Exhibit 99.1
SIERRA METALS INC.
Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(unaudited)
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November 5, 2020
Management’s Responsibility for Financial Reporting
Management is responsible for the preparation of the unaudited condensed interim consolidated financial statements. These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).
The Board of Directors of the Company is responsible for ensuring that Management fulfills its responsibilities for financial reporting. The Board of Directors carries out this responsibility through its Audit Committee, which is composed of three members. The committee meets various times during the year and at least once per year with the external auditors, with and without Management being present, to review the financial statements and to discuss audit and internal control related matters.
The Audit Committee of the Board of Directors approved the Company’s unaudited condensed interim consolidated financial statements.
“Luis Marchese” | “Ed Guimaraes” | |
Luis Marchese | Ed Guimaraes | |
CEO | Chief Financial Officer |
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Sierra Metals Inc.
Condensed Interim Consolidated Statements of Financial Position
As at September 30, 2020 and December 31, 2019
(In thousands of United States dollars, unaudited)
Note | September 30, 2020 | December 31, 2019 | ||||||||||
$ | $ | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 63,846 | 42,980 | ||||||||||
Trade and other receivables | 4 | 37,518 | 31,892 | |||||||||
Derivative instruments | 13 | 712 | - | |||||||||
Income tax receivable | 391 | 1,471 | ||||||||||
Prepaid expenses | 1,644 | 1,904 | ||||||||||
Inventories | 5 | 22,311 | 26,053 | |||||||||
126,422 | 104,300 | |||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment | 6 | 303,236 | 305,115 | |||||||||
Deferred income tax | 1,280 | 2,032 | ||||||||||
Total assets | 430,938 | 411,447 | ||||||||||
LIABILITIES | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued liabilities | 7 | 36,875 | 44,910 | |||||||||
Income tax payable | 4,112 | 1,355 | ||||||||||
Loans payable | 8 | 12,648 | - | |||||||||
Decommissioning liability | 3,278 | 865 | ||||||||||
Other liabilities | 6,578 | 7,248 | ||||||||||
63,491 | 54,378 | |||||||||||
Non-current liabilities: | ||||||||||||
Loans payable | 8 | 86,728 | 99,814 | |||||||||
Deferred income tax | 29,689 | 27,653 | ||||||||||
Decommissioning liability | 19,215 | 16,029 | ||||||||||
Other liabilities | 1,745 | 1,554 | ||||||||||
Total liabilities | 200,868 | 199,428 | ||||||||||
EQUITY | ||||||||||||
Share capital | 9 | 230,980 | 230,456 | |||||||||
Accumulated deficit | (49,423 | ) | (65,239 | ) | ||||||||
Other reserves | 11,050 | 11,566 | ||||||||||
Equity attributable to owners of the Company | 192,607 | 176,783 | ||||||||||
Non-controlling interest | 10 | 37,463 | 35,236 | |||||||||
Total equity | 230,070 | 212,019 | ||||||||||
Total liabilities and equity | 430,938 | 411,447 |
Contingencies (note 3, 8 and 17)
Approved on behalf of the Board and authorized for issue on November 5, 2020:
“Alberto Arias” | “Koko Yamamoto” | |
Alberto Arias | Koko Yamamoto | |
Chairman of the Board | Chairperson of the Audit Committee |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
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Sierra Metals Inc.
Condensed Interim Consolidated Statements of Income (Loss)
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, except per share amounts, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Note | $ | $ | $ | $ | ||||||||||||||||
Revenue | 16 | 73,211 | 64,551 | 170,670 | 164,404 | |||||||||||||||
Cost of sales | ||||||||||||||||||||
Mining costs | 11 | (29,247 | ) | (35,782 | ) | (88,638 | ) | (97,622 | ) | |||||||||||
Depletion, depreciation and amortization | 11 | (10,943 | ) | (10,449 | ) | (29,098 | ) | (26,662 | ) | |||||||||||
(40,190 | ) | (46,231 | ) | (117,736 | ) | (124,284 | ) | |||||||||||||
Gross profit from mining operations | 33,021 | 18,320 | 52,934 | 40,120 | ||||||||||||||||
General and administrative expenses | (4,516 | ) | (4,858 | ) | (14,594 | ) | (14,254 | ) | ||||||||||||
Selling expenses | (2,600 | ) | (2,689 | ) | (7,177 | ) | (6,792 | ) | ||||||||||||
Income from operations | 25,905 | 10,773 | 31,163 | 19,074 | ||||||||||||||||
Other income (loss) | (27 | ) | 335 | 790 | (345 | ) | ||||||||||||||
Foreign currency exchange gain (loss) | 365 | (338 | ) | 1,760 | (917 | ) | ||||||||||||||
Interest expense and other finance costs | (1,025 | ) | (1,417 | ) | (3,411 | ) | (3,710 | ) | ||||||||||||
Derivative instruments gains | 13 | 941 | - | 941 | - | |||||||||||||||
Income before income tax | 26,159 | 9,353 | 31,243 | 14,102 | ||||||||||||||||
Income tax (expense) recovery: | ||||||||||||||||||||
Current tax (expense) | (7,439 | ) | (5,810 | ) | (11,532 | ) | (12,195 | ) | ||||||||||||
Deferred tax recovery (expense) | 770 | (311 | ) | (1,668 | ) | 1,494 | ||||||||||||||
(6,669 | ) | (6,121 | ) | (13,200 | ) | (10,701 | ) | |||||||||||||
Net income | 19,490 | 3,232 | 18,043 | 3,401 | ||||||||||||||||
Net income (loss) attributable to: | ||||||||||||||||||||
Shareholders of the Company | 17,531 | 1,779 | 15,816 | (103 | ) | |||||||||||||||
Non-controlling interests | 1,959 | 1,453 | 2,227 | 3,504 | ||||||||||||||||
19,490 | 3,232 | 18,043 | 3,401 | |||||||||||||||||
Weighted average shares outstanding (000s) | ||||||||||||||||||||
Basic | 162,811 | 163,336 | 162,580 | 163,286 | ||||||||||||||||
Diluted | 164,220 | 165,046 | 163,989 | 163,286 | ||||||||||||||||
Basic earnings (loss) per share | 0.11 | 0.01 | 0.10 | (0.00 | ) | |||||||||||||||
Diluted earnings (loss) per share | 0.11 | 0.01 | 0.10 | (0.00 | ) |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
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Sierra Metals Inc.
