TORONTO--(BUSINESS WIRE)--Sierra Metals Inc. (TSX:SMT | OTCQX:SMTSF | BVL:SMT) ("Sierra Metals" or the "Company") reports consolidated financial results for the three-month ("Q2") and six- month ("H1") periods ending June 30, 2024. The information provided below are excerpts from the Company's Q2 2024 financial statements and Management's Discussion and Analysis ("MD&A"), which are available on the Company's website (www.SierraMetals.com) and on SEDAR+ (www.sedarplus.ca) under the Company's profile. Consolidated results include results from the Company's Yauricocha Mine ("Yauricocha") in Peru and the Bolivar Mine ("Bolivar") in Mexico.
Ernesto Balarezo, Sierra Metals' CEO, comments, "The operating results and financial performance during the second quarter demonstrate the continued momentum in our business. Operationally, we saw improved performance and throughput increases at Yauricocha, mainly driven by the increased access to mining areas and higher levels of extraction. Throughput volumes are expected to continue to improve as development below the 1120 level progresses and we access the massive ore body continuations at depth, allowing us to reach full capacity in the fourth quarter of 2024.
Bolivar had a lower throughput during Q2 2024 which was mainly attributable to the scheduled plant maintenance combined with the lower availability of water for the concentration process. The issue of water availability has been resolved, and we anticipate improved production levels in the second half of the year, supported by the new plant equipment and the regularized rainy season.
We completed the sale of our Cusi property, allowing us to concentrate our focus on Yauricocha and Bolivar moving forward. As well, our shares began trading on the Lima Stock Exchange last month offering increased investor exposure and liquidity potential into the Chilean, Colombian, and Peruvian markets. Overall, we are delighted with our performance in the first half of 2024 as we continue to execute our strategy and maintain momentum into the second half of the year."
Conference Call & Webcast
Management will host a conference call and webcast at 11:00 am ET on August 12, 2024 to discuss Q2 2024 consolidated operating and financial results. Participate on the telephone at 1-844-763-8276 (North America) or +1-647-484-8814 (rest of world) or register for the English webcast HERE or the Spanish webcast HERE.
Q2 2024 CONSOLIDATED OPERATING AND FINANCIAL HIGHLIGHTS
| (In thousands of dollars, except per share and cash cost amounts, consolidated figures unless noted otherwise) | Six months ended June 30, | ||||||||||||||
Q2 2024 | Q1 2024 | Q2 2023 | 2024 | 2023 | |||||||||||
| Operating | |||||||||||||||
| Ore Processed / Tonnes Milled | 627,015 | 638,916 | 650,302 | 1,265,931 | 1,168,464 | ||||||||||
| Copper Pounds Produced (000's) | 8,531 | 11,247 | 10,459 | 19,778 | 18,744 | ||||||||||
| Zinc Pounds Produced (000's) | 11,272 | 10,132 | 12,228 | 21,404 | 22,807 | ||||||||||
| Silver Ounces Produced (000's) | 387 | 427 | 523 | 814 | 912 | ||||||||||
| Gold Ounces Produced | 3,438 | 4,505 | 4,311 | 7,943 | 8,102 | ||||||||||
| Lead Pounds Produced (000's) | 3,053 | 3,049 | 3,930 | 6,102 | 6,708 | ||||||||||
| Cash Cost per CuEqLb (Yauricocha)1,2 | $ | 3.44 | $ | 3.27 | $ | 3.38 | $ | 3.32 | $ | 3.13 | |||||
| AISC per CuEqLb (Yauricocha)1,2 | $ | 3.79 | $ | 3.69 | $ | 3.85 | $ | 3.60 | $ | 3.43 | |||||
| Cash Cost per CuEqLb (Bolivar)1,2 | $ | 2.76 | $ | 2.44 | $ | 2.22 | $ | 2.55 | $ | 2.35 | |||||
| AISC per CuEqLb (Bolivar)1,2 | $ | 3.53 | $ | 3.12 | $ | 2.97 | $ | 3.27 | $ | 3.01 | |||||
| Financial | |||||||||||||||
| Revenues | $ | 57,524 | $ | 63,140 | $ | 58,411 | $ | 120,664 | $ | 111,948 | |||||
| Net income (loss) | |||||||||||||||
