Q1 2021 Sierra Metals Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Sierra Metals first quarter 2021 of financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
If you should require any further assistance. Please press star Zero I would now like turn the conference over to your speaker for today, Mr. Mike Mcallister, Vice President of Investor Relations. Thank you Sir Please go ahead.
Thank you operator, and good morning, everyone.
Welcome to Sierra metals first quarter 'twenty.
2021 results conference call on today's call. We are joined by a new Mark Haden, our CEO as the Marin our CFO.
We are assuming that all published materials have been read.
Today's presentation highlights the key issues of the quarter. However, I would like the highlight that as always we are open for questions at the end of the presentation, which can expand upon other issues that might be of interest for those listening the.
The accompanying presentation for today's call is available for download through the webcast or from the company's website at Sierra metals Dot com.
Yesterday's press release, the financial statements and the management discussion and analysis are also posted on the company's website.
Before I turn the call over to Luis.
I would like to indicate that this earnings call contains forward looking information.
But that is based on on the company's current expectations estimates and beliefs.
This forward looking information is subject to a number of risks uncertainties and other factors actual results could differ materially from our conclusions forecast or projections as reflected in the forward looking information.
Additional information about the material factors that could cause actual results to differ materially from the conclusions forecast or projections in the forward looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as the.
Reflected in the forward looking information is contained in the company's annual information form which is publicly available on SEDAR or Edgar buy of form 40 F or on the company's website.
Please note that all dollar amounts mentioned on today's call are in U S dollars unless otherwise noted.
I would now like to turn the call over to Louis Mark Daisy our CEO for the first quarter highlights and the company outlook and then to add the merit to our CFO for the financial highlights. Please go ahead Luis.
Thanks, Mike.
Good morning, everyone.
Turning now to slide four.
Well, we would like to stock price stays in the <unk>.
For the safety of our workforce from the communities and we use for.
Which we operate remains paramount to the COVID-19.
COVID-19 has imposed values direct on.
In the rig challenges to the company of management.
Which has affected on a reality to operate effectively.
In 2020 on continuing into 2021.
The impact of coffee.
Included.
The lithium mine development.
In preparation of areas for mining and consequently, lower head grades we focus on larger.
The lower grade ore bodies, as we strive to meet the.
This has resulted in lower missile tubes routes would be for a moment of rigs.
Costs were also affected mainly due to indirect close.
With the steel must be incur.
Despite lower metals production.
That's it.
We continue to take proactive measures to mitigate potential impacts the code.
19 makeup of employees.
The NDP operations supply chain on our financing.
We continue to based on current <unk> employees.
Before they can during the active workforce.
Continue to monitor all employees the.
Further we're also the ferry so anyway of producing the capital projects.
Due to ongoing on credit one of our difficulties for the 2000 for it.
Additionally, our goofy mind will host of afflicted by a large scale power outage that affected picks up on <unk>.
The northern Mexico.
Which of course, most production during on approximately 10 day period on both.
The instability in the power grid of lot of Mexico, which has also brought some of the for lots of difficulties.
For the mix of a few months.
However.
Despite the challenges we face.
The company is to have solid revenue of adjusted EBITDA of Mint.
The positive free cash flow.
Furthermore, while the we are facing challenges from COVID-19 currently.
The midterm plan remain in place.
Looking ahead for 2000 to endure the dollars.
<unk> thousand two of them.
Please turn to slide five.
Despite the challenges we're currently facing.
We continue to see the strong growth opportunities for the company.
The operations in Mexico.
And on the way to running of the increased capacities of.
The <unk> tonnage per day of Bolivar and.
In 11 countries tonnage per day of closing.
Furthermore.
We recently received on Ips.
Environmental permits.
For Devry culture on and expect to receive the final permit.
Which is the operational permit by the.
The end of Q2 2021.
These will see the agriculture increased permits.
Permitted throughput by 50% to 6600 Boes per day.
It will allow us to make better use of the already installed capacity of Jody.
Joe the culture.
A dozen culture, we continue to complete drilling.
To grow our mineral reserves and resources on complete.
The development work for acquiring operations to increase throughput in the future.
The capital expenditure projects will result.
On the future increased cash flows.
On lower cash costs.
Additionally.
We expect.
