Sierra Metals Produces Record 3.1 Million Silver Equivalent Ounces in Q2-2015
- Subsequent to quarter end, successfully refinanced US$48 million Corona Acquisition Credit Facility, providing increased financial flexibility to the Company
- Record silver equivalent production for the second consecutive quarter
- Record throughput for the second consecutive quarter with increases at all three Mines
- On track to meet 2015 production guidance
- Conference call to be held Monday August 17, 2015 at 10:00 AM Eastern Daylight Time
(All amounts expressed in US Dollars unless otherwise noted)
TORONTO, Aug. 12, 2015 /CNW/ - Sierra Metals Inc. (TSX:SMT)(BVL:SMT) ("Sierra Metals" or the "Company") today reported revenue of $45.9 million and adjusted EBITDA of $18.3 million on record throughput of 483,374 tonnes and record silver equivalent production of 3.1 million ounces, for Q2 2015. The Company continued to maintain its status as a low-cost producer by maintaining its low operating costs again this quarter.
Mark Brennan, President and CEO of Sierra Metals, stated: "Despite the pervasive decline in commodity prices, strong metal production and operating cost control contributed to another strong quarter of cash flow generation and financial performance for the Company." He continued, "We are focused on unlocking the significant economic potential that we believe to be available at all three of our producing Mines while continuing to deliver solid production and financial returns for our shareholders during the remainder of 2015 and beyond."
The following displays selected unaudited financial information for the three and six months ended June 30, 2015:
| Three Months Ended |
Six Months Ended |
|||||||||
| (In thousands of dollars, except per share and cash cost amounts) |
June 30, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
||||||
| Operating |
||||||||||
| Ore Processed / Tonnes Milled |
483,374 |
430,766 |
955,781 |
847,331 |
||||||
| Silver Ounces Produced |
911,019 |
750,283 |
1,810,710 |
1,478,495 |
||||||
| Copper pounds produced (000's) |
6,508 |
5,697 |
12,992 |
11,426 |
||||||
| Lead pounds produced (000's) |
11,116 |
12,005 |
23,232 |
24,185 |
||||||
| Zinc pounds produced (000's) |
13,019 |
13,457 |
23,480 |
26,189 |
||||||
| Gold ounces produced |
2,177 |
2,499 |
4,838 |
4,984 |
||||||
| Silver Equivalent Ounces Produced (000's)1 |
3,115 |
2,910 |
6,165 |
5,776 |
||||||
| Copper Equivalent Pounds Produced (000's)1 |
20,761 |
19,402 |
41,097 |
38,505 |
||||||
| Cash Cost per Tonne Processed |
$ |
38.17 |
$ |
40.74 |
$ |
38.11 |
$ |
40.01 |
||
| Cash Cost (recovery) per silver payable ounce (Yauricocha)2 |
$ |
(14.42) |
$ |
(19.67) |
$ |
(10.97) |
$ |
(20.33) |
||
| Cash Cost per copper payable pound (Bolivar)2 |
$ |
1.37 |
$ |
1.51 |
$ |
1.45 |
$ |
1.54 |
||
| Cash Cost per silver payable ounce (Cusi)2 |
$ |
8.46 |
$ |
5.29 |
$ |
8.16 |
$ |
7.96 |
||
| Financial |
||||||||||
| Revenues |
$ |
45,867 |
$ |
45,578 |
$ |
80,607 |
$ |
87,252 |
||
| Adjusted EBITDA2 |
$ |
18,249 |
$ |
21,340 |
$ |
32,239 |
$ |
38,520 |
||
| Operating cash flows before movements in working capital |
$ |
18,796 |
$ |
21,249 |
$ |
33,461 |
$ |
38,692 |
||
| Adjusted net income attributable to shareholders2 |
$ |
7,274 |
$ |
9,466 |
$ |
11,353 |
$ |
16,626 |
||
| Net income attributable to shareholders |
$ |
1,209 |
$ |
2,382 |
$ |
542 |
$ |
4,469 |
||
| Cash and cash equivalents |
$ |
29,829 |
$ |
42,100 |
$ |
29,829 |
$ |
42,100 |
||
| Working capital |
$ |
22,747 |
