Sierra Metals Reports Fourth Quarter and Year-End 2015 Financial Results
CONFERENCE CALL APRIL 1, 2016 AT 10:00 AM (EDT)
TORONTO, March 29, 2016 /CNW/ -
- Annual 2015 silver equivalent production of 10.9 million ounces or copper equivalent production of 73.0 million pounds; a 7% decrease from 2014 but within production guidance
- 2016 Production guidance of 10.4 - 12.8 million Ag Eq oz or 69.1 - 85.3 M Cu Eq lbs
- Revenue from metals payable of $134.1 million in 2015 decreased by 22% from $172.6 million in 2014
- Operating cash flows before movements in working capital of $32.5 million in 2015 vs $71.3 million in 2014
- Restructuring at Yauricocha mine continues to temporarily depress metal production; improvements to be reflected in second half of 2016
- Refinancing of $48 million Corona acquisition credit facility
- $25.1 million of cash and cash equivalents as at December 31, 2015
- Shareholder conference call to be held Friday April 1, 2016 at 10:00 AM (EDT)
(All amounts expressed in US Dollars unless otherwise noted.)
Sierra Metals Inc. (TSX:SMT)(BVL:SMT) ("Sierra Metals" or the "Company") today reported revenue of $134.1 million and an adjusted EBITDA of $32.3 million on throughput of 1.9 million tonnes and metal production of 10.9 million silver equivalent ounces or 73.0 million copper equivalent pounds for the year ended December 31, 2015.
The Company continues the restructuring process of its mining operations at the Yauricocha Mine which has continued to suppress throughput and head grades, resulting in significantly lower production of all metals during the second half of 2015. The decrease in production was primarily due to lower ore grades being mined and interruptions to throughput caused by water control issues, development and infrastructure shortfalls. The Company continues to focus on the improvement of mine sequencing, safety, implementation of water drainage programs, as well as the design and introduction of mechanized mining methods in mine operations. The benefits of these implementations will be most visible in the second half of the year and will enable the Company to benefit from best practices with the expectation of increased production in the future.
Mark Brennan, President and CEO of Sierra Metals commented: "Sierra had a very strong start in 2015 with record production, throughput and strong cash flows. However, the latter part of 2015 has been challenging with weaker financial and production results as a result of lower metal prices and the introduction of important operational improvements, primarily at the Yauricocha Mine. These changes and improvements have temporarily impacted production levels but aim to structurally improve our operations and production capabilities for the longer term."
He continued, "Despite the challenges faced in the latter half of 2015, the Company continues to have a strong balance sheet and liquidity to drive operations. Sierra met its 2015 production guidance despite the need for a major restructuring program at Yauricocha and has also seen increases in tonnage and metal production at both the Bolivar and Cusi Mines."
He added "We have had tremendous success with our brownfield exploration program with the recent discovery of the Esperanza Zone at the Yauricocha Mine. This program has the potential to transform the capabilities of our assets in both Peru and Mexico. We look forward to keeping you updated on our progress."
2015 Operating and Financial Highlights
The following table displays selected audited financial information for the three and twelve months ended December 31, 2015:
| Three Months Ended | Year Ended | |||||||||
| (In thousands of dollars, except per share and cash cost amounts) | December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||
| Operating | ||||||||||
| Ore Processed / Tonnes Milled | 456,842 | 428,859 | 1,864,706 | 1,706,715 | ||||||
| Silver Ounces Produced | 603,114 | 875,400 | 3,104,952 | 3,148,145 | ||||||
| Copper pounds produced (000's) | 5,493 | 5,908 | 23,197 | 22,643 | ||||||
| Lead pounds produced (000's) | 7,920 | 12,096 | 42,177 | 48,834 | ||||||
| Zinc pounds produced (000's) | 9,265 | 13,399 | 42,077 | 54,256 | ||||||
| Gold ounces produced | 2,201 | 2,329 | 9,066 | 9,457 | ||||||
| Copper Equivalent Pounds Produced (000's)1 | 15,609 | 20,385 | 72,946 | 78,588 | ||||||
| Silver Equivalent Ounces Produced (000's)1 | 2,341 | 3,058 | 10,943 | 11,788 | ||||||
| Cash Cost per Tonne Processed | $ | 41.30 | $ | 40.48 | $ | 40.14 | $ | 40.55 | ||
| Cash Cost per AgEqOz (Yauricocha)2 | $ | 10.50 | $ | 5.23 | $ | 7.54 | $ | 5.66 | ||
| AISC per AgEqOz (Yauricocha)2 | $ | 18.25 | $ | 11.53 | $ | 14.19 | $ | 11.93 | ||
| Cash Cost per AgEqOz (Cusi)2 | $ | 12.44 | $ | 10.17 | $ | 9.03 | $ | 8.04 | ||