Condensed Interim Consolidated Statements of Comprehensive Income (Loss)
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Net income | 19,490 | 3,232 | 18,043 | 3,401 | ||||||||||||
Other comprehensive income | ||||||||||||||||
Items that may be subsequently classified to net income: | ||||||||||||||||
Currency translation adjustments on foreign operations | (253 | ) | (238 | ) | (457 | ) | 162 | |||||||||
Total comprehensive income | 19,237 | 2,994 | 17,586 | 3,563 | ||||||||||||
Total comprehensive income attributable to shareholders | 17,278 | 1,541 | 15,359 | 59 | ||||||||||||
Non-controlling interests | 1,959 | 1,453 | 2,227 | 3,504 | ||||||||||||
Total comprehensive income attributable to shareholders | 19,237 | 2,994 | 17,586 | 3,563 |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
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Sierra Metals Inc.
Condensed Interim Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unaudited)
Common Shares | Other | Retained earnings | Total attributable | Non-controlling | Total | |||||||||||||||||||||||
Shares | Amounts | reserves | (accumulated deficit) | to shareholders | Interest | shareholders' equity | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Balance at January 1, 2020 | 162,115,380 | 230,456 | 11,566 | (65,239 | ) | 176,783 | 35,236 | 212,019 | ||||||||||||||||||||
Exercise of RSUs | 695,174 | 524 | (524 | ) | - | - | - | - | ||||||||||||||||||||
Share-based compensation expense | - | - | 465 | - | 465 | - | 465 | |||||||||||||||||||||
Total comprehensive income (loss) | - | - | (457 | ) | 15,816 | 15,359 | 2,227 | 17,586 | ||||||||||||||||||||
Balance at September 30, 2020 | 162,810,554 | 230,980 | 11,050 | (49,423 | ) | 192,607 | 37,463 | 230,070 |
Common Shares | Other | Retained earnings | Total attributable | Non-controlling | Total | |||||||||||||||||||||||
Shares | Amounts | reserves | (accumulated deficit) | to shareholders | Interest | shareholders' equity | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Balance at January 1, 2019 | 163,427,336 | 231,792 | 10,870 | (69,307 | ) | 173,355 | 30,250 | 203,605 | ||||||||||||||||||||
Exercise of RSUs | 700,698 | 1,145 | (1,145 | ) | - | - | - | - | ||||||||||||||||||||
Share-based compensation expense | - | - | 821 | - | 821 | - | 821 | |||||||||||||||||||||
Shares repurchased and cancelled | (1,491,534 | ) | (1,833 | ) | - | (346 | ) | (2,179 | ) | - | (2,179 | ) | ||||||||||||||||
Total comprehensive income (loss) | - | - | 162 | (103 | ) | 59 | 3,504 | 3,563 | ||||||||||||||||||||
Balance at September 30, 2019 | 162,636,500 | 231,104 | 10,708 | (69,756 | ) | 172,056 | 33,754 | 205,810 |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
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Sierra Metals Inc.
Condensed Interim Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Note | $ | $ | $ | $ | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Net income from operations | 19,490 | 3,232 | 18,043 | 3,401 | ||||||||||||||||
Adjustments for: | ||||||||||||||||||||
Items not affecting cash: | ||||||||||||||||||||
Depletion, depreciation and amortization | 10,965 | 10,593 | 29,264 | 26,907 | ||||||||||||||||
Share-based compensation | 199 | 138 | 465 | 821 | ||||||||||||||||
Loss on disposals and write-offs | 3 | 550 | 956 | 1,008 | ||||||||||||||||
Interest expense and other finance costs | 1,278 | 1,417 | 3,664 | 3,710 | ||||||||||||||||
Net realizable value adjustment to inventory | - | - | 1,216 | - | ||||||||||||||||
Current income tax expense | 7,439 | 5,810 | 11,532 | 12,195 | ||||||||||||||||
Deferred income taxes expense (recovery) | (770 | ) | 311 | 1,668 | (1,494 | ) | ||||||||||||||
Unrealized derivative gains | 13 | (712 | ) | - | (712 | ) | - | |||||||||||||
Unrealized foreign currency exchange (gain) loss | (40 | ) | (220 | ) | 650 | (140 | ) | |||||||||||||
Operating cash flows before movements in working capital | 37,852 | 21,831 | 66,746 | 46,408 | ||||||||||||||||
Net changes in non-cash working capital items | 15 | (3,298 | ) | (1,863 | ) | (11,677 | ) | (6,765 | ) | |||||||||||
Decomissioning liabilities settled | (29 | ) | (56 | ) | (272 | ) | (477 | ) | ||||||||||||
Income tax paid | (2,033 | ) | (4,867 | ) | (7,625 | ) | (17,240 | ) | ||||||||||||
Cash generated from operating activities | 32,492 | 15,045 | 47,172 | 21,926 | ||||||||||||||||
Cash (used in) investing activities | ||||||||||||||||||||
Capital expenditures | (8,495 | ) | (13,140 | ) | (22,956 | ) | (41,200 | ) | ||||||||||||
Cash (used in) investing activities | (8,495 | ) | (13,140 | ) | (22,956 | ) | (41,200 | ) | ||||||||||||
Cash from (used in) financing activities | ||||||||||||||||||||
Proceeds from issuance of loans, net of transaction costs | - | - | - | 99,233 | ||||||||||||||||
Repayment of loans and credit facilities | - | - | - | (56,193 | ) | |||||||||||||||
Loans interest paid | 8 | (886 | ) | (1,350 | ) | (3,208 | ) | (3,287 | ) | |||||||||||
Cash paid to repurchase shares | - | (270 | ) | - | (1,833 | ) | ||||||||||||||
Cash from (used in) financing activities | (886 | ) | (1,620 | ) | (3,208 | ) | 37,920 | |||||||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (8 | ) | (97 | ) | (142 | ) | (44 | ) | ||||||||||||
Increase in cash and cash equivalents | 23,103 | 188 | 20,866 | 18,602 | ||||||||||||||||
Cash and cash equivalents, beginning of period | 40,743 | 40,246 | 42,980 | 21,832 | ||||||||||||||||
Cash and cash equivalents, end of period | 63,846 | 40,434 | 63,846 | 40,434 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
1 | Description of business and nature of operations |
Sierra Metals Inc. (“Sierra Metals” or the “Company”) was incorporated under the Canada Business Corporations Act on April 11, 1996, and is a Canadian and Peruvian listed mining company focused on the production, exploration and development of precious and base metals in Peru and Mexico. The Company’s key priorities are to generate strong cash flows and to maximize shareholder value.
