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Sierra Metals Inc
Symbol SMT
Shares Issued 162,810,553
Close 2020-07-31 C$ 2.14
Recent Sedar Documents

Sierra Metals' Corona earns $1.84-million in Q2

2020-07-31 17:30 ET - News Release

Mr. Luis Marchese reports

SIERRA METALS REPORTS Q2-2020 FINANCIAL RESULTS AT ITS SOCIEDAD MINERA CORONA SUBSIDIARY IN PERU

Sierra Metals Inc. has filed Sociedad Minera Corona SA's unaudited financial statements, and the management discussion and analysis (MD&A) for the second quarter of 2020 (Q2 2020).

Yauricocha mine, Peru

The company holds an 81.8-per-cent interest in Corona. All amounts are presented in U.S. dollars unless otherwise stated and have not been adjusted for the 18.2 per cent non-controlling interest.

Corona's highlights for the three months ended June 30, 2020:

  • Revenues of $23.4-million (U.S.) versus $34.0-million (U.S.) in Q2 2019;
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $7.8-million (U.S.) versus $11.9-million (U.S.) in Q2 2019;
  • Total tonnes processed of 202,534 versus 254,165 in Q2 2019;
  • Net production revenue per tonne of ore milled decreased by 19 per cent to $106.53 (U.S.);
  • Cash cost per tonne processed decreased by 22 per cent to $44.27 (U.S.);
  • Cash cost per copper equivalent payable pound decreased by 22 per cent to 91 U.S. cents;
  • Cash cost per zinc equivalent payable pound decreased by 32 per cent to 34 U.S. cents;
  • All-in sustaining cost (AISC) per copper equivalent payable pound decreased by 9 per cent to $1.80 (U.S.);
  • AISC per zinc equivalent payable pound decreased by 22 per cent to 67 U.S. cents;
  • Copper equivalent production of 14.4 million pounds versus 16.8 million pounds in Q2 2019;
  • Zinc equivalent production of 38.7 million pounds versus 38.4 million pounds in Q2 2019;
  • $33.1-million of cash and cash equivalents as at June 30, 2020;
  • $66.1-million of working capital as at June 30, 2020.

The Yauricocha mine processed 202,534 tonnes during Q2 2020, which was a 20-per-cent decrease from Q2 2019, resulting from the government-imposed state of emergency, which remained in force until June 4, 2020. Higher head grades, and higher gold and silver recoveries partially offset the impact of decreased throughput during Q2 2020, resulting in a 15-per-cent decrease in copper equivalent metal production compared with Q2 2019. The higher grades realized during Q2 2020 was the result of increased production from the cuerpos chicos, which contained higher grades. Higher copper head grades resulted from a greater proportion of copper sulphides processed as compared with polymetallic ore. Gold and silver recoveries were boosted by the installation of the SK-240 cells and grade analyzers.

Luis Marchese, chief executive officer of Sierra Metals, commented: "The Yauricocha mine had a good second quarter despite the negative implications of the COVID-19-related shutdowns. The company was able to maintain essential activities while fully complying with the government protocols during the state of emergency. Throughout this period, we maintained a high level of productivity with a reduced work force, and we reviewed our processes at the mine, with a target of improving efficiencies. As we ramp up production at the mine we remain cognizant that COVID-19 cases remain high in Peru. As such, we continue to adhere to strict health protocols to protect our employees and the communities in which we operate to avoid any further work stoppages."

He continued: "Looking ahead to the second half of the year, due to our operating flexibility, we have the potential to recover some of the lost production experienced during the shutdowns. When coupled with higher copper and precious-metal prices, we are optimistic we will see a stronger second half for 2020. Furthermore, we will be seeking the required permits to increase throughput at the mine to 3,600 tonnes per day. Yauricocha remains a strong revenue contributor to the company, and we look forward to stronger performance in the latter part of this year."

The attached table shows selected unaudited financial information for the three months and six months ended June 30, 2020.

