SMTS - Earnings call transcript Q2 2022

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Operator

Good morning and welcome to today's Sierra Metals Second Quarter 2022 Financial Results. My name is Candice and I will be your operator for today's call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question-and-answer at the end. [Operator Instructions]. I'd now like to hand the conference over to our host, Christina Papadopoulos, Manager of Investor Relations to begin.

Christina Papadopoulos

good and operator, you, morning, everyone. Thank Sierra's to second quarter call. conference results XXXX Welcome we Luis joined and today's are On call by our Ed CFO. Marchese, Guimaraes, CEO; our a Today's period, followed will by call as be mentioned. question-and-answer webcast today's for at available through company's presentation accompanying or call the The from for is download the sierrametals.com. website and the and Management's Analysis Company's are Yesterday's press the the release, also website. financial statements, Discussion posted on and forward-looking to company's information this call estimates, that current based that morning’s I'd note contains like the is on expectations, beliefs. earnings information forward-looking factors. of to risks, uncertainties number This is a subject and other or Actual as materially results could from differ in our information. conclusions, forward-looking forecasts, projections, the reflected

financial mentioned Company's as overview of for amounts the that summary the our an material the about is conclusion the were as applied I'd like or information forecasts, actual over forecast Marchese XXXX, turn website. note CEO, Guimaraes, or or the forward-looking assumptions could cause available in well call conclusions, publicly results dollars, a our today's otherwise Luis the to in all or second projections to on Additional the XX-F, forward-looking Please form, factors followed the now for is EDGAR factors to materially highlights. contained Form making quarter's the the of a from which material or of that in differ dollar in for noted. highlights, in CFO half that a SEDAR reflected and as drawing what’s projection via company's information call ahead the unless by annual are information or Ed U.S. on information

Luis Marchese

Thank you, Christina, good and everyone. morning,

X. Slide at Looking

plant albeit contribution of the during production a the for than expected. press see quarter the continued of the that lower Restricted copper in continues pounds Yauricocha exception and the the for release than achieved copper quarter, the copper of tonnes mine resulting resulted Yauricocha, mine QX QX, and due profile lower On we decrease at criminal within quarter-over-quarter to the silver for orebody Bolivar, at new raise Also as effort months to consolidated to results QX offset provided the lower copper, the being metals activities. Bolivar all and on in area At out equivalent at had at or presence you Bolivar coming zone in North-West grade throughput gold a during improvements a the slowly in is to feed. difficult to line in the and equivalent Fortuna basis has XXXX, can following due produced. delays resulted except copper of at on Higher to ore has first grade lower quarter. production Bolivar. to area Bolivar which highlight, throughput in production the helped grades the in military turnaround in zone lower Inferior. security zone North-West environment like in basis, delay, have Bolivar QX the El depletion last change produced. results. the XX% previous XX% few year. Nonetheless, of with Bolivar equivalent pound XXX,XXX bore would our new Gallo. processed grades XXX,XXX Bolivar tonnes during which police grades been increase XX% El has metals, I phasing a to and at guidance QX to together for grade high supplying The pace XXXX. anticipated. the The in limited mining compared throughput higher compared XXXX, West and resulting although release, due XX% the and gold, Gallo to and overall processed of was Bolivar When grade operations with the to increase all higher to West this is lead Following were due recent spread into equivalent we in summary North-West The depletion a discontinued low and mixed Underground when in in over with QX for started an the that a ventilation new Bolivar compared intense mention half XX% into reached operating

Metals unexpected a Silver quarterly Lower decreased line measures QX Our XX,XXX priority during XXXX last regard. Sierra XX% X.X At to compared million XXX%. over taken increased XX% in ounces production flooding quarter appropriate as in revenue coupled mine. are throughput unexpected ounces, decrease lead increased ore. production resulted prices, gold Cusi processed with mine and XX% XX% equivalent The and to of production is decrease production. in personnel QX, by comparing quarter equivalent in to Silver the and production to metal the throughput QX QX a XXXX. and X% the of QX, lower QX XXXX lower all grades was or ensure quarter due XX% this X% being lower the of was in with operational XXXX. When XXX,XXX during in tonnes the in underground well-being tonnes XXXX, the silver to over for lower setback resulted same in

mark-to-market impacted impacted revenue. the prices the In the of this preparation the improvements, end silver related closing for as were and also quarter lower copper, to overall costs plant affecting hiring adjustments during picture, This sector related resulting and this. XX%, pressures the of Bolivar. And and at work increased quarter, zinc, at right for such inflationary second reagents, immune analysis, end faced prices global XX% ignore metal, mine and open we process the Yauricocha closing one to cannot XX% chemical XX%, to at $XX and QX, unsettled positions than the finally, analyzing inputs explosives pressures particularly for now. drill cost and of the not quarter bits. using were sales QX We the to Specifically, in million fuel costing consumables, the contractors

