Exhibit 99.1
SIERRA METALS INC.
Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(unaudited)
1 | Page
August 5, 2021
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 | |
Chief Executive Officer | Chief Financial Officer |
2 | Page
Sierra Metals Inc.
Condensed Interim Consolidated Statements of Financial Position
As at June 30, 2021 and December 31, 2020
(In thousands of United States dollars, unaudited)
Note | June 30, 2021 | December 31, 2020 | ||||||||||
$ | $ | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 76,102 | 71,473 | ||||||||||
Trade and other receivables | 4 | 45,020 | 38,694 | |||||||||
Income tax receivable | 489 | 438 | ||||||||||
Prepaid expenses | 1,598 | 1,968 | ||||||||||
Inventories | 5 | 29,938 | 23,476 | |||||||||
153,147 | 136,049 | |||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment | 6 | 311,454 | 301,786 | |||||||||
Deferred income tax | 1,928 | 1,757 | ||||||||||
Total assets | 466,529 | 439,592 | ||||||||||
LIABILITIES | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued liabilities | 7 | 44,159 | 30,317 | |||||||||
Income tax payable | 9,862 | 7,545 | ||||||||||
Loans payable | 8 | 24,822 | 18,480 | |||||||||
Decommissioning liability | 3,283 | 1,260 | ||||||||||
Other liabilities | 8,730 | 7,562 | ||||||||||
90,856 | 65,164 | |||||||||||
Non-current liabilities: | ||||||||||||
Loans payable | 8 | 68,501 | 80,903 | |||||||||
Deferred income tax | 29,742 | 29,903 | ||||||||||
Decommissioning liability | 18,393 | 21,207 | ||||||||||
Other liabilities | 3,324 | 2,207 | ||||||||||
Total liabilities | 210,816 | 199,384 | ||||||||||
EQUITY | ||||||||||||
Share capital | 9 | 232,915 | 230,980 | |||||||||
Accumulated deficit | (29,652 | ) | (41,820 | ) | ||||||||
Other reserves | 10,571 | 11,840 | ||||||||||
Equity attributable to owners of the Company | 213,834 | 201,000 | ||||||||||
Non-controlling interest | 10 | 41,879 | 39,208 | |||||||||
Total equity | 255,713 | 240,208 | ||||||||||
Total liabilities and equity | 466,529 | 439,592 |
Contingencies (notes 3, 8 and 17)
Approved on behalf of the Board and authorized for issue on August 5, 2021:
“Jose Vizquerra” | “Koko Yamamoto” | |
Jose Vizquerra | 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.
3 | Page
Sierra Metals Inc.
Condensed Interim Consolidated Statements of Income (Loss)
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, except per share amounts, unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Note | $ | $ | |||||||||||||
Revenue | 16 | 79,449 | 41,901 | 149,073 | 97,459 | ||||||||||
Cost of sales | |||||||||||||||
Mining costs | 11 | (35,549 | ) | (21,643 | ) | (72,666 | ) | (59,391 | ) | ||||||
Depletion, depreciation and amortization | 11 | (10,725 | ) | (8,562 | ) | (21,973 | ) | (18,155 | ) | ||||||
(46,274 | ) | (30,205 | ) | (94,639 | ) | (77,546 | ) | ||||||||
Gross profit from mining operations | 33,175 | 11,696 | 54,434 | 19,913 | |||||||||||
General and administrative expenses | (5,187 | ) | (4,588 | ) | (11,183 | ) | (10,078 | ) | |||||||
Selling expenses | (2,858 | ) | (1,979 | ) | (5,578 | ) | (4,577 | ) | |||||||
Income from operations | 25,130 | 5,129 | 37,673 | 5,258 | |||||||||||
Other income (loss) | (464 | ) | 501 | (703 | ) | 817 | |||||||||
Foreign currency exchange gain (loss) | (1,229 | ) | (2,049 | ) | (497 | ) | 1,395 | ||||||||
Interest expense and other finance costs | (863 | ) | (954 | ) | (1,743 | ) | (2,386 | ) | |||||||
Derivative instruments gains | 13 | - | - | 451 | - | ||||||||||
Income before income tax | 22,574 | 2,627 | 35,181 | 5,084 | |||||||||||
Income taxes (expense) recovery: | |||||||||||||||
Current tax (expense) | (11,875 | ) | (2,082 | ) | (20,667 | ) | (4,093 | ) | |||||||
Deferred tax (expense) recovery | 380 | (244 | ) | 325 | (2,438 | ) | |||||||||
(11,495 | ) | (2,326 | ) | (20,342 | ) | (6,531 | ) | ||||||||
Net income (loss) | 11,079 | 301 | 14,839 | (1,447 | ) | ||||||||||
Net income (loss) attributable to: | |||||||||||||||
Shareholders of the Company | 9,084 | 154 | 12,168 | (1,715 | ) | ||||||||||
Non-controlling interests | 10 | 1,995 | 147 | 2,671 | 268 | ||||||||||
11,079 | 301 | 14,839 | (1,447 | ) | |||||||||||
Weighted average shares outstanding (000s) | |||||||||||||||
Basic | 163,428 | 162,811 | 163,121 | 162,463 | |||||||||||
Diluted | 164,740 | 164,220 | 164,504 | 163,872 | |||||||||||
Basic income (loss) per share | 0.06 | 0.00 | 0.07 | (0.01 | ) | ||||||||||
Diluted income (loss) per share | 0.06 | 0.00 | 0.07 | (0.01 | ) |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
4 | Page
Sierra Metals Inc.