To fund these capital expenditure programs through the generation of operating cash flows.
At Bolivar on coffee.
Lagged every quarter, we are continuing with mineral exploration programs.
On completing infrastructure on operational improvements to doubled throughput in the future.
These improvements include.
The expanded tailings facility of both mines.
And driving on underground tunnel that will connect the mines with the concentrated client of <unk>.
The improved efficiencies and reduce haulage costs.
Ah recently.
I believe.
We expect to commence construction of Io loans processing plant.
On <unk>.
Which is expected to produce approximately 500000 tommy's per the year of 62% iron ore concentrate.
This is expected to enhance <unk> profitability line.
Also lowering our transportation on business development costs.
This is a project of one.
Recently.
I would work.
We continue to work on the completion of the pre feasibility studies for the three months.
Which build upon.
On the previous preliminary economic assessments completed of all three mines.
The study of the expansion of the record share mine throughput of 250 500 tonnes per day.
On the doubling of throughput capacity of.
The Bolivar and cost remains true.
On 3400 bonus per day.
Prospectively.
In conclusion on it.
Slide seven.
The company has had a relatively decent first quarter, despite the direct and indirect.
With the receivables challenges, we faced from the COVID-19 pandemic.
We were still able to emerge with the stronger balance sheets on cash position.
While we continue to operate in a holder of oil environment due to COVID-19, we remain hopeful.
We expect further cash flow of liquidity the improvements in 2021.
The benefit of improved production.
The metal price.
The company has made the necessary capital investments on infrastructure improvements to continue growing production for improving costs.
We will remain committed.
For the company's prudent.
Similar growth.
And more importantly, the improving the per share value benefiting ultra deposits.
With that.
I will now turn the call over to Ed for the first quarter financial highlights.
Thank you on the risks and good morning, everyone.
Turning now to slide six.
The company had a relatively good first quarter. Despite the COVID-19 related operational challenges.
We reported a four 5% increase to our consolidated throughput.
And generated EBITDA of $25 million.
We also reported positive free cash flow of net income.
And we finished the quarter with approximately $74 3 million in cash.
These relatively solid results are the product of evolving optimized operations and expansions ramp up despite.
Despite the effects of COVID-19.
Providing solid financial and operational performance.
Which we expect to continue as we progress into 2021.
Our revenue mix by metal continues to be led by copper.
Followed by silver.
And zinc.
While we have seen the copper portion reduced in Q1 due to previously disclosed factors.
It is expected to continue to take a leading role in the company's metal mix of production.
And revenue.
In Q1 2021, we saw an improvement in all realized metal prices.
Copper continued to improve at the end of 2020.
And into Q1 2021 and remains strong currently I believe today, it's $4 70 per pound.
Precious metals in the zinc have also remained relatively strong in Q1 2021.
Turning now to slide seven.
Compared to the same period in 2019.
Cash costs were higher at both the Audi culture in Bolivar.
Attributable to lower metal production.
Due to lower head grades from reduced tonnage contributions from higher grade zones.
And bad weather at Bolivar, and the early part of Q1.
<unk> cash costs were lower during the quarter due to the 23% increase in silver equivalent payable ounces sold.
However, all in sustaining cost per silver equivalent payable ounce was in line with Q1 2020.
As higher sustaining capital.
Offset the impact of the increase in silver equivalent payable ounces.
Turning now to slide eight.
We finished the quarter with $74 3 million.
And have total net debt of approximately $25 million.
The company continues to have a strong balance sheet.
Working capital and cash position to support capital expenditures and growth initiatives.
Management remains committed to the company's prudent and sustainable growth plan and.
And more importantly, improving the per share value benefiting all shareholders.
With that I will now turn the call back over to Mike Mike.
Debt net of.
And for the presentation portion of this call as previously mentioned we are open to discussing other topics of interest the shareholders may have.
We would now like to open the call to <unk>.
<unk> from participants.
Operator, please open the line.
Ladies and.
Gentlemen, just as a reminder, if you'd like to ask a question. Please press Star then the number one on your telephone keypad.
Your first question comes from the line of Mark Reichman with noble capital markets.
Good morning.
For the first question is Luis.
Probably address some of the commentary, but I wanted to ask just what exactly needs to happen and when do you expect to see greater improvements at your co chair of Bolivar.
