SMTS - Earnings call transcript Q3 2021

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Operator

Hello, and welcome to the Sierra Metals Third Quarter 2021 Financial Results Call. My name is Emma, and I'll be your operator today. [Operator Instructions] It's now my pleasure to hand the call over to Mike McAllister, Vice President of Investor Relations, to begin. Please go ahead.

Mike McAllister

Thanks, operator. everyone. morning, Good Metals Sierra XXXX conference results Welcome third call. to quarter we On CFO. Luis are Marchese, call, our our by Guimaraes, joined today's Ed CEO; and

are the quarter. read, have presentation published that the as highlights of such, today's We been issues key assuming all and materials

at webcast request, like expand questions time, upon interest the that be end from at website Yesterday's be I other conference posted open participants addressed today's and the would always, can to are presentation, all participants press further accompanying questions sierrametals.com. allowing prospective X financial asking of company's In statements are of also highlight issues are we release, The to discussion However, e-mail on of the the presentation management those for questions as the the for that, we or ask for and website. the or after can call. interest analysis we're available listening. the call which might company's follow-up to calls and is the through through download that

reflected call and the information subject forward-looking based from over and uncertainties information results to differ the conclusions, number Actual is could management, expectations, like to I turn materially forward-looking information. the our indicate call that that I Before or on current of risks, company's contains beliefs. in would as This this estimates earnings to a projections is other factors. forward-looking forecasts

were as or company's dollars will a CEO, mentioned turn unless material in amounts factors publicly reflected or the over their about our projection now quarter information with today's in otherwise EDGAR note in is noted. us the the forward-looking BioFarm With well on call SEDAR or forecasts Ed which call assumptions in cause available year. results is the the that or or forward-looking information over as actual on will would highlights. will to Guimaraes, differ company's XX-F Please Additional the form, U.S. contained information who like financial material website. that, the to provide conclusions, the of making applied to the highlights Luis a materially remainder annual are turn conclusion information from I take I on as forecast factors the could outlook drawing that and Marchese, in the or projections us all our quarter's that third call now Marchese. Afterwards, an dollar Luis to through CFO, the for

Luis Marchese

morning, everyone. Good Mike. Thanks,

on yesterday's exceptionally to third for are Slide highlights reading quarter the Turning QX you X. press that now After quarter an the release, aware company. now difficult was

affected with which drilling, dealing infill residual grade have performance. includes backlog -- effects on and mine throughput, infrastructure others, been the have which high metallurgical delays and development, of turnover, personnel We COVID-XX,

Cusi are impacting track, drilling Yauricocha during Mine mine on availability heavily on head recoveries. While now is back the development, infilling the and year, which and Bolivar past and limitations has grades throughput, experienced equipment

prices revenue. production, throughput stronger capabilities the quarter, we nature, provide are with temporary we the the Mine findings processes conducting comprehensive the mine. the contingencies operational of focused Bolivar the are projection normal Mine updated steady We a and Mill. the reviews stakeholders metal the and incorporate well review the findings from Mine state supported prepared Bolivar from to the have currently for operations potential to the Mine into of challenges this to a the created of lower into operations as and Geology The return at to intend as an Bolivar forward. budget being early these to at operations allow situation, currently are very improving believed issues these While in all be in going a coming profitable current of and have the being Despite mines, in review significant the XXXX metal including to Bolivar we at

on previously revised production we consideration prudent to Bolivar these the lower moving cost was rates the large increased the guidance and helping it to CapEx exchange After EBITDA of foreign nature working into Additionally, offset company. our and are limitations COVID-XX favor reviewing forward Yauricocha, for guidance XXXX. taking guidance, felt for at of the associated which better reflect to and outcome benefited costs the expected

range between X. million now copper to remains guidance XXX production expected Production Slide to with pounds. XXX Turning equivalent unchanged million to

to the at range to between have our $XXX to our changing guidance we million rapidly the million $XXX from Mexican mine, EBITDA $XXX primarily due million range to previously million. issues However, lowered Bolivar $XXX mentioned operations, and at now

