Caledonia Mining Corporation Plc press release

Sierra Metals Reports Consolidated Financial Results Including $18.1 Million of Operating Cash Flows Before Movements in Working Capital for the Third Quarter of 2018

2018-11-12

NYSE - New York Stock Exchange · Jersey

Canada NewsWire

TORONTO, Nov. 12, 2018

CONFERENCE CALL NOVEMBER 13, 2018AT 10:30 AM (EST)

(All $ figures reported in USD)

Adjusted EBITDA of $18.2 millionin Q3 2018 decreased 3% from $18.8 millionin Q3 2017 due to the decrease in prices of all metals Operating cash flows before movements in working capital of $18.1 millionin Q3 2018 decreased 17% from $21.8 millionin Q3 2017 due to lower metal prices Revenue from metals payable of $53.0 millionin Q3 2018 increased by 4% from $50.9 millionin Q3 2017 due to higher throughput, despite lower metal prices Q3 2018 consolidated copper production of 8.3 million pounds, consolidated silver production of 0.7 million ounces, consolidated zinc production of 20.8 million pounds, consolidated lead production of 6.4 million pounds, and consolidated gold production of 1,906 ounces; a 24% increase, 44% increase, 5% increase, a 0% increase, and a 26% increase respectively, from Q3 2017, and within production guidance(1) Significant reduction in the all-in sustaining costs in Q3 2018: 19.3% lower at Yauricocha, 31.9% lower at Bolivar, and 63.3% lower at Cusi vs Q3 2017 $29.1 millionof cash and cash equivalents as at September 30, 2018 Net Debt of $30.7 millionas at September 30, 2018 Shareholder conference call to be held Tuesday, November 13, 2018, at 10:30 AM (EST)

| (1) | Silver equivalent ounces and copper and zinc equivalent pounds for Q3 2018 were calculated using the following realized prices: $14.85/oz Ag, $2.79/lb Cu, $0.94/lb Pb, $1.14/lb Zn, $1,206/oz Au. Silver equivalent ounces and copper and zinc equivalent pounds for Q3 2017 were calculated using the following realized prices: $16.86/oz Ag, $2.93/lb Cu, $1.08/lb Pb, $1.36/lb Zn, $1,280/oz Au. Silver equivalent ounces and copper and zinc equivalent pounds for 9M 2018 were calculated using the following realized prices: $15.99/oz Ag, $3.02/lb Cu, $1.06/lb Pb, $1.36/lb Zn, $1,279/oz Au. Silver equivalent ounces and copper and zinc equivalent pounds for 9M 2017 were calculated using the following realized prices: $17.31/oz Ag, $2.70/lb Cu, $1.03/lb Pb, $1.28/lb Zn, $1,253/oz Au. |

TORONTO, Nov. 12, 2018/CNW/ - Sierra Metals Inc. (TSX:SMT)(BVL:SMT)(NYSE American:SMTS) ("Sierra Metals" or the "Company") today reported revenue of $53.0 millionand adjusted EBITDA of $18.2 millionon throughput of 566,194 tonnes and metal production of 4.5 million silver equivalent ounces, 23.6 million copper equivalent pounds, and 57.9 million zinc equivalent pounds for the three month period ended September 30, 2018.

The Company has been able to continue the successful production increases realized during the last year and a half. Q3 2018 consolidated production of copper increased 24% to 8.3 million pounds, silver increased 44% to 0.7 million ounces, lead remained consistent at 6.4 million pounds, zinc increased 5% to 20.8 million pounds, and gold increased 26% to 1,906 ounces compared to Q3 2017.

Metal production at Yauricocha in Q3 increased due to higher ore throughput, higher copper and gold head grades, and higher recoveries of all metals, except gold. At Bolivar, higher ore throughput, higher head grades for all metals, and higher copper and gold recoveries resulted in a 13% increase in copper equivalent production in Q3 2018 compared to Q3 2017. The Company exceeded our year over year production levels at Bolivar, but due to significant rain events in the third quarter, which impacted operations, we experienced lower quarter over quarter production. We are hopefully through the worst of the rainy season and are back on track for the fourth quarter. At Cusi, the increase in ore throughput and higher silver head grades resulted in higher silver equivalent production.

