SMT Sierra Metals Inc

Q2 2024 Highlights:

• Based on H1-2024 performance and expected production in H2-2024, Sierra Metals reaffirms 2024 annual guidance
• Development below the 1120 Level at Yauricocha remains on schedule to achieve full production by Q4
• Revenues of $57.5 million, a 2% decrease from Q2 2023
• Adjusted EBITDA(1) of $12.9 million in Q2 2024 was 11% lower when compared with the adjusted EBITDA of Q2 2023, mainly driven by the increase in G&A costs related to severance payments and organizational changes
• Cash flow generated from operating activities before movements in working capital of $14.9 million for Q2 2024 as compared to $11.6 million in Q2 2023
• Cash and cash equivalents of $22.5 million as at June 30, 2024 increased by almost 150% when compared to the $9.1 million at the end of 2023
• Cusi Mine binding agreement announced and sold in July for US$2.5 million in cash and a 2.0% net smelter royalty
• Commenced trading on the Lima Stock Exchange on June 28, 2024

Management will host a conference call and webcast at 11:00 am ET on August 12, 2024.

All dollar figures are in USD. (1) This is a non-IFRS performance measure, see non-IFRS Performance Measures section of this press release

Sierra Metals Inc. (TSX:SMT | OTCQX:SMTSF | BVL:SMT) (“Sierra Metals” or the “Company”) reports consolidated financial results for the three-month (“Q2”) and six- month (“H1”) periods ending June 30, 2024. The information provided below are excerpts from the Company’s Q2 2024 financial statements and Management’s Discussion and Analysis (“MD&A”), which are available on the Company's website (www.SierraMetals.com) and on SEDAR+ (www.sedarplus.ca) under the Company’s profile. Consolidated results include results from the Company’s Yauricocha Mine (“Yauricocha”) in Peru and the Bolivar Mine (“Bolivar”) in Mexico.

Ernesto Balarezo, Sierra Metals’ CEO, comments, “The operating results and financial performance during the second quarter demonstrate the continued momentum in our business. Operationally, we saw improved performance and throughput increases at Yauricocha, mainly driven by the increased access to mining areas and higher levels of extraction. Throughput volumes are expected to continue to improve as development below the 1120 level progresses and we access the massive ore body continuations at depth, allowing us to reach full capacity in the fourth quarter of 2024.

Bolivar had a lower throughput during Q2 2024 which was mainly attributable to the scheduled plant maintenance combined with the lower availability of water for the concentration process. The issue of water availability has been resolved, and we anticipate improved production levels in the second half of the year, supported by the new plant equipment and the regularized rainy season.

We completed the sale of our Cusi property, allowing us to concentrate our focus on Yauricocha and Bolivar moving forward. As well, our shares began trading on the Lima Stock Exchange last month offering increased investor exposure and liquidity potential into the Chilean, Colombian, and Peruvian markets. Overall, we are delighted with our performance in the first half of 2024 as we continue to execute our strategy and maintain momentum into the second half of the year.”

Conference Call & Webcast Management will host a conference call and webcast at 11:00 am ET on August 12, 2024 to discuss Q2 2024 consolidated operating and financial results. Participate on the telephone at 1-844-763-8276 (North America) or +1-647-484-8814 (rest of world) or register for the English webcast HERE or the Spanish webcast HERE.

Q2 2024 CONSOLIDATED OPERATING AND FINANCIAL HIGHLIGHTS

(In thousands of dollars, except per share and cash cost amounts, consolidated figures unless noted otherwise)

 

 

 

Six months ended June 30,

Q2 2024

Q1 2024

Q2 2023

 

2024

 

 

2023

 

Operating Ore Processed / Tonnes Milled

 

627,015

 

 

638,916

 

 

650,302

 

 

1,265,931

 

 

1,168,464

 

Copper Pounds Produced (000's)

 

8,531

 

 

11,247

 

 

10,459

 

 

19,778

 

 

18,744

 

Zinc Pounds Produced (000's)

 

11,272

 

 

10,132

 

 

12,228

 

 

21,404

 

 

22,807

 

Silver Ounces Produced (000's)

 

387

 

 

427

 

 

523

 

 

814

 

 

912

 

Gold Ounces Produced

 

3,438

 

 

4,505

 

 

4,311

 

 

7,943

 

