RCKS Talk

Wednesday, July 20, 2016 Derek Macpherson

Sierra’s Operations Continue to Improve in Q2


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Sierra Metals Inc. (TSX:SMT,BVL:SMT) released second quarter production results which continue to demonstrate improving operations after a weak H2 2015. Overall copper equivalent production was 9% lower than Q2 2015 but a 15% improvement Q1 2016 and a 21% improvement over Q4 2015 (Figure 1). Production benefited from increased throughput at all three operations and improved grades at the company’s flagship Yauricocha mine in Peru. In our view, these results demonstrate progress in management’s ongoing turnaround of operations at Yauricocha. In our view, the expectation for continued operating improvements from Yauricocha and Bolivar, along with the release of a maiden resource from the Esperanza zone should benefit Sierra’s share price in the second half of this year.





Improving grades and increasing throughput deliver QoQ improvements from Yauricocha. While results were not as impressive as the records set in Q2 2015, operations continued to demonstrate QoQ improvements, particularly from the low point in Q4 2015 (Figure 2). The improving results appear to be reflective of the company’s ongoing restructuring program at the mine bearing fruit. As well, the company continues to advance the recently discovered Esperanza zone which has increased widths and could further benefit the mines economics when brought into production. A maiden resource for the Esperanza zone is expected shortly.


Lower head grades and recoveries partially offset record plant throughput at Bolivar. Throughput at Bolivar continues to increase, up 8% QoQ. This improvement partially offset YoY lower grades allowing production to continue to grow (Figure 3). In H2 2016, the company expects grades and recoveries to improve which should see production continue to grow.


Improving grades and modestly better throughput benefit Q2 2016 production at Cusi. While grades and throughput improved QoQ, a 7% decline in silver recoveries resulted in lower production QoQ (Figure 4). 


Company description: Sierra Metals Inc. (TSX:STM, BVL:SMT) is a Canadian mining company with three operating mines in Latin America. Yauricocha mine (polymetallic) in Peru, Bolivar (copper) and Cusi (silver) mines in Mexico. 

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