Sierra Metals: Strong 2020 Production & Bullish 2021 Guidance

On January 18th Sierra Metals (NYSE:SMTS, TSX:SMT) announced their 2020 full year production results along with production and EBITDA growth guidance.

The coronavirus has presented one of the most challenging global operating environments for mining companies, despite this challenging 2020 backdrop Sierra Metals was able to achieve strong full year production of 118.2 million pounds of copper equivalent production – an increase of +6% from 2019.

The company also announced a very bullish production and profitability outlook for 2021:

  • 2021 production guidance of between 130.0 – 141.0 million copper equivalent pounds, at the midpoint this implies a production growth of 14.4% from 2020.
  • 2021 EBITDA guidance at current spot prices is anticipated to be between $170 – $185 million, at the midpoint it implies an increase of 74% versus 2020 EBITDA consensus forecast (source: Bloomberg).

Luis Marchese, CEO of Sierra Metals stated the following about the company’s outlook for 2021:

“The company is providing a strong production, lower cost and substantial EBITDA growth guidance for 2021. Management forecasts higher throughput and metals production for the Company. More importantly we expect continued low cash costs and reduced all in costs as we ramp up production rates. This should continue to drive efficiency improvements, which should enhance even more our global cost competitive position in the copper industry”

Operational Highlights

Yauricocha Mine (Peru)

The Yauricocha Mine processed 1.12 million tonnes during 2020, which was in-line with the previous year. Copper equivalent production decreased by 4% in 2020 vs 2019.

Q4 2020 copper equivalent production decreased by 20% vs the previous year due to lower throughput and lower head grades, availability of manpower impacted mine development for the quarter.

Bolivar Mine (Mexico)

The Bolivar Mine processed 1.48 million tonnes during 2020, a strong increase of 17% from 2019. Copper equivalent production increased by 31% in 2020 vs. 2019.

Q4 2020 throughput increased by 10% vs the previous year despite manpower challenges due to COVID-19.

Cusi (Mexico)

The Cusi Mine processed 230 thousand tonnes during 2020, a decrease of 19% versus 2019, this is a result of the mine being in care and maintenance throughout Q2 2020 and part of Q3 2020.

Q4 2020 throughput increased by 35% from the previous year, and silver equivalent production increased by 83%.  Annual silver equivalent production was 3% below 2019 annual production.

 

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

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