 

8,102

 

Lead Pounds Produced (000's)

 

3,053

 

 

3,049

 

 

3,930

 

 

6,102

 

 

6,708

 

  Cash Cost per CuEqLb (Yauricocha)1,2

$

3.44

 

$

3.27

 

$

3.38

 

$

3.32

 

$

3.13

 

AISC per CuEqLb (Yauricocha)1,2

$

3.79

 

$

3.69

 

$

3.85

 

$

3.60

 

$

3.43

 

Cash Cost per CuEqLb (Bolivar)1,2

$

2.76

 

$

2.44

 

$

2.22

 

$

2.55

 

$

2.35

 

AISC per CuEqLb (Bolivar)1,2

$

3.53

 

$

3.12

 

$

2.97

 

$

3.27

 

$

3.01

 

  Financial Revenues

$

57,524

 

$

63,140

 

$

58,411

 

$

120,664

 

$

111,948

 

Net income (loss) - Continuing operations

$

4,912

 

$

1,630

 

$

3,897

 

$

6,542

 

$

7,606

 

- Discontinued Operations

$

(810

)

$

(865

)

$

(2,824

)

$

(1,675

)

$

(4,394

)

Net income (loss) attributable to shareholders, including discontinued operations

$

4,115

 

$

1,159

 

$

1,638

 

$

5,274

 

$

3,691

 

Adjusted EBITDA1 from continuing operations

$

12,949

 

$

17,913

 

$

14,494

 

$

30,862

 

$

29,976

 

Operating cash flows before movements in working capital

$

14,923

 

$

16,486

 

$

11,588

 

$

31,408

 

$

24,439

 

Adjusted net income (loss) attributable to shareholders1 - Continuing operations

$

5,022

 

$

5,174

 

$

5,984

 

$

10,196

 

$

11,525

 

- Discontinued Operations

$

(810

)

$

(865

)

$

(1,676

)

$

(1,675

)

$

(2,471

)

Cash and cash equivalents

$

22,477

 

$

11,220

 

$

4,393

 

$

22,477

 

$

4,393

 

(1) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of this press release.

(2) Copper equivalent payable pounds for the purpose of cash cost and AISC were calculated using the following realized prices:

Q2 2024: $4.43/lb Cu, $1.28/lb Zn, $28.61/oz Ag, $2,334/oz Au, $0.99/lb Pb.

Q1 2024: $3.84/lb Cu, $1.12/lb Zn, $23.41/oz Ag, $2,069/oz Au, $0.94/lb Pb.

Q2 2023: $3.99/lb Cu, $1.16/lb Zn, $24.17/oz Ag, $1,977/oz Au, $0.96/lb Pb.

H1 2024: $4.08/lb Cu, $1.20/lb Zn, $25.73/oz Ag, $2,177/oz Au, $0.96/lb Pb.

H1 2023: $4.02/lb Cu, $1.29/lb Zn, $23.37/oz Ag, $1,934/oz Au, $0.96/lb Pb.

Q2 2024 Operational Highlights

• Consolidated quarterly throughput during Q2 2024 was 627,015 tonnes. On a year-to-date basis, consolidated throughput is 8% higher in 2024 than in 2023, mainly driven by the stabilization and ramp up of Bolivar.
• Lower grades at Yauricocha for Q2 2024 compared to Q1 2024 and Q2 2023 were partially compensated for by the increase in throughput. Lower grades from Yauricocha were primarily due to the limited available ore above the 1120 level. The Company expects that grades and throughput will improve from the current levels as the development below 1120 level progresses.
• In Q2 2024, Bolivar experienced a decrease in throughput and grades as compared to Q1 2024 and Q2 2023. The lower throughput rates in Q2 2024 were a result of the planned maintenance downtime required for the commissioning of the new primary crusher and due to lower water availability as a dry season hit the region, which has been resolved as the rainy season has commenced.
• Yauricocha’s cash cost per copper equivalent payable pound(1) was $3.44 (Q2 2023 - $3.38), and All-In Sustaining Cost (“AISC”) per copper equivalent payable pound(1) of $3.79 (Q2 2023 - $3.85). Cash costs for Q2 2024 were slightly higher than Q2 2023, given that lower costs compensated for the 23% decrease in copper equivalent payable pounds. The decrease in the Q2 2024 AISC resulted from 41% lower capital expenditure when compared to Q2 2023.
• Bolivar’s cash cost per copper equivalent payable pound(1) was $2.76 (Q2 2023 - $2.22), and AISC per copper equivalent payable pound(1) was $3.53 (Q2 2023 - $2.97) for Q2 2024. Lower grades resulted in a drop in metal sales, representing a 21% decrease in copper equivalent payable pounds; therefore, leading to higher unit costs when compared to Q1 2024 and Q2 2023.