The Company’s shares are listed on the TSX, NYSE American Exchange, and the Bolsa de Valores de Lima (“BVL”) and its registered office is 161 Bay Street, Suite 4260, Toronto, Ontario, M5J 2S1, Canada.
The Company owns an 81.84% interest in the polymetallic Yauricocha Mine in Peru and a 100% interest in the Bolivar and Cusi Mines in Mexico. In addition to its producing mines, the Company also owns various exploration projects in Mexico and Peru.
2 | Significant accounting policies |
The significant accounting policies used in the preparation of these condensed interim consolidated financial statements are as follows:
(a) | Basis of preparation |
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019. The Company’s significant accounting policies were presented in note 2 to the consolidated financial statements for the year ended December 31, 2019, and have been consistently applied in the preparation of these condensed interim consolidated financial statements. These condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on November 5, 2020.
(b) | Basis of consolidation |
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries, which are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date that control commences until the date that control ceases.
Non-controlling interests represent equity interests in subsidiaries owned by outside parties. Changes in the parent company’s ownership interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
2 | Significant accounting policies (continued) |
The principal subsidiaries of the Company and their geographical locations as at September 30, 2020 are as follows:
Name of the subsidiary | Ownership interest | Location | ||||
Dia Bras EXMIN Resources Inc. | 100 | % | Canada | |||
Sociedad Minera Corona, S. A. (“Corona”) 1 | 81.84 | % | Perú | |||
Dia Bras Peru, S. A. C. (“Dia Bras Peru”) 1 | 100 | % | Perú | |||
Dia Bras Mexicana, S. A. de C. V. (“Dia Bras Mexicana”) | 100 | % | México | |||
Servicios de Minería de la Sierra, S. A. de C. V. | 100 | % | México | |||
Bolívar Administradores, S. A. de C. V. | 100 | % | México | |||
EXMIN, S. A. de C. V. | 100 | % | México | |||
Servicios de Produccion Y Extraccion de Chihuahua, S.A. de C.V | 100 | % | México | |||
Asesores Administrativos Y de Recursos Humanos, S.A. de C.V | 100 | % | México |
1The Company, through its wholly owned subsidiary Dia Bras Peru, holds an 81.84% interest in Corona, which represents 92.33% of the voting shares. The Company consolidates Corona's financial results and records a non-controlling interest for the 18.16% that it does not own.
3 | COVID-19 estimation uncertainty |
In preparing the Company’s consolidated financial statements, the management makes judgments in applying its accounting policies. The areas of policy judgment are consistent with those reported in the Company’s 2019 annual consolidated financial statements. In addition, the Company makes assumptions about the future in deriving estimates used in preparing our consolidated financial statements. As disclosed in the 2019 annual consolidated financial statements, sources of estimation uncertainty include estimates used to determine the recoverable amounts of long-lived assets, recoverable reserves and resources, the provision for income taxes and the related deferred tax assets and liabilities and the valuation of other assets and liabilities including decommissioning and restoration provisions.
In March 2020, the World Health Organization declared a global pandemic related to COVID-19. The current and expected impacts on global commerce are anticipated to be far-reaching. To date there have been significant stock market volatility, significant volatility in commodity and foreign exchange markets, restrictions on the conduct of business in many jurisdictions and the global movement of people and some goods has become restricted. There is significant ongoing uncertainty surrounding COVID-19 and the extent and duration of the impacts that it may have on demand and prices for the commodities the Company produces, on the Company’s suppliers, on its employees and on global financial markets.
On March 17, 2020, the Peruvian government announced a state of emergency to contain the advancement of COVID-19, as a result of which the Yauricocha mine operated at reduced capacity, maintaining an essential crew at site. The mine started ramping up its operations in June 2020 after the inclusion of mining and related activities in phase 2 of the government’s economic recovery plan. Similarly, on March 31, 2020, the Mexican Federal Government also announced suspension of all non-essential services, causing the Company to slow down its mining operations at Bolivar and placing Cusi under care and maintenance. In June, the Company resumed normal operations at Bolivar as the Government deemed mining to be an essential service effective June 1, 2020. After remaining under care and maintenance throughout the second quarter, the Cusi Mine resumed operations and production on July 28, 2020. Despite lifting of restrictions in these countries, the Company continues to experience challenges related to movement of manpower and supplies, which is impacting operations, development and exploration activities at minesites. Additionally, the Company has incurred additional costs related to COVID-19 such as cleaning and sanitization activities, purchase of disinfectants and quarantine costs for employees and contractors.