freight at We project complete at the the where capital markets and Bolivar set $XXX $XX to expenditure iron required in to million part constructive due have deferral access magnetite our to $XX between we range also of and ore until the ore land iron and process. million. previously now as is detailed normalized This our the guidance engineering XXXX million lowered Mine

all that guidance growth and cash of between equivalent is $X.XX, Cash priority. challenges, expected reducing we strong to higher issues Scaling up XXXX equivalent be range Finally, pound. at now continuing $X.XX provided a would costs production the respective expected to stabilization now to on to focus mention are three from push improving now to per costs have I unit we to have Mine, the copper production between we to are for given our pound. per mines. the from up previously in $X.XX range $X.XX despite costs but the All-in of the are range to but remain expected provided adjusted $X.XX $X.XX for to these Bolivar sustaining like up and previously costs operations, at for $X.XX guidance copper $X.XX XXXX. and

COVID-XX. emerging the from are restriction we by house Additionally, imposed

this Metals We transition. prices are vaccination operations. rates availability remain during normalized have help as expected our period return continue continue to of to which of to should improvements and to in more see workforce relatively strong to us improve,

X, see for opportunities of Slide the of to production and while we the challenges the and Yauricocha ore still remainder company. up XXXX, despite stage Cusi, studies. Opportunities looking unexpected production growth and continue at to initiatives of we we Bolivar, at encouraging iron and ahead include concentrate accelerated continuous are preliminary facing, the are XXXX improvement Turning scaling to completing feasibility

La continue drill exploration mine projects, especially received we Mine. We our as and also La Sidra Bolivar where Kilcasca with well including at brownfield at Tucumachay Yauricocha Montura recently opportunities, near Mine, [indiscernible] the permits as near

improvements With production company's I more over in sustainable We benefiting will and to call making and improving the results. Ed is turn the remain The importantly Mexico. the the improving per now continue operational our and to prudent value our We greenfield at for Peru third reactivate the planned to committed financial growth our shareholders. growing share and costs. land of to and capital company quarter investments position infrastructure that, extensive also to programs necessary

Ed Guimaraes

Luis. Thanks,

Turning QX operational in generated the now Mine XXXX. quarter in and of primarily due residual Bolivar and had our million at third to adjusted of a effects to Slide X. a The consolidated COVID-XX. to the challenges company decrease X% comparison $XX.X throughput EBITDA reported difficult We

million, and Luis at These mentioned in reported also of operational million we are Bolivar finished cash. with issues due results our Mine. loss approximately net by primarily the We $XX an $X.X the quarter to adjusted previously

will reflect improvement XXXX that increase to X% XXXX, prices. of continues EBITDA million still $XXX $XXX company of the to to an However, a of stronger over expect benefit metal million XX%

realized zinc QX a has role and revenue Copper has first gold Our by we improvement XXXX, currently half copper, continued of XXXX growth be realized leading is minor copper, remains to production relatively expected continues in In seen to zinc and strong. with and improve in and mix QX remain Copper remained in metal strong. by to and of prices company's silver. a metal led mix reduction Zinc an silver followed in revenue. lead saw by in and the prices. the

Turning operational this Compared have issues in Bolivar at lines. XXXX, across in the previously The again, to Mine, all call, and all our period Slide been costs lower but now metal mines. is reasons higher mainly X. at this to production disclosed due to were cash same

increased affected be costs despite fixed treatment Unit must have incurred charges to due off-takers. participation also still from seen due which production. costs, metals indirect escalators We lower to were mainly also price

XXXX, per year have of to million approximately higher see CapEx of to to during because costs expect up delayed of year been due we costs projects, Looking COVID-XX. labor legislation implications which Also, $X infrastructure operations of from we catch the as changes. on Mexican see recent our higher the a backlog past we to expect

in has and Slide June in the have installment debt to repayment with of now installments quarter company commenced this finished million. X. $XX.X total million million. with Turning of its year $XX facility $X.XX cash net initial debt the of of We The

