An anonymous director reports

SIERRA METALS RESPONDS TO INFLAMMATORY AND UNTRUE STATEMENTS BY ALPAYANA

Sierra Metals Inc. has responded to the unfounded allegations made by Alpayana SAC in its July 18, 2025, press release.

Alpayana began its pursuit of Sierra Metals on Dec. 16, 2024, by launching a hostile takeover for Sierra Metals at a bid price of 85 cents per common share.

The 85-cent bid price was a 10-per-cent premium to the prior-day closing price, a price that Alpayana knew would never be recommended by the board of directors of Sierra Metals or accepted by the company's shareholders. Alpayana launched its bid without prior engagement with the board about a possible negotiated transaction.

Ultimately, the unattractiveness of its 85-cent bid forced Alpayana to increase its bid price on two occasions, to $1.11 on April 2, 2025, and to $1.15 on May 1, 2025.

Even as it increased its bid price, Alpayana refused to meaningfully engage in customary discussions with the company that would permit Alpayana's acquisition to be completed expeditiously, at a lower cost, and with the support of the board. Alpayana's decision to proceed at every stage on an adversarial basis, and contrary to Canadian capital market practice, created delay and came at the expense of the business that Alpayana has been seeking to acquire.

In Canada, a negotiated public merger-and-acquisition transaction can customarily be completed in three months or less. It has been more than seven months since Alpayana launched its hostile bid, and it still does not own all of the company's shares or control the board.

The odd transaction structure chosen by Alpayana, together with its aggressive tactics, forced a protracted transaction timeline and caused Sierra Metals to incur greater expenses and divert more of management's attention away from running the business over the seven plus months since the hostile bid was launched.

When Alpayana did finally engage with the board in April, 2025, months after Alpayana commenced its bid, Alpayana ended negotiations without disclosing its reasons for doing so. The board believes that Alpayana's decision to terminate engagement and continue on a hostile basis was contrary to the interests of Sierra Metals and contrary to Alpayana's own interests.

As part of the April, 2025, engagement, Alpayana was given confidential access to diligence, including employment agreements and details of employee entitlements on a change of control. The information disclosed to Alpayana in April was consistent with the disclosure on pages 59 and 60 of Sierra Metals' Jan. 13, 2025, directors circular.

During the April, 2025, discussions, Alejandro Gubbins, chair of Alpayana, sent a formal letter to the chair of the special committee, demanding that Sierra Metals unilaterally amend existing employment agreements with certain key senior officers of Sierra Metals to deprive them of their contractually agreed change of control entitlements.

The change of control payments, which is fully and clearly disclosed in the directors circular, is customary, both in amounts and triggers, for Canadian-listed public companies. Sierra Metals was unable to unilaterally amend existing employment agreements, nor would the board agree to take steps to deprive employees of their entitlements on a change of control.

After Alpayana ceased discussions about a supported transaction, likely because Alpayana intended to have Sierra Metals dishonour lawful obligations to its employees after it acquired control, the board became justifiably concerned to protect employee entitlements. On page 16 of the company's notice of change to directors circular dated May 5, 2025, the company disclosed that the board was considering taking steps to ensure the continuity of Sierra Metals' business operations and taking measures to safeguard the entitlements of employees in the event of a change of control

To ensure retention of management and the continuity of Sierra's business operations while the revised offer is pending, the board may take steps to ensure the continuity of Sierra's business operations, including, among other things, the acceleration of vesting and the settlement of outstanding restricted stock units and deferred stock units, and other measures to safeguard the entitlements of employees in the event of a change of control.

As set out above, since January, 2025, Alpayana had full knowledge of the customary change of control entitlements owing to Sierra Metals' senior officers as it increased its bid price twice and waived conditions to complete its bid, including waiving conditions relating to the contractually agreed change of control entitlements that are the subject to Alpayana's July 17, 2025, press release.

Shortly after the disclosure made as of May 5, 2025, as disclosed in its management information circular dated June 23, 2025, and acting in the best interest of the company and in accordance with its fiduciary duties, the board approved separation agreements with its senior management for the dual purposes of ensuring retention for the sake of the smooth operation of the business during the postchange of control period of transition and to ensure such employees are treated fairly and to safeguard their legal entitlements.

Regrettably, Alpayana has chosen to characterize the separation agreements as removing the double trigger from the employment agreements. Alpayana did not mention, however, that change of control entitlements is also triggered by the employee resigning for good reason, not just by termination.

Sierra Metals prides itself on operating in accordance with the highest ethical standards, both in respect of its mining operations and also in treating its employees and all of its stakeholders fairly. Sierra Metals believes that Alpayana never intended to honour its employees' contractual change of control entitlements, which are customary and market standard for management of Canadian public companies.

As its acquisition of complete control is only days away, Alpayana has chosen to issue a press release that contains misleading and untrue statements, all for no apparent purpose, as its acquisition of complete control is by now assured. It is unfortunate, but ultimately to its own account, that Alpayana has taken steps inconsistent with Canadian practice that have prolonged its bid and created unnecessary conflict and uncertainty for Sierra Metals and its employees. The board remains committed to acting in the best interests of the company as directors near the end of their service to the company.

About Sierra Metals Inc.

Sierra Metals is a Canadian mining company focused on copper production with additional base and precious metal byproduct credits at its Yauricocha mine in Peru and its Bolivar mine in Mexico. The company is intent on safely increasing production volume and 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.