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
The Company continues to act to protect the safety and health of its employees, contractors and the communities in which it operates in accordance with guidance from governments and public health authorities. These above-mentioned challenges and measures taken by the Company, combined with commodity market fluctuations resulting from COVID-19 have affected our financial results for the nine months ended September 30, 2020.
4 | Trade and other receivables |
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Trade receivables | 28,796 | 20,549 | ||||||
Sales tax and other receivables | 8,722 | 11,343 | ||||||
37,518 | 31,892 |
5 | Inventories |
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Stockpiles | 1,107 | 4,096 | ||||||
Concentrates | 3,965 | 4,376 | ||||||
Supplies and spare parts | 17,239 | 17,581 | ||||||
22,311 | 26,053 |
Cost of sales are comprised of production costs of sales and depletion, depreciation and amortization, and represent the cost of inventories recognized as an expense for the three and nine-month periods ended September 30, 2020 of $40,190 and $117,736 (2019 - $46,231 and $124,284), respectively. During the three and nine months ended September 30, 2020, the Company wrote down stockpile and concentrate inventory to its net realizable value, recording a charge of $nil and $1,216 (2019 - $nil and $nil) respectively.
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
6 | Property, plant and equipment |
Plant and equipment | Mining properties | Assets under construction | Exploration and evaluation expenditure | Total | ||||||||||||||||
Cost | $ | $ | $ | $ | $ | |||||||||||||||
Balance as of January 1, 2019 | 239,921 | 436,810 | 47,482 | 64,524 | 788,737 | |||||||||||||||
Additions | 14,455 | 6,249 | 26,046 | 8,751 | 55,501 | |||||||||||||||
Change in estimate of decomissioning liability | 3,713 | - | - | - | 3,713 | |||||||||||||||
Disposals | (11,768 | ) | - | (28 | ) | - | (11,796 | ) | ||||||||||||
Transfers | 23,348 | 4,016 | (23,348 | ) | (4,016 | ) | - | |||||||||||||
Balance as of December 31, 2019 | 269,669 | 447,075 | 50,152 | 69,259 | 836,155 | |||||||||||||||
Additions | 4,157 | 4,079 | 6,399 | 8,274 | 22,909 | |||||||||||||||
Change in estimate of decomissioning liability | 5,432 | - | - | - | 5,432 | |||||||||||||||
Disposals | (1,520 | ) | - | (9 | ) | (915 | ) | (2,444 | ) | |||||||||||
Transfers | 14,319 | - | (14,319 | ) | - | - | ||||||||||||||
Balance as of September 30, 2020 | 292,057 | 451,154 | 42,223 | 76,618 | 862,052 |
Plant and equipment | Mining properties | Assets under construction | Exploration and evaluation expenditure | Total | ||||||||||||||||
Accumulated depreciation | $ | $ | $ | $ | $ | |||||||||||||||
Balance as of January 1, 2019 | 156,223 | 335,960 | - | 13,041 | 505,224 | |||||||||||||||
Depletion, depreciation and amortization | 21,447 | 15,093 | - | - | 36,540 | |||||||||||||||
Disposals | (10,724 | ) | - | - | - | (10,724 | ) | |||||||||||||
Balance as of December 31, 2019 | 166,946 | 351,053 | - | 13,041 | 531,040 | |||||||||||||||
Depletion, depreciation and amortization | 16,078 | 13,186 | - | - | 29,264 | |||||||||||||||
Disposals | (1,488 | ) | - | - | - | (1,488 | ) | |||||||||||||
Balance as of September 30, 2020 | 181,536 | 364,239 | - | 13,041 | 558,816 | |||||||||||||||
Net Book Value - September 30, 2020 | 110,521 | 86,915 | 42,223 | 63,577 | 303,236 | |||||||||||||||
Net Book Value - December 31, 2019 | 102,723 | 96,022 | 50,152 | 56,218 | 305,115 | |||||||||||||||
Net Book Value - December 31, 2018 | 83,698 | 100,850 | 47,482 | 51,483 | 283,513 |
7 | Accounts payable and accrued liabilities |
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Trade payables | 21,435 | 30,422 | ||||||
Other payables and accrued liabilities | 15,440 | 14,488 | ||||||
36,875 | 44,910 |
All accounts payable and accrued liabilities are expected to be settled within 12 months.
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
8 | Loans payable |
Senior Secured Corporate Credit Facility with Banco de Crédito del Perú (“BCP”)
On March 11, 2019, the Company entered into a six-year senior secured corporate credit facility (“Corporate Facility”) with BCP that provided funding of up to $100 million effective March 8, 2019. The Corporate Facility provided the Company with additional liquidity and the financial flexibility to fund future capital projects in Mexico as well as corporate working capital requirements. The Company also used the proceeds of the new facility to repay existing debt balances. The most significant terms of the agreement were:
· | Term: 6-year term maturing March 2025 |
· | Principal Repayment Grace Period: 2 years |
· | Principal Repayment Period: 4 years |
· | Interest Rate: 3.15% + LIBOR 3M |
The Corporate Facility is subject to customary covenants, including consolidated net leverage and interest coverage ratios and customary events of default. The Company is in compliance with all covenants as at September 30, 2020.
