Q2 2022 Sierra Metals Inc Earnings Call
Good morning, and welcome to today's Sierra metals second quarter 2022.
Financial results My name is <unk> and I'll be your moderator for today's call.
All lines have been placed on mute during the.
Presentation portion of the call with an opportunity for a question and answer.
If you'd like to ask a question. Please press star followed by one on your telephone keypad.
As a reminder, if you can limit your questions to two questions. Please I'd now like to hand.
April two our highest Christiana papadopoulos manager of Investor relations to begin.
Thank you operator, and good morning, everyone welcome to theorize back in quarter two.
2000, <unk> results conference call on today's call. We are joined by Louise Mark Heaney, our CEO and <unk>. Our CFO today's call will be followed by a question and answer period as mentioned the accompanying presentation for today's call is available for download through the webcast or from the company's website.
Our metal Dot com.
Yesterday's press release, the financial statements and management's discussion and analysis also posted on the company's website.
I'd like to note that.
Earnings call contains forward looking information that is based on the company's current expectations estimates and beliefs.
Forward looking information and such.
From a number of risks uncertainties and other factors.
Actual results could differ materially.
Our conclusions forecast or projection as reflected in the forward looking information additional information about the material factors that could cause actual results to differ materially from the conclusion forecast or projection in the forward looking information and the material factors or assumptions that were applied in drawing a conclusion or making.
A forecast or projection.
In the forward looking information is contained in the company's annual information form which is available publicly.
SEDAR or Edgar via <unk>.
Well I am for the App or the Companys website.
Please note that all of the dollar all dollar amount 19 on today's call are in U S dollars unless otherwise noted.
Now I'd like to call turn the call over to our CEO Luis marched JV for an overview of the quarter's highlights as.
As well as a summary of what's ahead for the second half of 2022, followed by <unk>, our CFO for the financial highlight.
Okay. Thank you thanks, Jamie.
Good morning, everyone.
Looking at slide four.
Sure.
Following the release of our Q2 results the.
The press release.
Working providing for mixed results.
Adobe courtroom, although remind grocers.
Welcome.
In Q1.
Hi, great.
Thank you Amit.
11% increase.
Good morning.
Also during the quarter, we reached a new high grade.
Okay.
Or.
Because.
Like every quarter.
The reported.
Lower production.
Okay.
Operating growth in production.
Guidance for the group.
Okay.
We've been around and for continued support.
Lower grades.
Okay.
For operations.
I mean, it had been mentioned.
These are new.
Great.
Watson, which was great.
Great.
Yeah, well you are mining process.
Thanks, Scott Bowman during Q2 or 57% higher compared to Q1.
The underground mining.
Slowly we continue go down while you are away from it.
Okay.
Mark Wilson.
Thank you.
Higher copper.
We told you.
We are seeing corporate grunebaum production, when compared with previous quarters.
When compared to Q2.
Thank you Doug.
<unk> and lower grades were lower.
We'll be talking to your 46% decrease in Calgary.
Yes.
Thanks, Jason Great profile.
On the new continuum.
With ore body.
With a low grade thank you guys.
I would like to mention.
So I believe up.
Operator.
<unk> security environment.
A few months.
Doing well.
While these military president Peevey area.
Following briefing.
Sure.
Our priority is to ensure their well being of all personnel and appropriate measures.
And by General medical condition.
<unk> throughput was 56700 vintage.
And finally during Q2.
A 34% lower than Q1.
Will.
Due to the unexpected slowing and the omni globally.
Lower throughput and lower grades resulting.
8%.
Goodbye.
When comparing Q2.
Okay.
Hey.
Hey, Mike profit, 9% lower technical support.
Production decreased 4%.
<unk> in Greece.
And therefore actually increased.
Great.
Silver equivalent production.
For the quarter was in line with Q2.
Sure.
The unexpected conversion of peer banks.
Coupled with lower metal prices.
Wanted to get a 15% decrease in quarterly revenue over last quarter.
57% over the three important going forward.
Specifically growth in pricing for Q2.
David.
Our therapy before.
3% lower than the GAAP comparisons at the end of Q1.