Condensed Interim Consolidated Statements of Comprehensive Income (Loss)
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Net income (loss) | 11,079 | 301 | 14,839 | (1,447 | ) | |||||||||||
Other comprehensive loss | ||||||||||||||||
Items that may be subsequently classified to net loss: | ||||||||||||||||
Currency translation adjustments on foreign operations | 161 | 532 | (58 | ) | (204 | ) | ||||||||||
Total comprehensive income (loss) | 11,240 | 833 | 14,781 | (1,651 | ) | |||||||||||
Total comprehensive income (loss) attributable to shareholders | 9,245 | 686 | 12,110 | (1,919 | ) | |||||||||||
Non-controlling interests | 1,995 | 147 | 2,671 | 268 | ||||||||||||
Total comprehensive income (loss) attributable to shareholders | 11,240 | 833 | 14,781 | (1,651 | ) |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
5 | Page
Sierra Metals Inc.
Condensed Interim Consolidated Statements of Changes in Equity
For the six months ended June 30, 2021 and 2020
(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, 2021 | 162,810,553 | 230,980 | 11,840 | (41,820 | ) | 201,000 | 39,208 | 240,208 | ||||||||||||||||||||
Exercise of RSUs | 617,597 | 1,935 | (1,935 | ) | - | - | - | - | ||||||||||||||||||||
Share-based compensation expense | - | 724 | - | 724 | - | 724 | ||||||||||||||||||||||
Total comprehensive income (loss) | - | (58 | ) | 12,168 | 12,110 | 2,671 | 14,781 | |||||||||||||||||||||
Balance at June 30, 2021 | 163,428,150 | 232,915 | 10,571 | (29,652 | ) | 213,834 | 41,879 | 255,713 |
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 | 162,115,379 | 230,456 | 11,566 | (65,239 | ) | 176,783 | 35,236 | 212,019 | ||||||||||||||||||||
Exercise of RSUs | 695,174 | 524 | (524 | ) | - | - | - | - | ||||||||||||||||||||
Share-based compensation expense | - | - | 266 | - | 266 | - | 266 | |||||||||||||||||||||
Total comprehensive income | - | - | (204 | ) | (1,715 | ) | (1,919 | ) | 268 | (1,651 | ) | |||||||||||||||||
Balance at June 30, 2020 | 162,810,553 | 230,980 | 11,104 | (66,954 | ) | 175,130 | 35,504 | 210,634 |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
6 | Page
Sierra Metals Inc.
