Sierra Metals: Record Quarterly Production with a Ramp Up to Full Capacity

On October 14th Sierra Metals (NYSE:SMTS, TSX:SMT) announced record quarterly production results for Q3 2020.

Despite the challenging operational backdrop of 2020 with the headwinds of COVID-19, Sierra Metals was able to quickly restart operations and deliver record quarterly production of 35.2 million pounds of copper equivalent production – an increase of +9% year-over-year.

Luis Marchese, CEO of Sierra Metals stated the following in the press release about operating during the pandemic:

“The COVID-19 situation in Mexico and Peru is still very serious and remains an important factor in our daily operations at the mines. We are continuing to adhere to strict health protocols to protect our employees, the communities in which we operate and our operations”

Q3-2020 Production Highlights

Operational Highlights

Yauricocha Mine (Peru)

The Yauricocha Mine processed 318K tonnes during the quarter, an increase of 4% from the previous year. The company continues to process throughput at increased levels which helped recover some of the lower production experienced during the Q2 COVID-19 shutdowns.

Grades were lower for all metals this quarter due to a lower proportion of ore coming from a higher grade zone of the mine compared to Q3 2019.

Bolivar Mine (Mexico)

The Bolivar Mine processed 410K tonnes during the quarter, a strong increase of 24% from the previous year.

The processing increase along with higher gold recoveries resulted in a 37% y/y increase in copper equivalent pounds produced – a quarterly record for metal production as well as for ore throughput.

Cusi (Mexico)

The Cusi Mine recommenced production in Q3 after being in care and maintenance for Q2. The mine was in operations for 65 days of the quarter with ore throughput reaching over 1,000 tonnes per day, which is 34% higher than the rate achieved in Q3 2019.

Total quarterly throughput was 69,835 tonnes which was 1% below the Q3 2019 throughput due to lower number of operating days in Q3 2020.

Mine development and production were also focused on the Northeast Southwest vein system, as exploration results indicated higher grades.

Outlook

The company continues to ramp up operations to full capacity during a period of structurally strong commodity pricing due to record government money printing. We believe there are very few companies that offer this level of production growth with a quality underlying asset mix.

In August Capital 10X highlighted Sierra Metals as a stock that effectively serves as its own inflation protection commodity basket.

On top of the inflation protection, Sierra is priced at a deep discount to its mining peers offering investors an attractive margin of safety.

 

 

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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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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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