$ |
23,186 |
$ |
22,747 |
$ |
23,186 |
||
| Shareholders |
||||||||||
| Earnings per share ("EPS") - basic |
$ |
0.00 |
$ |
0.01 |
$ |
0.00 |
$ |
0.03 |
||
| Adjusted EPS2 |
$ |
0.04 |
$ |
0.06 |
$ |
0.07 |
$ |
0.11 |
||
| Weighted average shares outstanding for the periods |
161,035 |
159,145 |
160,624 |
158,923 |
||||||
| (1) Silver equivalent ounces and copper equivalent pounds were calculated using the following metal prices: $20/oz Ag, $3.00/lb Cu, $0.85/lb Pb, $0.95/lb Zn, $1,250/oz Au. |
||||||||||
| (2) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A. |
||||||||||
Financial Update
Revenue from metals payable of $45.9 million in Q2 2015, were consistent with $45.6 million in Q2 2014. The increase in plant throughput at all three Mines, along with the increase in silver and copper grades and recoveries of all metals, except copper, at Yauricocha help offset the decreases in the prices of silver (-18%), copper (-12%), lead (-7%) and gold (-9%) in Q2 2015 compared to Q2 2014. Also, there was a build-up of concentrate inventory at the end of Q1 2015 that was sold during Q2 2015 which resulted in higher revenues during the quarter.
Cash cost (recovery) per silver payable ounce for Q2 2015 was $(14.42) compared to $(19.67) in Q2 2014 at Yauricocha, cash cost (recovery) per copper payable pound was $1.37 compared to $1.51 in Q2 2014 at Bolivar and cash cost (recovery) per silver payable ounce was $8.46 compared to $5.29 in Q2 2014 at Cusi. The increase in cash costs at Yauricocha during Q2 2015 was due to the reduction of by-product credits which were the result of the lower metal prices discussed previously, lower zinc head grades, partially offset by the increase in silver payable ounces during the quarter. Bolivar's cash costs decreased due to an increase in copper payable pounds and lower cash costs of production which helped offset the decline in copper and silver prices during Q2 2015. The increase in costs at Cusi was due to higher production costs incurred, and lower by-product credits due to lower lead and gold head grades and realized metal prices. This was partially offset by the increase in silver payable ounces and by-product credits due to higher plant throughput.
Net income attributable to shareholders of $1.2 million, or $0.00 per share, for Q2 2015 compared to net income attributable to shareholders of $2.4 million, or $0.01 per share in Q2 2014. The decrease in net income is due to the decrease in metal prices previously discussed, an increase in operating costs, general and administrative costs and income tax expense in Q2 2015 compared to Q2 2014.
Adjusted EBITDA of $18.3 million for Q2 2015 decreased compared to $21.3 million in Q2 2014. The decrease in adjusted EBITDA in Q2 2015 is due to the decrease in metal prices and the increase in operating and general and administrative costs.
A large component of the net income for every period is the non-cash depletion charge in Peru, which was $7.5 million in Q2 2015 compared to $9.1 million in Q2 2014. The non-cash depletion charge is based on the aggregate fair value of the Yauricocha mineral property at the date of acquisition of Corona of $371.0 million amortized over the total proven and probable reserves and measured and indicated resources of the mine. The Company has been successful in reducing the depletion expense year over year as a result of the increase in the mineral reserves at Yauricocha based on the NI 43-101 reports dated October 2012, November 2013 and March 2015.