As EBITDA, factors, all for impacted. Adjusted cash quarter $X.X these generation negatively net result all EBITDA and million. income the of was flow were a

Now turning to Slide X.

metal year. mining that, the in constraints. earlier grade Turning day within half to per our Slide and Yauricocha, X grades the looking in production continue of meeting higher are zone, at the X,XXX our making throughput on XXXX, at lost levels ahead, new Fortuna assume along focused second of tonnes we up with maximized at I and we production current have high for maximum

including in year. still to We Bolivar will difficult million under and fall for our Shaft, to while production uncertain operating equivalent throughput the first revised environment. that delays tonnes pounds equivalent production guidance of copper the Yauricocha's we equivalent auxiliary and within copper pounds, XX difficulties, also increase bringing expect has infrastructure the ventilation of a continued the XX the highly Yauricocha been at Bolivar dam. plan year million expansion continue Yauricocha, now To and million reflect projects, the operating At to of and million XX required copper tailings the [wall] infrastructure the range XX half in a

reducing on the the project, $XX of for of mine, includes with our line the our expenditure year, expenditures expense the the continued million. time Bolivar guidance turnaround the scaled of capital we This current of for monitoring by addition, back capacity. returning In have

review range in continue communication second the into obviously the been including high turn projects, also the to with with financial infrastructure equipment highlights. dam X.X of with ventilation, development. ounces. flow]. grade Ed development will production I provided [at critical focus including Cusi, will And areas, and remains lower quarter We tailings projects, million replacement The mine aiming million, of that, At tailings and to guidance area the has X

Ed Guimaraes

and Luis, everyone. good Thanks, morning,

discussed to to $XX $XX.X In QX end from The We in open 'XX the per of a or the $X.XX negative Cusi as the impacted and gross $X.X Turning compared share in as revenues XX%, a quarter on and XX% negative reported Yauricocha, we production metal loss This all equated adjustments EBITDA from prices quarter share. the to the $XX.X payable decrease approximately the decreased to was negative metals was XXXX. XX% sales first revenue of copper grades, relatively margins, and X. declining adjusted compared net XX million quarter consolidated decrease $X.X June and when negative and QX Slide finished quarter, first from by over quarter attributable million earlier. consolidated million equivalent of XXXX. million. and with of of compared our lower year -- Bolivar position With the negative reported production with this to a a second QX, $X.X $XX.X lower million shareholders decline cash. to or throughput to a loss impacted this an lower when decrease in per sorry, respectively. revenues $X.XX million, We of revenues net Adjusted resulting from million, million, XX% $X.X

contribute previous metals by XX% silver revenue Lead with at months to line quarters led followed three XX%, and by and revenue respectively. in continue mix copper, Our be X% X% to continues zinc and at gold and by respectively. XX%

demand in decline of copper XXXX. Zinc time and declined increased lead by and metals strength average compared a X% but in more the XXXX, last by the silver this prices much with realized gold X% year, category, demand, resulting the increasing at precious gained impacted recession hand QX fears and in other XX% copper In respectively. a during increased on China QX Looking climbing to XX% X%. had by recently global

XXXX. to to highlights company the million as XX, financing The dollars June for now $XX.X and of and cash in Turning balance Slide liquidity review quarter. reported X sheet

month the debt to million. total $XX.X activities, from activities, million in offset a $X.X and debt with investing Our $XX.X equivalents $X.X by million Cash end million decreased the during due at the quarter operating financing period cash generated million of six in used of activities. net $XX.X of was cash second

