Sierra Metals announces 2013 second quarter financial results

TORONTO, Aug. 13, 2013 /PRNewswire/ - Sierra Metals Inc. (TSX:SMT) (BVL:SMT) ("Sierra Metals" or the "Company" previously Dia Bras Exploration) is pleased to report the filing of its unaudited Financial Statements and Management Discussion and Analysis ("MD&A") for the second quarter of 2013. All amounts are presented in Canadian dollars unless otherwise stated. For the full Financial Statements or MD&A please visit the Company's website www.sierrametals.com or SEDAR at www.sedar.com.

Daniel Tellechea, President and CEO of Sierra Metals, commented: "Sierra Metals' production for the first half of 2013 was in line with our expectations. However, the overall financial results for the second quarter of 2013 reflect the significant decrease in commodity prices. Accordingly, we are in the process of implementing cost reduction measures and increasing our productivity levels during the second half of 2013. Sierra Metals has a strong balance sheet, continues to generate solid operating cash flows and will continue with the development of key projects that will improve the Company's production profile in the medium term".

The following table sets out the selected first quarter financial results:

  Three months ended  Six months ended 
  June 30 June 30
(In thousands of dollars, unless stated)   2013 2012 2013 2012
             
Revenue   $ 37,108 $ 43,955 $ 79,003 $ 90,243
Adjusted EBITDA1     13,264   20,955   31,774   45,495
Cash Flow from continuing operations     5,670   18,182   8,029   25,399
Adjusted net income attributable to shareholders2     7,948   15,651   21,096   30,244
Non-cash depletion charge on Corona acquisition     18,086   19,625   34,589   38,110
Net loss attributable to shareholders     (10,138)   (3,974)   (13,493)   (7,866)
Basic and diluted earnings (loss) per share ($)                  
  From continuing operations     (0.06)   (0.03)   (0.09)   (0.06)
  Cash Cost per oz of Ag (Yauricocha)  US$    (13.78)   (22.06)   (18.14)   (27.63)
  Cash Cost per lb of Cu (Bolivar)  US$    1.73   0.95   1.57   1.22
  Cash Cost per oz of Ag (Cusi)  US$    16.27   N/A    16.19   N/A 
                   
(In thousands of dollars)   June 30, 2013 Dec 31, 2012        
                   
Cash and cash equivalents   $ 42,097 $ 79,835        
Assets     471,909   505,064        
Liabilities     201,696   221,574        
Equity     270,213   283,490        

1 Adjusted EBITDA is defined by management as EBITDA adjusted for non-cash and non-recurring items including share-based compensation, foreign exchange gain (loss), gain (loss) from discontinued operations and unrealized gain (loss) on financial instruments held at fair value through profit and loss.
2 Adjusted net income attributable to shareholders is defined by management as net income attributable to shareholders shown in the financials statements plus non-cash depletion charges due to the acquisition of Corona.

Financial Events

  • Adjusted net income attributable to shareholders (excluding the non-cash depletion charge described above) of $7.9 million or $0.05 per share for the three months ended June 30, 2013 compared to $15.7 million or $0.11 per share for the same period in 2012. Adjusted net income attributable to shareholders of $21.1 million or $0.13 per share for the six months ended June 30, 2013 compared to $30.2 million or $0.21 per share for the same period in 2012.
  • Net loss attributable to shareholders of $10.1 million or $0.06 per share for the three months ended June 30, 2013 compared to a loss of $4.0 million ($0.03 per share) for the same period in 2012. Net loss attributable to shareholders of $13.5 million or $0.09 per share for the six months ended June 30, 2013 compared to a loss of $7.9 million ($0.06 per share) for the same period in 2012.
  • A large component of the net loss for every quarter is the non-cash depletion charge in Peru, which for the three months ended June 30, 2013 was $18.1 million (2012- $19.6 million) and the six months ended June 30, 2012 was $34.6 million (2012- $38.1 million). The units of production depletion charge is based on aggregate fair value of the Yauricocha mineral property at the date of acquisition of Corona of $363.9 million amortized over the total proven and probable reserves of the mine. In the event that additional reserves and resources are identified this depletion charge will be prospectively reduced in future periods.
  • Adjusted EBITDA of $13.3 million for the three months ended June 30, 2013 compared to $21.0 million for the same period in 2012. Adjusted EBITDA of $31.8 million for the six months ended June 30, 2013 compared to $45.5 million for the same period in 2012.
  • Cash flow generated from continuing operations of $5.7 million for the three months ended June 30, 2013 compared to $18.2 million for the same period in 2012. Cash flow generated from continuing operations of $8.0 million for the six months ended June 30, 2013 compared to $25.4 million for the same period in 2012.
  • Cash and cash equivalents of $42.1 million as at June 30, 2013 compared to $79.8 million at the end of 2012. Cash and cash equivalents have decreased by $37.7 million during the first half of 2013 mainly due to the capital expenditures incurred in Mexico and Peru for $22.8 million. These expenditures are in line with the Company's growth and development initiatives financed by the $45.0 million private placement completed in 2012.
  • Revenues of $37.1 million for the three months ended June 30, 2013 compared to $44.0 million for the same period in 2012. Revenues of $79.0 million for the six months ended June 30, 2013 compared to $90.2 million for the same period in 2012.
  • Negative silver cash cost1 of US$13.78 per ounce ("oz") at Yauricocha, silver cash cost of US$16.27 per oz at Cusi and copper cash cost of US$1.73 per pound ("lb") at Bolivar for the three months ended June 30, 2013 compared to negative silver cash cost of US$22.06 per oz at Yauricocha and US$0.95 per lb at Bolivar for the same period of 2012. Negative silver cash cost of US$18.14 per oz at Yauricocha, silver cash cost of US$16.19 per oz at Cusi and copper cash cost of US$1.57 per lb at Bolivar for the six months ended June 30, 2013 compared to negative silver cash cost of US$27.63 per oz at Yauricocha and US$1.22 per lb at Bolivar for the same period of 2012. Cash costs at Cusi for 2012 are not available because this property was not in commercial production at that time.