Condensed Interim Consolidated Statements of Cash Flows
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unaudited)
Three Months Ended June 30, | Six months ended June 30, | |||||||||||||||||||
Note | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Net income (loss) from operations | 11,079 | 301 | 14,839 | (1,447 | ) | |||||||||||||||
Adjustments for: | ||||||||||||||||||||
Items not affecting cash: | ||||||||||||||||||||
Depletion, depreciation and amortization | 12,027 | 8,597 | 23,809 | 18,299 | ||||||||||||||||
Share-based compensation | 287 | (107 | ) | 724 | 266 | |||||||||||||||
Loss on disposals and write-offs | - | 751 | - | 953 | ||||||||||||||||
Interest expense and other finance costs | 792 | 954 | 1,672 | 2,386 | ||||||||||||||||
NRV adjustment to inventory | 385 | - | 741 | 1,216 | ||||||||||||||||
Current income tax expense | 11,875 | 2,082 | 20,667 | 4,093 | ||||||||||||||||
Deferred income taxes expense (recovery) | (380 | ) | 244 | (325 | ) | 2,438 | ||||||||||||||
Unrealized foreign currency exchange (gain) loss | (217 | ) | 362 | (653 | ) | 690 | ||||||||||||||
Operating cash flows before movements in working capital | 35,848 | 13,184 | 61,474 | 28,894 | ||||||||||||||||
Net changes in non-cash working capital items | 15 | (11 | ) | (4,612 | ) | 3,253 | (8,379 | ) | ||||||||||||
Decomissioning liabilities settled | (300 | ) | (205 | ) | (358 | ) | (243 | ) | ||||||||||||
Income tax paid | (7,119 | ) | (217 | ) | (17,791 | ) | (5,592 | ) | ||||||||||||
Cash generated from operating activities | 28,366 | 8,150 | 46,578 | 14,680 | ||||||||||||||||
Cash flows used in investing activities | ||||||||||||||||||||
Capital expenditures | (19,499 | ) | (3,226 | ) | (34,051 | ) | (14,461 | ) | ||||||||||||
Cash used in investing activities | (19,499 | ) | (3,226 | ) | (34,051 | ) | (14,461 | ) | ||||||||||||
Cash flows used in financing activities | ||||||||||||||||||||
Repayment of BCP loan | (6,250 | ) | - | (6,250 | ) | - | ||||||||||||||
Loans interest paid | (850 | ) | (1,049 | ) | (1,693 | ) | (2,322 | ) | ||||||||||||
Cash used in financing activities | (7,100 | ) | (1,049 | ) | (7,943 | ) | (2,322 | ) | ||||||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (46 | ) | (47 | ) | 45 | (134 | ) | |||||||||||||
Increase (decrease) in cash and cash equivalents | 1,773 | 3,828 | 4,629 | (2,237 | ) | |||||||||||||||
Cash and cash equivalents, beginning of period | 74,329 | 36,915 | 71,473 | 42,980 | ||||||||||||||||
Cash and cash equivalents, end of period | 76,102 | 40,743 | 76,102 | 40,743 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
7 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(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, 2020. The Company’s significant accounting policies were presented in note 2 to the consolidated financial statements for the year ended December 31, 2020, 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 August 5, 2021.
(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.
8 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(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 June 30, 2021 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 |
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 2020 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 2020 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.
Since March 2020, the global economic activities have been impacted by the spread of the Coronavirus, also known as COVID-19. While commodities and stock markets have recovered from the earlier shocks of the pandemic, there is still some uncertainty due to the new variants of the virus. The impact of this pandemic could include placing sites into care and maintenance, significant COVID-19 specific costs, volatility in the prices for gold and other metals, logistical challenges shipping our products, delays in product refining and smelting due to restrictions or temporary closures, additional travel restrictions, other supply chain disruptions and workforce interruptions, including loss of life. Depending on the duration and extent of the impact of COVID-19, this could materially impact the Company’s results of operations, cash flows and financial condition and could result in material impairment charges to the Company’s property, plant and equipment and inventories.
The Company continues to take proactive and reactive mitigation measures to minimize any potential impacts COVID-19 may have on its employees, communities, operations, supply chain, and finances. Costs for Q2 2021 included additional $2.2 million spent in Peru ($4.2 million for H1 2021) and $0.7 million spent in Mexico ($1.7 million for H1 2021) on these measures, which include COVID testing and quarantining employees and contractors.
9 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unless otherwise stated, unaudited)
4 | Trade and other receivables |
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
$ | $ | |||||||
Trade receivables | 34,583 | 28,750 | ||||||
Sales tax receivables | 10,437 | 9,944 | ||||||
45,020 | 38,694 |
5 | Inventories |
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
$ | $ | |||||||
Stockpiles | 3,877 | 1,047 | ||||||
Concentrates | 6,423 | 4,185 | ||||||
Supplies and spare parts | 19,638 | 18,244 | ||||||
29,938 | 23,476 |
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 six-month periods ended June 30, 2021 and 2020 of $46,274 and $94,639 (2020 - $30,205 and $77,546), respectively. During the three and six months ended June 30, 2021, the Company wrote down stockpile and concentrate inventory to its net realizable value (“NRV”), recording a charge $385 and $741 (2020 - $nil & $1,216), respectively.