On March 11, 2019 DBP drew down $21.4 million from this facility. On May 8, 2019 DBP drew down another $48.6 million from this facility, and on June 29, 2019, DBP drew down the remaining $30 million available from this facility. Interest is payable quarterly and interest payments began on the drawn and undrawn portions of the facility starting in June 2019. During the nine months ended September 30, 2020, DBP made interest payments of $3,208 (2019 - $3,263).
Principal payments on the amount drawn from the facility are due starting in June 2021. The Company repaid the amount owed on the Corona Acquisition Loan on May 11, 2019 using funds drawn from the new facility. The loan is recorded at amortized cost and is being accreted to face value over 6 years using an effective interest rate of 3.47%.
9 | Share capital and share-based payments |
(a) | Authorized capital |
The Company has an unlimited amount of authorized common shares with no par value.
(b) | Restricted share units (“RSUs”) |
The changes in RSU’s issued during the nine months ended September 30, 2020 and the year ended December 31, 2019 was as follows:
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Outstanding, beginning of period | 1,630,423 | 1,380,085 | ||||||
Granted | 898,857 | 1,356,418 | ||||||
Exercised | (695,174 | ) | (700,698 | ) | ||||
Forfeited | (425,048 | ) | (405,382 | ) | ||||
Outstanding, end of period | 1,409,058 | 1,630,423 |
12 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
9 | Share capital and share-based payments (continued) |
On June 14, 2017, the Company’s shareholders approved the RSU plan, whereby RSUs may be granted to directors, officers, consultants or employees at the discretion of the Board of Directors. The RSU plan provides for the issuance of common shares from treasury upon the exercise of vested RSUs at no additional consideration. There is no cash settlement related to the vesting of RSU’s as they are all settled with equity. The current maximum number of common shares authorized for issue under the RSU plan is 5% of the number of issued and outstanding common shares of the Company at the time of grant. The RSUs have vesting conditions determined by the Board of Directors, and the vesting conditions are non-market conditions and are not performance based.
During the nine months ended September 30, 2020, the Company granted RSU’s totaling 898,857 which had a fair value of C$1.11 based on the closing share price at grant date. RSUs exercised during the nine months ended September 30, 2020 had a weighted average fair value of C$2.60 (2019 - $2.17) and the RSUs forfeited had a weighted average fair value of C$1.88 (2019 – C$2.81) As at September 30, 2020, the weighted average fair value of the RSUs outstanding is C$1.57 (2019 – C$2.35).
10 | Non-controlling interest |
Set out below is the summarized financial information of our subsidiary Corona which has a material non-controlling interest (note 2(b)). The information below is before intercompany eliminations.
Summarized balance sheet | ||||||||
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
$ | $ | |||||||
Current | ||||||||
Assets | 108,269 | 90,438 | ||||||
Liabilities | (30,668 | ) | (27,863 | ) | ||||
Total current net assets | 77,601 | 62,575 | ||||||
Non-current | ||||||||
Assets | 174,063 | 171,884 | ||||||
Liabilities | (44,771 | ) | (39,915 | ) | ||||
Total non-current net assets | 129,292 | 131,969 | ||||||
Net assets | 206,893 | 194,544 |
Summarized income statement | ||||||||||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Revenue | 44,580 | 44,427 | 101,703 | 113,752 | ||||||||||||
Income before income tax | 17,404 | 14,082 | 25,276 | 29,864 | ||||||||||||
Income tax expense | (6,609 | ) | (6,080 | ) | (13,013 | ) | (10,567 | ) | ||||||||
Total income | 10,795 | 8,002 | 12,263 | 19,297 | ||||||||||||
Total income attributable to non-controlling interests | 1,959 | 1,453 | 2,227 | 3,504 |
13 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
Summarized cash flows | ||||||||||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Cash generated from operating activities | 24,245 | 20,435 | 41,564 | 45,539 | ||||||||||||
Net changes in non cash working capital items | 218 | (4,767 | ) | (2,746 | ) | (7,029 | ) | |||||||||
Decomissioning liabilities settled | (29 | ) | (56 | ) | (272 | ) | (477 | ) | ||||||||
Income taxes paid | (1,981 | ) | (4,867 | ) | (7,309 | ) | (17,240 | ) | ||||||||
Net cash generated from operating activities | 22,453 | 10,745 | 31,237 | 20,793 | ||||||||||||
Net cash used in investing activities | (2,841 | ) | (6,833 | ) | (12,508 | ) | (16,608 | ) | ||||||||
Net cash used in financing activities | (350 | ) | (44 | ) | (1,380 | ) | 6,867 | |||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | - | (30 | ) | (41 | ) | (2 | ) | |||||||||
Increase in cash and cash equivalents | 19,262 | 3,838 | 17,308 | 11,050 | ||||||||||||
Cash and cash equivalents, beginning of period | 33,050 | 25,110 | 35,004 | 17,898 | ||||||||||||
Cash and cash equivalents, end of period | 52,312 | 28,948 | 52,312 | 28,948 |
11 | Expenses by nature |
Mining costs include mine production costs, milling and transport costs, royalty expenses, site administration costs but not the primary mine development costs which are capitalized and depreciated over the specific useful life or reserves related to that development and ore included in depreciation and amortization. The mining costs for the three and nine months ended September 30, 2020 and 2019 relate to the Yauricocha, Bolivar and Cusi Mines.