| - Continuing operations | $ | 4,912 | $ | 1,630 | $ | 3,897 | $ | 6,542 | $ | 7,606 | |||||
| - Discontinued Operations | $ | (810 | ) | $ | (865 | ) | $ | (2,824 | ) | $ | (1,675 | ) | $ | (4,394 | ) |
| Net income (loss) attributable to shareholders, including discontinued operations | $ | 4,115 | $ | 1,159 | $ | 1,638 | $ | 5,274 | $ | 3,691 | |||||
| Adjusted EBITDA1 from continuing operations | $ | 12,949 | $ | 17,913 | $ | 14,494 | $ | 30,862 | $ | 29,976 | |||||
| Operating cash flows before movements in working capital | $ | 14,923 | $ | 16,486 | $ | 11,588 | $ | 31,408 | $ | 24,439 | |||||
| Adjusted net income (loss) attributable to shareholders1 | |||||||||||||||
| - Continuing operations | $ | 5,022 | $ | 5,174 | $ | 5,984 | $ | 10,196 | $ | 11,525 | |||||
| - Discontinued Operations | $ | (810 | ) | $ | (865 | ) | $ | (1,676 | ) | $ | (1,675 | ) | $ | (2,471 | ) |
| Cash and cash equivalents | $ | 22,477 | $ | 11,220 | $ | 4,393 | $ | 22,477 | $ | 4,393 | |||||
(1) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of this press release. |
(2) Copper equivalent payable pounds for the purpose of cash cost and AISC were calculated using the following realized prices: |
Q2 2024: $4.43/lb Cu, $1.28/lb Zn, $28.61/oz Ag, $2,334/oz Au, $0.99/lb Pb. |
Q1 2024: $3.84/lb Cu, $1.12/lb Zn, $23.41/oz Ag, $2,069/oz Au, $0.94/lb Pb. |
Q2 2023: $3.99/lb Cu, $1.16/lb Zn, $24.17/oz Ag, $1,977/oz Au, $0.96/lb Pb. |
H1 2024: $4.08/lb Cu, $1.20/lb Zn, $25.73/oz Ag, $2,177/oz Au, $0.96/lb Pb. |
H1 2023: $4.02/lb Cu, $1.29/lb Zn, $23.37/oz Ag, $1,934/oz Au, $0.96/lb Pb. |
Q2 2024 Operational Highlights
- Consolidated quarterly throughput during Q2 2024 was 627,015 tonnes. On a year-to-date basis, consolidated throughput is 8% higher in 2024 than in 2023, mainly driven by the stabilization and ramp up of Bolivar.
- Lower grades at Yauricocha for Q2 2024 compared to Q1 2024 and Q2 2023 were partially compensated for by the increase in throughput. Lower grades from Yauricocha were primarily due to the limited available ore above the 1120 level. The Company expects that grades and throughput will improve from the current levels as the development below 1120 level progresses.
- In Q2 2024, Bolivar experienced a decrease in throughput and grades as compared to Q1 2024 and Q2 2023. The lower throughput rates in Q2 2024 were a result of the planned maintenance downtime required for the commissioning of the new primary crusher and due to lower water availability as a dry season hit the region, which has been resolved as the rainy season has commenced.
- Yauricocha's cash cost per copper equivalent payable pound(1) was $3.44 (Q2 2023 - $3.38), and All-In Sustaining Cost ("AISC") per copper equivalent payable pound(1) of $3.79 (Q2 2023 - $3.85). Cash costs for Q2 2024 were slightly higher than Q2 2023, given that lower costs compensated for the 23% decrease in copper equivalent payable pounds. The decrease in the Q2 2024 AISC resulted from 41% lower capital expenditure when compared to Q2 2023.
- Bolivar's cash cost per copper equivalent payable pound(1) was $2.76 (Q2 2023 - $2.22), and AISC per copper equivalent payable pound(1) was $3.53 (Q2 2023 - $2.97) for Q2 2024. Lower grades resulted in a drop in metal sales, representing a 21% decrease in copper equivalent payable pounds; therefore, leading to higher unit costs when compared to Q1 2024 and Q2 2023.
Q2 2024 Consolidated Financial Highlights
- Revenue from metals payable of $57.5 million in Q2 2024 represented a 2% decrease from the Q2 2023 revenue of $58.4 million, as the impact of lower grades was largely offset by higher realized metal prices when compared to the previous year. Higher realized metal prices could not offset the impact of the lower metal sales when compared to Q1 2024, resulting in a revenue decrease of 9% from the prior quarter.