Thanks, Marc for the question.
While cutting the.
Both mikes moving to Mark is debt.
We are being with the COVID-19 situation for the.
The year now.
The recent being overtime prioritizing.
Development on mining, we've made sure that we cut the Tony's tools to feed the.
The plant.
In the process, we have been prioritizing.
Larger ore bodies.
Though with lower grades.
Okay.
<unk>.
We are.
Now when we have had in the first quarter the.
The effect of this prioritization.
Otherwise, we will complete the tonnage.
As we speak we're in the process of trying to catch up back on the development of enriching for these higher grade areas. So we can have.
With the result.
Of metal production.
Having said that I just want to highlight the fifth.
Tuition for.
Through the Mexico in terms of COVID-19.
It's quite different from other.
The other parts of the world, where due to the vaccination.
The on the EMEA seems to be receded in Peru.
We are still in the middle of the second wave.
And only two of 3% of the population because we investigated.
We have already started to rollout vaccine the issue for the over 70 year old people.
This week.
So we're still a way of chip from.
For ongoing over the <unk>.
And this is having.
Issues. This is presenting issues in terms of.
For the winter, we can do at the moment.
Certainly we expect this to hopefully to finish by vehicle of the year win.
The mass amounts of vaccines will be getting into the country.
So in the meantime, we are.
Adding more contractors switching to more people and trying to go back into our.
Our the.
Development of these required.
As stated in the mix in the months, we will start.
See the.
Results of them in Mexico.
We feel that we are.
Starting to get into better areas as we speak.
So we could see the sooner.
Although.
The team is.
With the few of the timing with some residual effects from COVID-19.
So is it fair to say when comparing first quarter production of actuals to the guidance range I mean, it doesn't seem like it should be too much of a stretch to achieve the low end of the range, but your ability to gain ground. During the remainder of the year that will in part be driven by the trajectory of the impact of COVID-19.
It is that the way to kind of think about it.
Yes.
So I think the summarizes it.
I've got a couple more questions, but I think I will just go back into the queue in the follow up with them later.
Okay. Thank you Mark.
Your next question comes from the line of Alex <unk> with CIBC.
Hi, everyone. Thanks for taking my questions.
If I could ask on the guidance for it looks like because of sort of answered that one, but maybe switching to the exploration at yard project.
The nice results out there is that.
Some of that you guys can add to the resources this year or is it kind of take a bit more joining the math.
When can we maybe see some of that new zone in the actual mine plan.
Thanks for the question Alex.
Yes.
The earnings of <unk>.
We expect the driving what we call the Crusaders of Camille.
The last year.
And to add to look into this.
While on to one of the half kilometer of stretch with the Esperanza category on a sales growth in some.
The exploration.
<unk> as a result of that we have for.
Some continuity.
But the mix to the north of the announcement that we announced in the marketing of the press release. So this is fairly close to where we are.
So the mix of therapies that we're going to do some of them.
Infill drilling on also a bit of embracing often down we'll see how fast these.
Finding scope.
This should take us to add resources this year.
Rachel EBIT mindset.
Okay. So so diesel is a very good news is very close to where we are operating.
And the issue.
Help us.
To reach.
The resources for this year.
Okay, great. Thank you for that.
And then maybe could you also just given the comments maybe on the political situation in Peru, and how that might impact the market share going forward I know, it's a bit uncertain still but how are you guys viewing that going forward.
Yeah well.
The return.
It's very important in Peru.
10% of the GDP.
18% of the taxes for the.
The weather the percent of loans.
On the exports of the country. So it's the yearly from them in the room in terms of the economy.
It always comes as a topic of discussion early presidential election.
So this is the case now we have two candidates one keiko fujimori of political for you.
The hub also address.
The initial initiatives around mining on the input.
Of the country.
On the review.
There are other discussions how on the government take of out.
And on the redistributing the benefits of the of.
Of the Miami.
<unk> revenues from total population on the risk.
Having said that.
The recent demography so there is day.
For the initiatives to move forward.
They will have to go through Congress.
Two strong EBIT keep in mind that the.
The Congress has already being elected.
None of the two candidates from pharma.
Sure.
The majority of the.
The minorities in Congress.
So any decision making in terms of anything but in particular, the mining which is what we're discussing.
