Mr. Ernesto Balarezo reports

SIERRA METALS REPORTS THIRD QUARTER 2023 OPERATING AND FINANCIAL PERFORMANCE

Sierra Metals Inc. has released financial results for the three-month (Q3) and nine-month (9M) periods ended Sept. 30, 2023, with total revenues of $57-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $8.1-million on throughput of 622,622 tonnes and metal production of 18.5 million copper equivalent pounds in Q3 2023.

Ernesto Balarezo, chief executive officer of Sierra Metals, commented, "We continued to make incremental improvements across our operations during the quarter, and are very pleased the hard work by our team is paying off as we are on track to meet 2023 guidance. During the quarter we placed the non-core Cusi silver mine on care and maintenance and initiated a sale process for this asset with the belief that these steps will improve our portfolio and support our future growth. And lastly, we are pleased with the support shown by shareholders who participated in our recent financing, which validated our strategy and helped to strengthen our balance sheet."

Mr. Balarezo continues: "In the first three quarters of 2023, we have almost equalled the entire production of 2022 so our operational improvements are working. The momentum across our business has continued into the fourth quarter as we look forward to a strong finish for 2023."

Q3 2023 consolidated financial summary

The information provided below are excerpts from the company's Q3 2023 financial statements and management's discussion and analysis (MD&A), which are available on the company's website and on SEDAR+ under the company's profile.

Consolidated results include results from the company's Yauricocha mine in Peru and the Bolivar mine in Mexico. The Cusi mine in Mexico was classified as a non-core asset in Q1 2023 and, on Sept. 20, 2023, was put on care and maintenance, with a sale process now under way. Current and historical production and financial results for Cusi are not included in the company's consolidated results and 2023 guidance and has been classified as a discontinued operation.

Revenue from metals payable was $57-million in Q3 2023, representing an increase of 62 per cent over the same period in 2022 of $35.2-million and a 2-per-cent decline compared with Q2 2023 of $58.4-million. The increase in revenue from Q3 2022 to Q3 2023 was largely driven by higher metal sales at Bolivar and higher copper, silver, lead and gold prices.

Consolidated cash costs per copper equivalent payable pound in Q3 2023 of $2.11 and consolidated AISC (all-in sustaining cost) per equivalent payable pound copper of $3.66 were 12 per cent and 5 per cent, respectively, lower than the same quarter of 2022. The improvements in consolidated cash costs and AISC per copper equivalent pound were primarily due to higher production levels at Bolivar despite lower production at Yauricocha.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in Q3 2023 was $8.1-million, compared with negative adjusted EBITDA of $6.2-million in the same quarter of 2022. The improved adjusted EBITDA is primarily driven by higher revenues, attributable to higher production and improved operating costs compared with Q3 2022.

Net loss attributable to shareholders for Q3 2023 was $9.3-million (Q3 2022: a net loss of $46.2-million) or (six cents) per share (basic and diluted) (Q3 2022: (28 cents)).

Excluding discontinued operations, net loss was $2.8-million in Q3 2023 versus a loss of $38.1-million in Q3 2022.

Adjusted net loss attributable to shareholders of $2.1-million, or (one cent) per share, for Q3 2023 compared with the adjusted net loss of $12.1-million, or (seven cents) per share for Q3 2022.

Cash flow generated from operating activities before movements in working capital was $6-million for Q3 2023 as compared with $6.8-million of cash used in operating activities in Q3 2022. The increase resulted from higher revenues and lower costs during Q3 2023 versus Q3 2022.

Cash and cash equivalents as at Sept. 30, 2023, were $18.2-million (including restricted cash of $12.1-million), and working capital of $(81.4-million), compared with $5.1-million and $(78.1-million), respectively, at the end of 2022. Cash and cash equivalents increased during the nine-month period as a result of cash generated from operating activities of $35.3-million, cash generated from financing activities of $10.3-million and cash used in investing activities of $32.5-million.