6 | Property, plant and equipment |
Cost | Plant and equipment | Mining properties | Assets under construction | Exploration and evaluation expenditure | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Balance as of January 1, 2020 | 269,669 | 447,075 | 50,152 | 69,259 | 836,155 | |||||||||||||||
Additions | 5,180 | 6,348 | 13,218 | 11,184 | 35,930 | |||||||||||||||
Change in estimate of decomissioning liability | 5,427 | - | - | - | 5,427 | |||||||||||||||
Disposals | (4,514 | ) | - | - | (2,032 | ) | (6,546 | ) | ||||||||||||
Transfers | 24,783 | 25,979 | (10,909 | ) | (39,853 | ) | - | |||||||||||||
Balance as of December 31, 2020 | 300,545 | 479,402 | 52,461 | 38,558 | 870,966 | |||||||||||||||
Additions | 1,139 | 8,719 | 17,650 | 6,543 | # | 34,051 | ||||||||||||||
Change in estimate of decomissioning liability | (574 | ) | (574 | ) | ||||||||||||||||
Transfers | 1,061 | 2,345 | (1,044 | ) | (2,362 | ) | - | |||||||||||||
Balance as of June 30, 2021 | 302,171 | 490,466 | 69,067 | 42,739 | 904,443 |
10 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unless otherwise stated, unaudited)
6 | Property, plant and equipment (continued) |
Accumulated depreciation | Plant and equipment | Mining properties | Assets under construction | Exploration and evaluation expenditure | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Balance as of January 1, 2020 | 166,946 | 351,053 | - | 13,041 | 531,040 | |||||||||||||||
Depletion, depreciation and amortization | 27,475 | 13,958 | - | - | 41,433 | |||||||||||||||
Disposals | (3,293 | ) | - | - | - | (3,293 | ) | |||||||||||||
Transfers | 12,310 | 731 | - | (13,041 | ) | - | ||||||||||||||
Balance as of December 31, 2020 | 203,438 | 365,742 | - | - | 569,180 | |||||||||||||||
Depletion, depreciation and amortization | 15,352 | 8,457 | - | - | 23,809 | |||||||||||||||
Balance as of June 30, 2021 | 218,790 | 374,199 | - | - | 592,989 | |||||||||||||||
Net Book Value - June 30, 2021 | 83,381 | 116,267 | 69,067 | 42,739 | 311,454 | |||||||||||||||
Net Book Value - December 31, 2020 | 97,107 | 113,660 | 52,461 | 38,558 | 301,786 | |||||||||||||||
Net Book Value - December 31, 2019 | 102,723 | 96,022 | 50,152 | 56,218 | 305,115 |
7 | Accounts payable and accrued liabilities |
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
$ | $ | |||||||
Trade payables | 27,097 | 16,949 | ||||||
Other payables and accrued liabilities | 17,062 | 13,368 | ||||||
44,159 | 30,317 |
All accounts payable and accrued liabilities are expected to be settled within 12 months
8 | Loans payable |
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
$ | $ | |||||||
Senior Secured Corporate Credit Facility with Banco de Credito del Peru ("BCP") | ||||||||
Current Portion | 24,822 | 18,480 | ||||||
Long term Portion | 68,501 | 80,903 | ||||||
Total loans payable | 93,323 | 99,383 |
On March 11, 2019, the Company entered into a six-year senior secured corporate credit facility (“Corporate Facility”) with BCP that provides 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 June 30, 2021.
11 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unless otherwise stated, unaudited)
Interest is payable quarterly and interest payments began on the drawn and undrawn portions of the facility starting in June 2019. During the six months ended June 30, 2021, DBP made interest payments of $1,693 (2020 - $2,322).
On February 17, 2020, BCP entered into a syndication agreement with Banco Santander S.A for $30.0 million of this credit facility. BCP continues to remain as the principal lender and there were no changes to the terms and conditions of the original agreement. Principal payments on the amount drawn from the facility began in June 2021. The loan is recorded at amortized cost and is being accreted to face value over 6 years using an effective interest rate of 3.29%.