- Cash and cash equivalents of $22.5 million as at June 30, 2024 increased by almost 150% when compared to the $9.1 million at December 31, 2023. Cash and cash equivalents increased during the six-month period as cash generated from operating activities of $23.8 million and from the loan refinancing of $18.2 million were partially offset by cash used for capital expenditures of $24.2 million and loan interest payments of $3.9 million.
(1) This is a non-IFRS performance measure, see non-IFRS Performance Measures section of this press release |
H1 ACHIEVEMENTS AND COMPARISON TO 2024 GUIDANCE
During the first half of 2024, the Company successfully achieved the following major targets, which in the Management's opinion has laid the foundation for its future growth:
- In February 2024, the Company obtained the government's permit to develop and operate below the 1120 level at the Yauricocha Mine. This permit provides several significant catalysts for Sierra Metals, such as operational enhancements, maximized operating capacity, and cost efficiencies. Using a modest development capital investment, the Company anticipates ramping up to full production levels of 3,600 tonnes per day ("tpd") (40% higher than current levels) by Q4 2024.
- On May 7, 2024, the Company announced the results of an updated mineral reserves and resources under National Instrument 43-101 ("NI 43-101") for both its mines. These updated results reconfirm the presence of substantial reserves and resources in both mines. Additionally, this is a relevant indicator that the Company has been able to convert resources to reserves replacing what has been mined throughout the years. The Company filed the corresponding NI 43-101 technical reports on June 20, 2024, which are available on SEDAR+ and the Company's website.
- On June 3, 2024, the Company signed a new credit agreement with a syndicate of banks, led by Banco Santander Peru S.A ("Santander", together with the other banks referred as "lenders" or "the syndicate"), for a senior secured credit facility ("New Facility") of $95.0 million. The proceeds from the New Facility were used to repay the balance of $75.0 million of the original loans with Banco de Credito del Peru ("BCP") and Santander. The additional $20.0 million will be assigned to high-return capital projects as well as for all the transaction fees and expenses. The capital expenditures include the development below the 1120 level and the completion of the new shaft at the Yauricocha mine in Peru, which is expected to commence operations in early 2025, as well as mine developments of over 8,000 meters, a new ore pass, and the initial engineering works on a new tailings dam facility at Bolivar.
After the end of Q2 2024, the Company also completed the sale of the Cusi Mine and the surrounding mineral concessions (please refer to 'note 17 - subsequent events' to the financial statements for the six months ended June 30, 2024). Apart from adding $2.1 million net of fees to the Company's cash balance, the Cusi sale will also help the Company avoid the fixed monthly care and maintenance costs of around $0.3 million.
Additionally, the Company will continue with the construction of the new tailings dam at Bolivar, which is expected to be completed over the next three years, allowing the mine to increase its production capacity to 7,500 tpd in the future.
Despite reduced production during Q2 2024, metal production for H1 2024 remained within anticipated the levels. With the development activities below the 1120 level at Yauricocha progressing as planned, the Company remains on track to achieve its previously announced production, costs, and capital expenditure guidance for 2024. The tables below compare the 2024 production versus annual production guidance from the Yauricocha and the Bolivar mines.
Production Guidance
| Consolidated | 2024 Guidance | H1 2024 | |||||
| Low | High | Actual | |||||
| Copper (000 lbs) | 37,500 | 43,300 | 19,778 | ||||
| Zinc (000 lbs) | 38,600 | 44,500 | 21,404 | ||||
| Silver (000 oz) | 1,500 | 1,750 | 814 | ||||
| Gold (oz) | 10,100 | 11,600 | 7,943 | ||||
| Lead (000 lbs) | 10,200 | 11,800 | 6,102 | ||||
By Mine
| Yauricocha | 2024 Guidance | H1 2024 | |||||
| Low | High | Actual | |||||
| Copper (000 lbs) | 13,600 | 15,700 | 5,671 | ||||
| Zinc (000 lbs) | 38,600 | 44,500 | 21,404 | ||||
| Silver (000 oz) | 850 | 1,000 | 420 | ||||
| Gold (oz) | 2,100 | 2,400 | 936 | ||||
| Lead (000 lbs) | 10,200 | 11,800 | 6,102 | ||||
| Bolivar | 2024 Guidance | H1 2024 | |||||
| Low | High | Actual | |||||
| Copper (000 lbs) | 23,900 | 27,600 | 14,107 | ||||
| Silver (000 oz) | 650 | 750 | 394 | ||||
| Gold (oz) | 8,000 | 9,200 | 7,007 | ||||
2024 Cost Guidance
A per mine breakdown of 2024 production guidance, cash costs, and AISC are included in the table below. Starting 2024, the Company modified its definition of cash cost to include treatment and refining charges, selling costs and, site G&A costs. AISC includes cash costs and sustaining capital expenditure and is calculated on the basis of copper equivalent payable pounds.