                                  FINANCIAL INFORMATION
    (in thousands of U.S. dollars, except cash cost and revenue per tonne metrics)
    
                                                     Three months ended  Six months ended                        
                                              June 30,    June 30,    June 30,    June 30,
                                                 2020        2019        2020        2019

Revenue                                      $ 23,405    $ 33,987    $ 57,123    $ 69,325
Adjusted EBITDA (1)                             7,805      11,908      17,583      25,640
Cash flow from operations                       7,263      11,932      17,319      25,104
Gross profit                                    8,562      13,213      17,530      27,700
Income tax expense                            (2,939)      (3,136)     (7,709)     (6,156)
Net income                                      1,849       6,455       3,909      14,446
Net production revenue per
tonne of ore milled (2)                        106.53      132.13      113.36      139.61
Cash cost per tonne of ore milled (2)           44.27       66.01       59.44       69.66
Cash cost per copper equivalent
payable pound (2)                                0.91        1.16        1.06        1.21
All-in sustaining cost per copper
equivalent payable pound (2)                     1.80        1.98        2.05        1.98
Cash cost per zinc equivalent
payable pound (2)                                0.34        0.50        0.39        0.52
All-in sustaining cost per zinc
equivalent payable pound (2)                     0.67        0.86        0.76        0.86

                                              June 30,    Dec. 31,
                                                 2020        2019

Cash and cash equivalents                   $  33,050   $  35,004
Assets                                        198,974     200,474
Liabilities                                    40,625      46,034
Equity                                        158,349     154,440

(1) Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) includes
    adjustments for depletion and depreciation, interest expense and other financing costs,
    interest income, share-based compensation, foreign exchange (gain) loss and income taxes;
    see non-international financial reporting standards performance measures section of the
    company's MD&A.
(2) Net production revenue per tonne of ore milled, cash cost per tonne of ore milled, cash
    cost per copper/zinc equivalent pound sold and all-in sustaining cost (AISC) per copper/
    zinc equivalent pound are non-IFRS performance measures; see non-IFRS performance measures
    section of the company's MD&A. AISC includes cost of sales, treatment and refining charges,
    sustaining capital expenditures, general and administrative expense, and selling expense,
    and exclude workers' profit sharing, depreciation and other non-cash provisions.

Corona's financial highlights for the three and six months ended June 30, 2020

Revenues from metals payable were $23.4-million for Q2 2020 compared with $34.0-million in Q2 2019. The decrease in revenues for Q2 2020 compared with the same period in 2019 was largely due to a 20-per-cent decrease in tonnes processed due to the state of emergency imposed by the Peruvian government since March 17, 2020, and also due to the decrease in metal prices as compared with Q2 2019. Metal production and sales declined during Q2 2020 resulting in 15 per cent lower copper equivalent pounds sold as compared with Q2 2019. Average realized prices for copper, zinc and lead dropped 13 per cent, 26 per cent and 11 per cent, respectively, while silver and gold prices were 11 per cent and 30 per cent higher as compared with the average realized prices in Q2 2019.

Cash cost per copper equivalent pound sold at the Yauricocha mine was 91 cents for Q2 2020 compared with $1.16 for Q2 2019 and $1.06 for YTD 2020 compared with $1.21 for YTD 2019. All-in sustaining cost (AISC) per copper equivalent pound sold was $1.80 for Q2 2020 compared with $1.98 for Q2 2019 and $2.05 for YTD 2020 compared with $1.98 for YTD 2019. The decrease in the AISC per copper equivalent payable pound for Q2 2020 compared with Q2 2019 was due to lower cash costs and lower sustaining costs, which were partially offset by increase in treatment and refining charges, and lower number of equivalent copper pounds sold. The increase in the AISC per copper equivalent payable pound for YTD 2020 compared with YTD 2019 was largely due to the 71-per-cent increase in treatment and refining charges.

Cash cost per zinc equivalent pound sold at the Yauricocha mine was 34 cents for Q2 2020 compared with 50 cents for Q2 2019 and 39 cents for YTD 2020 compared with 52 cents for YTD 2019. All-in sustaining cost (AISC) per zinc equivalent pound sold was 86 cents for Q2 2020 compared with 72 cents for Q2 2019 and 86 cents for YTD 2020 compared with 77 cents for YTD 2019. AISC per zinc equivalent payable pound for Q2 and YTD 2020 decreased compared with the same periods in 2019 as the increase in zinc equivalent payable pounds was partially offset by the increase in treatment and refining charges.

Adjusted EBITDA was $7.8-million for Q2 2020 compared with $11.9-million for Q2 2019 and $17.6-million for YTD 2020 compared with $25.6-million for YTD 2019. The decrease in adjusted EBITDA was due to lower revenues resulting from lower metal prices. Q2 2020 revenues were also impacted by lower metal sales resulting from lower throughput.