Q2 2024 Consolidated Financial Highlights

• Revenue from metals payable of $57.5 million in Q2 2024 represented a 2% decrease from the Q2 2023 revenue of $58.4 million, as the impact of lower grades was largely offset by higher realized metal prices when compared to the previous year. Higher realized metal prices could not offset the impact of the lower metal sales when compared to Q1 2024, resulting in a revenue decrease of 9% from the prior quarter.
• Cash and cash equivalents of $22.5 million as at June 30, 2024 increased by almost 150% when compared to the $9.1 million at December 31, 2023. Cash and cash equivalents increased during the six-month period as cash generated from operating activities of $23.8 million and from the loan refinancing of $18.2 million were partially offset by cash used for capital expenditures of $24.2 million and loan interest payments of $3.9 million.

(1) This is a non-IFRS performance measure, see non-IFRS Performance Measures section of this press release

H1 ACHIEVEMENTS AND COMPARISON TO 2024 GUIDANCE

During the first half of 2024, the Company successfully achieved the following major targets, which in the Management’s opinion has laid the foundation for its future growth:

• In February 2024, the Company obtained the government’s permit to develop and operate below the 1120 level at the Yauricocha Mine. This permit provides several significant catalysts for Sierra Metals, such as operational enhancements, maximized operating capacity, and cost efficiencies. Using a modest development capital investment, the Company anticipates ramping up to full production levels of 3,600 tonnes per day (“tpd”) (40% higher than current levels) by Q4 2024.
• On May 7, 2024, the Company announced the results of an updated mineral reserves and resources under National Instrument 43-101 (“NI 43-101”) for both its mines. These updated results reconfirm the presence of substantial reserves and resources in both mines. Additionally, this is a relevant indicator that the Company has been able to convert resources to reserves replacing what has been mined throughout the years. The Company filed the corresponding NI 43-101 technical reports on June 20, 2024, which are available on SEDAR+ and the Company’s website.
• On June 3, 2024, the Company signed a new credit agreement with a syndicate of banks, led by Banco Santander Peru S.A (“Santander”, together with the other banks referred as “lenders” or “the syndicate”), for a senior secured credit facility (“New Facility”) of $95.0 million. The proceeds from the New Facility were used to repay the balance of $75.0 million of the original loans with Banco de Credito del Peru (“BCP”) and Santander. The additional $20.0 million will be assigned to high-return capital projects as well as for all the transaction fees and expenses. The capital expenditures include the development below the 1120 level and the completion of the new shaft at the Yauricocha mine in Peru, which is expected to commence operations in early 2025, as well as mine developments of over 8,000 meters, a new ore pass, and the initial engineering works on a new tailings dam facility at Bolivar.

After the end of Q2 2024, the Company also completed the sale of the Cusi Mine and the surrounding mineral concessions (please refer to ‘note 17 – subsequent events’ to the financial statements for the six months ended June 30, 2024). Apart from adding $2.1 million net of fees to the Company’s cash balance, the Cusi sale will also help the Company avoid the fixed monthly care and maintenance costs of around $0.3 million.

Additionally, the Company will continue with the construction of the new tailings dam at Bolivar, which is expected to be completed over the next three years, allowing the mine to increase its production capacity to 7,500 tpd in the future.

Despite reduced production during Q2 2024, metal production for H1 2024 remained within anticipated the levels. With the development activities below the 1120 level at Yauricocha progressing as planned, the Company remains on track to achieve its previously announced production, costs, and capital expenditure guidance for 2024. The tables below compare the 2024 production versus annual production guidance from the Yauricocha and the Bolivar mines.