2024 Guidance | H1 Actual | |||||||||
Cash costs(1)(2) range | AISC(1)(2) range | Cash costs(1)(2) | AISC(1)(2) | |||||||
| Mine | per CuEqLb | per CuEqLb | per CuEqLb | per CuEqLb | ||||||
| Yauricocha | Per Copper Payable Eq Lbs ('000) | $3.31 - $3.41 | $3.75 - $3.86 | $3.28 | $3.57 | |||||
| Bolivar | Per Copper Payable Eq Lbs ('000) | $2.56 - $2.72 | $3.28 - $3.36 | $2.60 | $3.33 | |||||
(1) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of this press release. Cash Cost comprises operating costs, selling expenses, administrative expenses, commercial terms and discounts. AISC is comprised of cash costs and sustaining capex. |
(2) Copper equivalent payable pounds for guidance AISC were calculated using the following metal prices: $3.91/lb Cu, $1.20/lb Zn, $23.66/oz Ag, $0.94/lb Pb, $1,921/oz Au. H1 2024 actual cash costs and AISC have been recalculated for comparison purposes. |
NON-IFRS PERFORMANCE MEASURES
The following table provides a reconciliation of adjusted EBITDA to the condensed interim consolidated financial statements for the three months and six months ended June 30, 2024 and 2023:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net income | $ | 4,102 | $ | 1,073 | $ | 4,867 | $ | 3,212 | ||||||||
| Adjusted for: | ||||||||||||||||
| Depletion and depreciation | 8,194 | 9,267 | 17,828 | 16,810 | ||||||||||||
| Interest expense and other finance costs | 2,742 | 2,788 | 5,147 | 4,987 | ||||||||||||
| NRV adjustments on inventory | - | 1,079 | - | 1,555 | ||||||||||||
| Share-based compensation | 800 | 86 | 1,434 | 188 | ||||||||||||
| Foreign currency exchange and other provisions | (1,309 | ) | 689 | 855 | 2,061 | |||||||||||
| Income taxes | (2,390 | ) | (1,456 | ) | (944 | ) | (82 | ) | ||||||||
| Adjusted EBITDA | $ | 12,139 | $ | 13,526 | $ | 29,187 | $ | 28,731 | ||||||||
| Less: Adjusted EBITDA from discontinued operations | (810 | ) | (968 | ) | (1,675 | ) | (1,245 | ) | ||||||||
| Adjusted EBITDA from continuing operations | 12,949 | 14,494 | 30,862 | 29,976 | ||||||||||||
The following table provides a reconciliation of adjusted net income to the condensed interim consolidated financial statements for the three months and six months ended June 30, 2024 and 2023:
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
| (In thousands of United States dollars) | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Net income attributable to shareholders | $ | 4,115 | $ | 1,638 | $ | 5,274 | $ | 3,691 | |||||||
| Non-cash depletion charge on Corona's acquisition | 455 | $ | 1,175 | 1,500 | 2,245 | ||||||||||
| Deferred tax recovery on Corona's acquisition depletion charge | 151 | $ | (359 | ) | (542 | ) | (686 | ) | |||||||
| NRV adjustments on inventory | - | $ | 1,079 | - | 1,555 | ||||||||||
| Share-based compensation | 800 | $ | 86 | 1,434 | 188 | ||||||||||
| Foreign currency exchange loss (gain) | (1,309 | ) | $ | 689 | 855 | 2,061 | |||||||||
| Adjusted net income (loss) attributable to shareholders | $ | 4,212 | $ | 4,308 | $ | 8,521 | $ | 9,054 | |||||||
| Less: Adjusted net loss from discontinued operations | (810 | ) | (1,676 | ) | (1,675 | ) | (2,471 | ) | |||||||
| Adjusted net income (loss) from continuing operations | 5,022 | 5,984 | 10,196 | 11,525 | |||||||||||
The following table provides a reconciliation of cash costs to cost of sales, as reported in the Company's condensed interim consolidated statement of income for the three months and six months ended June 30, 2024 and 2023:
| Three months ended | Three months ended | |||||||||||
| (In thousand of US dollars, unless stated) | June 30, 2024 | June 30, 2023 | ||||||||||
| Yauricocha | Bolivar | Yauricocha | Bolivar | |||||||||
| Cash Cost per Tonne of Processed Ore | ||||||||||||
| Cost of Sales | 21,400 | 20,847 | 24,630 | 19,439 | ||||||||
| Reverse: Workers Profit Sharing | - | 105 | - | - | ||||||||
| Reverse: D&A/Other adjustments | (5,687 | ) | (4,138 | ) | (5,648 | ) | (3,414 | ) | ||||
| Reverse: Variation in Inventory | 5,318 | (673 | ) | 718 | 850 | |||||||
| Total Cash Cost | 21,031 | 16,141 | 19,700 | 16,875 | ||||||||
| Tonnes Processed | 253,148 | 373,867 | 244,315 | 405,987 | ||||||||
| Cash Cost per Tonne Processed | US$ | 83.08 | 43.17 | 80.63 | 41.57 | |||||||
| Six months ended | Six months ended | |||||||||||
| (In thousand of US dollars, unless stated) | June 30, 2024 | June 30, 2023 | ||||||||||
| Yauricocha | Bolivar | Yauricocha | Bolivar | |||||||||
| Cash Cost per Tonne of Processed Ore | ||||||||||||
| Cost of Sales | 45,263 | 43,035 | 46,522 | 34,371 | ||||||||
| Reverse: Workers Profit Sharing | - | (497 | ) | - | - | |||||||
| Reverse: D&A/Other adjustments | (11,679 | ) | (6,604 | ) | (10,771 | ) | (5,715 | ) | ||||
| Reverse: Variation in Inventory | 5,624 | (347 | ) | 1,126 | 1,374 | |||||||
| Total Cash Cost | 39,208 | 35,587 | 36,877 | 30,030 | ||||||||
| Tonnes Processed | 493,834 | 772,097 | 463,460 | 705,004 | ||||||||
| Cash Cost per Tonne Processed | US$ | 79.40 | 46.09 | 79.57 | 42.60 | |||||||
The following table provides detailed information on Yauricocha's cash cost and all-in sustaining cost per copper equivalent payable pound for the three months and six months ended June 30, 2024 and 2023:
| YAURICOCHA | Three months ended | Six months ended | ||||||||||
| (In thousand of US dollars, unless stated) | June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||
| Cash Cost per zinc equivalent payable pound | ||||||||||||
| Total Cash Cost | 21,031 | 19,700 | 39,208 | 36,877 | ||||||||
| Variation in Finished inventory | (5,318 | ) | (718 | ) | (5,624 | ) | (1,126 | ) | ||||
| Treatment and Refining Charges | 4,009 | 6,697 | 9,634 | 11,438 | ||||||||
| Selling Costs | 710 | 803 | 1,350 | 1,418 | ||||||||
| G&A Costs(1) | 1,616 | 1,487 | 3,136 | 3,127 | ||||||||
| Total Cash Cost of Sales | 22,048 | 27,969 | 47,704 | 51,734 | ||||||||
| Sustaining Capital Expenditures | 2,252 | 3,897 | 4,098 | 4,941 | ||||||||
| All-In Sustaining Cash Costs | 24,300 | 31,866 | 51,802 | 56,675 | ||||||||
| Copper Equivalent Payable Pounds (000's)(2) | 6,409 | 8,279 | 14,370 | 16,516 | ||||||||
| Cash Cost per Copper Equivalent Payable Pound | (US$) | 3.44 | 3.38 | 3.32 | 3.13 | |||||||
| All-In Sustaining Cash Cost per Copper Equivalent Payable Pound | (US$) | 3.79 | 3.85 | 3.60 | 3.43 | |||||||
(1) G&A Costs for the three months and six months ended June 30, 2023 have been adjusted to include site G&A only. Allocation of corporate G&A costs have been excluded for consistency with the G&A costs for the three months and six months ended June 30, 2024 and those used in the 2024 guidance cash costs and AISC. |
(2) Copper equivalent payable pounds were calculated using the following realized prices: |
Q2 2024: $4.43/lb Cu, $1.28/lb Zn, $28.61/oz Ag, $2,334/oz Au, $0.99/lb Pb. |
Q2 2023: $3.99/lb Cu, $1.16/lb Zn, $24.17/oz Ag, $1,977/oz Au, $0.96/lb Pb. |
6M 2024: $4.08/lb Cu, $1.20/lb Zn, $25.73/oz Ag, $2,177/oz Au, $0.96/lb Pb. |