Operating cash flows before movements in working capital were $7.3-million for Q2 2020, compared with $11.9-million (U.S.) for Q2 2019 and $17.3-million for YTD 2020 compared with $25.1-million for YTD 2019. The decrease in operating cash flows before movements in working capital was primarily due to the decrease in revenues, discussed previously.

Cash and cash equivalents were $33.1-million as at June 30, 2020, compared with $35.0-million as at Dec. 31, 2019. The decrease in cash and cash equivalents resulted from capital expenditures of $9.7-million and related party repayment of $1.0-million, which was partially offset by operating cash flows of $8.8-million.

Net income was $1.8-million or five cents per share for Q2 2020 compared with net income of $6.5-million or 18 cents per share for Q2 2019. Net income was $3.9-million or 11 cents per share for YTD 2020 compared with net income of $14.4-million or 40 cents per share for YTD 2019.

Corona's operational highlights for the three and six months ended June 30, 2020

The associated table displays the production results for the three and six months ended June 30, 2020.

                               YAURICOCHA PRODUCTION

                                        Three months ended      Six months ended  
                                        Q2 2020    Q2 2019    Q2 2020    Q2 2019

Tonnes processed                        202,534    254,165    487,759    487,980
Daily throughput                          2,315      2,905      2,787      2,788
Silver grade (g/t)                        66.37      63.13      66.07      63.31
Copper grade                              1.21%      1.04%      1.17%      1.02%
Lead grade                                1.63%      1.57%      1.59%      1.51%
Zinc grade                                3.48%      3.36%      3.74%      3.46%
Gold grade (g/t)                           0.62       0.60       0.66       0.58
Silver recovery                          82.82%     77.82%     82.82%     77.54%
Copper recovery                          77.19%     78.04%     77.19%     76.52%
Lead recovery                            88.08%     89.96%     88.08%     89.15%
Zinc recovery                            88.32%     88.08%     88.32%     88.78%
Gold recovery                            21.18%     16.47%     21.18%     17.21%
Silver production (000 oz)                  358        401        853        770
Copper production (000 lb)                4,164      4,536      9,548      8,399
Lead production (000 lb)                  6,406      7,911     15,014     14,516
Zinc production (000 lb)                 13,741     16,593     35,387     33,014
Gold production (oz)                        850        809      2,104      1,562
Copper equivalent pounds (000s) (1)      14,354     16,811     34,549     32,283
Zinc equivalent pounds (000s) (1)        38,723     38,394     93,404     74,365

(1) Silver equivalent ounces, and copper and zinc equivalent pounds for Q2 2020
    were calculated using the following realized prices: $16.59 per ounce silver,
    $2.40 per lb copper, 89 cents per lb zinc, 76 cents per lb lead and $1,722 per
    oz Au. Silver equivalent ounces, and copper and zinc equivalent pounds for Q2
    2019 were calculated using the following realized prices: $14.88 per oz Ag,
    $2.75 per lb Cu, $1.20 per lb Zn, 85 cents per lb Pb and $1,323 per oz Au. Silver
    equivalent ounces, and copper and zinc equivalent pounds for YTD 2020 were
    calculated using the following realized prices: $16.58 per oz Ag, $2.46 per lb
    Cu, 91 cents per lb Zn, 78 cents per lb Pb and $1,654 per oz Au. Silver equivalent
    ounces, and copper and zinc equivalent pounds for YTD 2019 were calculated using
    the following realized prices: $15.23 per oz Ag, $2.80 per lb Cu, $1.22 per lb
    Zn, 90 cents per lb Pb and $1,314 per oz Au.

Qualified persons

All technical production data contained in this news release have been reviewed and approved by:

  • Americo Zuzunaga, FAusIMM CP (mining engineer), vice-president of corporate planning, a qualified person and chartered professional qualifying as a competent person under the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves;
  • Augusto Chung, FAusIMM CP (metallurgist), vice-president, special projects and metallurgy, and a chartered professional qualifying as a competent person on metallurgical processes.

About Sierra Metals Inc.

Sierra Metals is a diversified Canadian mining company focused on the production and development of precious and base metals from its polymetallic Yauricocha mine in Peru, and Bolivar and Cusi mines in Mexico. The company is focused on increasing production volume and growing mineral resources.

We seek Safe Harbor.

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