Sierra Announces Strong Second Quarter 2014 Financial Results

2014-08-13

CSE - Canadian National Stock Exchange · Copper · Zinc · Lead · Silver · Gold · Indium · Canada

VANCOUVER, Aug. 12, 2014/CNW/ - Sierra Metals Inc.(TSX:SMT) (BVL:SMT) ("Sierra Metals" or the "Company") is pleased to report the filing of its unaudited Financial Statements and Management Discussion and Analysis ("MD&A") for the second quarter of 2014. All amounts are presented in US dollars unless otherwise stated. For the complete Financial Statements and/or MD&A please visit the Company's website www.sierrametals.comor SEDAR at www.sedar.com.

Audra Walsh, President and CEO of Sierra Metals, commented: "Sierra continued reporting strong financial results during the second quarter of 2014. Main drivers include solid ore production growth, especially in Mexico. In addition, the Company has increased operating efficiencies and has continued implementing cost reduction measures to further increase its operating cash flow generation. On current metal prices, we expect to maintain strong financial results during the second half of 2014."

The following table sets out select unaudited financial information for the three and six months ended June 30, 2014and 2013:

| | | | | | | | | | | 3 Months Ended | 6 Months Ended | | | | | (In thousands of dollars, except per share and cash cost amounts) | June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | | | | | | | | | | | | Revenue | | $ 45,578 | $ 36,203 | $ 87,252 | $ 77,766 | | | Adjusted EBITDA1 | | 21,340 | 12,923 | 38,520 | 31,352 | | | Cash flow from operations | | 10,728 | 5,754 | 21,502 | 7,608 | | | Adjusted net income attributable to shareholders1 | | 9,466 | 3,645 | 16,626 | 11,430 | | | Non-cash depletion charge on Corona's acquisition | | (9,104) | (16,748) | (17,404) | (33,116) | | | Gross profit | | 12,070 | (5,403) | 22,223 | (3,350) | | | Income tax recovery (expense) | | (1,575) | 2,532 | (2,251) | 3,604 | | | Net income (loss) attributable to shareholders | | 2,382 | (9,821) | 4,469 | (13,056) | | | Basic earnings (loss) per share ($) | | 0.01 | (0.06) | 0.03 | (0.08) | | | Diluted earnings (loss) per share ($) | | 0.01 | (0.06) | 0.03 | (0.08) | | | | By-product cash cost per oz of Ag (Yauricocha)1 | US$ | (19.67) | (10.01) | (20.33) | (14.29) | | | By-product cash cost per lb of Cu (Bolivar)1 | US$ | 1.51 | 1.77 | 1.54 | 1.62 | | | By-product cash cost per oz of Ag (Cusi)1 | US$ | 5.29 | 17.10 | 7.96 | 16.89 |

| | | | | | (In thousands of dollars) | | June 30, 2014 | December 31, 2013 | | | | | | | Cash and cash equivalents | | $ 42,100 | $ 44,930 | | Assets | | 430,057 | 441,029 | | Liabilities | | 197,766 | 210,287 | | Equity | | 232,291 | 230,742 | | | | | | | 1An explanatory note regarding non-GAAP measures is included in section 13 of the Company's MD&A. | | | |

Financial Events

Revenues of $45.6 millionfor the three months ended June 30, 2014compared to $36.2 millionfor the same period in 2013. Revenues of $87.3 millionfor the six months ended June 30, 2014compared to $77.8 millionfor the six months ended June 30, 2013. Sierra has achieved stronger revenues during the first half of 2014 despite lower prices mainly due to higher lead and silver grades and recoveries, higher throughput capacity at Bolivar and Cusi, and higher volume of concentrate sold at Yauricocha.

| | | | | | | | | Average Realized Prices | 3 Months Ended | 6 Months Ended | | | | | | (In US dollars) | June 30, 2014 | June 30, 2013 | % Var. | June 30, 2014 | June 30, 2013 | % Var. | | | | | | | | | | Silver Price (oz) | 19.87 | 21.86 | -9% | 20.02 | 25.86 | -23% | | Copper Price (lb) | 3.14 | 3.19 | -2% | 3.12 | 3.40 | -8% | | Lead Price (lb) | 0.96 | 0.94 | 2% | 0.95 | 0.98 | -3% | | Zinc Price (lb) | 0.96 | 0.84 | 14% | 0.94 | 0.88 | 7% | | Gold Price (oz) | 1,289.56 | 1,372.19 | -6% | 1,288.91 | 1,499.43 | -14% | | | | | | | | |

Adjusted EBITDA of $21.3 millionfor the three months ended June 30, 2014compared to $12.9 millionfor the same period in 2013. Adjusted EBITDA of $38.5 millionfor the six months ended June 30, 2014compared to $31.4 millionfor the same period in 2013. The increase in adjusted EBITDA for 2014 compared to 2013 is mainly due to the increase in revenues as a result of the production ramp up in Bolivar from 1,000 tpd to 2,000 tpd since late in 2013, the higher silver and lead head grades and recoveries at Cusi, and the higher lead head grades and higher silver and lead recoveries at Yauricocha. In addition, the Company recorded higher gross margins during the period as a result of the measures taken to increase operating efficiencies and reduce costs. Moreover, the Company has improved its EBITDA results over the last quarters in Perudue to higher metal production and lower operating costs, and in Mexicodue to higher throughput levels and economies of scale.

