It’s always a good feeling when a mining company can say that profitability has contributed enough free cashflow to enable it to start returning cash to its shareholders.
Igor Gonzales, president and CEO of Toronto-based Sierra Metals Inc. (TSX:SMT), knows that feeling. With 2020 EBITDA levels forecasted to be between US$109-million and US$126-million, the company has committed to returning up to US$30-million in capital to its shareholders this year.
“We believe this will provide stronger value in the stock and allow larger shareholders an opportunity to reduce their ownership if they wish, which would help improve trading liquidity,” says Mr. Gonzales.
Sierra, a mid-tier precious and base metals producer, owns and operates three mines in commercial production: the Yauricocha mine in Peru and the Bolivar and Cusi mines in Mexico.
Formerly known as Dia Bras Exploration Inc., the company began exploration and development work in Mexico in early 2003. In 2004, the Bolivar Mine property was acquired, and active development was completed to advance the property towards production.
In 2006, a rapid expansion into the Cusihuiriachic (“Cusi”) silver district resulted in the acquisition of a 100-square-kilometre property encompassing 12 former silver mines. With its Mexican properties providing access to both copper and silver, the company further expanded into Peru in 2011 with the purchase of the Yauricocha Mine. The polymetallic mine has become Sierra Metals’ flagship property, providing most of the company’s revenue as well as the cashflows required for its recent production expansions.
We believe [returning cash to shareholders] will provide stronger value in the stock and allow larger shareholders an opportunity to reduce their ownership if they wish ...”— Igor Gonzales president and CEO, Sierra Metals Inc.
Mr. Gonzales says 2019 was a good year for Sierra. In spite of a strike in March at its Yauricocha mine, which resulted in a halt in production for a period of 24 days, when workers returned they were incentivized to make up for lost production, and year-end production fell within the company’s guidance for the year.
In Mexico, Sierra successfully expanded its operations – including a 40 per cent production increase at the Bolivar mine – and finished the year well ahead of initial goals, and production at the Cusi mine nearly doubled.
These expansions will allow the company to improve profitability and reduce unit costs in 2020, says Mr. Gonzales.
This year, the company will also focus on the permitting process at the Yauricocha mine to increase its production there as well. A dedicated team has been put in place in Peru to facilitate the process.
Sierra is also looking forward to the results of PEA studies at Bolivar to assess further production increases, which would further reduce costs and improve the valuation of the mine, adds Mr. Gonzales.
For more information, visit sierrametals.com
Produced by Randall Anthony Communications. The Globe’s editorial department was not involved in its creation.