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 six months ended June 30, 2021 and the year ended December 31, 2020 was as follows:
Number of RSUs | ||||||||
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Outstanding, beginning of period | 1,409,058 | 1,630,423 | ||||||
Granted | 617,187 | 898,857 | ||||||
Exercised | (617,597 | ) | (695,174 | ) | ||||
Forfeited | (96,407 | ) | (425,048 | ) | ||||
Outstanding, end of period | 1,312,241 | 1,409,058 |
On June 30, 2020, 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 six months ended June 30, 2021, the Company granted RSU’s totaling 617,187 which had a fair value of C$3.95 based on the closing share price at grant date. RSUs exercised during the six months ended June 30, 2021 had a weighted average fair value of C$1.81 (2020 – C$2.60) and the RSUs forfeited had a weighted average fair value of C$1.88 (2020 – C$1.88). As at June 30, 2021, the weighted average fair value of the RSUs outstanding is C$2.55 (2020 – C$1.57).
12 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unless otherwise stated, unaudited)
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 | ||||||||
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
$ | $ | |||||||
Current | ||||||||
Assets | 140,024 | 118,045 | ||||||
Liabilities | (37,384 | ) | (26,890 | ) | ||||
Total current net assets | 102,640 | 91,155 | ||||||
Non-current | ||||||||
Assets | 170,801 | 170,277 | ||||||
Liabilities | (42,328 | ) | (45,145 | ) | ||||
Total non-current net assets | 128,473 | 125,132 | ||||||
Net assets | 231,113 | 216,287 |
Summarized income statement | ||||||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Revenue | 50,830 | 23,405 | 92,755 | 57,123 | ||||||||||||
Income before income tax | 19,206 | 3,181 | 28,940 | 7,872 | ||||||||||||
Income tax expense | (8,221 | ) | (2,381 | ) | (14,231 | ) | (6,404 | ) | ||||||||
Total income | 10,986 | 800 | 14,709 | 1,468 | ||||||||||||
Total income attributable to non-controlling interests | 1,995 | 147 | 2,671 | 268 |
Summarized cash flows | ||||||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Cash generated from operating activities | 25,620 | 7,263 | 42,116 | 17,319 | ||||||||||||
Net changes in non cash working capital items | (5,139 | ) | (1,750 | ) | (3,976 | ) | (2,964 | ) | ||||||||
Decomissioning liabilities settled | (231 | ) | (204 | ) | (289 | ) | (243 | ) | ||||||||
Income taxes paid | (5,312 | ) | (218 | ) | (12,486 | ) | (5,328 | ) | ||||||||
Net cash generated from operating activities | 14,938 | 5,091 | 25,365 | 8,784 | ||||||||||||
Net cash used in investing activities | (7,329 | ) | (1,824 | ) | (13,721 | ) | (9,667 | ) | ||||||||
Net cash used in financing activities | (3,100 | ) | (695 | ) | (4,100 | ) | (1,030 | ) | ||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 1 | (17 | ) | (22 | ) | (41 | ) | |||||||||
Decrease in cash and cash equivalents | 4,510 | 2,555 | 7,522 | (1,954 | ) | |||||||||||
Cash and cash equivalents, beginning of period | 68,039 | 30,495 | 65,027 | 35,004 | ||||||||||||
Cash and cash equivalents, end of period | 72,549 | 33,050 | 72,549 | 33,050 |
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 six months ended June 30, 2021 and 2020 relate to the Yauricocha, Bolivar and Cusi Mines.
13 | Page
Sierra Metals Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2021 and 2020
(In thousands of United States dollars, unless otherwise stated, unaudited)
11 | Expenses by nature (continued) |
Mining costs
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Employee compensation and benefits | 8,112 | 6,067 | 15,219 | 12,490 | ||||||||||||
Third party and contractors costs | 17,306 | 6,252 | 35,905 | 24,021 | ||||||||||||
Depreciation | 10,725 | 8,562 | 21,973 | 18,155 | ||||||||||||
Consumables | 8,934 | 3,771 | 16,878 | 14,708 | ||||||||||||
Changes in inventory and other | 1,197 | 5,553 | 4,664 | 8,172 | ||||||||||||