Cash flow generated from operations before movements in working capital of $18.8 million for Q2 2015 compared to $21.3 million in Q2 2014. Cash and cash equivalents of $29.8 million as at June 30, 2015 compared to $41.3 million at the end of 2014. The Company received US$ 6.0 million in payments for concentrates on July 1, 2015, which was the main reason for the decrease in cash and increase in trade receivables as at June 30, 2015 compared to December 31, 2014. Cash and cash equivalents have decreased by $11.4 million during the first six months of 2015 due to the capital expenditures incurred in Mexico and Peru of $(20.2) million, dividends paid to non-controlling interest of $(0.9) million and repayment of loans and credit facilities of $(12.3) million, offset by $14.2 million of operating cash flow and proceeds from the issuance of a credit facility in Mexico of $8.0 million.
Refinancing of Corona Acquisition Credit Facility
Subsequent to the end of the second quarter Sierra Metals successfully refinanced the remaining US$48 million due on the Corona Acquisition Credit Facility with Banco de Credito del Peru ("BCP") effective August 7, 2015.
Significant amendments to the facility include:
- The remaining $48M due on the facility is split into 2 tranches:
- Tranche 1, in the amount of $24M has quarterly principal repayments of $1.25M beginning in November 2016 and ending in August 2020
- Tranche 2, in the amount of $24M has no quarterly principal repayments and to be repaid in full in August 2020
- One year principal repayment grace period
- Reduced Interest rate equal to 3.65% plus 3M LIBOR vs previous rate of 4.15% plus 3M LIBOR
- Term of the facility extended for 5 Years
The cost of this restructuring was $0.36M equal to 0.75% of the restructured loan amount.
This was a very successful refinancing for the Company as almost $20M of debt principal repayments are no longer due for the remainder of 2015 and 2016. Additionally, quarterly principal repayments thereafter have been reduced from $3.4M to $1.25M.
Operational Update
Total tonnes of ore processed of 483,374 in Q2 2015, a Company record, compared to 430,766 in Q2 2014, representing a 12% increase, highlighted by higher throughput at all three Mines - Bolivar (24%), Cusi (18%) and Yauricocha (2%). Silver production of 911,019 ounces in Q2 2015, also a Company record, compared to 750,283 in Q2 2014, representing an increase of 21%. The increase in silver production was a result of increases in silver head grades and recoveries and plant throughput at the Yauricocha Mine, combined with the increase in silver head grades and plant throughput at the Cusi and Bolivar Mines. The continued ramp-up at Bolivar and the connection of the new power line during March 2015 contributed to the increased production during Q2 2015.
The Company is on pace to meet 2015 production guidance for all metals, as well as silver equivalent ounces and copper equivalent pounds, and expects to stay within its capital expenditure guidance.
| Metal Production |
Q2 2015 |
H1 2015 |
2015 Guidance |
|
| Low |
High |
|||
| Ore Processed/tonnes milled |
483,374 |
955,781 |
1,805,000 |
2,105,000 |
| Silver ounces |
911,019 |
1,810,710 |
3,144,000 |
3,668,000 |
| Copper pounds (000's) |
6,508 |
12,992 |
21,000 |
24,300 |
| Lead pounds (000's) |
11,116 |
23,232 |
44,300 |
51,800 |
| Zinc pounds (000's) |
13,109 |
23,480 |
41,900 |
48,900 |
| Gold ounces |
2,177 |
4,838 |
11,200 |
13,000 |
| Silver equivalent ounces (000's)(1) |
3,115 |
6,165 |
10,800 |
12,600 |
| Copper equivalent pounds (000's)(1)(2) |
20,761 |
41,097 |
72,000 |
84,000 |
| Capital expenditures ($ millions) |
$ 11.9 |
$ 20.2 |
$ 30.0 |
$ 40.0 |
| (1) Silver equivalent ounces and copper equivalent pounds were calculated using the following metal prices: $20/oz Ag, $3.00/lb Cu, $0.85/lb Pb, $0.95/lb Zn, $1,250/oz Au. |
||||
| (2) Copper equivalent pounds has been added to the fiscal 2015 guidance as Management believes it is a useful measure to provide comparability between the Company's production and their peers |
Project Development Update
During Q2 2015, the Company's drilling objectives at Yauricocha were to define ore zones for operational planning and exploration. At Yauricocha, definition drilling was done from two locations during Q2 2015: 1) Rosaura Level 920, 55.3 metres ("m") in one hole to complete the hole that totaled 205.0 m. The hole cut 4.5 m true width of polymetallic mineralization averaging 3.25% copper; 2) Mascota Level 1020, 2,062.8 m in 16 holes. These holes cut multiple zones of potentially-economic polymetallic and oxide mineralization.