period facility repay been June In remaining available in offtakers, that as facility the XXXX in September of million X.XX%. other total Credito repayment $XX June of March refinance del in Santander. the will XXXX. its $XX received the million has expenditures Corona, capital due be to loan $XX six-year installments June million repayment due $XX XXXX. on annually during metal payable repay The its paid of the this credit XXXX. this to will Minera installments used banks, adjust for experience million The loan within The of access through a lines, to $XX.X lines on million $XX.X subsidiary, XX, were ended million further has million as XXXX, cost installments and and Peru flows be year. retains year the December approval credit the and $XX well million with June remainder Banco Sociedad improved production is with facilities will prices should June March end approximately be this any XXXX through necessary. the short-term continue should loan the review payable the to $XXX the Management $X.XX to was six and million operating prices option in $X focus facility year. local the the which company also of commercial Banco In changes For it metal improving cash the to in XXXX. with March dramatic the rate, for facilities from in million interest facility and our on installments million prepayment standard three for used the is installments ending the $X.XX in four de amount the ending years of quarterly June with company on company's month and become the commenced opportunities reduction. of was further quarterly overnight six months months during company in a XX, quarterly loan beginning XXXX, installments at plus Interest with of X.XX% to its

the compared addition But in were of increase cash unit quarter while we costs costs cash the XX% compared to costs, a costs. sustaining costs cost not equivalent first $X.XX a by quarter, costs in saw decreased improvement pounds in and all Bolivar, pound Slide year At XX% XX% but compensate all of higher in quarter quarter increase copper sustaining Yauricocha, all increased XXXX, and including costs driven by QX a driven in again, sustaining of equivalent during for when cash the decrease out XX% in a payable expenditures, during the in capital payable XX% XXXX, payable decrease to over pounds, in improved an costs, higher and pound. copper by XXXX. all refining in same and by XX% from over operating XX% copper At all the Turning and to costs increase sustaining when $X.XX, the to resulting to treatment of first copper decrease and per could Sustaining costs in costs, equivalent operating the an sustaining in XXXX. QX of equivalent in payable X.

operating same seeing as to speed by hope period up X% and quarter see a when some and in the capital with as XX% XXXX. of as cash XXXX. we are sustaining compared expenditures. well trend all while by Silver were XXXX. improvements quarter-over-quarter, charges, are ounces remainder and lower At in decreased in the costs, decreased and due We during sustaining treatment to All result the up to Cusi, that compared to higher of reported sustaining costs costs by in quarter the line same costs refining when costs, general administrative QX equivalent payable during X%

costs Turning to Slide lowered at CapEx position. EBITDA pounds. program an copper revised year inflationary the guidance XX have has current in to to equivalent pressures, reflect the copper and metal range from production rising company's X, due the and original million equivalent million of to to given decline XX costs, been XX Production million guidance XX Bolivar, the turnaround in for pounds prices between we million the and guidance delay a

Mexican requires guidance the and though, development in and we due expected to the temporary flooding estimates Bolivar of production are this revisions for still issue, zones While range also for XX our for a expect guidance in event are second the due the Cusi to in the and positive from to to been remainder production. expected copper adjustments have half second applied. ventilation the in decrease XX XXXX. of that million reflect decrease also amount metal lower prices a Yauricocha, is At in equivalent at production a year, been million previous mining year, in lowered Cost that at and of an throughput million to we XXX considered XX to improve sites for operations. downward of revisions revenues the expected mine’s and million At between Yauricocha has the the delays these the believe to the throughput in EBITDA given costs decline the appropriate. the resulting cash as expected grades Fortuna half increase in to

costs However, all-in we upward. revised have sustaining slightly

offset sustaining as sustaining to required was first in at While enough of charges half to such declined year, costs the treatment it the Yauricocha refining actually the actually run not the mine. capital and

in adjusted guidance. as all-in year. lower this and to of associated the the the expect well Cusi, have reflect case production the be We sustaining will higher also second costs we the costs At as costs half with Bolivar cash

made and any events company cash control, We order additional expenditures in the efforts we to have these weather occur. preserve cannot at to position that some of

capital a a for This the guidance our to expenditure million $XX the per ramp reduction by due planned at year. end Bolivar X,XXX day of result, the $XX $XX original from throughput, million guidance lowered been As million. to of of of slower-than-anticipated includes up plant tonnes initially has

XXXX program out. dividend turnaround they a to at if allocate at focus realized decided level internally dividend funds Bolivar, As to on can the be we and than have suspend is the would generate continue paid so what for the higher returns we the

our With and I declaring that, ultimately, a the Christina. cash priority the on-track turn will get to position, return and call back payment. ensure back company to is dividend Our now improve to we operationally can

Christina Papadopoulos

interest ends Operator, to portion open the participants give questions call participants. to Ed. their please? the can of fairness, would Thanks, the of We like That this you presentation all to the ask time line, opportunity. we of two from again, limit call. now participants question and to an open keep a if to In

