Sierra Metals announces Q2-2016 financial results at its Sociedad Minera Corona Subsidiary in Peru

• Operational Improvements at the Yauricocha Mine continue to have positive impact on financial results

TORONTO, Aug. 2, 2016 /CNW/ - Sierra Metals Inc. (TSX:SMT, BVL:SMT) ("Sierra Metals" or the "Company") announces the filing of Sociedad Minera Corona S.A.'s ("Corona") unaudited Financial Statements and Management Discussion and Analysis ("MD&A") for the second quarter of 2016 ("Q2 2016").

The Company holds an 81.8% interest in Corona. All amounts are presented in US dollars unless otherwise stated and have not been adjusted for the 18.2% non-controlling interest.

Corona's Highlights for the Three Months Ended June 30, 2016

• $24.4 million of cash and cash equivalents as at June 30, 2016
• $13.2 million of working capital as at June 30, 2016
• Revenues of US$ 23.4 million for Q2 2016
• Adjusted EBITDA of US$ 5.3 million for Q2 2016
• Total tonnes processed: 215,510
• Silver equivalent production of 1.9 million ounces
• Copper equivalent production of 12.3 million pounds

Sierra Metals continues to see significant improvements in Revenue and Adjusted EBITDA at Yauricocha as the Company works towards the completion of the restructuring and returns to normalized operations where emphasis on further improvements will continue to take place at the mine. Year over year revenue was down 17% from Q2-2015's record production quarter; however, when compared to Q1-2016, revenue was up 87%.  Similarly, Adjusted EBITDA was also down 60% year over year from Q2-2015; however, when compared to previous quarter, Adjusted EBITDA was up 489%.  The Company's emphasis at Yauricocha continues to be on the production of higher value ore in a continued effort to improve the Company's operating margins and cash flow generation.

"I am very pleased with the increases in production, revenue and cash flow on a quarter by quarter basis as we begin to return to more normalized operations at Yauricocha", stated Mark Brennan, President and CEO of Sierra Metals. "The strong impact the operational improvements and focus on higher value ore are having on Corona's operating margins, cash flows and overall results can be seen by the 24% increase in silver equivalent ounce production from the previous quarter and as well as by the significant increases in Revenue and Adjusted EBITDA. We expect to see continued improvements on a quarter by quarter basis for the remainder of the year as we make further improvements at the mine."

He continued, "Management is very optimistic that we will continue to see significant growth from our brownfield exploration programs within the mine complex, especially from areas such as the Esperanza zone.  When combined with significant operational improvements already completed at Yauricocha, we expect this will lead to substantial growth in shareholder value. Corona has a solid balance sheet, strong liquidity, and has benefitted from the recent increase in metal prices during the second quarter of 2016."

The following table displays selected unaudited financial information for the three and six months ended June 30, 2016:

	(In thousands of US dollars, except cash cost and revenue		Three Months Ended					Six Months Ended
	per tonne metrics)		June 30, 2016	March 31, 2016	Var %	June 30, 2015	Var %	June 30, 2016	June 30, 2015	Var %
	Revenue	$	23,409	12,500	87%	28,338	-17%	35,909	50,907	-29%
	Adjusted EBITDA ^(1)		5,272	910	479%	13,315	-60%	6,182	23,578	-74%
	Cash Flow from operations		5,814	(5,577)	-204%	2,706	115%	237	7,328	-97%
	Gross profit		5,989	1,685	255%	14,250	-58%	7,674	24,668	-69%
	Income Tax Expense		(287)	(37)	676%	(4,327)	-93%	(324)	(7,467)	-96%
	Net Income		3,274	(1,386)	-336%	7,240	-55%	1,888	11,933	-84%
	Net production revenue per tonne of ore milled ^(2)		102.30	72.19	42%	119.49	-14%	87.53	113.50	-23%
	Cash cost per tonne of ore milled ^(2)		55.41	55.30	0%	48.34	15%	55.36	49.54	12%
	Cash cost per silver equivalent payable ounce ^(2)		9.30	8.47	10%	5.76	61%	8.98	5.64	59%
	All-In Sustaining Cost per silver equivalent payable ounce ^(2)		14.27	14.78	-3%	11.72	22%	14.47	11.53	25%
	Cash cost per copper equivalent payable pound ^(2)		1.40	1.27	10%	0.87	61%	1.35	0.85	59%
	All-In Sustaining Cost per copper equivalent payable pound ^(2)	$	2.15	2.22	-3%	1.76	22%	2.18	1.73	26%
	(In thousands of US dollars, unless otherwise stated)		June 30, 2016	December 31, 2015
	Cash and cash equivalents	$	24,445	21,818
	Assets		114,460	105,605
	Liabilities		60,557	53,599
	Equity		53,894	52,006