Igor Gonzales, President, and CEO of Sierra Metals stated:_"I am very pleased with the Company's performance during Q3 2018. Despite weaker realized metal prices, and harsh weather events at the Bolivar Mine, the Company generated positive cash flow at its three operating mines of $18 million, and our production results were solid. We continue building upon the strong results from the first half of the year. The Company also realized positive returns on our capital investments and our operational improvement efforts at all our Mines. This is best demonstrated through our improving operating performance, strengthening of our asset base, significantly lower cash costs and all-in sustaining costs, strong cash flow year to date as well as increases to the mineral reserves and resources at each of our Mines._

Yauricocha continues to be a solid performing Mine for the Company with steady throughput in the third quarter. Additionally, despite lower realized metal prices in the third quarter, Yauricocha still contributed to higher revenues representative of the successful capital investments made at the Mine. At Bolivar, the effects of the Mexicoturn-around program are continuing and can be noticed with improved head grade and recoveries. However, Bolivar experienced a difficult quarter with significant rainfall events which impacted production and costs versus the previous quarter but were still improved on a year over year basis. We continue to work towards our goal of expanding production to 3,600 tonnes per day in Q1 2019. At Cusi, the mill reached its full capacity rate of 650 tonnes per day in late Q2-2018 and continued running at that rate in Q3-2018. As such, the Company realized an increase in silver equivalent payable ounces and saw improved recoveries resulting in lower operating costs. We continue to campaign development ore from the Santa Rosa de Limazone with increasing throughput rates, while selectively mining structures in the older part of the mine. The addition of another ball mill, currently being installed, will see capacity increase to approximately 1,200 tonnes per day in Q1 2019."

He concluded, "_Sierra Metals balance sheet remains strong with the liquidity needed to meet its operational and growth expenditure requirements, with the Company on track for a solid finish to the year. The groundwork for further improvements has been laid through the implementation of best operational practices, and the first stages of expansion plans are underway. The expansion plans were highlighted in positive PEA studies released earlier this year, which demonstrate robust growth opportunities for the Company. Additionally, aggressive, brownfield exploration programs focused on high value targets have resulted in a recent porphyry discovery at Yauricocha and continue to be executed at all Mines which should lead to further significant of mineral reserves and resources growth at all of our Mines, adding to the value of our assets now and in the years ahead."_

The following table displays selected financial and operational information for the three and nine months ended September 30, 2018:

Q3 and 9M2018 Financial Highlights

| | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | | | | _(In thousands of dollars, except per share and cash cost amounts, consolidated figures unless noted otherwise)_ | | September 30, 2018 | | September 30, 2017 | | September 30, 2018 | | September 30, 2017 | | Operating | | | | | | | | | | Ore Processed / Tonnes Milled | | 566,194 | | 504,751 | | 1,725,991 | | 1,489,251 | | Silver Ounces Produced (000's) | | 728 | | 507 | | 2,015 | | 1,821 | | Copper Pounds Produced (000's) | | 8,326 | | 6,700 | | 25,037 | | 19,305 | | Lead Pounds Produced (000's) | | 6,358 | | 6,358 | | 19,766 | | 23,968 | | Zinc Pounds Produced (000's) | | 20,772 | | 19,877 | | 59,286 | | 56,543 | | Gold Ounces Produced | | 1,906 | | 1,517 | | 5,606 | | 4,606 | | Copper Equivalent Pounds Produced (000's)1 | | 23,628 | | 21,851 | | 71,717 | | 68,996 | | Zinc Equivalent Pounds Produced (000's)1 | | 57,883 | | 47,076 | | 159,165 | | 145,918 | | Silver Equivalent Ounces Produced (000's)1 | | 4,447 | | 3,797 | | 13,540 | | 10,762 | | | | | | | | | | | | Cash Cost per Tonne Processed | $ | 48.43 | $ | 48.01 | $ | 46.55 | $ | 45.60 | | Cost of sales per AgEqOz | $ | 7.62 | $ | 7.94 | $ | 7.14 | $ | 7.69 | | Cash Cost per AgEqOz2 | $ | 7.38 | $ | 7.62 | $ | 6.82 | $ | 7.36 | | AISC per AgEqOz2 | $ | 10.21 | $ | 13.21 | $ | 9.86 | $ | 12.32 | | Cost of sales per CuEqLb2 | $ | 1.43 | $ | 1.38 | $ | 1.35 | $ | 1.21 | | Cash Cost per CuEqLb2 | $ | 1.39 | $ | 1.32 | $ | 1.29 | $ | 1.15 | | AISC per CuEqLb2 | $ | 1.92 | $ | 2.30 | $ | 1.86 | $ | 1.93 | | Cost of sales per ZnEqLb2 | $ | 0.58 | $ | 0.64 | $ | 0.60 | $ | 0.57 | | Cash Cost per ZnEqLb2 | $ | 0.57 | $ | 0.61 | $ | 0.58 | $ | 0.54 | | AISC per ZnEqLb2 | $ | 0.78 | $ | 1.07 | $ | 0.83 | $ | 0.91 | | | | | | | | | | | | Cash Cost per ZnEqLb (Yauricocha)2 | $ | 0.48 | $ | 0.53 | $ | 0.52 | $ | 0.48 | | AISC per ZnEqLb (Yauricocha)2 | $ | 0.67 | $ | 0.83 | $ | 0.73 | $ | 0.73 | | Cash Cost per CuEqLb (Bolivar)2 | $ | 1.68 | $ | 1.75 | $ | 1.36 | $ | 1.41 | | AISC per CuEqLb (Bolivar)2 | $ | 2.35 | $ | 3.45 | $ | 2.06 | $ | 2.57 | | Cash Cost per AgEqOz (Cusi)2 | $ | 14.11 | $ | 21.95 | $ | 14.68 | $ | 14.80 | | AISC per AgEqOz (Cusi)2 | $ | 19.08 | $ | 51.94 | $ | 21.72 | $ | 33.77 | | Financial | | | | | | | | | | Revenues | $ | 52,956 | $ | 50,859 | $ | 177,352 | $ | 153,948 | | Adjusted EBITDA2 | $ | 18,212 | $ | 18,845 | $ | 74,493 | $ | 61,826 | | Operating cash flows before movements in working capital | $ | 18,108 | $ | 21,818 | $ | 74,981 | $ | 61,973 | | Adjusted net income attributable to shareholders2 | $ | 4,482 | $ | 4,993 | $ | 28,226 | $ | 20,241 | | Net income (loss) attributable to shareholders | $ | 1,922 | $ | (6,523) | $ | 21,468 | $ | (6,763) | | Cash and cash equivalents | $ | 29,073 | $ | 28,607 | $ | 29,073 | $ | 28,607 | | Working capital | $ | 1,780 | $ | (233) | $ | 1,780 | $ | (233) |