1 Cash costs are calculated to include cost of sales, treatment and refining charges, and selling expenses less depreciation, workers profit sharing and other non-cash provisions included in cost of sales.

Operational Events

  • Total tonnes processed of 323,751 in the second quarter of 2013 compared to 325,913 tonnes in the same period of 2012. A 1% decrease year-over-year. Total tonnes processed of 641,387 in the first half of 2013 compared to 619,488 tonnes in the same period of 2012. A 4% increase year-over-year.
  • Total silver production of 669,620 oz in the second quarter of 2013 compared to 670,706 oz for the same period of 2012. A very similar amount year-over-year. Total silver production of 1,280,028 oz in the first half of 2013 compared to 1,254,990 oz for the same period of 2012. A 2% increase year-over-year.
  • Total copper production of 3.8 million lb in the second quarter of 2013 compared to 4.1 million lb for the same period of 2012. A 9% decrease year-over-year. Total copper production of 7.8 million lb in the first half of 2013 compared to 8.0 million lb for the same period of 2012. A 2% decrease year-over-year.
  • Total lead production of 9.6 million lb in the second quarter of 2013 compared to 9.1 million lb for the same period of 2012. A 5% increase year-over-year. Total lead production of 18.1 million lb in the first half of 2013 compared to 17.0 million lb for the same period of 2012. A 6% increase year-over-year.
  • Total zinc production of 12.8 million lb in the second quarter of 2013 compared to 15.3 million lb for the same period of 2012. A 16% decrease year-over-year. Total zinc production of 26.1 million lb in the second quarter of 2013 compared to 28.9 million lb for the same period of 2012. A 10% decrease year-over-year.
  • Total gold production from the Yauricocha Mine was 1,800 oz in the second quarter of 2013 compared to 2,876 oz for the same period of 2012. A 37% decrease year-over-year. Total gold production from the Yauricocha Mine was 3,398 oz in the first half of 2013 compared to 5,901 oz for the same period of 2012. A 42% decrease year-over-year.

The following table sets out consolidated production results for the three and six months ended June 31, 2013 and 2012. Please note that the production figures presented below include 100% of Yauricocha's figures for that period. No adjustments have been made for the portion applicable to the non-controlling interest.

Consolidated Production  3 Months Ended 6 Months Ended
June 30, 2013 June 30, 2012 % Var. June 30, 2013 June 30, 2012 % Var.
Silver production (oz) 669,620 670,706 0% 1,280,028 1,254,990 2%
Copper production (000 lb) 3,755 4,122 -9% 7,816 8,000 -2%
Lead production (000 lb) 9,559 9,084 5% 18,087 17,014 6%
Zinc production (000 lb) 12,776 15,282 -16% 26,080 28,905 -10%
Gold Production (oz) 1,800 2,876 -37% 3,398 5,901 -42%

 