¹ Adjusted EBITDA 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-IFRS Performance Measures section of the Company's MD&A.

² All-In Sustaining Cost per silver equivalent ounce sold and copper equivalent pound sold are non-IFRS performance measures and include 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; Cash cost per silver equivalent ounce sold and copper equivalent pound sold, net production revenue per tonne of ore milled, and cash cost per tonne of ore milled are non-IFRS performance measures; see non-IFRS Performance Measures section of the Company's MD&A.

Corona's Financial Highlights for the Three and Six Months Ended June 30, 2016

• Cash and cash equivalents of $24.4 million as at June 30, 2016 compared to $21.8 million as at December 31, 2015. Cash and cash equivalents increased by $2.6 million which was driven by operating cash flows of $0.2 million, proceeds received from credit facilities of $8.8 million, partially offset by capital expenditures of $4.2 million, and debt and interest payments of $2.3 million.
• Revenues of $23.4 million for Q2 2016 compared to $28.3 million in Q2 2015 and revenues of $35.9 million for the six months ended June 30, 2016 compared to $50.9 million for the same period in 2015. The decrease in revenues was due to  a 5% decrease in tonnes processed, lower head grades for silver, copper and gold, lower recoveries for all metals and the decrease in the price of copper (21%), lead (2%) and zinc (19%).
• Cash cost per silver equivalent ounce sold (at the Yauricocha Mine) of $9.30 for Q2 2016 compared to $5.76 for Q2 2015 and $8.98 for the six months ended June 30, 2016 compared to $5.64 for the first six months in 2015. All-in sustaining cost ("AISC") per silver equivalent ounce sold of $14.27 for Q2 2016 compared to $11.72 for Q2 2015 and AISC of $14.47 for the six months ended June 30, 2016 compared to $11.53 for the same period in 2015. The increase in AISC during Q2 and H1 2016 was due to the decrease in plant throughput and lower ore feed head grades due to the decrease in available production from higher grade zones in the Mine and additional costs related to the mechanization and water management controls continuing to be implemented at the Mine.
• Adjusted EBITDA of $5.3 million for Q2 2016 compared to $13.3 million for Q2 2015 and $6.2 million for the six months ended June 30, 2016 compared to $23.6 million for the same period in 2015. The decrease in adjusted EBITDA for Q2 and H1 2016 is due to the decrease in plant throughput, decrease in revenues, and increase in costs, previously discussed.
• Operating cash flows of $5.8 million for Q2 2016 compared to US$ 2.7 million for Q2 2015 and $0.2 million for the six months ended June 30, 2016 compared to $7.3 million for the same period in 2015.
• Net income of $3.3 million, or $0.09 per share, for Q2 2016 compared to net income of $7.2 million, or $0.20 per share, for Q2 2015. Net income of $1.9 million, or $0.05 per share, for the six months ended June 30, 2016 compared to $11.9 million, or $0.33 per share, for the same period in 2015.