XXXX. now price recently Mike. policy continues make to have a installment which debt press installments With budgeting and cash will strong current X, was I quarterly occurring Based turn position per and the The a in We environment, release expenditures, and has initiatives. scenario strong with our March of repayment to company November that, capital metals $X.XX last to continue this process capital call balance working over for dividend supported support current will on back growth sheet, dated to the base the declared share relatively XXXX. in

Mike McAllister

portion of Ed. call. Thanks, That concludes presentation the the

in Again, up interest to two please portion Q&A time your the questions call all to questions to the open this now limit from of ask will time. stakeholders, the call. the allow of that you we We at

please after Additional open questions conference addressed operator, With be can call. that, lines. the the

Operator

Ihle today go Thank comes question from Instructions] from first Please Heiko you. [Operator H.C. Our Wainwright. ahead.

now is open. line Your

Heiko Ihle

Hello? my Hello you Thanks Can me? safe. you're Hope taking everyone. questions. for hear

Mike McAllister

you. Thanks, Heiko. we can Yes, hear

Heiko Ihle

Good, good.

Okay.

Let's the second. Bolivar revision for a talk for guidance about

is just sustaining mine up on with and new XX-ish personnel midpoint a XX.X% the in – really if another the left delays talked taking your turnover. days at infill in you're You drilling Therefore, high midpoint all-in old this about year. and midpoint quote development, are

ignores actually figure? at math at you the ago? are this that which there you obviously, is in stands. costs – now about less. is end higher change could my you either the question known impact still effects words, XX that have nonetheless, wouldn't to maybe And any days QX, So, But the in other swing What of of QX, end the

Ed Guimaraes

Luis grade, Bolivar the terms all mentioned, Luis to Thanks the year was mostly to underlying Really, Hi, that a rationale cost, or And ago higher grade lack for more at Heiko. in it's tied due as personnel, issues Mine. lack started that, your of the the the something the – as of than were throughput question. of for this through reason a the working COVID, forcing of sequencing we're from us than expected. lack with longer development, to review we mentioned, areas, a high into but We're geology, It's go having, issue. the that we mine areas, to lot had still higher And grades. much turnover comprehensive and doing tonnage full was mill. lower been

but the And should about this get months, of so, bottom we the over coming know to to want we this. more weeks,

Heiko Ihle

Okay. Fair building also bit. then one enough. quick And more clarification last a question and just it's on

CapEx longer-term to taking only at again, to iron for inflations use seeing workers? by anything to magnetite planned million, is $XX of everything Mine? the from guidance Bolivar How crazy ore to we're cost the left project days the printers for the And due You're for $XX given on million this much do will costs the $XX. cars to your that in quarter actually XX

Ed Guimaraes

fast when due Thanks, CapEx $XXX ton. projects tracking were guidance that had in revision was project. correct you’re prices Yes, primarily We magnetite the to iron the ore above per we the magnetite Heiko.

came with and track fast it and tripling allowed the to to freight bulk our of revising costs, consider down almost those time. more prudently As taking this prices us

And to CapEx we December. until to in detail now project. comprehensive we per and on freight the at were $XX. of iron engineering. $XXX The comfortable had the detailed weeks, prices believe a right you’ve costs we both embarking results And that engineering it really a were coming start of make have that freight economics where from north ore it anywhere but have slightly that around you’ve Again, doing normalize. when changed, early freight we got costs didn’t on $XXX iron doing the it’s We’re should the but now tonne, $XX – sense ore got program should much different

in costs, would in to this and with little line short-term system to I months. next more expect blur think over the six a norms – is historical freight a I get months XX it’s the

Heiko Ihle

back get I'll you. Thank you. Thank Perfect. queue. in

Operator

Thank you.

today Mark Noble ahead, Our Markets. next comes Capital question Please Mike. go from from Reichman

Your is Mark? line open. now

Mark Reichman

Thank you. Good morning.

really ones. is question piggyback my just So the of kind on last

would be quarter. given just guidance three seems you quarters, like So modest some fourth despite at in expecting the Bolivar, raised the the it cost still first improvement

of doing it two wanted do will And kind I – normal? delve expectations. you or it study. the quarter be normal? take? So into the know bodies, will developing beyond consider terms ore Do I of just you it to kind how just what But higher-grade of long the you’re before your get you think in a you to back would think