6M 2023: $4.02/lb Cu, $1.29/lb Zn, $23.37/oz Ag, $1,934/oz Au, $0.96/lb Pb. |
The following table provides detailed information on Bolivar's cash cost, and all-in sustaining cost per copper equivalent payable pound for the three months and six months ended June 30, 2024 and 2023:
| BOLIVAR | Three months ended | Six months ended | ||||||||||
| (In thousand of US dollars, unless stated) | June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||
| Cash Cost per copper equivalent payable pound | ||||||||||||
| Total Cash Cost | 16,141 | 16,875 | 35,587 | 30,030 | ||||||||
| Variation in Finished inventory | 673 | (850 | ) | 347 | (1,374 | ) | ||||||
| Treatment and Refining Charges | 1,856 | 2,819 | 4,710 | 4,984 | ||||||||
| Selling Costs | 1,976 | 2,335 | 4,615 | 3,871 | ||||||||
| G&A Costs(1) | 1,019 | 853 | 2,576 | 1,873 | ||||||||
| Total Cash Cost of Sales | 21,665 | 22,032 | 47,835 | 39,384 | ||||||||
| Sustaining Capital Expenditures | 6,022 | 7,350 | 13,405 | 10,898 | ||||||||
| All-In Sustaining Cash Costs | 27,687 | 29,382 | 61,240 | 50,282 | ||||||||
| Copper Equivalent Payable Pounds (000's)(2) | 7,841 | 9,908 | 18,734 | 16,726 | ||||||||
| Cash Cost per Copper Equivalent Payable Pound | (US$) | 2.76 | 2.22 | 2.55 | 2.35 | |||||||
| All-In Sustaining Cash Cost per Copper Equivalent Payable Pound | (US$) | 3.53 | 2.97 | 3.27 | 3.01 | |||||||
(1) G&A Costs for the three months and six months ended June 30, 2023 have been adjusted to include site G&A only. Allocation of corporate G&A costs have been excluded for consistency with the G&A costs for the three months and six months ended June 30, 2024 and those used in the 2024 guidance cash costs and AISC. |
(2) Copper equivalent payable pounds were calculated using the following realized prices: |
Q2 2024: $4.43/lb Cu, $1.28/lb Zn, $28.61/oz Ag, $2,334/oz Au, $0.99/lb Pb. |
Q2 2023: $3.99/lb Cu, $1.16/lb Zn, $24.17/oz Ag, $1,977/oz Au, $0.96/lb Pb. |
6M 2024: $4.08/lb Cu, $1.20/lb Zn, $25.73/oz Ag, $2,177/oz Au, $0.96/lb Pb. |
6M 2023: $4.02/lb Cu, $1.29/lb Zn, $23.37/oz Ag, $1,934/oz Au, $0.96/lb Pb. |
The non-IFRS performance measures presented do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be directly comparable to similar measures presented by other issuers.
Non-IFRS reconciliation of adjusted EBITDA
EBITDA is a non-IFRS measure that represents an indication of the Company's continuing capacity to generate earnings from operations before taking into account management's financing decisions and costs of consuming capital assets, which vary according to their vintage, technological currency, and management's estimate of their useful life. EBITDA comprises revenue less operating expenses before interest expense (income), property, plant and equipment amortization and depletion, and income taxes. Adjusted EBITDA has been included in this document. Under IFRS, entities must reflect in compensation expense the cost of share-based payments. In the Company's circumstances, share-based payments involve a significant accrual of amounts that will not be settled in cash but are settled by the issuance of shares in exchange for cash. As such, the Company has made an entity specific adjustment to EBITDA for these expenses. The Company has also made an entity-specific adjustment to the foreign currency exchange (gain)/loss. The Company considers cash flow before movements in working capital to be the IFRS performance measure that is most closely comparable to adjusted EBITDA.