We'll have to go through Congress on through.
The good debate, we are now as your sales in the middle of the campaigns for it's a bit uncertain demand constant range.
So.
Let's wait for the result.
Let's see what comes out of the yields on them.
Virtually we will engage.
The industry will kind of engaging in a conversation together with the political letters.
Okay. That's a good from assets Synopsys. Thank you.
Yes.
Thanks, guys.
Thank you Ali.
Your next question comes from the line of Lee Cooperman with Omega family Office.
Let me just say this that the.
I am incredulous that you guys do not voluntarily say something about the strategic review process, which was valued as a big deal in early January so what can you say to update us about the strategic review process.
Thank you with the government interest.
For the question.
Okay, but I can say is that the.
Fatigue of review process.
<unk> has also been.
Affected by these unusual times.
And the.
It's taking a bit longer than we had expected.
Because of the restrictions on.
On pretty much anything when do you think that youll have something to say one way I'm not asking for what you're going to say, but when do you think youll conclude the process.
If you have a guess on where we want.
Difficult to tell but certainly we are working on it.
<unk>.
Consistently.
We expect these to helping the next.
A few months.
And hopefully.
Come back to the two of them.
Market.
Good results from this process.
Alright second question for the process doesn't yield an attractive enough price I haven't the carbon from the vantage point of your stock of significantly mispriced year to day to give you. The example of Freeport cap on gold was up 67%. Despite youre, putting the for sale sign the couple of your stock was only up 13% year to date, but after the strategic review.
<unk> does not provide a per.
Thats attractive how much debt is the company willing to carry because I think we could recapitalize the company had a very favorable price than the words I.
Look at the.
You look at the EBITDA forecast this year and look at the tonnage that you are projected for the next couple of years I assume your earnings will grow quite substantially if prices stay at these levels.
But as the company prepared to take on debt to buy back stock or is the company uncomfortable doing that.
Okay.
Thank you for the question, Mike maybe Mike can comment on the on the market situation on the comparison of the Ddos made on the weekend comment.
On the scenario that you are.
So Jack the only thing I would say the areas yes.
Yes, Lee if you compare it to <unk>, then were down but it's not really an apples to apples comparison Freeport is more of a pure copper plate for a diversified producer if you look at it compared to like.
At Bay or some other.
Base metals comparable we're pretty much in line.
With iron ore, we are doing better than silver peers were doing good against them as well on a mid tier level.
So.
Well I hear you on the Freeport, we're not a major yet.
So a little weighted off so it's not really a fair comparison for that where more of on well of late.
What I would observe as none of these companies you're mentioning it put themselves up for sale generally speaking of win.
Can we put yourself up for sale.
Yes.
Premium.
Of course people anticipate a favorable outcome.
I am not interested in selling the company at a discounted price. So when I look at the enterprise value of the company and I look at our free cash flow seems to me that we could create a lot of value for the shareholders by.
Recapping the company on the words for.
For example, if EBITDA was a couple of hundred million, which I think will be next year.
And you had debt, David say, two times debt $400 million pleasure.
Pleasure of being a net cash position.
The two thirds of it.
Market cap of the company.
So it seems to me very exciting that we can make our own luck, but anyway just plant debt seed.
Right in assuming that you are still staying with guidance, which is that at current spot prices EBITDA. This year of 170 285 and on.
Price is 155 to 170 <unk> is that still your guidance.
Okay.
Yes, yes, it's stellar guidance, okay. Good okay, and I assume that you would anticipate.
If I said two prices will remain at current levels.
Which of the big assumption that we would earn more money in 'twenty one 'twenty two and 2023, then we're earning currently.
That's correct okay. Good.
Okay.
Tell me about the iron ore project, which is going to take up.
Fair amount of Capex.
What is the return on that Capex likely to look like or the profitability of the iron ore business.
We're going to thanks for the question.
Wherever your type of the protein.
<unk>, which we are bringing to the.
The contracts for milk.
We are going to release the economics in the mix of a few weeks.
Awesome.
We shoot.
For the believer.
The price for item for.
For him the economics, but I can tell you some characteristics of on this project.
We are going to do it at the very reduced capital intensity will go into the spin.
As you see in the press release $28 million for half of million Tony's of.