Mine development at Bolívar during Q2 totaled 1,241 m. Most of these meters (969 m) were developed to prepare stopes for the Fierro Mine. The Gallo Mine was developed 272 m; 213 m to prepare stopes, and the rest to provide access between the Fierro and Gallo Mines. The Company also continues to explore the La Sidra vein over a strike length of 1,300 m. During Q2 2015, 3,362 m were drilled in 30 holes.
During Q2 2015, at the Cusi property, mine development drilling totaled 2,040 m while exploration drilling totaled 876 m in various veins.
Exploration Update
At Yauricocha, the Company initiated basic property scale mapping and sampling as a result of a five-year agreement which gives the Company permission to explore the surface of the community's lands within the Yauricocha property boundary. Initial results from sampling of a gossan zone along Yauricocha Fault 2 has returned highly-anomalous silver and lead.
Conference Call Webcast
Sierra Metals' senior management will host a conference call on Monday, August 17th, 2015 at 10:00 AM (E.D.T.) to discuss the Company's second quarter 2015 financial and operating results.
Via Webcast:
A live audio webcast of the meeting will be available on the Company's website
http://event.on24.com/r.htm?e=1034039&s=1&k=2A9EB076984F0441A27A9439E56809B5
The webcast along with presentation slides will be archived for 180 days on www.sierrametals.com
Via phone:
For those who prefer to listen by phone, dial-in instructions are below. To ensure your participation, please call approximately five minutes prior to the scheduled start time of the call.
Participant Number (Toll Free Peru): 0800-53-840
Participant Number (Toll Free North America): (888) 231-8191
Participant Number (International): (647) 427-7450
Conference ID: 10381313
Replay Archive:
A replay of the conference call will be available until 23:59 pm (E.D.T.) on Monday, August 24, 2015 and can be accessed using the following dial-in numbers:
Encore Toll Free Dial in Number: 1.855.859.2056
Encore Local Dial in Number: 416.849.0833
Encore ID: 10381313
Sierra Metals AGM Voting Results
At the request of the Toronto Stock Exchange, Sierra Metals is hereby reconfirming that the nominees listed in the Management Information Circular dated May 6, 2015 for the Company's Annual and Special Meeting of Shareholders (the "Meeting") held on June 10, 2015 were all elected as directors of the Company. Detailed results of the vote for the election of directors held at the Meeting are set out below:
| Outcome of |
Common Shares Voted (including proxy vote) |
||
| For |
Withheld |
||
| J. Alberto Arias |
Approved Approved Approved Approved Approved Approved Approved |
108,815,154 (99.29%) 109,552,154 (99.96%) 109,552,225 (99.96%) 109,552,225 (99.96%) 109,552,225 (99.96%) 106,477,399 (97.16%) 109,551,225 (99.96%) |
779,669 (0.71%) 42,669 (0.04%) 42,598 (0.04%) 42,598 (0.04%) 42,598 (0.04%) 3,117,424 (2.84%) 43,598 (0.04%) |
For further information regarding the voting results for other matters considered and approved by the shareholders at the Meeting, please see the Company's news release dated June 11, 2015 and the Company's Report of Voting Results, both of which have been filed on SEDAR at www.sedar.com.
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.
SOURCE Sierra Metals Inc.
regarding Sierra Metals, please visit www.sierrametals.com or contact: Mike McAllister, Director, Corporate Development, Sierra Metals Inc., 1-866-493-9646 or 1 (416) 366-7777, [email protected]; Ed Guimaraes, CFO, Sierra Metals Inc., 1 (416) 366-7777; Mark Brennan, President & CEO, Sierra Metals Inc., 1 (416) 366-7777
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