Sierra Metals‘ [stock_market_widget type="inline" template="generic" color="default" assets="SMT.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"][stock_market_widget type="inline" template="generic" color="default" assets="SMTS" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] 82% owned subsidiary in Peru, Sociedad Minera Corona, (Yauricocha) reported Q4 financial results. Despite a challenging environment for zinc miners, the mine generated positive results and continues to be the workhorse for Sierra Metals.
Operational and Financial Results
The mine generated revenues of US$42.2 million in Q4 2019, compared to US$39.2 million in Q4 2018, and US$ 44.4 million in Q4 2019. Quarterly adjusted EBITDA was US$17.9 million versus US$17.6 million in Q4 2018 and US$20.5 million in Q3 of 2019.
Overall tonnes processed increased 20% year over year, reaching a new record of 322,000, resulting in 58.1 million pounds of zinc equivalent production (43% increase year over year). This is despite a small shipment of inventories that were delayed and now expected to ship in Q1 2020.
Cash costs decreased by 17% in the quarter to US$0.43/lb, while AISC increased by 11% to US$0.81. Overall liquidity was US$35 million, compared to US$29 million at the end of 2019 Q3.
Overall, the company is clearly benefiting from investments made at the mine, with record throughput and consolidated production. Further, the reduction in cash costs signifies the mine developments are being fully realized.
AISC were higher on the quarter due to high zinc treatment charges, a negative macro headwind facing all zinc producers. The subsidiary’s strong performance despite this challenge speaks to the quality of its operations. Further, Sierra Metals continues to decrease its dependence on zinc as a source of revenue and profit.
Looking forward, the company expects continued strong performance from its Yauricocha mine and has plans for additional improvements and exploration across 2020.
They recently released an updated 43-101, which improved asset quality and partially replaced diminished reserves and resources since the last update. Additional surface drilling is being completed with the goal of maintaining a 7-year life of mine.
With additional work on the tailings deposition completed, the subsidiary is awaiting permits from the government to increase mine throughout to the 3,600 tpd level.
Sierra Metals is a market awareness client of Capital 10X.