| AISC per AgEqOz (Cusi)2 | $ | 22.26 | $ | 36.78 | $ | 26.79 | $ | 31.15 | ||
| Cash Cost per CuEqLb (Bolivar)2 | $ | 1.44 | $ | 1.32 | $ | 1.34 | $ | 1.28 | ||
| AISC per CuEqLb (Bolivar)2 | $ | 2.40 | $ | 2.55 | $ | 2.33 | $ | 2.43 | ||
| Financial | ||||||||||
| Revenues | $ | 25,024 | $ | 40,857 | $ | 134,052 | $ | 172,614 | ||
| Adjusted EBITDA2 | $ | (1,935) | $ | 13,404 | $ | 32,317 | $ | 72,597 | ||
| Operating cash flows before movements in working capital | $ | (2,513) | $ | 12,987 | $ | 32,475 | $ | 71,276 | ||
| Adjusted net income (loss) attributable to shareholders2 | $ | (3,599) | $ | 5,583 | $ | 4,108 | $ | 30,496 | ||
| Net income (loss) attributable to shareholders | $ | (27,083) | $ | 3,366 | $ | (33,302) | $ | 9,300 | ||
| Cash and cash equivalents | $ | 25,102 | $ | 41,273 | $ | 25,102 | $ | 41,273 | ||
| Working capital | $ | 13,581 | $ | 23,186 | $ | 13,581 | $ | 23,186 | ||
| (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
The Company had cash and cash equivalents of $25.1 million as at December 31, 2015 compared to $41.3 million at the end of 2014. Cash and cash equivalents have decreased by $16.2 million during 2015 due to the capital expenditures incurred in Mexico and Peru of $37.6 million, dividends paid to non-controlling interest of $0.9 million and repayment of loans and credit facilities of $12.9 million, partially offset by $31.3 million of operating cash flow and proceeds from the issuance of a credit facility in Mexico of $8.0 million. Cash flow generated from operations before movements in working capital of $32.5 million for 2015 compared to $71.3 million in 2014.
Sierra Metals refinanced the remaining $48 million due on the Corona Acquisition Credit Facility ("the Facility") with Banco de Credito del Peru ("BCP") resulting in the deferral of $20 million of principal repayments, previously due in 2015 and 2016, due to the extension of the Facility to August 2020. The reduced Interest rate is now equal to 3.65% plus 3M LIBOR vs the previous rate of 4.15% plus 3M LIBOR. In the event of non-compliance with covenants, the Company may seek accommodation from BCP for 2016 and 2017 in relation to this facility.
Net income (loss) attributable to shareholders of $(33.3) million, or $(0.21) per share, for the year ended December 31, 2015 compared to net income attributable to shareholders of $9.3 million, or $0.06 per share in 2014. The decrease in net income is mainly due to the $19.0 million impairment charge recognized on the Cusi Mine during 2015, as well as the decrease in revenues in 2015 compared to 2014, mentioned previously.
Revenue from metals payable of $134.1 million in 2015 decreased by 22% from $172.6 million in 2014. Lower revenues are attributable to the decrease in the prices of silver (33%), copper (24%), lead (15%), and gold (17%) in 2015 compared to 2014; the decrease in plant throughput, head grades and recoveries at Yauricocha; the decrease in head grades and recoveries at Bolivar and Cusi.
Yauricocha's 2015 cash cost (recovery) per silver equivalent payable ounce was $7.54 vs $5.56 in 2014 and the all-in sustaining cash cost ("AISC") was $14.19 vs $11.93 in 2014. The increase in cash costs and AISC at Yauricocha during 2015 were due to the decrease in plant throughput and 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.
Bolivar's 2015 cash cost per copper equivalent payable pound was $1.34 vs $1.28 in 2014 and the AISC was $2.33 vs $2.44 in 2014. The increase in cash costs at Bolivar were due to an increase in equipment maintenance costs incurred in 2015 compared to 2014 while the decrease in AISC per copper equivalent payable pound was due to the increase in throughput resulting in an increase in copper equivalent pounds, which offset the increase in cash costs previously mentioned.
Cusi's 2015 cash cost per silver equivalent payable ounce was $9.03 vs $8.04 in 2014 and the AISC was $26.79 vs $31.15 in 2014. The increase in cash costs at Cusi in 2015 were due to an increase in labour and equipment maintenance costs associated with mining certain veins within the Promontorio and Santa Eduwiges mines as additional low grade mineralized rock was encountered. AISC per silver equivalent payable ounce decreased due to the increase in plant throughput, which resulted in more silver equivalent ounces produced, and a decrease in sustaining capital expenditures related to stope and drift development within the mine.
Adjusted EBITDA(1) of $32.3 million for the year ended December 31, 2015 decreased 55% compared to $72.6 million in 2014. The decrease in adjusted EBITDA in 2015 is due to the $40.0 million decrease in revenue at Yauricocha, mainly due to the decline in metal prices, the decline in head grades, and the increase in costs at Yauricocha mentioned previously.
