Q3 2022 Sierra Metals Inc Earnings Call - Q&A Session

Hello, everyone and welcome to the Sierra metals third quarter 2022 consolidated financial results Q&A ankle, we will begin shortly.

If you would like to register a question ready for the Q&A. Please press star followed by one on your telephone keypad. Thank you for your patience.

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Hello, everyone and thank you for your patience and welcome to the Irobot shows third quarter 2022 consolidated financial results Q&A call. My name is Daisy and I'll be coordinating your coach day. If you would like to register a question. Please press star one on your telephone keypad now like Tom Mccourt.

But your highest quick kristi on up.

Douglas manager of Investor Relations to begin so Christiana. Please go ahead.

Thank you operator, and good morning, everyone. Thank you for joining us today following the technical issues experienced during yesterday's Q3, 2022 earnings call. This Q&A call is intended to provide participants with the opportunity to ask questions related to the third quarter results.

I would like to note that this Q&A.

Paul May contain forward looking information that is based on the company's current expectations estimates and beliefs.

Forward looking formation is subject to a number of risks uncertainties and other factors actual results could differ materially from our conclusion forecast or projection as reflected in the forward looking information.

Additional information about material factors that could cause actual results to differ materially from conclusions forecasts or projections and forward looking information and material factors or assumptions that were applied in drawing a conclusion or.

Making a forecast or projected as reflected in the forward looking information.

They are contained and the actual annual information in the company's annual information form which is publicly available on SEDAR or Edgar via.

40 F or on the company's website.

On October 18th we filed a press release to inform our shareholders and stakeholders of the outlook for the company and the formation of a special committee made up of the Board's independent directors and the initiation of a strategic review process. The Special Committee continues as mandated to explore review and consider all options to optimize the APA.

<unk> got the company impossible financing restructuring and strategic options in the first tranche of the company.

It is the company's current intention to not disclose developments with respect to the special committee process, unless and until the board of directors of Sierra metals has approved a specific transaction or material steps or otherwise determines that disclosure is necessary, we will not be taking questions today about the strategic process, which is being <unk>.

We're seeing and diligent transparent inclusive and comprehensive manner by a special committee of the board of directors.

A quick reminder, that in the interest of time, we will also be limiting questions to two people two per person.

And now I'll turn the call over to our CEO Luis My cheesy and Ed can merits our CFO .

Yeah.

Thank you Christina.

The Q&A session.

Thank you as a reminder, if anyone would like to register a question. Please press star followed by one Oh no telephone keypad. If you would like to withdraw your question. Please press star two.

When preparing to ask a question. Please ensure you Amit likely another current reminder, please stick to two questions out of me.

Our first question today comes from the line of Mark Fleishman from Noble capital markets. Mark. Your line is open. Please go ahead.

Thank you and good morning.

Just two questions first question is for.

Pertains to slide five.

Yesterday's presentation.

In the presentation you talk about are the euro could you mind at full production.

The mine is yet to be achieved.

Safety assurance process and I was wondering if you could at least.

Maybe tell us kind of where are you in terms of the production rates.

And how you see that unfolding over the next couple of quarters.

Thank you Mark.

We are.

That's a really.

Good question.

We've been very careful.

Sure.

Mark before we can be.

So you can't vehicles, what can be done.

We're trying to bring all the my introduction, but in the meantime, we sort of thing.

Going into every single.

Control.

Training.

Food safety is good.

It can be it can be incorporated into our books.

Oh.

Well you don't conference.

Okay.

To bring these but certainly we should be very close to full production in the next couple of quarters.

Sure.

Okay, and when you're talking about.

Let me get the second question.

Kind of a follow up to that would be kind of what you consider to be the full production level.

The second question is on slide nine.

Yesterday's presentation and I wanted to just maybe ask you to maybe provide a little more detail with regard to.

In terms of the offtake agreement on the 2023 concentrates for Bolivar mine, you know up to what percentage of the production might you expect in <unk> and.

If you could just maybe provide some additional color.

You mentioned here that you've secured some short term credit facilities.

Over the past several weeks and you know relative to your cash burn.

You know I was just trying to wonder if you could maybe provides us a little more color in terms of Oh.

What the what the numbers associated with these agreements are.

Hi, Mark Thanks for your question.

The off take agreements are currently.

Being negotiated and they haven't been finalized so I can't comment on that.

As well as would be.

The short term credit facilities.

Is there also.

In process.

Being a thing.

Further supplemented if you will so I'm not prepared to comment on that either.

Okay.

Just as a follow up on that.

The off take agreement on Bolivar could.

Would there be any offtake agreements on any of the other mines like a like your culture or where do you think it's pretty much your focus more on our bolivar.

The off take agreements are typically.

Rolled if you will or.

Confirmed.

Annually.

So those will be coming but right now at Bolivar.

Or is the focus.

Okay.

Okay. Thank you very much it's helpful.

Thank you.

Next question today comes from Jim Young from Midwest investments Jim. Your line is open. Please go ahead.

Yeah, Hi first of all.

Is my question really pertains to the balance sheet and the liquidity that you have can.

Can you talk about.

The upcoming debt repayments and any other.

Required payments that are feeling would be required.

How do you expect to.

To meet those demands.

For example, you've got about $13 million of cash on the balance sheet right now or as of September 30th.

So.

The and it's my understanding that you've got about $6 5 million dollar debt.

Quarterly debt payment that's due.

And when that next payment due.

I mean, the banks maybe possibly.

Either refinance those.

Any debt or any other information you can share it was about the.

So you can do the liquidity would be appreciated. Thank you.

Hi, Jim. Thanks. Thanks for your question the the notes of the financials under the bank debt that clearly outlines the repayments.