Production Guidance

Consolidated 2024 Guidance H1 2024 Low High Actual Copper (000 lbs)

37,500

43,300

19,778

Zinc (000 lbs)

38,600

44,500

21,404

Silver (000 oz)

1,500

1,750

814

Gold (oz)

10,100

11,600

7,943

Lead (000 lbs)

10,200

11,800

6,102

By Mine

Yauricocha 2024 Guidance H1 2024 Low High Actual Copper (000 lbs)

13,600

15,700

5,671

Zinc (000 lbs)

38,600

44,500

21,404

Silver (000 oz)

850

1,000

420

Gold (oz)

2,100

2,400

936

Lead (000 lbs)

10,200

11,800

6,102

Bolivar 2024 Guidance H1 2024 Low High Actual Copper (000 lbs)

23,900

27,600

14,107

Silver (000 oz)

650

750

394

Gold (oz)

8,000

9,200

7,007

2024 Cost Guidance

A per mine breakdown of 2024 production guidance, cash costs, and AISC are included in the table below. Starting 2024, the Company modified its definition of cash cost to include treatment and refining charges, selling costs and, site G&A costs. AISC includes cash costs and sustaining capital expenditure and is calculated on the basis of copper equivalent payable pounds.

2024 Guidance

 

H1 Actual

Cash costs(1)(2) range

AISC(1)(2) range

Cash costs(1)(2)

AISC(1)(2)

Mine

per CuEqLb

per CuEqLb

per CuEqLb

per CuEqLb

  Yauricocha Per Copper Payable Eq Lbs ('000)

$3.31 - $3.41

$3.75 - $3.86

$3.28

$3.57

Bolivar Per Copper Payable Eq Lbs ('000)

$2.56 - $2.72

$3.28 - $3.36

$2.60

$3.33

(1) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of this press release. Cash Cost comprises operating costs, selling expenses, administrative expenses, commercial terms and discounts. AISC is comprised of cash costs and sustaining capex.

(2) Copper equivalent payable pounds for guidance AISC were calculated using the following metal prices: $3.91/lb Cu, $1.20/lb Zn, $23.66/oz Ag, $0.94/lb Pb, $1,921/oz Au. H1 2024 actual cash costs and AISC have been recalculated for comparison purposes.

NON-IFRS PERFORMANCE MEASURES

The following table provides a reconciliation of adjusted EBITDA to the condensed interim consolidated financial statements for the three months and six months ended June 30, 2024 and 2023:

Three months ended June 30,

 

Six months ended June 30,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

  Net income

$

4,102

 

$

1,073

 

$

4,867

 

$

3,212

 

Adjusted for: Depletion and depreciation

 

8,194

 

 

9,267

 

 

17,828

 

 

16,810

 

Interest expense and other finance costs

 

2,742

 

 

2,788

 

 

5,147

 

 

4,987

 

NRV adjustments on inventory

 

-

 

 

1,079

 

 

-

 

 

1,555

 

Share-based compensation

 

800

 

 

86

 

 

1,434

 

 

188

 

Foreign currency exchange and other provisions

 

(1,309

)

 

689

 

 

855

 

 

2,061

 

Income taxes

 

(2,390

)

 

(1,456

)

 

(944

)

 

(82

)

Adjusted EBITDA

$

12,139

 

$

13,526

 

$

29,187

 

$

28,731

 

  Less: Adjusted EBITDA from discontinued operations

 

(810

)

 

(968

)

 

(1,675

)

 

(1,245

)

Adjusted EBITDA from continuing operations

 

12,949

 

 

14,494

 

 

30,862

 

 

29,976

 

The following table provides a reconciliation of adjusted net income to the condensed interim consolidated financial statements for the three months and six months ended June 30, 2024 and 2023:

Three months ended June 30,

 

Six months ended June 30,

(In thousands of United States dollars)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

  Net income attributable to shareholders

$

4,115

 

$

1,638

 

$

5,274

 

$

3,691

 

Non-cash depletion charge on Corona's acquisition

 

455

 

$

1,175

 

 

1,500

 

 

2,245

 

Deferred tax recovery on Corona's acquisition depletion charge

 

151

 

$

(359

)

 

(542

)

 

(686

)

NRV adjustments on inventory

 

-

 

$

1,079

 

 

-

 

 

1,555

 

Share-based compensation

 

800

 

$

86

 

 

1,434

 

 

188

 

Foreign currency exchange loss (gain)

 

(1,309

)

$

689

 

 

855

 

 