Corona's Operational Highlights for the Three and Six Months Ended June 30, 2016:

The following table displays the production results for the three and six months ended June 30, 2016:

	Yauricocha Production		3 Months Ended					6 Months Ended
			Q2 2016	Q1 2016	% Var.	Q2 2015	% Var.	H1 2016	H1 2015	% Var.
	Tonnes processed (mt)		215,510	207,580	4%	224,988	-4%	423,090	444,957	-5%
		Daily throughput	2,463	2,372	4%	2,571	-4%	2,418	2,543	-5%
		Silver grade (g/t)	107.34	74.21	45%	109.77	-2%	91.09	112.48	-19%
		Copper grade	0.39%	0.75%	-48%	0.71%	-45%	0.57%	0.61%	-7%
		Lead grade	2.93%	2.29%	28%	2.79%	5%	2.62%	3.01%	-13%
		Zinc grade	3.30%	2.68%	23%	2.92%	13%	2.99%	2.67%	12%
		Gold Grade (g/t)	0.64	0.63	2%	0.65	-1%	0.64	0.72	-12%
		Silver recovery	62.26%	57.19%	9%	72.61%	-14%	60.23%	70.01%	-14%
		Copper recovery	51.98%	54.23%	-4%	58.15%	-11%	53.44%	62.54%	-15%
		Lead recovery	68.49%	66.17%	4%	77.58%	-12%	67.50%	76.20%	-11%
		Zinc recovery	87.53%	83.98%	4%	90.01%	-3%	85.97%	89.62%	-4%
		Gold Recovery	27.79%	25.33%	10%	26.24%	6%	26.60%	27.41%	-3%
	Silver ounces (000's)		463	283	63%	577	-20%	746	1,127	-34%
	Copper pounds (000's)		959	1,863	-49%	2,037	-53%	2,822	3,749	-25%
	Lead pounds (000's)		9,550	6,944	38%	10,751	-11%	16,494	22,489	-27%
	Zinc pounds (000's)		13,708	10,281	33%	13,019	5%	23,989	23,480	2%
	Gold ounces		1,236	1,062	16%	1,232	0%	2,299	2,819	-18%
	Silver equivalent ounces (000's)^(1)		1,852	1,496	24%	2,152	-14%	3,348	4,176	-20%
	Copper equivalent pounds (000's)^(1)		12,314	9,948	24%	14,308	-14%	22,261	27,764	-20%
	(1) Silver equivalent ounces & copper equivalent pounds were calculated using the following metal prices: $14.96/oz Ag, $2.25/lb Cu, $0.75/lb Pb, $0.73/lb Zn, $1,113/oz Au.

Quality Control

All production technical data contained in this news release has been reviewed and approved by Gordon Babcock, P.Eng., Chief Operating Officer and a Qualified Person under National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

About Sierra Metals

Sierra Metals Inc. is a Canadian mining company focused on precious and base metals from its Yauricocha Mine in Peru, its Bolivar Mine and Cusi Mine in Mexico. In addition, Sierra Metals is exploring several precious and base metal targets in Peru and Mexico. Projects in Peru include Adrico (gold), Victoria (copper-silver) and Ipillo (polymetallic) at the Yauricocha property in the province of Yauyos and the San Miguelito gold properties in Northern Peru. Projects in Mexico include Bacerac (silver) in the state of Sonora, and La Verde (gold) at the Batopilas property in the state of Chihuahua.

The Company's shares trade on the Bolsa de Valores de Lima and the Toronto Stock Exchange under the symbol "SMT".

Forward-Looking Statements

Except for statements of historical fact contained herein, the information in this press release may constitute "forward-looking information" within the meaning of Canadian securities law. Statements containing forward-looking information express, as at the date of this news release, the Company's plans, estimates, forecasts, projections, expectations or beliefs as to future events or results. These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available at www.sedar.com.

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SOURCE Sierra Metals Inc.

For further information regarding Sierra Metals, please visit www.sierrametals.com or contact: Mike McAllister, Vice President, Corporate Development, Sierra Metals Inc., 1 [phone], [email protected]; Ed Guimaraes, CFO, Sierra Metals Inc., 1 [phone]; Mark Brennan, President & CEO, Sierra Metals Inc., 1 [phone]