Mining costs
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Employee compensation and benefits | 6,861 | 8,141 | 19,351 | 21,472 | ||||||||||||
Third party and contractors costs | 12,430 | 16,078 | 36,451 | 42,500 | ||||||||||||
Depreciation | 10,943 | 10,449 | 29,098 | 26,662 | ||||||||||||
Costs associated with illegal strike action | - | 589 | - | 1,856 | ||||||||||||
Consumables | 8,107 | 10,298 | 22,815 | 28,727 | ||||||||||||
Changes in inventory and other costs | 1,849 | 676 | 10,021 | 3,067 | ||||||||||||
40,190 | 46,231 | 117,736 | 124,284 |
12 | Segment reporting |
The Company primarily manages its business on the basis of the geographical location of its operating mines. The Company’s operating segments are based on the reports reviewed by the senior management group that are used to make strategic decisions. The Chief Executive Officer considers the business from a geographic perspective considering the performance of the Company’s business units. The corporate division only earns income that is considered to be incidental to the activities of the Company and thus it does not meet the definition of an operating segment; as such it has been included within “other reconciling items.”
The reporting segments identified are the following:
· | Peru – Yauricocha Mine |
· | Mexico – Bolivar and Cusi Mines |
14 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
12 | Segment reporting (continued) |
The following is a summary of the reported amounts of net income (loss) and the carrying amounts of assets and liabilities by operating segment:
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Nine months ended September 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 101,703 | 58,654 | 10,313 | - | 170,670 | |||||||||||||||
Production cost of sales | (51,573 | ) | (26,298 | ) | (10,767 | ) | - | (88,638 | ) | |||||||||||
Depletion of mineral property | (6,192 | ) | (2,803 | ) | (1,356 | ) | - | (10,351 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (9,089 | ) | (7,378 | ) | (2,280 | ) | - | (18,747 | ) | |||||||||||
Cost of sales | (66,854 | ) | (36,479 | ) | (14,403 | ) | - | (117,736 | ) | |||||||||||
Gross profit (loss) from mining operations | 34,849 | 22,175 | (4,090 | ) | - | 52,934 | ||||||||||||||
Income (loss) from operations | 24,400 | 15,166 | (5,120 | ) | (3,283 | ) | 31,163 | |||||||||||||
Interest expense and other finance costs | (2,368 | ) | 11 | (69 | ) | (985 | ) | (3,411 | ) | |||||||||||
Other income (expense) | (633 | ) | 1,276 | 162 | (15 | ) | 790 | |||||||||||||
Foreign currency exchange gain (loss) | 59 | 1,020 | 137 | 544 | 1,760 | |||||||||||||||
Derivative instruments gains | - | - | 941 | - | 941 | |||||||||||||||
Income (loss) before income tax | 21,458 | 17,473 | (3,949 | ) | (3,739 | ) | 31,243 | |||||||||||||
Income tax expense | (13,012 | ) | (166 | ) | (22 | ) | - | (13,200 | ) | |||||||||||
Net income (loss) from operations | 8,446 | 17,307 | (3,971 | ) | (3,739 | ) | 18,043 |
Peru | Mexico | Canada | Total | |||||||||||||
September 30, 2020 | $ | $ | $ | $ | ||||||||||||
Total assets | 259,220 | 168,121 | 3,597 | 430,938 | ||||||||||||
Non-current assets | 174,466 | 129,993 | 57 | 304,516 | ||||||||||||
Total liabilities | 144,575 | 25,397 | 30,896 | 200,868 |
(1) Includes provisional pricing adjustments of: $495 for Yauricocha, $(110) for Bolivar, and $326 for Cusi. |
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Three months ended September 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 44,580 | 23,308 | 5,323 | - | 73,211 | |||||||||||||||
Production cost of sales | (17,417 | ) | (8,596 | ) | (3,234 | ) | - | (29,247 | ) | |||||||||||
Depletion of mineral property | (2,447 | ) | (1,127 | ) | (648 | ) | - | (4,222 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (3,651 | ) | (2,622 | ) | (448 | ) | - | (6,721 | ) | |||||||||||
Cost of sales | (23,515 | ) | (12,345 | ) | (4,330 | ) | - | (40,190 | ) | |||||||||||
Gross profit (loss) from mining operations | 21,065 | 10,963 | 993 | - | 33,021 | |||||||||||||||
Income (loss) from operations | 17,364 | 8,963 | 645 | (1,067 | ) | 25,905 | ||||||||||||||
Interest expense and other finance costs | (705 | ) | 53 | (63 | ) | (310 | ) | (1,025 | ) | |||||||||||
Other income (expense) | (35 | ) | (10 | ) | 20 | (2 | ) | (27 | ) | |||||||||||
Foreign currency exchange gain (loss) | 23 | 270 | 54 | 18 | 365 | |||||||||||||||
Derivative instruments gains | - | - | 941 | - | 941 | |||||||||||||||
Income (loss) before income tax | 16,647 | 9,276 | 1,597 | (1,361 | ) | 26,159 | ||||||||||||||
Income tax expense | (6,608 | ) | (52 | ) | (9 | ) | - | (6,669 | ) | |||||||||||
Net income (loss) from operations | 10,039 | 9,224 | 1,588 | (1,361 | ) | 19,490 |
(1) Includes provisional pricing adjustments of: $1,244 for Yauricocha, $(971) for Bolivar, and $246 for Cusi. |
15 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
12 | Segment reporting (continued) |
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Nine months ended September 30, 2019 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 113,752 | 40,713 | 9,939 | - | 164,404 | |||||||||||||||
Production cost of sales | (58,210 | ) | (25,701 | ) | (13,711 | ) | - | (97,622 | ) | |||||||||||
Depletion of mineral property | (10,413 | ) | (2,488 | ) | (622 | ) | - | (13,523 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (4,821 | ) | (6,626 | ) | (1,692 | ) | - | (13,139 | ) | |||||||||||
