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Friday, April 21, 2017 Derek Macpherson

Sierra Q1 Results Show Continued Improvements


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Sierra Metals Inc. (TSX:SMT, BVL:SMT) reported Q1 2017 production results from its operating mines in Peru and Mexico. The company’s quarterly production showed continued incremental operational improvements at both Yauricocha and Bolivar, offsetting a weak quarter at Cusi (Figure 1). The company remains focused on improving operations and near-mine exploration, which should help it surface the value of these assets. In our view, continued exploration success along with ongoing operational improvements at Sierra’s operating mines are key to enhancing the company’s value and liquidity.



Operational improvements make for strong Q1 at Yauricocha. Q1 production at Yauricocha increased 54% YoY while quarterly production increased by 3.7% QoQ (Figure 2). Over the past year, operational improvements have led to an increase in throughput by 21% (6% QoQ) and higher recoveries of silver (33%), copper (14%), lead (30%) and zinc (6%), gold being the exception which decreased by 32%. On a quarterly basis, copper grades and production improved significantly up 59% and 62%, while silver and zinc grades fell 19%, and lead and gold production fell 10% and 14%. The company expects operations to remain stable throughout the year.


Bolivar sees production improvements YoY and QoQ. Bolivar’s quarterly production increased by 9% YoY, 1% QoQ (Figure 3). Compared to Q1 2016, despite a decrease in metal grades, higher throughput of 2,788 tpd in Q1 2017 and increased recoveries for all metals benefitted overall production. On a quarterly basis, copper and gold grades and production improved, while recoveries decreased slightly along with silver grade and production. The company will focus on improving production volume at Bolivar in 2017, with the addition of new equipment anticipated by the end of Q2. We expect upcoming operational improvements at Bolivar to advance production over the course of the year.


Sierra reports poor Q1 at Cusi. Compared to Q1 2016, Q1 2017 revealed a significant reduction in production (-48%), throughput (-31%), metal grades and recoveries at Cusi (Figure 4). However, compared to Q4 2016, throughput was down slightly by %4, while results showed improvements in metal grades, recoveries, and production, apart from silver which moderately decreased in all categories, and gold which saw a slight decrease in recovery. Although the results are not positive, the company recently completed a 15,000m drill program which targeted the Santa Rosa de Lima zone, a high-grade opportunity for the company to improve grades at the mine.



Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
 
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Sierra Metals Inc. - TSX:SMT, BVL:SMT - 2

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