Luis Marchese

Mark. you, Marchese. Luis is Thank This

have. should go have to we – planning by of We that normal are expecting ore to normal. certainty meant. reach take a let that more And to at have have have the had mine to us go wanted to that And we the is to what it’s What we quarters different mean that the areas We’ve less a going reach we we them. mine. couple – and we going the development delays we me on are are can back would steady operation that through should –

now have And the have terms the flexibility So to reach limited of can production mine, grade. areas of we in lower able we some only mine. are or we where which

infield to do. In we terms drilling, this, have and of we have done would the wanted again,

is estimate of of we’re that quality the the lower. resources also So the mining

what surprises sometimes of on find. we have sort ore So we

quarter is the that has what last So been driving so. or

go we’ve prompted mine. Now But the to to are the has very speed machines infill a we’re the what up all to now with drilling us this get some equipment more development. we also contractors back of to mine doing comprehensive bringing at into review processes some And and we go bringing drilling. are to usual as more highlighted, is

have technical outside engage other going to we’re our now to do We team review. and more there, with some experts detailed a

quarters, of should to couple a normal. we back in hopefully, be So

Mark Reichman

Thank That's helpful. you very very much.

Luis Marchese

you. Thank

Operator

[Operator Advisors. next from Cooperman Leon. comes Instructions] Please Our go question from ahead, Omega Leon

Your open. line is now

Leon Cooperman

you. Thank

couple is market number major EBITDA curious, for is, in And what back expectations? quarters, to normal before made look One or In of The do at any XXXX? one we should no in to this EBITDA words of you a indicate last terms of Just willingness philosophy expectations you you quarters, educate an we’ll questions. mentioned just be two have the two ability you any thought the or the had controls example misses the attempt XXXX I’m and communication. secondly, weak to report.

you know on it’s just is this business what’s a question. don’t communication you. and So the philosophical philosophy I of know if But or a going didn’t in whatever. Thank

Ed Guimaraes

to we our never guess around. have second how We that’s at the But this have no EBITDA for play say by saw of and in particular, could January comprehensive clearly guidance point. have of the we take answers in we up if It’s We’ve out might that Yes, optimistic was your we Usually, forecast sure certainly these to major is we our is through could in make end updated this point, EBITDA EBITDA was every We turned something view questions. a the had that don’t months. area. to put continuing be And have your we But past that willing to at you have don’t, EBITDA misses. they out. And that been I’d And the we until make adjust the year was year. year, the difficult. could in out we we of When a in hopefully, I going half. and the two every to to next quickly that point, occurring. really for for that we for the was terms push was year. We Thanks full mine, got things the had and forecasting year. missing little until to this It Bolivar, we that review I year. it it better like ability And guidances. that choice. the it in guidance did we’ll indication. our But mines, your I drive something improved when that halfway that – forecast next guidance. on was that’s trend then. that September, saw been two revised reexamine completed something need And extremely of forecast we our second our

Leon Cooperman

do the sure been have communicated you think Well, some ability; right on said. has or the people you have upon you going working think on the it. are it. not it make Enough information just I market for you’re quite I And track. mean stale incumbent But that’s to it’s whoever time. to Mike

Ed Guimaraes

our in just information at of And to lot put issues was on presented we’re a and bottom we the this Board difficult, to to Leon. extremely level available Bolivar. we point, we timely again, all presentations, And and and Thanks, have and the revised manner. of been Board when has guidance get that continuing discussions a at it the the the

Operator

Thank you.

Our Young Please next comes today Jim. from Jim go question ahead, Midwest from Investments.