46,274 | 30,205 | 94,639 | 77,546 |
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 |
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 | ||||||||||||||||
Six months ended June 30, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 92,755 | 44,083 | 12,235 | - | 149,073 | |||||||||||||||
Production cost of sales | (42,598 | ) | (19,128 | ) | (10,940 | ) | - | (72,666 | ) | |||||||||||
Depletion of mineral property | (4,898 | ) | (2,616 | ) | (794 | ) | - | (8,308 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (8,234 | ) | (3,613 | ) | (1,818 | ) | - | (13,665 | ) | |||||||||||
Cost of sales | (55,730 | ) | (25,357 | ) | (13,552 | ) | - | (94,639 | ) | |||||||||||
Gross profit (loss) from mining operations | 37,025 | 18,726 | (1,317 | ) | - | 54,434 | ||||||||||||||
Income (loss) from operations | 29,702 | 13,275 | (2,520 | ) | (2,784 | ) | 37,673 | |||||||||||||
Derivative gains | - | - | 451 | - | 451 | |||||||||||||||
Interest expense and other finance costs | (1,116 | ) | (32 | ) | (6 | ) | (589 | ) | (1,743 | ) | ||||||||||
Other income (expense) | (1,008 | ) | 260 | 50 | (5 | ) | (703 | ) | ||||||||||||
Foreign currency exchange gain (loss) | (124 | ) | (467 | ) | (91 | ) | 185 | (497 | ) | |||||||||||
Income (loss) before income tax | 27,454 | 13,036 | (2,116 | ) | (3,193 | ) | 35,181 | |||||||||||||
Income tax expense | (14,231 | ) | (5,134 | ) | (977 | ) | - | (20,342 | ) | |||||||||||
Net income (loss) from operations | 13,223 | 7,902 | (3,093 | ) | (3,193 | ) | 14,839 |
Peru | Mexico | Canada | Total | |||||||||||||
June 30, 2021 | $ | $ | $ | $ | ||||||||||||
Total assets | 286,382 | 178,693 | 1,454 | 466,529 | ||||||||||||
Non-current assets | 170,927 | 142,421 | 34 | 313,382 | ||||||||||||
Total liabilities | 144,520 | 37,021 | 29,275 | 210,816 |
(1) Includes provisional pricing adjustments of: ($1,129) for Yauricocha, ($983) for Bolivar, and ($291) for Cusi. |
14 | Page
Sierra Metals Inc. | |
Notes to the Condensed Interim Consolidated Financial Statements | |
For the three and six months ended June 30, 2021 and 2020 | |
(In thousands of United States dollars, unless otherwise stated, unaudited) |
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Six months ended June 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 57,123 | 35,346 | 4,990 | - | 97,459 | |||||||||||||||
Production cost of sales | (34,156 | ) | (17,702 | ) | (7,533 | ) | - | (59,391 | ) | |||||||||||
Depletion of mineral property | (3,745 | ) | (1,676 | ) | (708 | ) | - | (6,129 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (5,438 | ) | (4,756 | ) | (1,832 | ) | - | (12,026 | ) | |||||||||||
Cost of sales | (43,339 | ) | (24,134 | ) | (10,073 | ) | - | (77,546 | ) | |||||||||||
Gross profit (loss) from mining operations | 13,784 | 11,212 | (5,083 | ) | - | 19,913 | ||||||||||||||
Income (loss) from operations | 7,036 | 6,203 | (5,765 | ) | (2,216 | ) | 5,258 | |||||||||||||
Interest expense and other finance costs | (1,663 | ) | (42 | ) | (6 | ) | (675 | ) | (2,386 | ) | ||||||||||
Other income (expense) | (598 | ) | 1,286 | 142 | (13 | ) | 817 | |||||||||||||
Foreign currency exchange gain (loss) | 36 | 750 | 83 | 526 | 1,395 | |||||||||||||||
Income (loss) before income tax | 4,811 | 8,197 | (5,546 | ) | (2,378 | ) | 5,084 | |||||||||||||
Income tax expense | (6,404 | ) | (114 | ) | (13 | ) | - | (6,531 | ) | |||||||||||
Net income (loss) from operations | (1,593 | ) | 8,083 | (5,559 | ) | (2,378 | ) | (1,447 | ) | |||||||||||
Peru | Mexico | Canada | Total | |||||||||||||
June 30, 2020 | $ | $ | $ | $ | ||||||||||||
Total assets | 234,157 | 154,405 | 5,121 | 393,683 | ||||||||||||
Non-current assets | 172,995 | 130,354 | 68 | 303,417 | ||||||||||||
Total liabilities | 130,384 | 21,824 | 30,841 | 183,049 |
(1) Includes provisional pricing adjustments of: $(749) for Yauricocha, $861 for Bolivar, and $80 for Cusi.
