Sierra Metals FY 2021 Results | Operations Ramping Back Up

Copper focused diversified miner Sierra Metals (TSX:SMT) (NYSE:SMTS) reported full year 2021 results; strong metal prices lifted revenue and operating profits.

After a challenging 2021 dealing with unprecedented COVID-19 headwinds and operational challenges, Sierra Metals is now ramping back operations at its key mines: Yauricocha and Bolivar.

Sierra Metals offers investors diversified exposure to base metals with leverage to key green demand trends and inherent inflation protection. The company is one of the cheapest miners in the copper universe, while also having a very attractive dividend yield versus the overall market.

Luis Marchese, CEO of Sierra Metals stated the following about the company’s outlook for 2022:

“COVID-19 safety protocols are in place and operations are returning to normal; Sierra Metals expects to be able to fully catchup and meet its operational growth initiatives in 2022”

The company is taking significant steps to improve operations at the Bolivar Mine, including capital expenditures towards infill drilling and mine development; management is focused on turning operations around by H2 2022 to deliver on Sierra’s full potential.

FY 2021 Operational Results

Revenue for 2021 was $272 million, an increase of 10% from 2020; and EBITDA was $104.7 million, a 2% increase vs. the prior year.

With a backdrop of soaring inflation, Sierra Metals provides investors with an attractive inflation protection revenue mix. 90% of current production comes from copper, silver, zinc and gold.

Copper equivalent production for 2021 came in at 89.9 million pounds, a decrease of 24% vs 2020; this is a result of COVID 19 headwinds related to labor and lower throughput and grades at Bolivar.

Average realized prices were strong in 2021, with Copper, Silver and Zinc up 51%, 22% and 33% respectively.

Outlook

Management has announced Full Year 2022 guidance:

  • Production is expected to come in between 79.5 and 89.7 million pounds
  • EBITDA is expected to be between $90 and $105 million dollars

In 2022 the focus at the Yauricocha mine will be on meeting the maximum permitted throughput of 3,600 tonnes per day and on mine development. At the Bolivar mine, the focus will be on meeting throughput of over 5,000 tonnes per day and on infill drilling and development.

Sierra Metals: Green Metals Exposure & Inflation Protection at a Deep Discount

Earlier this month Capital 10X highlighted copper as the strategic green metal during the current energy crisis and Sierra Metals as one of the best value plays.

Copper is a critical metal for the green economy; Goldman Sachs projects green copper demand as a percent of total copper demand will rise from 4% to 16% by 2030.

Sierra Metals has meaningful leverage to this structural green demand tailwind, with 35% of its revenue coming from copper.

Additionally, Metals provide an important hedge against inflation. During the ’70s the best way for investors to protect themselves versus inflation was by owning gold and commodities; we believe that applies to this decade as well.

Sierra Metals trades at a fraction of the valuation multiple relative to its copper peers. The company screens deep value on forward price-to-cashflow, EV-to-EBITDA and price-to-sales. There is significant rerating potential for Sierra.

Sierra Metals also has an attractive dividend yield of 2.3%, 0.8% higher than the dividend yield of the S&P 500.

Sierra Metals is a market awareness client of Capital 10X.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Capital 10X gets down to the real money business, actionable financial insights for traders and investors. We analyze company earnings, interview management teams and help teach the fundamentals of financial analysis and options trading. Our mission is to hunt for genuine 10 baggers.

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