Cost of sales | (73,444 | ) | (34,815 | ) | (16,025 | ) | - | (124,284 | ) | |||||||||||
Gross profit (loss) from mining operations | 40,308 | 5,898 | (6,086 | ) | - | 40,120 | ||||||||||||||
Income (loss) from operations | 28,399 | 1,591 | (6,839 | ) | (4,077 | ) | 19,074 | |||||||||||||
Loss on spin out of Plexmar net assets | - | - | - | - | - | |||||||||||||||
Interest expense and other finance costs | (3,039 | ) | - | (417 | ) | (254 | ) | (3,710 | ) | |||||||||||
Other income (expense) | 1,582 | (1,381 | ) | (244 | ) | (302 | ) | (345 | ) | |||||||||||
Foreign currency exchange gain (loss) | (775 | ) | 20 | 3 | (165 | ) | (917 | ) | ||||||||||||
Income (loss) before income tax | 26,167 | 230 | (7,497 | ) | (4,798 | ) | 14,102 | |||||||||||||
Income tax expense | (10,567 | ) | (110 | ) | (24 | ) | - | (10,701 | ) | |||||||||||
Net income (loss) from operations | 15,600 | 120 | (7,521 | ) | (4,798 | ) | 3,401 |
September 30, 2019 | Peru | Mexico | Canada | Total | ||||||||||||
$ | $ | $ | $ | |||||||||||||
Total assets | 228,960 | 161,385 | 11,186 | 401,531 | ||||||||||||
Non-current assets | 165,133 | 133,445 | 100 | 298,678 | ||||||||||||
Total liabilities | 131,367 | 33,539 | 30,815 | 195,721 |
(1) Includes provisional pricing adjustments of: $671 for Yauricocha, $(12) for Bolivar, and $(4) for Cusi. |
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Three months ended September 30, 2019 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 44,427 | 14,675 | 5,449 | - | 64,551 | |||||||||||||||
Production cost of sales | (20,753 | ) | (8,175 | ) | (6,854 | ) | - | (35,782 | ) | |||||||||||
Depletion of mineral property | (3,861 | ) | (773 | ) | (245 | ) | - | (4,879 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (2,385 | ) | (2,417 | ) | (768 | ) | - | (5,570 | ) | |||||||||||
Cost of sales | (26,999 | ) | (11,365 | ) | (7,867 | ) | - | (46,231 | ) | |||||||||||
Gross profit (loss) from mining operations | 17,428 | 3,310 | (2,418 | ) | - | 18,320 | ||||||||||||||
Income (loss) from operations | 13,258 | 3,922 | (5,247 | ) | (1,160 | ) | 10,773 | |||||||||||||
Interest expense and other finance costs | (1,150 | ) | - | (13 | ) | (254 | ) | (1,417 | ) | |||||||||||
Other income (expense) | 780 | (338 | ) | (73 | ) | (34 | ) | 335 | ||||||||||||
Foreign currency exchange gain (loss) | (216 | ) | (215 | ) | (39 | ) | 132 | (338 | ) | |||||||||||
Income (loss) before income tax | 12,672 | 3,369 | (5,372 | ) | (1,316 | ) | 9,353 | |||||||||||||
Income tax expense | (6,080 | ) | (32 | ) | (9 | ) | - | (6,121 | ) | |||||||||||
Net income (loss) from operations | 6,592 | 3,337 | (5,381 | ) | (1,316 | ) | 3,232 |
(1) Includes provisional pricing adjustments of: $(5) for Yauricocha, $117 for Bolivar, and $13 for Cusi. |
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
12 | Segment reporting (continued) |
For the nine months ended September 30, 2020, 60% of the revenues ($101,703) were from six customers based in Peru and the remaining 40% of the revenues ($68,967) were from two customers based in Mexico. In Peru, the two major customers accounted for 75% of the revenues. In Mexico, the two customers accounted for 85% and 15% of the revenues.
For the nine months ended September 30, 2019, 69% of the revenues ($113,752) were from two customers based in Peru and the remaining 31% of the revenues ($50,652) were from two customers based in Mexico. In Peru, the two customers accounted for 74% and 26% of the revenues. In Mexico, the two customers accounted for 82% and 18% of the revenues.
As at September 30, 2020, the trade receivable balance of $28,976 includes amounts outstanding of $19,572 from the six customers in Peru and $9,224 from two customers in Mexico.
13 | Derivative instruments |
In accordance with IFRS 9, the Company records the fair value of the derivative instruments (fixed price contracts) at the end of the reporting period as an asset (in the money) or liability (out of the money). The mark-to-market fair value of the Company’s outstanding derivative instruments is based on independently provided market rates and determined using standard valuation techniques. At the end of the reporting period, a corresponding gain or loss is recorded in the Condensed Interim Consolidated Statements of Income (Loss) as ‘Derivative Instruments Gains’.
These derivatives are significantly driven by the market price of silver and as noted in Note 14, these derivatives are considered as Level 2 measurements.
The Company had the following outstanding derivative instruments at September 30, 2020:
Contract Prices | Cash settlement | Contract Quantities | ||||||
Silver | ||||||||
Silver forwards (October to December) | $26.55 - $26.80 / ounce | Monthly | 240,000 ounces |
The outstanding balance of $712 included as ‘Derivative Instruments’ corresponds to the unrealized portion of these contracts.
For the three-month period and nine-month period ended September 30, 2020, the Company received $229 ($nil for three-month period and nine-month period ended September 30, 2019), in settlement of the derivative instruments that matured in the period.
Changes in the fair value of the Company’s outstanding derivative instruments are recognized through the Company’s income statement as non-cash derivative instrument unrealized gains or losses. At maturity of each contract, a cash settlement takes place resulting in a corresponding reduction in the carrying value of the derivative instruments.