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Three months ended June 30, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 50,830 | 22,555 | 6,064 | - | 79,449 | |||||||||||||||
Production cost of sales | (21,132 | ) | (8,711 | ) | (5,706 | ) | - | (35,549 | ) | |||||||||||
Depletion of mineral property | (2,522 | ) | (1,503 | ) | (283 | ) | - | (4,308 | ) | |||||||||||
Depreciation and amortization of property, plant and equipment | (3,924 | ) | (1,545 | ) | (948 | ) | - | (6,417 | ) | |||||||||||
Cost of sales | (27,578 | ) | (11,759 | ) | (6,937 | ) | - | (46,274 | ) | |||||||||||
Gross profit (loss) from mining operations | 23,252 | 10,796 | (873 | ) | - | 33,175 | ||||||||||||||
Income (loss) from operations | 19,748 | 7,883 | (1,320 | ) | (1,181 | ) | 25,130 | |||||||||||||
Derivative gains | - | - | - | - | - | |||||||||||||||
Interest expense and other finance costs | (513 | ) | (21 | ) | (3 | ) | (326 | ) | (863 | ) | ||||||||||
Other income (expense) | (691 | ) | 198 | 31 | (2 | ) | (464 | ) | ||||||||||||
Foreign currency exchange gain (loss) | (294 | ) | (871 | ) | (215 | ) | 151 | (1,229 | ) | |||||||||||
Income (loss) before income tax | 18,250 | 7,189 | (1,507 | ) | (1,358 | ) | 22,574 | |||||||||||||
Income tax expense | (8,221 | ) | (2,928 | ) | (346 | ) | - | (11,495 | ) | |||||||||||
Net income (loss) from operations | 10,029 | 4,261 | (1,853 | ) | (1,358 | ) | 11,079 | |||||||||||||
Adjusted EBITDA | 25,503 | 11,135 | (58 | ) | (781 | ) | 35,799 |
(1) Includes provisional pricing adjustments of: $(1,705) for Yauricocha, $(1,414) for Bolivar, and $(160) for Cusi.
15 | Page
Sierra Metals Inc. |
Notes to the Condensed Interim Consolidated Financial Statements |
For the three and six months ended June 30, 2021 and 2020 (In thousands of United States dollars, unless otherwise stated, unaudited) |
Peru | Mexico | Mexico | Canada | |||||||||||||||||
Yauricocha Mine | Bolivar Mine | Cusi Mine | Corporate | Total | ||||||||||||||||
Three months ended June 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||
Revenue (1) | 23,405 | 16,786 | 1,710 | - | 41,901 | |||||||||||||||
Production cost of sales | (12,462 | ) | (7,822 | ) | (1,359 | ) | - | (21,643 | ) | |||||||||||
Depletion of mineral property | 203 | (645 | ) | 31 | - | (411 | ) | |||||||||||||
Depreciation and amortization of property, plant and equipment | (4,191 | ) | (2,789 | ) | (1,171 | ) | - | (8,151 | ) | |||||||||||
Cost of sales | (16,450 | ) | (11,256 | ) | (2,499 | ) | - | (30,205 | ) | |||||||||||
Gross profit (loss) from mining operations | 6,955 | 5,530 | (789 | ) | - | 11,696 | ||||||||||||||
Income (loss) from operations | 3,407 | 3,222 | (747 | ) | (753 | ) | 5,129 | |||||||||||||
Interest expense and other finance costs | (628 | ) | (37 | ) | - | (289 | ) | (954 | ) | |||||||||||
Other income (expense) | (588 | ) | 1,129 | 109 | (149 | ) | 501 | |||||||||||||
Foreign currency exchange gain (loss) | (25 | ) | (1,622 | ) | (403 | ) | 1 | (2,049 | ) | |||||||||||
Income (loss) before income tax | 2,166 | 2,692 | (1,041 | ) | (1,190 | ) | 2,627 | |||||||||||||
Income tax expense | (2,260 | ) | (63 | ) | (3 | ) | - | (2,326 | ) | |||||||||||
Net income (loss) from operations | (94 | ) | 2,629 | (1,044 | ) | (1,190 | ) | 301 |
(1) Includes provisional pricing adjustments of: $(876) for Yauricocha, $1,144 for Bolivar, and $(81) for Cusi.
For the six months ended June 30, 2021, 62% of the revenues ($92,755) were from seven customers based in Peru and the remaining 38% of the revenues ($56,318) were from two customer based in Mexico. In Peru, two major customers accounted for 50% and 23% of the revenues, while the two customers in Mexico accounted for 59% and 41% of the revenues.
For the six months ended June 30, 2020, 59% of the revenues ($57,123) were from six customers based in Peru and the remaining 41% of the revenues ($40,336) were from one customer based in Mexico. In Peru, two major customers accounted for 44% and 35% of the revenues.