Adjusted net income attributable to shareholders(1) of $4.1 million, or $0.03 per share, for the year ended December 31, 2015 decreased compared to $30.5 million, or $0.19 per share for 2014.
| (1) This is a non-IFRS performance measure, see non-IFRS Performance Measures section of the Company's MD&A. |
Operational Update
Annual silver equivalent production of 10.9 million ounces or annual copper equivalent production of 73.0 million pounds represented a 7% decrease from 2014. The Company's metals production of silver equivalent ounces and copper equivalent pounds was within guidance range for 2015. Despite recognizing lower production at Yauricocha in the short-term, the implementation of best practices, modern mining methodologies and mechanized mining methods will provide the opportunity to increase production and benefit from best practices in the coming years. The Company has maintained a solid year of consolidated production, including increased copper equivalent production and plant throughput at the Bolivar Mine and increased silver equivalent production and plant throughput at the Cusi Mine.
The following is a summary of the Company's 2016 outlook, by producing mine:
| Anticipated Operating Parameters | Yauricocha | Bolivar | Cusi | Total |
| Ore Processed/tonnes milled | 752,000 - 929,000 | 888,000 - 1,097,000 | 178,000- 220,000 | 1,818,000 - 2,246,000 |
| Silver ounces produced | 1,262,000 - 1,553,000 | 491,000 - 605,000 | 847,000 - 1,042,000 | 2,600,000 - 3,200,000 |
| Copper pounds produced (000,000's) | 6,800 - 8,400 | 17,600 - 21,700 | - | 24,400 - 30,100 |
| Lead pounds produced (000,000's) | 23,800 - 29,400 | - | 2,900 - 3,500 | 26,700 - 32,900 |
| Zinc pounds produced (000,000's) | 43,200 - 53,400 | - | - | 43,200 - 53,400 |
| Gold ounces produced | 4,100 - 5,000 | 4,400 - 5,400 | 600 - 800 | 9,100 - 11,200 |
| Silver equivalent ounces (000's)(1) | 5,900 - 7,200 | 3,500 - 4,300 | 1,000 - 1,300 | 10,400 - 12,800 |
| Copper equivalent pounds (000's)(1) | 39,200 - 48,300 | 23,000 - 28,400 | 6,900 - 8,600 | 69,100 - 85,300 |
| (1) Silver equivalent ounces and 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, $1,112/oz Au. | ||||
Exploration Update
On January 28, 2016 the Company announced the discovery of a new high grade sulfide zone at the Yauricocha Mine, referred to as the "Esperanza" zone, located 400 metres north of the central mine area and 100 metres from the existing underground infrastructure, along strike from current mining activities. The Esperanza zone has returned the thickest sulfide intercepts in the 60-year mining history at Yauricocha. Drilling to date demonstrates a strike of length of 240 metres to a depth of 170 metres. The zone is open along strike and at depth. Underground drilling continues to test for mineralized extensions of the Esperanza zone. At Yauricocha in 2015, the Company continued to drill for resource expansion in the Central Mine Area and Cachi Cachi Mine area (along strike, and at depth to ore zones). To the end of 2015, the Company has drilled 34 holes totaling 8,208 meters. In 2015 at Yauricocha the Company also completed a total of 30,176 metres of diamond drilling including 15,681 meters of exploration drilling, 12,019 meters of infill drilling and 4,476 meters for dewatering. During 2015 exploration drilling at Yauricocha was completed in the following areas: 2,077 metres of surface drilling at Giliana (oxide zone); 11,603 metres of underground drilling at the Central Mine Zone including the Esperanza Zone and 2,001 metres of underground drilling was completed at the Cachi-Cachi Mine.
At Bolivar, the Company is attempting to determine the lateral extent of the El Fierro deposit and continues to explore the La Sidra vein. At Cusi, drilling continues to be focused on the delineation of and to increase the resource size within numerous different various veins.
Conference Call and Webcast
Sierra Metals' senior management will host a conference call on Friday, April 1, 2016 at 10:00 AM (E.D.T.) to discuss the Company's fourth quarter and year-end 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/wcc/r/1160331/3DAC7A14ECAA1A6F60D72BF9B4DA514D
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): (877) 201-0168
Participant Number (International): (647) 788-4901
Conference ID: 75275377
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 metal production 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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Contact
regarding Sierra Metals, please visit www.sierrametals.com or contact: Mike McAllister, Director - Corporate Development, Sierra Metals Inc., 1 (416) 366-7777, info@sierrametals.com; Ed Guimaraes, CFO, Sierra Metals Inc., 1 (416) 366-7777; Mark Brennan, President & CEO, Sierra Metals Inc., 1 (416) 366-7777