Revenue from metals payable of $53.0 millionin Q3 2018 increased by 4% from $50.9 millionin Q3 2017. Higher revenues are primarily attributable to the 6% increase in throughput, the increase in copper, and gold head grades, and higher recoveries for all metals, except gold, at Yauricocha in Q3 2018 compared to Q3 2017; the 2% increase in throughput, higher head grades, and recoveries of all metals, except silver recoveries, resulted in Bolivar's revenues being 19% higher than Q3 2017; and the 316% increase in throughput, and higher silver head grades resulted in Cusi's revenues being 135% higher than Q3 2017; the increase in revenues were realized despite decreases in the prices of all metals in Q3 2018 compared to Q3 2017.

Yauricocha's cash cost per zinc equivalent payable pound was $0.48(Q3 2017 - $0.53), and AISC per zinc equivalent payable pound of $0.67(Q3 2017 - $0.83). The decrease in the AISC per zinc equivalent payable pound for Q3 2018 compared to Q3 2017 was a result of lower sustaining capital expenditures and higher zinc equivalent payable pounds, while cash costs remained consistent; this was partially offset by slight increases in general and administrative costs.

Bolivar's cash cost per copper equivalent payable pound was $1.68(Q3 2017 - $1.75), and AISC per copper equivalent payable pound was $2.35(Q3 2017 - $3.45) for Q3 2018 compared to Q3 2017. The decrease in the AISC per copper equivalent payable pound during Q3 2018 compared to Q3 2017 was due to the increase in copper equivalent payable pounds resulting from higher throughput, and head grades and recoveries of all metals, except silver recoveries, as well as a decrease in sustaining capital expenditures.

Cusi's cash cost per silver equivalent payable ounce was $14.11(Q3 2017 - $21.95), and AISC per silver equivalent payable ounce was $19.08(Q3 2017 - $51.94) for Q3 2018 compared to Q3 2017. AISC per silver equivalent payable ounce decreased due to higher silver equivalent payable ounces resulting from higher throughput, higher silver recoveries, and lower cash costs and sustaining capital expenditures.

Adjusted EBITDA(1)of $18.2 millionfor Q3 2018 decreased 3% compared to $18.8 millionin Q3 2017. The decrease in adjusted EBITDA in Q3 2018 was due to the decreases in the prices of silver (12%), copper (5%), lead (13%), zinc (16%), and gold (6%) during Q3 2018 compared to Q3 2017, which had a negative impact on the Company's revenues.

Cash flow generated from operations before movements in working capital of $18.1 millionfor Q3 2018 decreased compared to $21.8 millionin Q3 2017. The decrease in operating cash flow is mainly the result of lower gross margins realized due to the decline in prices of all metals in Q3 2018 compared to Q3 2017.

Net income (loss) attributable to shareholders for Q3 2018 was $1.9 million(Q3 2017: $(6.5) million) or $0.01per share (basic and diluted) (Q3 2017: $(0.04)).

Cash and cash equivalents of $29.1 millionand working capital of $1.8 millionas at September 30, 2018, compared to $23.9 millionand $(6.8) million, respectively, at the end of 2017. Cash and cash equivalents have increased by $5.2 millionduring 9M2018 due to $49.1 millionof operating cash flows, and $5.0 milliondrawn down from a short-term revolving line of credit, being offset by capital expenditures incurred in Mexicoand Peruof $(34.1) million, repayment of loans, credit facilities and interest of $(12.5) million, dividends paid to non-controlling interest shareholders of $(2.3) million.

| (1) | This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A. |

Project Development

Based on the positive Preliminary Economic Assessment studies completed the Company is now working towards the first stage of expansion plans at all three Mines. We have also commenced pre-feasibility and feasibility studies on potential secondary stage expansion plans at all Mines.