The Company recorded fair value adjustments on its derivative instruments for the three and nine months ended September 30, 2020 as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Change in unrealized fair value | 712 | - | 712 | - | ||||||||||||
Realized gain on cash settlements of derivative instruments | 229 | - | 229 | - | ||||||||||||
941 | - | 941 | - |
17 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
14 | Financial instruments and financial risk management |
The Company’s financial instruments include cash and cash equivalents, trade receivables, derivative instruments, financial assets, accounts payable and loans payable.
(a) | Fair value of financial instruments |
As at September 30, 2020 and December 31, 2019, the fair value of the current financial instruments approximates their carrying value.
(b) | Fair value hierarchy |
Financial instruments carried at fair value are categorized based on a three level valuation hierarchy that reflects the significance of inputs used in making the fair value measurements as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)
The Company’s metal concentrate sales are subject to provisional pricing with the selling prices adjusted at the end of the quotational period. The Company’s trade receivables are marked-to-market at each reporting period based on quoted forward prices for which there exists an active commodity market.
Derivative instruments are measured at fair value using the forward price curves for each commodity.
Level 3 – inputs for the asset or liability that are not based on observable market data.
At September 30, 2020 and December 31, 2019, the levels in the fair value hierarchy into which the Company’s financial assets and liabilities are measured and recognized on the Consolidated Statement of Financial Position are categorized as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||
Recurring measurements | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Trade receivables (1) | - | 28,796 | - | 28,796 | - | 20,549 | - | 20,549 | ||||||||||||||||
Derivative instruments (2) | - | 712 | - | 712 | - | - | - | - | ||||||||||||||||
- | 29,508 | - | 29,508 | - | 20,549 | - | 20,549 |
(1)Trade receivables exclude sales and income tax receivables.
(2)See note 13.
There were no transfers between Level 1, Level 2, and Level 3 during the nine months ended September 30, 2020 and 2019.
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Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
15 | Supplemental cash flow information |
Changes in working capital
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
$ | $ | $ | $ | |||||||||
Trade and other receivables | (11,783 | ) | (1,095 | ) | (5,626 | ) | (7,734 | ) | ||||
Financial and other assets | (689 | ) | (596 | ) | 307 | (968 | ) | |||||
Inventories | (1,499 | ) | (871 | ) | 2,526 | (2,523 | ) | |||||
Accounts payable and accrued liabilities | 8,711 | (2,710 | ) | (8,035 | ) | 4,186 | ||||||
Other liabilities | 1,962 | 3,409 | (849 | ) | 274 | |||||||
(3,298 | ) | (1,863 | ) | (11,677 | ) | (6,765 | ) |
16 | Revenues from mining operations |
The Company has recognized the following amounts related to revenue in the consolidated statements of income:
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||
$ | $ | $ | $ | |||||||||
Revenues from contracts with customers | 72,692 | 64,410 | 169,959 | 163,749 | ||||||||
Provisional pricing adjustments on concentrate sales | 519 | 141 | 711 | 655 | ||||||||
Total revenues | 73,211 | 64,551 | 170,670 | 164,404 |
The following table sets out the disaggregation of revenue by metals and form of sale:
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||
$ | $ | $ | $ | |||||||||
Revenues from contracts with customers: | ||||||||||||
Silver | 18,152 | 17,389 | 37,480 | 36,340 | ||||||||
Copper | 26,976 | 22,433 | 67,063 | 61,031 | ||||||||
Lead | 6,545 | 8,698 | 16,504 | 20,157 | ||||||||
Zinc | 14,886 | 14,726 | 33,228 | 42,563 | ||||||||
Gold | 6,133 | 1,164 | 15,684 | 3,658 | ||||||||
Total revenues from contracts with customers | 72,692 | 64,410 | 169,959 | 163,749 |
17 | Contingencies |
In 2009, a personal action was filed in Mexico against DBM by an individual, Ambrosio Bencomo Muñoz, as administrator of the intestate succession of Ambrosio Bencomo Casavantes y Jesus Jose Bencomo Muñoz, claiming the annulment and revocation of the purchase agreement of two mining concessions, Bolívar III and IV between Minera Senda de Plata S.A. de C.V. and Ambrosio Bencomo Casavantes, and with this, the nullity of purchase agreement between DBM and Minera Senda de Plata S.A. de C.V. In June 2011, the Sixth Civil Court of Chihuahua, Mexico, ruled that the claim was unfounded and dismissed the case, the plaintiff appealed to the State Court. On November 3, 2014, the Sixth Civil Court of Chihuahua ruled against the plaintiff, noting that the legal route by which the plaintiff presented his claim was not admissible. On February 17, 2017 the State Court issued a ruling dismissing the arguments of the plaintiff. Sierra Metals is attentive to any legal action that is generated in relation to this process.
19 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and 2019
(In thousands of United States dollars, unless otherwise stated, unaudited)
Carlos Emilio Seijas Bencomo, a relative of Ambrosio Bencomo Casavantes and Ambrosio Bencomo Muñoz, following the steps of the Ambrosio lawsuit, filed a similar personal action to claim annulment and revocation of the purchase of the two mining concessions. In May 31, 2019, the Second Federal Civil Court issued a resolution ordering: a) the annulment and revocation of the purchase agreement of the two mining concessions, Bolívar III and IV between Minera Senda de Plata S.A. de C.V. and Ambrosio Bencomo Casavantes, and with this, the nullity of purchase agreement between DBM and Minera Senda de Plata S.A. de C.V., and b) the payment of a sum of money pending to be defined by concept of restitution of the benefits of those two mining concessions. In June 2019, a Federal Court Chihuahua granted Sierra Metals a suspension of this adverse resolution issued. At this time, the appeal (writ of amparo) presented by the Company is pending to be resolved by the Third Federal Collegiate Court of Civil and Labor Matters of the Seventeenth circuit in Chihuahua. Sierra Metals will continue to vigorously defend this action and is confident that the claim is of no merit.
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