Iron ore concentrate of your components with the Capex intensity of any other iron ore for Ya.
In the market we are in the low end.
On the other hand in terms of operating costs.
While the rate is very fortunate that we have a railroad line only 50 miles from the mining.
If you have.
Iron ore project anywhere in the.
In the world usually build of the infrastructure becomes a major hurdle on a major issue in terms of Capex, we don't have debt because we have the training available.
And also we have.
In Mexico, one port.
Which is the closest one to our operation.
The space of facilities and infrastructure to manage the.
Production, there, we're going to bring from from the Magnetek.
On the ahead we have.
Quite a good.
On the stockpile of ore that we're going to process through these new facilities.
And this will drive our own cash operating costs of the mine to the low end. So no. Our challenge is to bring these two operations.
As soon as possible and we are going to add value from our resources. So in both of our current metals mix, which is.
But I think extremely strong because we have.
You are aware of copper fueled our CCAR the risks, we're going to iron ore.
Share of our metals who's going to pretty much we kind of example of the variety of metals for.
For the future.
You don't want to answer the question for a few more weeks, but by and large you have the answer because you would.
We have not gone ahead and improve the capex of $28 million without doing the analysis is the correct.
Absolutely yes.
We have to follow we have to follow into.
The originations.
This is an open Mike you have sort of open to the public price. So whenever I don't want to go down that path.
Do you expect the end of year with more cash than you have presently the words, you have $175 million, let's say on using as EBITDA.
We have capex of.
With the $106 million how much of the 106 million has already been spent this year.
And the orders how much additional.
On the spending we're looking at the have you spent any money this year yet the one.
Six.
Yes, yes, yes, we have and we're a little bit behind in Q1 were about $10 million from what we said in terms of annualized secured affect the quarter of annualize that but to answer. Your question. Yes, we expect there to be of positive free cash flow.
And add on too.
For the cash balance, yes, yes, I would expect that you would end the year of debt free. If you took the cash minus the debt that you would be debt free is that of bad assumption when the too aggressive.
No it's going to be it's going to be closely but yes, it's going to be approximately.
Around that might have some but it is going to be de minimis might be less than $1 million.
This is a little bit of esoteric but.
I am I think the third largest shareholder of the company.
And if.
If we don't have a favorable conclusion to the auction process and like to say, we don't have a favorable conclusion I think the.
The buyer should have to pay materially more than the last sales to buy this business that we should consider.
Substituting.
The debt for equity in the capital structure of the orders were in an environment, where interest rates the lowest in history and our equity price is very cheap relative to the underlying asset value for it seem to me to be intelligent to substitute debt for equity of the capital structure as long as we feel we are a couple of hundred million dollars EBITDA type of arena, which are.
The spec do you think we can probably higher than net.
And going forward.
Traditional express delivery of gene expression of you and I'm happy to discuss the AD offline with management.
My last observation.
I Love. This one Mike why are we making it so difficult for people to listen to the core of why we requiring pre registration and stuff like that and what are we afraid of.
I've been doing this for over 50 years I Havent I don't recall of this being done by anybody else.
Why why Youre doing it that way and to ask questions you have to pre register.
Yes.
Matter of debt provider has scaled back during COVID-19.
Non as many operators available and Paul really dialed in at the last minute, they're going to be overwhelmed and some of the rocky public guidance.
Sure.
Yes.
The simple way.
Net income Gotcha. Okay got you. Thank you. Thank you for your answers I appreciate it good luck stay safe stay healthy. Thank you.
Your next question. Your next question comes from the line of Richard Carrion Paragon with equities.
Good morning, guys you bought assets.
Already answered my questions, but I have one one last question did we undertake this review process for months ago as a result of some specific.
Suppression of interest on the company.
That's my only question Neal.
Well. Thank you. Thank you for the question no it won't because we the board discussed the strategic position with the company.
The new wells the view of the board.
The group.
Time on the right opportunities to undertake this this process.
And did I understand you correctly ashwin on.
In the earlier question that the process will probably drag on for another two months perhaps.
Well I can more premiums out.
Bob.
The.
We expect that it will go for the next few months.
Thank you for your time and good luck.
Thank you.
Your next question comes from the line of Jim Young with Midwest investment.
Yes, hi, the couple of questions here for you.