2,061

 

Adjusted net income (loss) attributable to shareholders

$

4,212

 

$

4,308

 

$

8,521

 

$

9,054

 

  Less: Adjusted net loss from discontinued operations

 

(810

)

 

(1,676

)

 

(1,675

)

 

(2,471

)

Adjusted net income (loss) from continuing operations

 

5,022

 

 

5,984

 

 

10,196

 

 

11,525

 

The following table provides a reconciliation of cash costs to cost of sales, as reported in the Company’s condensed interim consolidated statement of income for the three months and six months ended June 30, 2024 and 2023:

Three months ended Three months ended (In thousand of US dollars, unless stated) June 30, 2024 June 30, 2023 Yauricocha Bolivar Yauricocha Bolivar   Cash Cost per Tonne of Processed Ore Cost of Sales

21,400

 

20,847

 

24,630

 

19,439

 

Reverse: Workers Profit Sharing

-

 

105

 

-

 

-

 

Reverse: D&A/Other adjustments

(5,687

)

(4,138

)

(5,648

)

(3,414

)

Reverse: Variation in Inventory

5,318

 

(673

)

718

 

850

 

Total Cash Cost

21,031

 

16,141

 

19,700

 

16,875

 

Tonnes Processed

253,148

 

373,867

 

244,315

 

405,987

 

Cash Cost per Tonne Processed US$

83.08

 

43.17

 

80.63

 

41.57

 

Six months ended Six months ended (In thousand of US dollars, unless stated) June 30, 2024 June 30, 2023 Yauricocha Bolivar Yauricocha Bolivar   Cash Cost per Tonne of Processed Ore Cost of Sales

45,263

 

43,035

 

46,522

 

34,371

 

Reverse: Workers Profit Sharing

-

 

(497

)

-

 

-

 

Reverse: D&A/Other adjustments

(11,679

)

(6,604

)

(10,771

)

(5,715

)

Reverse: Variation in Inventory

5,624

 

(347

)

1,126

 

1,374

 

Total Cash Cost

39,208

 

35,587

 

36,877

 

30,030

 

Tonnes Processed

493,834

 

772,097

 

463,460

 

705,004

 

Cash Cost per Tonne Processed US$

79.40

 

46.09

 

79.57

 

42.60

 

The following table provides detailed information on Yauricocha’s cash cost and all-in sustaining cost per copper equivalent payable pound for the three months and six months ended June 30, 2024 and 2023:

YAURICOCHA Three months ended Six months ended (In thousand of US dollars, unless stated) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023   Cash Cost per zinc equivalent payable pound Total Cash Cost

21,031

 

19,700

 

39,208

 

36,877

 

Variation in Finished inventory

(5,318

)

(718

)

(5,624

)

(1,126

)

Treatment and Refining Charges

4,009

 

6,697

 

9,634

 

11,438

 

Selling Costs

710

 

803

 

1,350

 

1,418

 

G&A Costs(1)

1,616

 

1,487

 

3,136

 

3,127

 

Total Cash Cost of Sales

22,048

 

27,969

 

47,704

 

51,734

 

Sustaining Capital Expenditures

2,252

 

3,897

 

4,098

 

4,941

 

All-In Sustaining Cash Costs

24,300

 

31,866

 

51,802

 

56,675

 

Copper Equivalent Payable Pounds (000's)(2)

6,409

 

8,279

 

14,370

 

16,516

 

Cash Cost per Copper Equivalent Payable Pound (US$)

3.44

 

3.38

 

3.32

 

3.13

 

All-In Sustaining Cash Cost per Copper Equivalent Payable Pound (US$)

3.79

 

3.85

 

3.60

 

3.43

 

(1) G&A Costs for the three months and six months ended June 30, 2023 have been adjusted to include site G&A only. Allocation of corporate G&A costs have been excluded for consistency with the G&A costs for the three months and six months ended June 30, 2024 and those used in the 2024 guidance cash costs and AISC.

(2) Copper equivalent payable pounds were calculated using the following realized prices:

Q2 2024: $4.43/lb Cu, $1.28/lb Zn, $28.61/oz Ag, $2,334/oz Au, $0.99/lb Pb.

Q2 2023: $3.99/lb Cu, $1.16/lb Zn, $24.17/oz Ag, $1,977/oz Au, $0.96/lb Pb.

