra.

Rather than answer to Sierra shareholders for their woeful performance and unthinkable destruction of over 90 per cent of shareholder value, ARC believes that the Sierra board has tried to paint ARC and its principal, J. Alberto Arias, as self-interested actors, while falsely and maliciously claiming that Mr. Arias is somehow to blame for the situation that the company now finds itself in. Furthermore, the Sierra board has blatantly mischaracterized the discussions and engagement with respect to Compania Minera Kolpa SA. The nominating shareholders urge all shareholders to hold the Sierra board accountable for its attempted obfuscation.

Contrary to the company's May 12, 2023 assertions, Mr. Arias and the other ARC representative left the Sierra board almost two years ago. The distribution of Sierra shares to the limited partners of an ARC-managed fund that Sierra now blames for its share price performance was made over two years ago and does not explain the over 90-per-cent loss of value to shareholders or the disastrous operational performance of the company since.

Fundamentally, the Sierra board and the company's current management have no one to blame for the state of the company but themselves. And they owe shareholders the truth about the company's 2021 strategic review process. Sierra's press release on Friday, May 12, 2023, states that "the strategic review process was concluded without having identified a buyer for the company," which is not accurate. ARC recently learned that, following the departure of the ARC representatives from the Sierra board in 2021, the Sierra board received and rejected an all-cash offer from a prominent, fully financed strategic buyer. To the best of ARC's information and belief, the Sierra board, following months of due diligence and after entering into an exclusivity agreement, received and rejected a cash offer which was in excess of $400-million (U.S.), a valuation more than eight times the company's market value as of the close on May 12, 2023.

"This loss to all shareholders is incomprehensible," Mr. Arias stated. "We don't see how the Sierra board acting reasonably with a view to the best interest of Sierra and all its shareholders could have rejected an offer that would have received widespread support from the company's stakeholders. ARC is completely vindicated in its assessment that the Sierra special committee could not -- or would not -- deliver under the 2021 strategic review process. But the incumbent Sierra board is now following the same misguided path after destroying over 90 per cent of Sierra's market capitalization over the past two years," Mr. Arias said.

Similarly, ARC believes that the Sierra board's description in its May 15, 2023, press release of its engagement regarding a potential transaction with Kolpa is inaccurate. Following Kolpa's public offer, over four months passed before the company decided to reach out to Kolpa with respect to the proposed transaction and concurrent financing. Despite Kolpa having provided a second offer with enhanced terms in respect of an operational merger, which represented, and continues to represent, a significant premium to the prevailing market price of Sierra shares, the company refused to provide any counteroffer. Notwithstanding constructive attempts by Kolpa and its financing sources to reach common ground with Sierra regarding mutually acceptable asset valuations, Kolpa was met with refusals to engage in ordinary course discussions and a litany of contrived excuses to avoid meaningful engagement. Contrary to today's press release from Sierra, Kolpa has provided all information in its possession that was requested by Sierra. Finally, in the Sierra board's own words, the Sierra board's refusal to engage further was based on ARC's intention to nominate directors to the Sierra board and not as a result of an impasse in Kolpa-related matters, which is directly contrary to the Sierra board's statements earlier this morning.

In addition to providing Sierra shareholders with the accurate description of events outlined above, ARC and Mr. Arias plan to further consider the contents of Sierra's May 12, 2023, and May 15, 2023, press releases and respond in due course, including evaluating whether any further action will be taken.

In light of this new information surrounding the fully financed, premium offer rejected as part of the 2021 strategic review process, ARC is also examining events surrounding the failure of the 2021 strategic review process and the subsequent strategic review process announced by Sierra in October, 2022. The actions of the Sierra board and the related outcomes appear to be squarely at odds with the best interests of the company and its shareholders, while seemingly being motivated by a vindictive and self-interested anyone but Arias shareholders approach.

Urgent need for change

Despite these deliberate falsehoods to distract shareholders from the company's staggering and mounting losses, ARC cautions all Sierra shareholders to remain focused on the urgent task of protecting Sierra by taking the crucial first step of electing a reconstituted Sierra board. The nominating shareholders have proposed five highly qualified nominees: Mr. Arias, Derek White, Daniel Tellechea, Ricardo Arrarte and Alonso Checa -- for election to the board at Sierra's annual general and special meeting scheduled for June 28, 2023.

A copy of ARC's preliminary information circular dated May 11, 2023, is available under Sierra's profile on SEDAR, where ARC's press releases and other relevant case for change documents are available.

Advisers

ARC has retained Kingsdale Advisors as its strategic shareholder and communications adviser and, should ARC commence a formal solicitation of proxies, its strategic shareholder advisor and proxy solicitation agent. ARC has retained Stikeman Elliott LLP as its legal adviser.

We seek Safe Harbor.