Sierra Metals (NYSE:SMTS, TSX:SMT) released Q2 2021 results; solid production and EBITDA growth year-over-year in the face of COVID-19 headwinds.
Sierra’s operations consist of 3 mines in 2 geologically prospective mining jurisdictions:
Metals that provide inflation protection versus inflation made up 67% of total revenue for the quarter: copper (37%), silver (25%) and gold (5%).
The company’s flagship mines, Yauricocha and Bolivar, have best-in-class production costs versus global copper mining peers. Both mines sit at the 31st percentile of the global copper industry cash cost curve.
Sierra Metals delivered solid production and profitability results in Q2 in the face of COVID-19 headwinds.
On a copper equivalent basis Sierra Metals produced 24.8 million pounds, delivering +9% year-over-year growth for the quarter despite the headwinds of COVID-19.
Processing throughput continues to ramp up at all mines, the company recorded record throughput at its Yauricocha Mine in Peru.
Looking ahead to the remainder of 2021 the company has provided investors the following outlook:
In the first half of 2021 Sierra Metals was impacted by operational challenges in relation to COVID-19, which resulted in lower workforce availability and additional costs. Management believes these issues are transitory and will not impact the company’s results in the medium and longer term.
The company has accordingly lowered its 2021 guidance to account for these near term headwinds. Copper equivalent production is now expected in the range of 110 to 115 million pounds for the full year.
2021 EBITDA guidance was lowered to $130 – $140 million from the previous guidance of $155 – $170 million. The mid-point of the new range represents a 2021 EBITDA increase of +39% from 2020.
Looking at updated valuation metrics (Bloomberg consensus, August 11th, 2021), Sierra Metals trades at a deeply discounted valuation multiple relative to its copper peers across all metrics.
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.
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