The company has raised approximately $16.4-million from various investors, including existing shareholders, directors and employees, in a private placement of 43,107,360 common shares. The private placement closed after the end of the third quarter and funds became available in two tranches, the first being approximately $12.8-million and the second being approximately $3.5-million, each at a subscription price of 38 cents per common share. Common shares issued pursuant to the private placement are subject to statutory hold requirements, as applicable.

Outlook 2023

The company is on track to meet its 2023 production guidance as previously announced on Aug. 14, 2023. Production for all metals has been in line with the guidance range. Copper equivalent production calculations have been negatively impacted by the drop in zinc prices during the nine-month period ended Sept. 30, 2023. For comparison purposes, the copper equivalent production has been recalculated at the same metal prices that were used for the original guidance.

Q3 2023 operating highlights

The company reported Q3 2023 production results on Oct. 19, 2023. Highlights of each mine's activities in the quarter is as follows:

Yauricocha mine, Peru

Yauricocha processed 259,732 tonnes during Q3 2023, an increase of 6 per cent over Q2 2023 and a decrease of 3 per cent from Q3 2022. Copper, silver and gold grades increased by 23 per cent, 7 per cent and 3 per cent, respectively, over Q2 2023 and increased by 16 per cent, 23 per cent and 0 per cent, respectively, over Q3 2022. Copper equivalent production for Q3 2023 of 10.4 million pounds represented a 9-per-cent increase over the previous quarter and a decline of 4 per cent when compared with Q3 2022.

When compared with Q3 2022, the 4-per-cent decrease in the copper equivalent pounds produced in Q3 2023 resulted from the change in metal prices, particularly zinc prices, which declined by more than 26 per cent as compared with Q3 2022. The increase in metal production, except for gold, did not offset the impact of the change in metal prices as compared with Q3 2022.

Yauricocha had a cash cost per copper equivalent payable pound of $2.08 (Q3 2022 -- $2.01), and an AISC per copper equivalent payable pound of $3.75 (Q3 2022 -- $3.36) for Q3 2023. Cash costs increased for Q3 2023 due to a 26-per-cent decline in average realized prices for zinc which resulted in a 3-per-cent decrease in the copper equivalent payable pounds as compared with Q3 2022. The increase in the AISC for Q3 2023 was mainly a result of the 37-per-cent and 44-per-cent increase in the general and administration (G&A) costs and sustaining capital expenditure respectively, as compared with Q3 2022.

Bolivar mine, Mexico

Bolivar achieved a throughput of 362,890 tonnes in Q3 2023, a 59-per-cent increase from Q3 2022, but a decline of 11 per cent compared with Q2 2023, as anticipated. Bolivar recorded higher grades for all metals in Q3 2023, namely 28 per cent, 27 per cent and 37 per cent for copper, silver and gold, respectively, as compared with Q3 2022, and 16 per cent, 21 per cent and 12 per cent lower for copper, silver and gold, respectively, when compared with Q2 2023. As a result, copper equivalent production of 8.1 million pounds in Q3 2023 was 113 per cent higher than in Q3 2022 and 24 per cent lower than in Q2 2023.

Bolivar's cash cost per copper equivalent payable pound decreased 37 per cent to $2.15 (Q3 2022 -- $3.38), and AISC per copper equivalent payable pound decreased 30 per cent to $3.57 (Q3 2022 -- $5.12) as a result of the 131-per-cent-higher copper equivalent payable pounds as compared with Q3 2022.

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 Sept. 30, 2023. Details are as follows:

Date: Nov. 13, 2023

Time: 11 a.m. (Eastern Time)

Webcast: Chorus Call website

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.

About Sierra Metals Inc.

Sierra Metals is a Canadian mining company focused on copper production with additional base and precious metals byproduct credits at its Yauricocha mine in Peru and Bolivar mine in Mexico. The company is intent on safely increasing production volume and growing mineral resources. Sierra Metals has recently had several new key discoveries and still has many more exciting brownfield exploration opportunities in Peru and Mexico that are within close proximity to the existing mines. Additionally, the company has large land packages at each of its mines with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.

We seek Safe Harbor.