6M 2024: $4.08/lb Cu, $1.20/lb Zn, $25.73/oz Ag, $2,177/oz Au, $0.96/lb Pb.

6M 2023: $4.02/lb Cu, $1.29/lb Zn, $23.37/oz Ag, $1,934/oz Au, $0.96/lb Pb.

The following table provides detailed information on Bolivar’s cash cost, and all-in sustaining cost per copper equivalent payable pound for the three months and six months ended June 30, 2024 and 2023:

BOLIVAR Three months ended Six months ended (In thousand of US dollars, unless stated) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023   Cash Cost per copper equivalent payable pound Total Cash Cost

16,141

 

16,875

 

35,587

 

30,030

 

Variation in Finished inventory

673

(850

)

347

(1,374

)

Treatment and Refining Charges

1,856

 

2,819

 

4,710

 

4,984

 

Selling Costs

1,976

 

2,335

 

4,615

 

3,871

 

G&A Costs(1)

1,019

 

853

 

2,576

 

1,873

 

Total Cash Cost of Sales

21,665

 

22,032

 

47,835

 

39,384

 

Sustaining Capital Expenditures

6,022

 

7,350

 

13,405

 

10,898

 

All-In Sustaining Cash Costs

27,687

 

29,382

 

61,240

 

50,282

 

Copper Equivalent Payable Pounds (000's)(2)

7,841

 

9,908

 

18,734

 

16,726

 

Cash Cost per Copper Equivalent Payable Pound (US$)

2.76

 

2.22

 

2.55

 

2.35

 

All-In Sustaining Cash Cost per Copper Equivalent Payable Pound (US$)

3.53

 

2.97

 

3.27

 

3.01

 

(1) G&A Costs for the three months and six months ended June 30, 2023 have been adjusted to include site G&A only. Allocation of corporate G&A costs have been excluded for consistency with the G&A costs for the three months and six months ended June 30, 2024 and those used in the 2024 guidance cash costs and AISC.

(2) Copper equivalent payable pounds were calculated using the following realized prices:

Q2 2024: $4.43/lb Cu, $1.28/lb Zn, $28.61/oz Ag, $2,334/oz Au, $0.99/lb Pb.

Q2 2023: $3.99/lb Cu, $1.16/lb Zn, $24.17/oz Ag, $1,977/oz Au, $0.96/lb Pb.

6M 2024: $4.08/lb Cu, $1.20/lb Zn, $25.73/oz Ag, $2,177/oz Au, $0.96/lb Pb.

6M 2023: $4.02/lb Cu, $1.29/lb Zn, $23.37/oz Ag, $1,934/oz Au, $0.96/lb Pb.

The non-IFRS performance measures presented do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be directly comparable to similar measures presented by other issuers.

Non-IFRS reconciliation of adjusted EBITDA

EBITDA is a non-IFRS measure that represents an indication of the Company’s continuing capacity to generate earnings from operations before taking into account management’s financing decisions and costs of consuming capital assets, which vary according to their vintage, technological currency, and management’s estimate of their useful life. EBITDA comprises revenue less operating expenses before interest expense (income), property, plant and equipment amortization and depletion, and income taxes. Adjusted EBITDA has been included in this document. Under IFRS, entities must reflect in compensation expense the cost of share-based payments. In the Company’s circumstances, share-based payments involve a significant accrual of amounts that will not be settled in cash but are settled by the issuance of shares in exchange for cash. As such, the Company has made an entity specific adjustment to EBITDA for these expenses. The Company has also made an entity-specific adjustment to the foreign currency exchange (gain)/loss. The Company considers cash flow before movements in working capital to be the IFRS performance measure that is most closely comparable to adjusted EBITDA.

Non-IFRS reconciliation of adjusted net income

The Company has included the non-IFRS financial performance measure of adjusted net income, defined by management as the net income attributable to shareholders shown in the statement of earnings plus the non-cash depletion charge due to the acquisition of Corona and the corresponding deferred tax recovery and certain non-recurring or non-cash items such as share-based compensation and foreign currency exchange (gains) losses. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may want to use this information to evaluate the Company’s performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance in accordance with IFRS.

