Mr. Ernesto Balarezo Valdez reports

SIERRA METALS REPORTS ANOTHER QUARTER OF INCREASED OPERATING AND FINANCIAL PERFORMANCE

Sierra Metals Inc. has released its financial results for the three-month (Q2) and six-month (H1) period ended June 30, 2023, showing total revenues of $62.7-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $13.5-million, on throughput of 702,052 tonnes and metal production of 21.7 million copper equivalent (CuEq) pounds in Q2 2023.

All figures are reported in United States dollars.

Ernesto Balarezo Valdez, chief executive officer of Sierra Metals, commented: "The second quarter of 2023 delivered strong operating and financial performance. Our Bolivar mine had record copper equivalent production for the quarter and far exceeded our expectations on costs. Our other core operation, the Yauricocha mine, continued its positive trend of quarter-over-quarter production increases. Both operations still have room for improvements, especially at Yauricocha where we are on track to obtain, by year-end, all required permits needed to operate below the 1120 level, which will allow us to mine in a larger orebody. As a result of our strong first half of 2023, we are well on our way to meeting our 2023 production guidance. Over all, we are very encouraged with the momentum we are building across our business."

Q2 2023 consolidated financial summary

The information provided herein are excerpts from the company's Q2 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 was $62.7-million in Q2 2023, representing an increase of 25 per cent over the revenue in Q2 2022 of $49.9-million and a 7-per-cent increase over the revenue in Q1 2023 of $58.5-million. The increase in revenue was largely driven by higher metal sales at the Bolivar mine, which recorded a 151-per-cent increase in copper equivalent sales compared with Q2 2022 and a 45-per-cent increase over Q1 2023.

The Yauricocha mine had a cash cost per copper equivalent payable pound of $2.29 (Q2 2022 -- $2.06) and an all-in sustaining cost (AISC) per copper equivalent payable pound of $3.97 (Q2 2022 -- $3.39) for Q2 2023. The increase in unit cash costs and AISC was mainly due to the 27-per-cent decrease in copper equivalent payable pounds as compared with Q2 2022.

Bolivar's cash cost per copper equivalent payable pound was $1.62 (Q2 2022 -- $3.39) and AISC per copper equivalent payable pound was $3.02 (Q2 2022 -- $5.49) for Q2 2023, due to a 25-per-cent decrease in operating costs per tonne combined with a 151-per-cent increase in copper equivalent payable pounds during the quarter as compared with Q2 2022.

The Cusi mine, which the company has classified as non-core, had Q2 2023 cash cost per silver equivalent payable ounce increase to $29.17 from $24.84 in Q2 2022 as a result of higher operating costs per tonne, largely attributable to lower throughput. Silver equivalent payable ounces declined 22 per cent to 203,000 ounces, further impacting cash costs and AISC per silver equivalent payable ounce, which was $38.83 for Q2 2023, or 15 per cent higher than Q2 2022.

Adjusted EBITDA increased to $13.5-million for Q2 2023 from $1.4-million in the same quarter of 2022, driven by higher revenues, attributable to higher production and improved operating costs at the Bolivar mine during Q2 2023.

Net income attributable to shareholders for Q2 2023 was $1.6-million (Q2 2022: a loss of $15.3-million), or one cent per share (basic and diluted) (Q2 2022: nil).

Cash flow generated from operating activities before movements in working capital of $11.6-million for Q2 2023 as compared with $1.6-million of cash used in operating activities in Q2 2022. The increase resulted from higher revenues during the quarter.

Cash and cash equivalents of $4.4-million, and working capital of negative $88.4-million as at June 30, 2023, compared with $5.1-million and negative $84.4-million, respectively, at the end of 2022. Cash and cash equivalents decreased during H1 2023, as the $21.8-million used in investing activities and $6.9-million of cash used in financing activities exceeded the cash generated from operating activities of $27.9-million.

The associated table displays average realized metal prices information for Q2 2023 and H1 2023 in comparison with the same periods of 2022.

Outlook 2023

The company is on schedule to meet its 2023 production guidance and has amended Yauricocha's cost guidance for the remainder of the year (previously announced on March 28, 2023). Most notably, the company expects slightly higher AISC costs at Yauricocha, to be partially compensated by better-than-expected costs at Bolivar for the remainder of 2023. The associated table summarizes the updated 2023 guidance from the Yauricocha and Bolivar mines, as the Cusi mine has been classified as non-core and has been excluded from guidance.

Management continues to review performance throughout the year, while exploring value-enhancing opportunities.

Q2 2023 operating highlights

The company reported Q2 2023 production results on July 25, 2023. A summary follows below.

Yauricocha mine, Peru

Throughput at the Yauricocha mine for Q2 2023 was 244,315 tonnes, 11 per cent higher than in Q1 2023, given that the company has been able to maximize the extraction above 1120 level. However, when compared with Q2 2022, throughput is 23 per cent lower. This anticipated decline was due to the continued depletion of the ore above the 1120 level. Copper equivalent pound production for Q2 2023 was 21 per cent lower than Q2 2022, as the reduced throughput was partially offset by higher grades of lead, zinc and silver coming from the high-grade small orebodies. Copper and gold grades declined due to the lower contribution from the Esperanza zone.

When compared with Q1 2023, there was a 6-per-cent increase in the copper equivalent production during Q2 2023, as the higher throughput was partially offset by the impact of lower copper grades, and recoveries for copper and silver.

Bolivar mine, Mexico

Operating at 4,640 tonnes per day during Q2 2023, the Bolivar mine achieved 405,987 tonnes of throughput, an increase of 36 per cent and 58 per cent over Q1 2023 and Q2 2022, respectively, attributable to substantial improvements in ventilation and drainage, which allowed for more metres of production drilling and better access to the mining zones. Grades were higher for all metals in comparison with Q1 2023 and Q2 2022, except for a slight decrease in gold grades as compared with Q1 2023. The increase in grades was effectively the direct result of mining in the Bolivar northwest zone.

In Q2 2023, copper equivalent production was a record 10.7 million pounds, as the mine recorded an increased production for all metals. Copper, silver and gold production for Q2 2023 was up 139 per cent, 149 per cent and 187 per cent, respectively, as compared with Q2 2022.

Cusi mine, Mexico

The non-core Cusi mine had lower Q2 2023 throughput, and was negatively impacted by the availability of mining equipment and floodings during the quarter. Operating at 591 tonnes per day, the Cusi mine processed 51,750 tonnes, which was 12 per cent lower than Q1 2023 and 22 per cent lower than Q2 2022. Higher silver and lead grades combined with improved gold recoveries partially offset the impact of lower throughput, resulting in silver equivalent production of 241,000 ounces during Q2 2023, which was 5 per cent and 15 per cent below the silver equivalent production achieved in Q1 2023 and Q2 2022, respectively.

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 June 30, 2023. Details are as follows.

Date:  Aug. 14, 2023

Time:  11 a.m. (ET)

Webcast:  access on-line

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 the company's website.

Qualified person

Ricardo Salazar Milla, corporate manager of mineral resources, is a member of the Australian Institute of Geoscientists and is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects. Mr. Salazar has reviewed and approved the scientific and technical content of this news release.

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.