<unk> 11 million Mark to market objective.
Okay.
At the end of this quarter and impacted revenue.
And finally again.
Again, I like the old one.
<unk> enrolled the global inflationary cost pressures.
Right now in the <unk>.
<unk> quarter, we were not immune to this.
We experienced constant bridges later greenfield fueled Atlantic two level.
Can you tell them all because it's lumpy.
This will be impacted.
And the accounting of constructing.
During the quarter.
Michael Partridge Morgan positive.
Particularly at 30 project in one year.
As a result of all of these factors.
Important customers in Asia.
Adjusted EBITDA for the quarter was $1 4 million.
Now turning to slide five.
Turning with lifecycle and be ahead.
Helpful. Thank you.
Devry culture, we are focused on meeting maximal levels absolutely.
At 76000 tons per day.
Continue making up for local election later in the year.
Hi.
Along with hiring a new hybrid.
We have maximized governmental production our current binding constraint.
We expect that Debbie project corporate Aquila intellectual, we know quality reporting earnings of $53 million.
Okay copper drilling pumps.
Vanilla in protection project of a dividend.
Gotcha.
Thank you Chuck diligent collection and the required.
Thank you Damian.
I believe will continue for.
Thank you.
Wasn't it.
Hi.
Leasing environment.
And it's literally an amazing.
Of the year.
Continued operating difficulties.
Production guidance.
Goodbye.
Yes for $14 million to $16 million corporate one inbound for the year.
Each of you to continue monitoring of the project.
I'm going from memory.
Scaled back on their capital spend.
Initial guidance for the year.
Reducing while you had extended jumped by tecogen.
Okay.
Good luck.
Critical infrastructure projects.
Relation communication.
Yes.
Okay.
Hopefully you guys can hit mostly with grain production range of one <unk>.
The area of focus and implement developing hybrid area.
Okay.
In terms of development.
Okay.
Thank you Ed.
In the second quarter financials.
Thanks, Luis and good morning, everyone.
Turning to <unk>.
To slide six.
In Q2, we reported a 19% decrease to a consolidated throughput.
And with the decline in all grades this equated to a 28% decrease in consolidated copper equivalent production.
With lower production and metal prices declining over the quarter revenues from metals payable decreased 37%.
When compared to Q2 'twenty, one as discussed earlier.
The adjustments on the open sales positions as of June 30 relative to the end of the first quarter of the year.
With $11 million.
This impacted revenues from the first quarter.
This impacted revenues from nearly kwacha and.
And could see by negative $8 4 million.
Negative $2 4 million.
And negative 0.2 million respectively.
Adjusted EBITDA was $1 4 million.
97% decrease resulting from lower revenues and lower gross margins when compared to Q2 2021.
We reported a net loss attributable to shareholders of $15 3 million.
Sure.
We finished the quarter with approximately $16 $4 million in cash.
Our three months revenue mix by metal continues to be less.
Thanks.
At 48%, 20% and 20% respectively.
<unk> continued to contribute.
Revenue in line with previous quarters at 5%, 7% respectively.
Looking at the average realized prices competitive.
For Q2 2021.
Copper had gained much strength during this time last year, but more recently increased fears, resulting in a 2% decline in Q2 2022.
And 3% respectively.
Precious metals category silver.
Declined by 15%.
With gold increasing by 3%.
Turning now to slide seven to review balance sheet and financing and liquidity highlights for the quarter.
The company reported $16 4 million in cash as of June 32022.
Our total debt at the end.
In the second quarter was $88 million with a net debt of $64 4 million.
Fashion patch equivalents decreased during the six month period due to $22 5 million in investing activities.
153 used in financing activities.
Offset by $5 5 million of cash generated.
Yes.
For the remainder of 2022 of the Companys focus will be on improving on the chips ship metal prices.
Any further dramatic changes.
Within the year.
In June 2020.
Installments on its $100 million.
Six year credit facility with Banco.
Creditors, so Peru, and Banco Santander.
Okay.
Annually and bending.
In March 2025.
In June .
This year through our subsidiaries.
Okay.
Minera Corona.