Number one regarding the cost trend that you experienced in the quarter.
Are these expected to remain at these.
Elevated levels for the foreseeable future or would we expect to see the.
The decline materializing over the next couple of quarters. Thank you. That's my first question.
Thank you Dave.
Thanks for the question.
As the grades go up Jim we expect the <unk>.
Cost per.
Per.
The metals produced to go down.
But thus far.
Function of.
No.
We can be successful on bringing these higher grade ore into the into the.
<unk>.
The thing we get in there in the lever.
<unk> is a bit behind because of all the inputs of the first quarter. So the culture is.
A bit more difficult because of its if we are in the middle of this.
Second wave of in Peru.
So.
It's getting on with.
<unk> two.
To get into those are as soon as we would have liked to.
Having said that.
We are the <unk>.
Bring in.
The more workforce into the into the minds of trying to.
To get faster into those those grades so that's the financial how we do on co where we can do in terms of this.
COVID-19 progression.
Let me give you a number.
The strikes for the asset tracking.
In the first quarter in January.
Out of the 560.
On a 70 the people that work in Bolivia.
We had in the through the screening process, we call the stock over 150.
Sure.
Secret COVID-19 on in February we have over 40.
We're talking in the first.
Over 25% of our war for it's for CCAR Colby on the.
The second month.
8%. So this has been.
On a real hit okay.
In.
The Mexico.
In the first quarter now, we're seeing way lower numbers, but we are still looking for it.
Now in Peru, where CE Mark cases.
So we still don't know how this is going to evolve, but we are.
Happy to add on the screening process is working.
Okay, but we are certainly.
And kind of be the so many of our workforce.
Ben.
Seek out of these dcs over the debt.
Great. Thank you and I appreciate your focus on the safety of the.
The employees the.
The next question would be pertain in this for add regarding the Tcs and Rcs.
And Ed I recognize and understand the in the past you.
Unable to really comment directly of PON.
The Sierra metals is specific situation, but can you give us a sense as to how much of the benefit from lower key season RSC, we saw in the first quarter.
And can you help us on giving us the feel for how much additional benefit do you expect in the second quarter third quarter and fourth quarter of 2021.
Thank you Jeff.
That's a very good question.
And I don't mind going in and the elaborating a little bit more on the situation.
Especially with the pricing.
Rising metal prices and I can explain on little bit how the Tc mechanism works.
So just first first of the first quarter still had tcs and Rcs from the previous year negotiated contracts and that was because because of COVID-19, we had delays in for.
Fulfilling all of our contractual commitments with our customers for their off takers.
Typically these these contracts.
For the <unk>.
Johnson traits.
Our cash.
Very short term for initially one year in nature.
And.
The reason that the.
The reasoning for that is many we do.
Due of tender process every year some involved about 20 off takers.
Some refiners.
And built into these.
The Tcs Rcs, if you will or our escalators and what that means is that when you negotiate a contract.
<unk>.
Counterparty.
Once two or puts and provision for that they participate in.
Upside of any metal price.
So on the case of lets just take copper comprehensive.
A year ago copper was around $2 50.
Currently.
$4 70.
So what does that mean to the TC Your Tc would be negotiated at the base price.
And that the base price for argument's sake, let's just say was $6 per ton.
Got it.
We're now at over $10000 per ton and ryzen.
What the what the implications on the Tcs has.
As the metal price rises.
The off takers can participate by way of an escalator in.
In the form of higher Tc.
So.
Of that debt essentially what I'm, saying is that they participate in the upside we don't get of 100% of the upside yet it's not like you can just take a benchmark Tc for copper for instance of.
$60.
No thats $60.
The increase in and in the case of copper it could be it could be significant if metal prices were at the stay where they are now.
You can see a significant rise in net in that TCE based on the escalators.
I understand.
Right.
That's correct, that's interesting industry wide and and it does affect our all in sustaining cost is not our cash costs, but our all in sustaining costs, which is essentially out of our control.
In that.
We included in the.
In the overall cause.
The number so and that's what we're dealing with there. So there is some upward pressure definitely on the Tcs and Rcs, even though we negotiated.
Much better terms in terms of with you if you want to take bench markets.
If you look at benchmark for zinc for instance of this downward.
Yes.
