Sierra Metals Reports First Quarter 2016 Production Results

TORONTO, April 21, 2016 /CNW/ - Sierra Metals Inc. (TSX: SMT) (BVL: SMT) ("Sierra Metals" or "the Company") reports first quarter production results with record mine throughput in Mexico, offset by lower volumes in Peru a consequence of continued restructuring at the Yauricocha Mine. However, the Yauricocha mine has started to see positive improvement from its restructuring with an increase in production and throughput in Q1 2016 vs Q4 2015.

During the quarter the Company had record silver equivalent production at its Cusi Mine due to higher throughput and better head grades.

Results are from Sierra Metals' three underground mines in Latin America: the Yauricocha polymetallic Mine in Peru and the Bolivar copper and Cusi silver Mines in Mexico.

In January, Sierra Metals announced the discovery of the high grade sulphide Esperanza Zone at Yauricocha; the thickest intercepts discovered at Yauricocha in the 60 year history of the mine. Delineation and exploration drilling is ongoing to bring Esperanza into the production schedule in the third quarter.

First Quarter Highlights

• Total tonnes processed of 476,220; a 1% increase over Q1 2015's record production
• Silver equivalent production of 2.6 million ounces; a 19% decrease from Q1 2015
• Copper equivalent production of 17.2 million pounds; a 19% decrease from Q1 2015
• Increase of 10% in silver equivalent production and 2% throughput increase for the Company during Q1 2016 vs Q4 2015
• Increase of 13% in silver equivalent production and 7% throughput increase at Yauricocha during Q1 2016 vs Q4 2015
• Record Cusi silver equivalent production of 326,000 ounces; up 35% from Q1 2015
• Discovery of the high grade sulphide Esperanza Zone at Yauricocha

During the first quarter of 2016, consolidated metal production declined as a result of reduced plant throughput, lower head grades and lower recoveries of all metals at the Yauricocha Mine in Peru, as well as lower head grades and recoveries of all metals at the Bolivar Mine in Mexico. This was partially offset by the increase in throughput, head grades and recoveries of all metals, except silver, at the Cusi Mine. The decrease in throughput at the Yauricocha Mine continues to be attributable to the ongoing restructuring that has addressed the management of water control issues and is focused on the improvement of mine sequencing and implementation of best practices and mechanization of the Mine.

"We anticipate improved consolidated results in the current year as we continue to focus on the restructuring and rehabilitation at the Yauricocha Mine with the implementation of best practices and the introduction of modern methodologies." commented Mark Brennan, President and CEO of Sierra Metals. "We have already begun to see the impact of these changes with increased throughput and improved silver/copper equivalent production over the previous quarter. Management continues to be optimistic that these changes that have resulted in lower production beginning in the third quarter of 2015 will serve to increase production in the coming years."

He continued, "We remain very optimistic that our brownfield exploration programs, an example of which is the new Esperanza discovery at Yauricocha, combined with our production optimization program at Yauricocha will lead to substantial growth in production and shareholder value."

Consolidated Production Results

Yauricocha Mine, Peru

The Yauricocha Mine processed a total of 207,580 tonnes in Q1 2016 representing a 6% decrease compared to Q1 2015. Lower metal production was driven by lower plant throughput and lower silver, lead and gold head grades from the polymetallic and lead-oxide concentrates. Lower recoveries of all metals were a consequence of lower head grades in the ore sources available to be mined in Q1 2016 versus Q1 2015.

The Company saw positive improvements from the restructuring at Yauricocha in Q1 2016 including a 7.2% increase in throughput and a 13.4% increase in silver equivalent production over Q4 2015. The Company also saw an increase in the production of all metals except silver with increases in production of copper 78%, zinc 11%, lead 2% and gold 2% with a minor reduction of 1% in silver production. Management believes throughput and metal production will continue to improve as we near the completion of the restructuring program later this year.

A summary of production from the Yauricocha Mine for Q1 2016 has been provided below:

During the first quarter Sierra announced the discovery of a new high grade sulfide zone, referred to as the "Esperanza" zone, located 400 metres north of the central mine area and 100 metres along strike from current mining activities. The discovery comes as part of ongoing drill testing of priority targets at the Yauricocha Mine (please see news release dated January 28, 2016).

The Esperanza zone has returned the thickest sulfide intercepts in the 60 year mining history at Yauricocha. Hole ESP-14 returned a length weighted average of 3.2% Cu, 1.7% Zn, 0.4% Pb, 1.01 gpt Au, 48.5 gpt Ag over 69.2 metres, hole ESP-15 returned a length weighted average of 1.8% Cu, 3.2% Zn, 1.4% Pb, 0.32 gpt Au, 61.5 gpt Ag over 70.0 metres and hole ESP-10 returned a length weighted average of 1.1% Cu, 4.9% Zn, 2.2% Pb, 0.25 gpt Au, 61.2 gpt Ag over 70.6 metres. The mineralization is hosted by a thick sequence of marble and consists of sulfide replacement and variably altered copper-magnetite mineralization (chalcopyrite, bornite, chalcocite +/- native copper) with extensive lead and zinc sulfide replacement. 

The area was identified as a high priority target adjacent to and along strike from the current underground mining activity. To the end of December 2015, a total of 15 holes (total of 3,922.8 metres) were drilled through the target area from the 870 and 920 level of the mine (607 metres and 657 metres below surface respectively). All holes intersected the zone with the exception of ESP-11 which tested the upper limit of the zone. Drilling to date demonstrates the zone has a strike length of at least 240 metres, has been successfully tested to a depth of 170 metres below the 870 level and is open along strike at depth. The majority of this zone appears to be located below the 870 level however additional drilling is required to define the upper limit of the zone. There are currently two drills operating on the 870 level that are focused on delineation and expansion of the Esperanza zone as it is a priority to fast track this material into the production schedule. Underground development has been initiated to support additional drill locations for further exploration and delineation of the zone.

Bolivar Mine, Mexico

Bolivar had another quarter of record plant throughput in Q1 2016 of 218,886 tonnes which was an 8% increase compared to Q1 2015. Despite the record throughput, lower head grades and recoveries for all metals were encountered which resulted in an 18% decrease in copper equivalent production in Q1 2016 compared to Q1 2015.

Copper production of 4.0 million pounds decreased 17%, silver production of 97,462 ounces decreased 30% and gold production of 859 ounces decreased 6% in Q1 2016 compared to Q1 2015. The decrease in metal production was driven by the lower head grades and recoveries of all metals.

The Company expects to see improved production as a result of higher throughput, better head grades and higher recoveries throughout the year by concentrating on known mineralized areas such as El Gallo.

A summary of production for the Bolivar Mine for Q1 2016 has been provided below:

Cusi Mine, Mexico

Total ore processed of 49,753 tonnes during Q1 2016 increased 1% compared to Q1 2015. Higher head grades for all metals and higher recoveries for all metals, except silver, as well as the start of zinc concentrate production from the plant, contributed to the 35% increase in silver equivalent production.

Silver production of 206,865 ounces decreased 2%, gold production of 314 ounces increased 102%, while lead production of 1.3 million pounds increased 248% compared to Q1 2015. The Mine also produced 0.6 million pounds of zinc which was the first quarter of zinc production at Cusi.

A summary of production for the Cusi Mine for Q1 2016 has been provided below:

Quality Control

All 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 production of precious and base metals from its Yauricocha Mine in Peru, and its Bolivar Mine and Cusi Mine in Mexico. In addition, Sierra Metals is exploring several precious and base metals 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 Lima Stock Exchange (Bolsa de Valores de Lima) and on the TSX 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 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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SOURCE Sierra Metals Inc.