<unk> received approval to refinance the quarterly installments.
Payable in 2022.
$12 nine a $12 $5 million has been used to repay the installment.
With you in March and June .
With the remaining 12.
June September and December of this year.
Okay.
The $25 million loan facility will become payable beginning in June 2025.
Interest on the 25.
Facility is three points.
But three months standard overnight rate, which at the end of June 32022.
Well.
We are two 9%.
Six months ended June 30th.
The company also has further access to approximately $25 million of available credit lines with local banks as well as opportunities for other short term lines and prepayments.
Facilities with its commercial uptake or.
Should it be necessary.
Turning now to slide eight.
Every quarter of the year when compared to Q2.
2021.
Cash cost and a 32%.
We're driven by.
Copper equivalent payable pounds.
In addition to higher operating costs.
At Bolivar again unit costs and further improve.
But when compared to Q2 2021 cash stock increased by 93%.
43%.
Driven by higher operating costs, and a 40% decrease in price.
Copper equivalent payable pound.
Sustaining cost, including treatment and refining costs.
The decrease in copper equivalent.
Payable pounds.
Hello.
Copper equivalent payable pound.
Okay.
A 43%.
Increased from beyond sustaining cost of $3 85.
Yeah.
We are seeing some improvements quarter over quarter, and we hope to see that trend speed up.
During the remainder of 2022.
Bye bye.
By 15% due to higher operating costs.
While all in sustaining costs.
Decreased by 5% compared to the same quarter of 2021.
Two 2021.
Decreased by 5%.
Lower treatment and refining charges.
And general and administrative costs as well as <unk>.
Turning to slide nine.
Given the delay in the turnaround program.
Alright.
The decline in metal prices and rising costs due to inflationary pressures.
To reflect the company's current position.
Okay.
Production guidance has been lowered to a range between $70 million 70.
Year from your original guidance.
80 million too.
<unk> 90 million.
But.
Okay.
While the delays in development.
<unk> and Bolivar, we believe that this required down.
Production estimates.
Okay.
At Guaranty culture.
Throughput.
Great.
Expected to improve due to the mining positive adjustments.
With the mines production for the second half of 2022.
It's been lowered to a range between $60.
From previous amount.
To 105.
To reflect the decrease in expected revenues affected throughput at our Mexican operation.
Cost guidance revision have also been applied.
The culture of.
The decrease in cash cost is expected for the remainder of the year.
Given that we expect an increase in copper equivalent production.
However, we have revised all in sustaining costs.
Slightly upwards.
While sustaining costs.
Treatment and refining charges actually declined at yard question first half of the year.
It was not.
We expect this will be the case in the second half of the year.
Adjusted cash stock as well as the all in sustaining costs associated with the lower production.
We have made efforts to reduce expenditures and preserve cash in order to position the company to weather any.
The additional events that we cannot control.
Okay.
As a.
<unk> capital expenditure guidance has been lowered to $59 million from our original guidance of $69 million.
This includes a reduction aided brand.
Our planned throughput initially client.
For 6000 tons.
Per day.
Hi, Christy.
Tons per day by the end of the year.
And that followed by.
We have decided to suspend the dividend for 2022 and allocate our funds internally level than what we would be realized that the dividend is paid out.
Our priority is to ensure we can get the company back on track operationally.
Okay.
Ultimately return to declaring it.
With that I will now turn the call back to Christine.
Okay.
Okay.
That ends the presentation portion of it.
Opening the call to questions from Barclays.
In the interest of time and fairness again, we ask that component.
Thank you.
To give all participants an opportunity.
Operator, if you can help.
Thank you if you'd like.
I'd like to ask a question. Please press star followed by one on your telephone keypad.
Any reason you would like to turn these a question. Please press star followed by <unk>.
It is star one to ask a question as a reminder, if you like a speaker phone. Please remember to pickup your handset this fall.
Last question comes from the line of Heiko I hate.
Your line is now open. Please go ahead.
Ed.
Hey, there thanks for taking my questions.
In your presentation Bolivar is progressing unquote.
Unsurprisingly here, but arguably the site has been a turnaround story for quite a while.