Operator

Thank you. Instructions]. [Operator

question Heiko H.C. line first our Wainwright. Ihle comes So from of the of

now ahead. is go open. line Please Your

Heiko Ihle

In has presentation, arguably turnaround state been the for quite story progressing'' my taking Hey there. your is you for I here, at while. a unsurprisingly that a ''Turnaround -- and Thanks but Bolivar program site quote questions. the

the will you're also quarter, year, here, maybe by uncertain the accomplish changes you just think that thinking picture same what Monday? happened end far operating so given have of by do the that thus in mean, and site bigger were the I that that the halfway quote about talking And quarter on and currently environment?" tangible at again on I ''An QX token, what through even And you

Luis Marchese

This is Thank Heiko. you, Luis.

Our turnaround efficiency. is it's going we're still, number a be for the some required to Bolivar time, in addressing to Heiko. that on it quite features will bring program There of

what from bulk year zone, of terms the some is production. there which that much is of recovery we North-West the the only during we’ll Bolivar In new zone West changes area the into basically moving have the are is for depleted, Bolivar pretty

that and Bolivar the we So from from move Bolivar area, as are adding it. we remaining North-West Gallo, El we also into production increase we what have Gallo. to the have areas North-West can can we from production El wet develop And we that from

going which develop an go in time, and more as production next Bolivar be bring we some from on Eventually, to can further up also from more area for able year, So is Bolivar that's we'll Cieneguita North-West. to North-West.

infrastructure. we because we most better This of nature Bolivar have of tunnels the of our time should what now. North-West grades appropriate both next business takes developing driving production the Cieneguita and by have of with year, and So the than the

the that with. we about referring uncertainty, categories resource we're to working talk when Now are we

in a our part of large resource inferred category. aware are have the We quite we

relative from program. have a inferred we very move as So drilling -- we

inferred we to in But mining. certainty. from process, still to we that move we measured, indicated have As are there more

more position the we are in resources has all So into where get the do. to into that this transition certainty sorts we ramifications we we this of but what with getting mine,

what referenced terms that's of in we uncertainty. So

Heiko Ihle

mean, you're of implying last what to But I you Bolivar out, on looking That's leads rate two midpoint, In really the the and I'm one. what changes had and could What's you know in next first so you planning to realistically on do guidance at deducting really do at actually here. you asset, community half pretty great with QX. XX% asset so you this think words, million once At a growth put Building picking whatnot a looking years? on that my keep questions build love that a completed mental you a on million should given look it question sorry X.X at good listen term? XX like for -- other bit need how that couple we that the year and all on think your and a pounds my the transformational just of guidance asset it's cut Yauricocha the the decent you're upside looking the analyst equivalent, X.X in prior essentially you million for half, are so you only and the then obviously. think copper longer

Luis Marchese

we to going better grades. be to Heiko. better I than now, think move into as have which I going has it's Cieneguita said much We're what

tonnes day. tonnes a we the reach increasing we into it And at X,XXX per looking reaching expand are per profit, day. X,XXX further We throughput, then can

and the our also drainage, tailing infrastructure productivity the facilities, that focusing by ventilation requires, program is turnaround on efficiencies the adequate mine improving the think I tunnel, rest. that integration adding and

have So and a the better what sometime full still with grades are now, should future, there. capacity. efficient move we mine operation, than But we operating we from at into have fairly we as more

side that have here on obvious had the other of is The the we a hit price. equation

drop As been during I over of most highlighted has my our in XX% presentation, the metals.

-- how that's process position. into out we a new So of this taking flexibility do operating position

on at to more looking effectively, manage options flexibility and having other forward. the position So this options and various we this are way reduced

Operator

Our the Markets. Capital Mark comes from line from of next question Reichman Noble

go Please Your ahead. now line open. is

Mark Reichman

its elaborate Bolivar, you you a on production pricing guess would in might But situation I really, environment be side couple and with in at new the you. bright years. Bolivar your is, on mine the earlier of security mentioned that you bringing delay impact on Thank the and operations on development a at my better question initiatives?