Your open. line is now

Jim Young

help help couple about hi. can the And the comments they the here. as RCs Are same us understand Yes, the made escalators? questions would of Number you participation them how can one two, TCs, are, can the so A you be, you it price XXXX? just or one. level take Will you. understand higher though, what be direction same at us they Number unfold we number the lower? – expect in Thank to these what

Ed Guimaraes

smelters these build Jim. Sure, offtakers Right. and RCs in. the the are TCs something and Yes, price the that and participation,

I around looking XXXX locked pound. the a to contracts June say, should And in want to in prices and of something the upside. when our So they to they copper, were XXXX, for want metal start $X.XX we back we at covering increase, year in ensure should participate metal around was prices Bolivar

essentially per in $XXX every detailed formula, get about it rise for formulas work think that the too a the granular, TC/RC. and tonne not to is into we in the pound but if there $XX rise copper price, the So per –

our went talk were we if a tonne. $XX,XXX hovering copper So you tonne in – to actually a $XX,XXX tonnage, from see $X,XXX a we We can that tonne. price from around went

the that approximately to on another based So it TCs/RCs. formula, $XXX adds

they’re that’s in at concentrates continue. great that have anticipated. question, quarter we So these operational we the XXXX, we of to answer of will XXXX extremely Bolivar that will the second not our issues, that significant. the commitments your – first were Because do of And the the part complete of because the level just issues likely

continuing of XXXX see more I’d I reset they to should So these much normal costs, go before TCs/RCs say, we April will and into, back likely a prices again say. or

Jim Young

So you I what – the have set is been XXXX the back of Ed, if would XXXX the June already. what in prices that assume – June XXXX, prices set

help XXXX, cost be when going for will So understand – XXXX, a what can forward to relative you on basis? to those set relative normalized us you

Ed Guimaraes

we’re They’re the in a will than $XX it. going seeing range be to $XXX a to whatever tonne It lower of much tonne. or be $XXX the

in So see TCs/RCs. you the should a significant decrease

Jim Young

Okay. Thank much. you very

Operator

Thank you.

[indiscernible] next Please Our ahead. go Resource from comes question Company. Alonso today

is now line open. Your

Unidentified Analyst

Ed. Thank you. and Good Luis morning,

So couple of I had a questions.

status to timing costs help And was going one of mines Yauricocha that you operating the issues and the second that looks head the Bolivar causing COVID-related it drilling. Cusi at COVID much impact related in and Can on on why worse help mine in reduce tunnel. development the affected mine. us the the operating grade to or understand Bolivar, that regarding First, We noted seems original tunnel understand is Mexico? to just you is the

So wanted time some to from I understand what that? just quite

Luis Marchese

Hi Alonso. Okay.

and in in yes, infield development COVID, COVID a because time the Regarding started. has Bolivar had backlog by of already place drilling it harder been Bolivar

has had compounded COVID Bolivar that has issues in think place. I So since the

said, Yauricocho better we but that’s in why much now. that’s a So are fit. was we’re position. I where And

beginning, operating could And COVID But got this issue, just in So it’s much backlog to but which not now things it’s due XXXX, ventilation be worse now. should Cusi often sold now pretty these sold. normally Bolivar in have been been over time. at had already the due to

to and now resources it back where enough capital we So be. putting should are go to

a tunnel. the the After integration good three-kilometer Regarding is tunnel, that’s tunnel yes, news.

We two kilometers have already. driven

short one are We kilometer.

we year, So in should less one finalizing tunnel. that be than

driving Fierro. tunnels and connecting We Bolivar from are de Mina the also West

So we eventually, in by terms connection. XXXX, operating have this should of

In something side like terms additional should crusher or bit that a of else, including take longer. a infrastructuring some

Unidentified Analyst

Okay. Thank you much. very

Luis Marchese

you. Thank

Operator

This you. Q&A concludes Thank session. today’s

back remarks. call I’ll So Mike any closing hand McAllister now to the for

Mike McAllister

today’s on after there us A to to If all would On like concludes would webcast participate website replay any today’s out that all found management joining sierrametals.com. call. our – questions you like Operator, further may reach at I call. us. concerns, of participants or I can materials for behalf and are thank of to team, the be

in you, Thank Our found presentation as operator. the as information conclude can the be on call. website. today’s well Please company’s

Operator

Thank for call. today’s joining you all

disconnect your You may now lines.

Sierra Metals (SMTSF) 9 Nov 212021 Q3 Earnings call transcript