So just thinking bigger picture here I mean, what tangible changes the changes have outflow Q3, thus far will work.
We're halfway through the quarter on Monday and on that same token what are you thinking by the year given that you are.
We are currently also talking about in that quarter again, the uncertain operating environment.
Absolutely.
Yeah.
Okay.
Our timber around.
Gordon will be going on for Simon.
Quite a number.
The features that we are addressing in bolivar to bring it to the required frequency.
Changes we have been doing.
Yes basically.
We are moving from the <unk>.
<unk> phone, which is.
Pretty much depleted.
So when you come recovery areas into renewable even more so.
Okay.
As we move into Bolivar northwest and we can develop that area, we can increase production from from it.
We are.
Adding to the production from Bolivar northwest.
Got you.
Okay.
So that's going to.
To go on for some time.
As we can bring more and more production from believe it or not.
Eventually make year, we will be able also to develop.
We choose further up from Markwest.
Paul.
By next year, we should comfortable with.
With <unk> <unk>.
Driving.
Bulk of our production.
Based on what we have now.
Sure.
It takes time because of the <unk>.
Nature of the business.
Developing.
Carlos on the Alco, bringing protection.
No.
You are aware.
We.
<unk>.
A large part of our resources.
Anyway.
Hello.
Remove from.
Got it.
Sure.
We measured.
David.
But in that process, we added fuel.
Okay.
For the kitchen.
In too.
And get into a position, where we get more certain.
Okay.
Okay.
Building on the last question a bit and then listen the women.
Yeah.
Good assets, I'm really sorry to keep picking on Blvd.
But just looking at the guidance that you put out you'll see essentially you cut guidance and half with really Hollywood.
Okay.
But decent upside for Q2.
At the midpoint Youre, implying 15 million tonnes of copper equivalent production was six eight that you had in the first half.
Looking at a 21% growth rate given that unique $8 2 million obviously.
It's actually pretty good and it leads to two questions. The build on my on my prior one.
What's the mental planning looking like for next year and what do you think this asset could realistically do once all your transformational changes and whatnot are completed in a couple of years.
In other words, how do you think the analyst community should look at the asset longer term.
I think it's going to be much greater than what we have now.
We're going to move to <unk>.
Sure.
We are looking at increasing the throughput.
Reaching further coming down some tonnage per day, and then we took appropriate beacon.
We expanded into 6000 beds.
Tonnage per day.
Okay.
It's also focusing on improving efficiencies and productivity.
By adding <unk>.
Stronger demand requires.
Taking facilities the integration.
As we move.
In the future we should contract shortly.
Currently and more efficient mining operation.
We basically based on what we have now.
Operating at full capacity.
But we added some time from them.
The other one.
Hi, Keith.
Right.
Okay.
Right.
Jim.
About 20% in most of our vehicles.
So that flexibility outlook, how we.
These projects include a new home.
Moving.
Position operating positions. So we're looking at other options to manage the confusion.
Thank you.
Having beef.
Usefully can you repeat it.
Of these functions on the wafer.
Right.
That's very helpful. I appreciate it and get back in queue.
Thank you.
Thanks Keith.
Our next question comes from the line of Mark.
Gentlemen from naval come from markets. Your line is now open. Please go ahead.
Thank you I guess on the bright side with the delay, but Oliver you might be bringing new production on and a better and better.
Better pricing environment in a couple of years, but my question is really would you elaborate on the security situation at Bolivar that you mentioned earlier and its impact on operations in your mine development initiatives.
Yes, Thank you product made some remark.
A couple of months ago.
Yes.
Larry.
Back in June .
Nearby.
While New York being a town called single Cowie.
We choose between value add it's Mike one hour from polyurethane town.
Actually Joe.
Too much from the mine.
Yeah.
Logo.
Dr <unk>.
Steve.
The main four having appeal.
Two.
Okay.
A couple of months.
Okay.
Please.
<unk>.
Okay.
A major issue.
Could be.
The security issue that we are increasing over time in the area.
While crop coming up.
Okay.
Appreciate computing.
In August .
Obviously impacted the way we operate.