As at June 30, 2021, the trade receivable balance of $34,583 includes amounts outstanding of $26,636 from the two major customers in Peru and $7,947 from the customer 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’.
The Company had no outstanding derivative instruments at June 30, 2021.
For the six-month period ended June 30, 2021, the Company received $451 ($nil for six-month period ended June 30, 2020), 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.
16 | Page
Sierra Metals Inc. |
Notes to the Condensed Interim Consolidated Financial Statements |
For the three and six months ended June 30, 2021 and 2020 (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, financial assets, accounts payable and loans payable.
(a) | Fair value of financial instruments |
As at June 30, 2021 and December 31, 2020, the fair value of the 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.
Level 3 – inputs for the asset or liability that are not based on observable market data.
At June 30, 2021 and December 31, 2020, the levels in the fair value hierarchy into which the Company’s financial assets are measured and recognized on the Consolidated Statement of Financial Position are categorized as follows:
June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
Recurring measurements | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Trade receivables (1) | - | 34,583 | - | 34,583 | - | 28,750 | - | 28,750 | ||||||||||||||||||||||||
- | 34,583 | - | 34,583 | - | 28,750 | - | 28,750 |
(1) Trade receivables exclude sales and income tax receivables.
There were no financial liabilities measured at fair value. There were no transfers between Level 1, Level 2, and Level 3 during the six months ended June 30, 2021 and 2020.
15 | Supplemental cash flow information |
Changes in working capital
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Trade and other receivables | (4,017 | ) | (1,278 | ) | (6,326 | ) | 6,157 | |||||||||
Financial and other assets | 376 | 779 | 370 | 996 | ||||||||||||
Income tax receivable | - | (377 | ) | - | (377 | ) | ||||||||||
Inventories | (5,080 | ) | 3,849 | (7,203 | ) | 4,025 | ||||||||||
Accounts payable and accrued liabilities | 6,876 | (6,750 | ) | 13,937 | (16,746 | ) | ||||||||||
Income taxes payable | - | 40 | - | - | ||||||||||||
Other liabilities | 1,834 | (875 | ) | 2,475 | (2,434 | ) | ||||||||||
(11 | ) | (4,612 | ) | 3,253 | (8,379 | ) |
17 | Page
Sierra Metals Inc. |
Notes to the Condensed Interim Consolidated Financial Statements |
For the three and six months ended June 30, 2021 and 2020 (In thousands of United States dollars, unless otherwise stated, unaudited) |
16 | Revenues from mining operations |
The Company has recognized the following amounts related to revenue in the consolidated statements of income:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
$ | $ | |||||||||||||||
Revenues from contracts with customers | 82,728 | 41,714 | 151,476 | 97,267 | ||||||||||||
Provisional pricing adjustments on concentrate sales | (3,279 | ) | 187 | (2,403 | ) | 192 | ||||||||||
Total revenues | 79,449 | 41,901 | 149,073 | 97,459 |
The following table sets out the disaggregation of revenue by metals and form of sale:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
$ | $ | |||||||||||||||
Revenues from contracts with customers: | ||||||||||||||||
Silver | 20,669 | 8,275 | 38,459 | 19,328 | ||||||||||||
Copper | 30,915 | 17,673 | 52,580 | 40,087 | ||||||||||||
Lead | 6,991 | 4,356 | 14,074 | 9,959 | ||||||||||||
Zinc | 20,077 | 7,025 | 38,386 | 18,342 | ||||||||||||
Gold | 4,076 | 4,385 | 7,977 | 9,551 | ||||||||||||
Total revenues from contracts with customers | 82,728 | 41,714 | 151,476 | 97,267 |
17 | Contingencies |
The Company and its subsidiaries have been named as defendants in certain actions incurred in the normal course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of Management, these matters will not have a material effect on the consolidated financial statements of the Company.
These matters include an ongoing personal action filed in Mexico against Dia Bras Mexicana S.A de C.V (“DBM”) by an individual, Carlos Emilio Seijas Bencomo, 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. Carlos Emilio Seijas Bencomo passed away in 2020 and his heirs appointed Mr. Emilio Ambrosio Bencomo Portillo as legal representative to pursue this case. As per latest development, on March 21, 2021, the first Civil Court of Chihuahua absolved DBM of all claims raised by the plaintiff. Although the plaintiff filed an appeal against this ruling on April 7, 2021, the Company believes that there is no merit in this appeal and the possibility of reversal of the March 12, 2021 ruling is very unlikely.
18 | Page