At Yauricocha, which we expect to increase production to the 3,600 tonnes per day level in 2019 once all permits are received. Several developments took place at Yauricocha in the third quarter including ramp and stope development in addition to the completion of the Yauricocha tunnel. The tunnel is currently being tied into the existing surface infrastructure and should be operational by the end of the fourth quarter. Work also commenced on the rehabilitation of the Mascotashaft, as well as the continued work of sinking of the Yauricocha shaft to provide access to a significant amount of reserves and resources recently delineated.

Mine development at Bolívar during Q3 2018 totaled 929 meters. Most of these meters (292m) were developed to prepare stopes for mine production. The remainder of the meters (673m) were related to the deepening of ramps and developing service ramps to be used for ventilation and pumping.

During Q3 2018, at the Cusi property, mine development totaled 1,197 meters, and 698 meters of infill drilling was carried out inside the mine, and 499 meters were related to the deepening of ramps.

Exploration Update

Peru:

During Q3 2018, the Company drilled 38 holes totaling 9,074 meters at Yauricocha. The drilling included the following:

Exploration Drilling:

Discovery of a copper-molybdenum mineralized porphyry – Copper Porphyry Mineralization was tested (Klepetco Tunnel Level 720): 1 hole totaling 1,395 meters was drilled to test the priority anomaly located in the monzonite intrusive zone; Cuye Orebody (Level 1070 Central Mine Zone): 3 holes totaling 1,789 meters to explore the continuity of the orebody at depth; these holes intercepted mineralization which will help determine if the orebody continues at depth; Escondida Norte (870 Level Cachi Cachi) – 5 holes totaling 1,656 meters with the objective to explore and define potential sulphide zones, as the previous drilling intercepted lead oxide mineralization; the results demonstrate the potential for more sulphide mineralization at depth.

Definition Drilling:

Antacaca Sur (Level 920): 5 holes totaling 572 meters with the objective of defining more certainty on the orebody to floor 8 on the 970 level; Esperanza(Level 970): 15 holes totaling 2,000 meters to define the continuity of mineralization of the orebody; which were executed from the 970 level to the 1020 level; Butz (1070 Level): finalized the drill hole started in the previous quarter and advanced the hole 44 meters; Yoselin (920 Level Cachi Cachi Mine): 9 holes totaling 1,618 meters to help define the orebody and provide more geological information to help plan potential mining of the orebody.

Bolivar

At Bolívar during Q3 2018, 8,332 meters were drilled from the surface as well as diamond drilling within the mine. 2,176 meters were drilled within the mine in the El Gallozone. There were 2,368 meters of surface diamond drilling done on the Cieneguita Orebody to explore its' continuity to the North. There was also 3,173 meters drilled at the Bolivar West extension to explore the extension of the orebody to the North and West, exploring the skarn orebody with semi-massive magnetite, and disseminated nodules of chalcopyrite. There was also 615 meters drilled at La Campana, which is a new exploration target where we are exploring the possibility of finding a skarn orebody with copper and zinc.

Cusi

During Q3 2018 the Company drilled 1,322 meters to support the development of the Santa Rosa de Limavein in Promontorio to further verify the size and continuity of the ore zone. 5,247 meters of surface diamond drilling was performed to define a portion of the San Antonio Pit in the Santa Eduwiges Mine, as well as to explore the continuity at a depth of the San Nicolasvein in the area of El Tajoand Promontorio. One drill hole was also completed in the southern extension of the Santa Rosa de Limazone in the area of San Miguel-La Bamba.

Conference Call Webcast

Sierra Metals' senior management will host a conference call on Tuesday, November 13, 2018, at 10:30 AM (EST)to discuss the Company's financial and operating results for the three and nine months ended September 30, 2018.

Via Webcast:

A live audio webcast of the meeting will be available on the Company's website:

https://event.on24.com/wcc/r/1822005/A792EE06AA9F7766DE51719C55820038

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 before the scheduled start time of the call.

Participant Number (Toll-Free North America): (833) 245-9659 Participant Number (Toll-Free Peru): 0800-71-476 Participant Number (International): +1 (647) 689-4231 Conference ID: 8188906

Quality Control

All technical production 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.

Americo Zuzunaga, MAusIMM CP (Mining Engineer) and Vice President of Corporate Planning is 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) and Consultant to Sierra Metals is a Qualified Person and chartered professional qualifying as a competent person on metallurgical processes.