To be very careful on.
On our.
On the movement of our people our suppliers our contractors.
It also impacted our operations.
Because we recently.
Flower concentrates for example.
Thank you.
So Bob.
Now a few ongoing.
So that's something that we would lose very seriously.
And we have.
The plan in place.
We took immunotherapies.
Can be point to point.
Project fuel.
Some ongoing issue less risky than when you're shopping.
But it's still.
Something done.
To check.
But in the future.
Okay, and then just on the deferral of the timber.
The capital expenditures.
I understand that.
That'll help you in terms of financial flexibility.
Does that delay the ramp up.
At Bolivar in terms of the turnaround.
<unk>.
It's a better time to ramp.
And average.
The ramp up.
Richard that you or delay.
A better time to ramp up.
Mark <unk>.
Some idle capacity yes.
Im sorry.
Okay. Okay.
No that's helpful.
Yes. Thank you. Thank you very much.
Thank you.
Thank you.
Awesome.
The line of Lee Cooperman.
Of Omega family Office. Your line is now open. Please go ahead two questions.
And do you have any concerns about your financial solvency.
And question number two.
As a best guess.
The moving parts.
Ability of the producing EBITDA isn't it.
In 2023, assuming present prices.
Hey, Mike.
Okay.
And.
Sure.
It's very very low relative to the coast.
And I would suggest that that can be considered.
We will do with respect to ability.
Sean please.
Okay.
Hi, Lee.
Jeff.
Just to address your first question on solvency.
Very fair no going concern uncertainties at this time.
And cash generative.
Folk to 15 months.
We're still focused very much sure.
We have.
Got it okay.
Speakers more lines of credit.
Okay.
With the production.
And estimates.
Our loss from Mike.
We have recently seen.
So that strengthening in the metal prices environment from from the lows that we saw.
In June .
So so that's all helpful but to answer your question.
Hey, Eric.
Life of mine.
Amit.
On a 2020.
23 <unk>.
EBITDA until until we have.
Our strategic needs.
Yes, I havent attitude about the trajectory of the reverse.
I think we should be.
Looking considering all options.
Yes.
Internally, we have talked about it and.
It's one.
To do something like that breakdown would be better to do something like that.
Sure.
Positive uptrend.
We can really show the turnaround taking place.
My concern with doing a reverse split now you still potentially haven't come.
We're not out of it yet with Alibaba.
Share price decline.
Subsequent to the reverse split but it is something we're looking at for sure.
Okay.
Okay.
Thank you.
Your line is now open. Please go ahead.
Yes.
Yes. Thank you I just wanted to know if you can just kind of touch on that mark to market adjustment.
On the unsettled open sales positions.
How can you kind of manage that.
And which how much of that would you expect to realize.
Thanks, Mark so so we have.
We have.
Thanks Lisa.
The concentrates.
Does that.
They have the option to either.
Pay us either one month.
And they've been choosing to pay between three to four.
That exposure.
Sure.
And given the significant declines.
March two.
June .
Copper dropped 24% in that period.
Okay.
The market as of June 30.
These are somewhat.
Yeah.
First in cells subsequent to June <unk>.
But it's a point in time Mark.
There could be reversed should metal prices.
To continue where they are now.
Yes.
A reversal of that.
Okay, well, that's very helpful. And then just to follow up on that.
That are changing.
Versus the three to four months out.
That because of the uncertainty already.
We think thats, becoming more normal.
Alright.
Can't really speak for Ya.
Perhaps with the traders Wilson.
Her views on that Mark.
Okay, well. Thank you very much that's helpful.
Thank you.
Thank you no more questions registered at this time I would like to hand, the conference call back over to the management team for closing thank you operator.
That concludes today's call on behalf of the management team I would like to thank all participants for joining us today.
A replay of the webcast in our material can be found on our website at <unk> Dot com.
Any further questions or concerns you may reach out to us after today's call.
Contact information can be found in today's presentation as well as on the company's website.
Thank you operator, please conclude the call.
This concludes today's conference call have a great day ahead, you may now disconnect your lines.
Yeah.
Yes.
[music].
Hi.