Exploration Events

  • On April 17, 2013, the Company announced the completion of a pre-feasibility study (the "PFS") on its Bolivar mine in the Piedras Verdes mining district of Chihuahua State, Mexico. According to this PFS completed by Gustavson Associates, LLC, proven and probable ("Proven and Probable") ore reserves now total 7,456,806 tonnes at 1.044% copper equivalent ("CuEq") averaging 19.5 grams per tonne ("g/t") Ag, 0.759% Cu and 0.329% Zn.  Gold contents average 0.226 g/t but were not included in the CuEq calculation; however, they were included within the project's economics.  Out of the 15.4 million tonnes of measured and indicated ("Measured and Indicated" or "M&I") resources (grading 19.45 g/t Ag, 0.79% Cu, 1.06% Zn and 0.24 g/t Au) defined in the October 15, 2012 NI 43-101 technical report, 6.1 million tonnes of the highest grades deposits (i.e. Alta Ley and portions of Gallo Superior deposits) were not included in the PFS as more data are required for mine planning purposes.  Additional drilling is underway to complete mine planning in order to convert these Measured and Indicated resources to Proven and Probable reserves. At a production rate of 2,000 tonnes per day ("tpd"), these reserves provide a 10-year mine life with an additional year of processing from the stockpile for a total of 11 years.
  • Additionally, on April 24, 2013, the Company issued a revised press release regarding the Bolivar PFS, which announced that economic results show capital costs of US$43.0 million, with an initial capital cost of approximately US$7.0 million and sustaining capital over the life of mine ("Life of Mine" or "LOM") of approximately US$36.0 million. The project has an estimated pre-tax net present-value ("NPV") of US$135.6 million and a post-tax, base case NPV of US$91.7 million, at an 8% discount rate.
  • On May 14, 2013 the Company announced that drilling encountered wide zones of mineralization in both the Upper and Lower Skarn horizons located 600 meters northwest of the major ore-hosting zones of the Bolivar (Alta Ley) Mine.  In addition, step-out drilling from the El Gallo deposit has extended that mineralized zone 600 m to the northeast with high grades of zinc in the Upper Skarn horizon. Drill hole DB13B433 cut 7.05 meters core length averaging 1.552 g/t Au, 53 g/t Ag, 0.55% Cu and 1.15% Zn, including 5.5 metyers averaging 1.914 g/t Au, 64 g/t Ag, 0.66% Cu and 1.38% Zn. At the Step Out area, 600 meter north east of El Gallo, drill hole DB12B416 cut 10.8 m core length averaging 0.89% Cu and greater than 9.66% Zn, including 3.2 meters averaging 2.91% Cu and greater than 30% Zn.
  • On May 28, 2013 Sierra Metals announced that it is on track to triple production at its Cusi property during 2013 and achieve 500 tpd during the fourth quarter of 2013. Development at Santa Eduwiges, La India and Minerva mines returned substantial results including 5,836 g/t Ag and 4.1 g/t Au over 0.9 meters, 1,496 g/t Ag and 5.4 g/t Au over 0.4 meters and 1,237 g/t Ag and 22.5 g/t Au over 0.3 meters, respectively. Additionally, the San Juan mine has been developed and production is scheduled to commence during the fourth quarter of 2013 at 80-100 tpd.

Corporate Events

  • On May 1, 2013, the Company announced the completion of its first quarterly cash dividend payment of $2.5 million, or $.016 per Common Share to shareholders.
  • On May 10, 2013, the Company announced that, in connection with its normal course issuer bid ("NCIB") announced on March 26, 2013, it entered into an automatic share repurchase plan agreement (the "Plan") with Haywood Securities. The Plan permits Haywood to repurchase shares under the NCIB at any time, including during internal blackout periods and/or when the Company is in possession of undisclosed material information, without the control or influence of the Company, subject to a maximum of 500,000 shares, certain price limitations and other parameters prescribed by the Plan. During the six months ended June 30, 2013, the Company repurchased and cancelled 371,700 shares.
  • On June 17, 2013 the Company announced that it retained First Canadian Capital Corp. ("First Canadian") as a consultant to provide consulting and investor relations services. Under the terms of the consulting agreement with First Canadian (the "Agreement"), Sierra Metals will pay First Canadian $7,000 per month for a twelve month initial term (with a right of termination by either party after six months) and grant 200,000 stock options at an exercise price of $2.50 per share, with vesting in accordance with the Agreement, the TSX policies and the Company's stock option plan. The stock options will expire and terminate upon the earlier of: (i) 15 months from the date of the execution of the Agreement; and (ii) 30 days after First Canadian ceases to provide any and all services set forth in the Agreement.
  • Additionally, on June 17, 2013 the Company announced the results of the annual and special meeting of Sierra Metals' shareholders held on May 29, 2013 in Lima, Peru. All of the resolutions tabled were overwhelmingly approved by shareholders, including the re-election of J. Alberto Arias, Douglas F. Cater, Steven G. Dean, John S. Donnelly, Guillermo Kaelin, Philip Renaud and Daniel Tellechea as directors.
  • On June 21, 2013 the Company announced its second quarterly cash dividend of approximately $2.5 million, or $0.016 per Common Share of the Company, payable on or about July 31, 2013 to the holders of the issued and outstanding Common Shares as of the close of business on June 28, 2013.

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, La Verde (gold) at the Batopilas Property in the state of Chihuahua, and Las Coloradas (silver) at the Melchor Ocampo Property in the state of Zacatecas.

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. Other than statements of historical fact, all statements are "forward-looking statements", which involve various known and unknown risk and uncertainties and other factors, including market conditions that may affect the Company's ability to execute its current business plan.  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.



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