The last year's benchmark was about 300 this year I think the.
They were closer to the $140 50 level same thing with copper and we're down probably 25% compared to last year.
Now have to factor in.
Escalator, if you will.
And that that could be significantly the especially for copper.
Copper is on it of tear right now.
Is it a bad thing no. Its a good thing I think we shouldnt I'd sooner take this from the copper price of $2 50, but it's important to recognize the we don't participate fully in the upside of milk.
And Thats just for the Street.
That's correct. So these the because we keep these contracts relatively short term so one renegotiate next year.
These escalators a reset to zero. So if copper was at $4 70 on January one.
2022.
Or whenever we negotiated the contract.
That escalator or that's the base based price and then escalators go from there.
So it really doesn't have any impact long term, it's really just the short term.
Impact on on the TC two of them.
And is that similar for Rfps to.
I know its just the PC it's.
On the headline for us on the treatment charge.
Normally these things wouldn't be we heard me talk about it because you wouldn't see significant swings in and base metal prices like we've seen I don't recall seeing such a swing.
Over the past the 10 years and copper prices.
Okay, and then secondly, I guess, our last issue and just say is that.
The guidance you gave back on January 18th for EBITDA.
I would.
Im a little curious on a little bit disappointed frankly that we have not eliminate the low end of that range because of yes.
And I totally recognize the understand the the near term challenges from COVID-19 the impact on production of the impact on grades a little bit but.
It would seem to me that given where the commodity prices on our overall debt low end of the range is just way way out of the question for I don't understand why you are not eliminating that low end of the range and updating the guidance for EBITDA for 2021.
I think it's still premature Tim.
We will certainly look at it I think probably in a couple of months when we close of Q2 will definitely.
We'll provide a lot more clarity at that point, but right now given given the cost of we've had in Q1 associated with COVID-19.
This price participation on that.
I had mentioned in terms of not benefiting fully in the the price of.
Of the metals.
It's we're comfortable leaving it where it is and we may make further adjustments of refinements to that in the future but for now we're maintaining.
Great.
Okay. Thank you very much that's all for right now.
And you have a follow up question from the line of Mark Reichman with noble capital markets.
Yes.
Question for Ed So capital expenditures for 2021 also originally forecast of 378 million, which included kind of.
Carryover of $10 million from last year.
So 37% was for sustaining 41 was for expansion.
Now you've got the the $28 million for the iron ore processing plant. So do you expect to expand the full budget.
For the for the year or maybe I should just ask could you kind of address the spending.
For the remainder of the year, including the $28 million for the the processing plant.
Thank you for the question yes.
Yes.
On page have had restrictions and that has affected mine development is expected.
Exploration development.
And so that was we had that explained the carryforward into.
2021 could we have a similar carryforward.
Still too early to tell but if we are restricted.
In terms of head count.
It could it could have an impact.
So, including the magnetite, we're looking at $106 million the of $78 million plus the for 28 million that was just recently.
Could we fall short of that.
Yes. It is.
Too early to say, but there could be of where we might have a carry forward into next year, but if we do it's really at the.
Because of the safety precautions.
Just having the orad counts.
Yes, so some of that spending will fund the some of the improvements that leaves the alluded to.
My earlier question.
So in terms of the.
Do you think for for your ability to gain ground in the.
For the remainder of the year.
The two two.
In terms of production is is that more of a function of the sustaining capex spending or will some of that be on expansion as well.
In terms of maintaining the because we could easily shapiro of plant the plant capacity.
We can go over.
So it's really it's just in the sustaining the growth really doesn't impact.
Production.
It's all in right.
The good thing is we have.
We have the cash to fund the Capex. So if we can we definitely will spend it.
It's really.
More of the security <unk>.
Situation.
Regarding the COVID-19.
Okay, great. Thank you very much.
And there are no questions at this time.
Thank you operator.
That concludes today's call on behalf of the management team I would like to thank all of the participants for joining us today.
A replay of the webcast and all materials can be found on our website at Sierra metals Dot com.
If there are any further questions or concerns you may reach out to us after today's call or contact information can be found in today's presentation as well as on the company's website.
Thank you operator, please conclude the call.
Ladies and gentlemen, thank you for your participation on today's conference call. Today's conference call has concluded you may now disconnect.
[music].