Luis Marchese

major Mark. hour for access laying town A has nearby What question, that local issue of in over that was together is area. This a priests called Bolivar military pretty issue hiding, the is certainly has for one with Bolivar couple residents. from been year happened killed way has it bad area, X,XXX very A have operate. to XX strong presence highlighted incident the much now the over a local burglar and a Bolivar, ago, mine. that you security Thank the is it's months impacted and Jesuit we -- there Yes. couple very we have road facing two has between Cerocahui, a have been old that, these we police in which the time obviously like of that in And after in officers.

to of example, operations few our for movement careful contractors. on impacted our have couldn't of also days certainly all concentrate, the for We be we our happened, suppliers, because some for move got very it this people, our a our gradation. when And the

but So better, it's that's still it's now -- ongoing.

very something have we that we address a And plan place. in So that's seriously.

have it We still the happened. to into we and issue, are But ongoing way supportive. an check that quite the it's it's authorities But been something lifted talking with they still -- it's future. have

Mark Reichman

Bolivar in on turnaround, just it's do it’s just you think expenditures. the times that'll better times up? $XX then that the of the terms understand in ramp the at to terms -- I you help flexibility. ramp or of financial of delay million But deferral up of does better And capital

Luis Marchese

time to up…? Better ramp

Mark Reichman

are you that delaying? Expenditures

Luis Marchese

ramp, It is idle don’t Mark, have to better capacity. time we a

Mark Reichman

helpful. That's Yes.

Operator

Family Office. question of final Our Instructions] [Operator Cooperman from the Omega comes Lee line of

Leon Cooperman

as ability number concern parts, And best the one, what your questions moving the bills? guess, solvency, suggestion. the pay and producing a Two any financial any raise a of to all you assuming two, do of EBITDA have in do of XXXX And stocks. to the per split, very, is a And price suggest you $X.XX to of most Company put that world the in out low get respectability. reverse the very of is, brokerage of to cost commissions. share us question And have of stock and your prices? kind relative firms I present consider my you suggestion way number charge because all sense about trade the of Question would capability back a the

first them two comments questions, the So any on please?

Ed Guimaraes

Hi, Lee. It’s Ed.

to on first and there XX are still on production no solvency, So time this over with very Bolivar. turnaround growing expected XX the at months. generation concerned focused at your question address much our plan uncertainties We're the next cash to

We out those lines and off secured have help, fall production to from estimates credit gone should more of that.

in recently have lows June. that seen the from strengthening prices the we metal environment We in saw

mine the question And that's as we're revising of far your the to number life So no. in of all question, two, number helpful. one, answer as process plans. our But

reluctant comment XXXX strategic on complete and XXXX I'm meetings So to our we have our budget. EBITDA until

Leon Cooperman

-- back reverse suggestion had split? you And of haven't to to

Ed Guimaraes

doing even reverse out price with we for to come with should it yet and it looking options, decline that's further share more not now it's potentially concern when you have split. better at uptrend, subsequent the do sure. be something reverse positive can to a that, something we're we cause My think like we it a talked of But think split are place. -- right that I at. considering on Bolivar now taking is I do turnaround and a still be we're all And it something Lee. really would something like Internally, to the that looking when when certainly haven't we is about could show looking

Operator

you. Thank

a We have follow-up Mark. question from

Your line now open. ahead. is Please go

Mark Reichman

on just know And on could kind realize? of to expect you wanted much the if open sales manage you that? position. of adjustment to touch kind how you unsettled that can How would of that mark-to-market just I

Ed Guimaraes

Mark. Thanks,

have deliver positions with essentially sales concentrates. -- our we where have we we So once offtakers, the

four months out They important. that's one either to the three or have So have to out either they to month pay four choosing between option out. been and pay us months

So, relative And that the exposure. zinc significant from given you XX% the period, silver around -- that have XX% had in dropped to June, March do copper and mark. we declines

So subsequent a in but essentially, themselves they finalized. where to Mark. it's XX, point an haven’t These time, have accounting adjustment June somewhat reversed it's

should So where of metal continue they where even I see that or be now. should some prices reversed are them

You'd get in…. a reversal that of coming $XX million

Mark Reichman

Okay. that's that from that. versus just month Is Is follow-up change that's normal? are more in of do Well, seen think And months becoming to helpful. that four to three do the just because to very that the maybe out? uncertainty? have on that one you that behavior a -- they you Or choosing

Ed Guimaraes

Mark. really the can't speak yes, -- I speak can't I on views on that, behalf of traders, and their

Operator

you. Thank

hand to for to questions call As remarks. at over the the management conference time, this team like back there closing are registered more I'd no

Christina Papadopoulos

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

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

Operator

great conference today's concludes call. day This ahead. Have a

your You may now disconnect lines.

Sierra Metals (SMTSF) 12 Aug 222022 Q2 Earnings call transcript