Sierra Metals Reports 16% Adj. EBITDA Increase at Flagship Yauricocha Mine

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"], a Toronto based polymetallic miner with three operating mines in Peru and Mexico, reported stellar financial results at Yauricocha, their primary mine in Peru.

The company is rounding the corner on a period of CapEx and production ramp-ups at all three mines and the first results are starting to show at Yauricocha.

While companies can never influence metals pricing, one lever they can pull to influence results is production and Sierra Metals is demonstrating that ability.

We’ve previously summarized the full Q3 production results in an earlier review, below is a summary of the financial results from their Yauricocha mine in Peru.

Yauricocha Ready for Ramp Up

The Yauricocha mine has been permitted to operate at an average of 3,150 tpd through 2019, with a planned increase to 3,600 tpd in 2020.

Due to a now resolved illegal strike action, the mine has been operating at a higher throughput, over 3,500 tpd for Q3, to make up for the lost time. The results have been strong and demonstrate the mine is ready for the production increase in 2020 once permitting is complete.

On the quarter, the mine recorded revenues of $44.4 million and Adjusted EBITDA of $20.5 million, an increase of 17% and 16% year over year. This was achieved with only an 8% increase in ore throughput year over year, and with realized zinc metal pricing down 7% over that time.

Cash costs per zinc equivalent pound were down 21% year over year to $0.38, while AISC held steady at $0.66 per zinc equivalent pound. Notably, AISC was down 23% from Q2, supporting our earlier statement that Q3 financials for Sierra Metals will be strong.

Looking forward, President and CEO Igor Gonzales highlighted some of the improvements and catalysts on the way for Sierra Metals.

These include basic mine and plant improvements that will sustain the lower production costs achieved this quarter, as well as further mine development that will allow an additional 10,000 tonnes of waste and ore to be removed from the mine.

Investors also have drill results at high-value targets and updated 43-101’s to look forward to before year-end.

Below summarizes the Q3 production results across all three mines.

Q3 Production Results Summary for Sierra Metals

On a consolidated basis, processed ore has increased substantially over the last two quarters, along with metal production.

Tonnes Processed

Source: Company Filings.

Notably, on both a year-over-year and quarter-over-quarter basis, the metal production increases have outpaced tonnes processed for virtually all metals. While this doesn’t speak to the economics, it’s certainly the first step to a successful expansion.

Production %Change on a Year-over-Year Basis

Source: Company Filings.

Production %Change on a Quarter-over-Quarter Basis

Source: Company Filings.

Read the full review of Sierra Metals Q3 production results here.


Sierra Metals is a Market Awareness client of Capital 10X.

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.

Evan Veryard has a Bachelor's of Chemical Engineering from McGill University and a MaSc. of Chemical Engineering from RMC. He has over 6 years of research experience focusing on industrial materials. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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