Cash flow generated from operations of $10.7 millionfor the three months ended June 30, 2014compared to $5.8 millionfor the same period in 2013. Cash flow generated from operations of $21.5 millionfor the six months ended June 30, 2014compared to $7.6 millionfor the same period in 2013. The increase in cash flow is mainly the result of higher revenues generated, higher gross margins and lower payments of workers' profit sharing and taxes during 2014.

Adjusted net income attributable to shareholders of $9.5 millionor $0.06per share for the three months ended June 30, 2014compared to $3.6 millionor $0.02per share for the same period in 2013. Adjusted net income attributable to shareholders of $16.6 millionor $0.10per share for the six months ended June 30, 2013compared to $11.4 millionor $0.07per share for the same period in 2013.

Net income attributable to shareholders of $2.4 millionor $0.01per share for the three months ended June 30, 2014compared to a loss of $9.8 million($0.06per share) for the same period in 2013. Net income attributable to shareholders of $4.5 millionor $0.03per share for the six months ended June 30, 2014compared to a loss of $13.1 million($0.08per share) for the same period in 2013. The increase in net income attributable to shareholders is mainly due to the measures that the Company has been implementing since the second half of 2013 in Mexicoand Peruto increase operating efficiencies and reduce costs, the decrease in the non-cash depletion charge on Corona's acquisition, and the increase in concentrate sold.

A factor depressing ‎reported net income to shareholders is the non-cash depletion charge in Peru, which for the three months ended June 30, 2014was $9.1 million(2013 - $16.7 million) and the six months ended June 30, 2014was $17.4 million(2013- $33.1 million). 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 millionamortized 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 2012and November 2013.

By-product cash cost per ounce of silver of a negative US$ 19.67at Yauricocha, by-product cash cost per ounce of silver of US$ 5.29at Cusi and by-product cash cost per pound of copper of US$ 1.51at Bolivar for the three months ended June 30, 2014compared to a by-product cash cost per ounce of silver of negative US$ 10.01at Yauricocha, by-product cash cost per ounce of silver of US$ 17.10at Cusi and by-product cash cost per pound of copper of US$ 1.77at Bolivar for the same period of 2013.

Cash and cash equivalents of $42.1 millionas at June 30, 2014compared to $44.9 millionat the end of 2013. Cash and cash equivalents have decreased by $2.8 millionduring the six months ended June 30, 2014mainly due to the capital expenditures incurred in Mexicoand Peruof $14.5 million, repayment of loans and credit facilities including interest of $5.8 million, and dividends paid to shareholders and non-controlling interest totaling $4.2 million, partially offset by $21.5 millionof operating cash flow.

Exploration Events

On April 16, 2014, the Company announced that development was proceeding along the Monacoshoot of the Milagro vein at its Cusi property, Mexico. The Monacoshoot contains high grades of gold and silver, and has been developed along a 170 m strike length. The shoot is open to depth and a ramp is being driven to reach deeper levels of the shoot.

On April 24, 2014, the Company announced that development in the Gallo Superior Magnetita ore body of its Bolivar mine in Mexicowas started and mining of this body began in June. In addition, The Company initiated an aggressive exploration program on the Bolivar property, outside the main mine area. The focus of the program will be to test several precious metals targets that have been identified by the Company's geologists over several years, which are, La Lilly, Veta Piedras Verde, La Sidra, La Cilica and Reyna de Oro.

On May 6, 2014, the Company announced that drilling to depth at the Central Mine Area of its Yauricocha Property, Peru, demonstrated that the Catas orebody extends at least an additional 130 meters to depth. On June 20, 2014, the Company also announced that drilling of three additional holes in the Central Mine Area demonstrated that the Antacaca orebody extends at least an additional 250 meters to depth.

Production Results

| | | | | | | | | | 3 Months Ended | 6 Months Ended | | | | | | | June 30, 2014 | June 30, 2013 | % Var. | June 30, 2014 | June 30, 2013 | % Var. | | | | | | | | | | Silver production (oz) | 750,283 | 669,620 | 12% | 1,478,495 | 1,280,028 | 16% | | Copper production (000 lb) | 5,697 | 3,755 | 52% | 11,426 | 7,816 | 46% | | Lead production (000 lb) | 12,005 | 9,559 | 26% | 24,185 | 18,087 | 34% | | Zinc production (000 lb) | 13,457 | 12,776 | 5% | 26,189 | 26,080 | 0% | | Gold Production (oz) | 2,499 | 1,800 | 39% | 4,984 | 3,398 | 47% | | | | | | | | |

Corporate Events

On June 17, 2014, the Company announced the results of its Annual and Special Meeting of shareholders held on June 12, 2014in Lima, Peru.

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 Peruand Mexico. Projects in Peruinclude Adrico (gold), Victoria(copper-silver) and Ipillo (polymetallic) at the Yauricocha Property in the province of Yauyos and the San Miguelitogold properties in Northern Peru. Projects in Mexicoinclude 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 Limaand the Toronto Stock Exchange under the symbol "SMT".

For further information regarding Sierra Metals, please visit http://www.sierrametals.comor contact:

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.

Audra Walsh, President & CEO, Sierra Metals Inc., 1 (866) 493?9646; Thomas Robyn, Senior Exploration Vice President, Sierra Metals Inc., 1 (866) 493?9646Copyright CNW Group 2014