Non-IFRS reconciliation of adjusted net income
The Company has included the non-IFRS financial performance measure of adjusted net income, defined by management as the net income attributable to shareholders shown in the statement of earnings plus the non-cash depletion charge due to the acquisition of Corona and the corresponding deferred tax recovery and certain non-recurring or non-cash items such as share-based compensation and foreign currency exchange (gains) losses. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may want to use this information to evaluate the Company's performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance in accordance with IFRS.
Cash cost per copper equivalent payable pound
The Company uses the non-IFRS measure of cash cost per copper equivalent payable pound to manage and evaluate operating performance. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company considers cost of sales per copper equivalent payable pound to be the most comparable IFRS measure to cash cost per copper equivalent payable pound and has included calculations of this metric in the reconciliations within the applicable tables to follow.
All-in sustaining cost per copper equivalent payable pound
AISC is a non-IFRS measure and is calculated based on guidance provided by the World Gold Council ("WGC"). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as differences in definitions of sustaining versus development capital expenditures.
AISC is a more comprehensive measure than cash cost per pound for the Company's consolidated operating performance by providing greater visibility, comparability and representation of the total costs associated with producing copper from its current operations.
The Company defines sustaining capital expenditures as, "costs incurred to sustain and maintain existing assets at current productive capacity and constant planned levels of productive output without resulting in an increase in the life of assets, future earnings, or improvements in recovery or grade. Sustaining capital includes costs required to improve/enhance assets to minimum standards for reliability, environmental or safety requirements. Sustaining capital expenditures excludes all expenditures at the Company's new projects and certain expenditures at current operations which are deemed expansionary in nature."
Consolidated AISC includes total production cash costs incurred at the Company's mining operations, including treatment and refining charges and selling costs, which forms the basis of the Company's total cash costs. Additionally, the Company includes sustaining capital expenditures and corporate general and administrative expenses. AISC by mine does not include certain corporate and non-cash items such as general and administrative expense and share-based payments. The Company believes that this measure represents the total sustainable costs of producing copper from current operations and provides the Company and other stakeholders of the Company with additional information of the Company's operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of copper production from current operations, new project capital and expansionary capital at current operations are not included. Certain other cash expenditures, including tax payments, dividends and financing costs are also not included.
Additional non-IFRS measures
The Company uses other financial measures, the presentation of which is not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following other financial measures are used:
- Operating cash flows before movements in working capital - excludes the movement from period-to-period in working capital items including trade and other receivables, prepaid expenses, deposits, inventories, trade and other payables and the effects of foreign exchange rates on these items.
The terms described above do not have a standardized meaning prescribed by IFRS, and therefore the Company's definitions are unlikely to be comparable to similar measures presented by other companies. The Company's management believes that their presentation provides useful information to investors because cash flows generated from operations before changes in working capital excludes the movement in working capital items. This, in management's view, provides useful information of the Company's cash flows from operations and are considered to be meaningful in evaluating the Company's past financial performance or its future prospects. The most comparable IFRS measure is cash flows from operating activities.
About Sierra Metals
Sierra Metals is a Canadian mining company focused on copper production with additional base and precious metals by-product 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.
For further information regarding Sierra Metals, please visit www.sierrametals.com.
Forward-Looking Statements
This press release contains forward-looking information within the meaning of Canadian securities legislation. Forward-looking information relates to future events or the anticipated performance of Sierra and reflect management's expectations or beliefs regarding such future events and anticipated performance based on an assumed set of economic conditions and courses of action. In certain cases, statements that contain forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur" or "be achieved" or the negative of these words or comparable terminology. By its very nature forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual performance of Sierra to be materially different from any anticipated performance expressed or implied by such forward-looking information.
Forward-looking information is subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward-looking information, including, without limitation, the risks described under the heading "Risk Factors" in the Company's annual information form dated March 15, 2024 for its fiscal year ended December 31, 2023 and other risks identified in the Company's filings with Canadian securities regulators, which are available at www.sedarplus.ca.
The risk factors referred to above are not an exhaustive list of the factors that may affect any of the Company's forward-looking information. Forward-looking information includes statements about the future and is inherently uncertain, and the Company's actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors. The Company's statements containing forward-looking information are based on the beliefs, expectations, and opinions of management on the date the statements are made, and the Company does not assume any obligation to update such forward-looking information if circumstances or management's beliefs, expectations or opinions should change, other than as required by applicable law. For the reasons set forth above, one should not place undue reliance on forward-looking information.
Contacts
Investor Relations
Sierra Metals Inc.
+1 (866) 721-7437
info@sierrametals.com