Cash cost per copper equivalent payable pound

The Company uses the non-IFRS measure of cash cost per copper equivalent payable pound to manage and evaluate operating performance. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company considers cost of sales per copper equivalent payable pound to be the most comparable IFRS measure to cash cost per copper equivalent payable pound and has included calculations of this metric in the reconciliations within the applicable tables to follow.

All-in sustaining cost per copper equivalent payable pound

AISC is a non‐IFRS measure and is calculated based on guidance provided by the World Gold Council (“WGC”). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as differences in definitions of sustaining versus development capital expenditures.

AISC is a more comprehensive measure than cash cost per pound for the Company’s consolidated operating performance by providing greater visibility, comparability and representation of the total costs associated with producing copper from its current operations.

The Company defines sustaining capital expenditures as, “costs incurred to sustain and maintain existing assets at current productive capacity and constant planned levels of productive output without resulting in an increase in the life of assets, future earnings, or improvements in recovery or grade. Sustaining capital includes costs required to improve/enhance assets to minimum standards for reliability, environmental or safety requirements. Sustaining capital expenditures excludes all expenditures at the Company’s new projects and certain expenditures at current operations which are deemed expansionary in nature.”

Consolidated AISC includes total production cash costs incurred at the Company’s mining operations, including treatment and refining charges and selling costs, which forms the basis of the Company’s total cash costs. Additionally, the Company includes sustaining capital expenditures and corporate general and administrative expenses. AISC by mine does not include certain corporate and non‐cash items such as general and administrative expense and share-based payments. The Company believes that this measure represents the total sustainable costs of producing copper from current operations and provides the Company and other stakeholders of the Company with additional information of the Company’s operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of copper production from current operations, new project capital and expansionary capital at current operations are not included. Certain other cash expenditures, including tax payments, dividends and financing costs are also not included.

Additional non-IFRS measures

The Company uses other financial measures, the presentation of which is not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following other financial measures are used:

• Operating cash flows before movements in working capital - excludes the movement from period-to-period in working capital items including trade and other receivables, prepaid expenses, deposits, inventories, trade and other payables and the effects of foreign exchange rates on these items.

The terms described above do not have a standardized meaning prescribed by IFRS, and therefore the Company’s definitions are unlikely to be comparable to similar measures presented by other companies. The Company’s management believes that their presentation provides useful information to investors because cash flows generated from operations before changes in working capital excludes the movement in working capital items. This, in management’s view, provides useful information of the Company’s cash flows from operations and are considered to be meaningful in evaluating the Company’s past financial performance or its future prospects. The most comparable IFRS measure is cash flows from operating activities.

About Sierra Metals Sierra Metals is a Canadian mining company focused on copper production with additional base and precious metals by-product credits at its Yauricocha Mine in Peru and Bolivar Mine in Mexico. The Company is intent on safely increasing production volume and growing mineral resources. Sierra Metals has recently had several new key discoveries and still has many more exciting brownfield exploration opportunities in Peru and Mexico that are within close proximity to the existing mines. Additionally, the Company has large land packages at each of its mines with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.

For further information regarding Sierra Metals, please visit www.sierrametals.com.

Forward-Looking Statements This press release contains forward-looking information within the meaning of Canadian securities legislation. Forward-looking information relates to future events or the anticipated performance of Sierra and reflect management's expectations or beliefs regarding such future events and anticipated performance based on an assumed set of economic conditions and courses of action. In certain cases, statements that contain forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur" or "be achieved" or the negative of these words or comparable terminology. By its very nature forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual performance of Sierra to be materially different from any anticipated performance expressed or implied by such forward-looking information.

Forward-looking information is subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward-looking information, including, without limitation, the risks described under the heading "Risk Factors" in the Company's annual information form dated March 15, 2024 for its fiscal year ended December 31, 2023 and other risks identified in the Company's filings with Canadian securities regulators, which are available at www.sedarplus.ca.

The risk factors referred to above are not an exhaustive list of the factors that may affect any of the Company's forward-looking information. Forward-looking information includes statements about the future and is inherently uncertain, and the Company's actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors. The Company's statements containing forward-looking information are based on the beliefs, expectations, and opinions of management on the date the statements are made, and the Company does not assume any obligation to update such forward-looking information if circumstances or management's beliefs, expectations or opinions should change, other than as required by applicable law. For the reasons set forth above, one should not place undue reliance on forward-looking information.

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