About $6 $5 million per year, plus interest we have made.

The December installment.

Of $6 7 million that was made.

And in terms of any additional comments.

That really falls under the special Committee mandate in terms of exploring.

Financing opportunities as well as any any further.

The negotiations and so forth so.

Prepare to comment on that.

Ed.

The $6 5 million dollar payment that was made.

It was that when what's the timing of that so.

The question is really yes.

At <unk> you show on the balance sheet, you had about $13 million of cash on the balance sheet.

At September 30, So made before September 30, since we've made after September 30th.

It was made after.

Okay.

And are there any other.

It required payments that are coming up there you're coming due.

No.

So basically you're saying that you got in a little over $6 million of cash on the balance sheet.

Yeah.

I'm not prepared to comment Jim I'm just.

Talking about the third quarter than anything else.

Post our liquidity and balance sheet cash and so forth.

I won't comment though.

Yes.

Thank you.

Our next question is from Lee Cooperman from Omega family Office. Li. Please go ahead. Your line is open.

Thank you let me just make a comment if I may if you guys are out to destroy the company I congratulate you because you've done a great job in destroying what was a very attractive property.

And I only have two questions here the market value of the company today are the equity is $32 million.

Wasn't too long ago, you guys bragged about a five dollar N V for $5 and a V a.

The market, obviously reflects the fact that there's a big insolvency risk or a big risk of a very dilutive equity financing do you know enough now to say that a dilutive equity financing and solvency is not on the table.

Yeah.

Hi, Lee.

Again that falls under the Special Committee mandate in terms of what is imagine being paid for to run the company everything is the special Committee everything has a special committee. What are you guys getting paid to do you Wanna get zero and compensation.

You know the special committee is running the companies that were saying.

Yeah.

You guys are idiots.

Okay.

Okay.

Great.

Okay.

Our next question today is from Alberto Arias from Rs resource capital Oh Boy I tell you. Your line is open. Please go ahead.

Yes, good morning.

You know I I wanted to express my frustration as well with how things have unfolded obviously.

But you know going on specifically in terms of the transparency that you mentioned on your conference call.

It is a bit.

Alarming to see that.

You cannot take questions about the short term liquidity problems of the company when we see the market value of the company going from $600 million to 32. So.

And you know just by you know that's a very clear we have not been involved in anything older than bolt in the AGM for the past 16 months in this company.

One important question.

I would like.

To close he's.

The decline in your share price is a consequence of the October 18th.

A press release that you put out.

And you know it.

It seems that there is a urgency in terms of our financials.

But we see an inconsistency between that and the speed at which we are seeing the.

The response for the offer that we put on the table and the reason we put it out.

We care about the company and we wanted the best thing.

For the company. So the specific question is what is the cash burn great. You know, we're talking about Jody courtyard coming back into production.

Full rate.

In two quarters are we going to make it in two quarters I think investors need to know you know why are these the operating rates look every coach are having right now what are the grades are we burning cash in Peru or not.

If you don't answer those questions you can know complaining about the share price because it's a direct you know consequence of what you are doing so.

As you know I used to be a research analyst. So I know what a management can say I'm trying not to say, we're asking you to give us clarity of what is happening with the company and you know I am the largest shareholder we will then offer.

That will save the company why the company hasn't moved for two weeks since we put it out of the over two weeks and a month since the October 18th press release.

Okay.

Can you talk about though I guess too.

I see.

We should because youre highlighting why he is referring to the.

Yeah, let nonbinding letter of interest from Colton.

Capital management.

The trust preferred adults.

Perfectly truthful.

The 51st in November 14th So we didn't.

Further on that.

Regarding the Derby closer to production.

Hmm.

I guess everybody's aware.

Primary interest to do something to take T O.

There was something on the contractors.

So we are taking it every every single measure to make sure that.

Everybody's face when working on their mind.

That's.

Pretty much I think that based on how we come back into full operations.

And when I say that in the next couple of quarters, we would reach full production, but we don't want to wait till about food production.

As we speak.

Thank you.

Yeah. The the I have a follow up question. Obviously, you were saying that safety is the key.

You are a minor I am a miner, we know very well that safety is first you know so there's nothing new I can't believe that we're saying that Oh, we're going to check on the safety measures of the company that has it been and that was the prime objective.

When I wasn't chairman of the company and I you know I can't believe that it is it should always be did you say.

Business as usual so my second question is on Bolivar.

No we you've you've been talking about the turnaround the bolivar.

For several months already and we're seeing that you know there was a flawed you know and then he's been deferred.

The frontier win you know are we starting to see the higher rates of Bolivar northwest are we having access to eat you know is easily.

Ventilation issues.

It's been resolved because there was a I think a.

There was a bit of insulation of shop that was being built.

Can you give us guidance. He goes I can't believe Bolivar burning cash.

My view is that it should be just a very temporary if it's not behind us is they're burning cash of bolivar behind us or are we already at Bolivar northwest can you answer that.

So Russell I think that'd be fair safety that we're working through these.

Issuance Brendan.

They have always been first and will over to you Sir.

We are assuring again.

We always do to make sure that everybody can see what it wouldn't be unexpected.

Event and Jody coach regarding Bolivar, just reacting to what do you have enough.

We've had these plugging that finalized the flooding event.

Have you stopped production for quite some.

Part of the Q.

Three and we are back into mining into Bolivar can always have to read that.

When conditions allow.

BARDA, we have to stop it because of the configuration around area all inflamed.

But we are using quantum installation, where we were back into production in Bolivar northwest.

As I mentioned in my presentation with real World driving.

The tunnel Cucina ether, we transferred there.

Good grades for the mix.

You are saying.

Thank you.

Okay. Thank you and I encourage the special committee to move fast given the urgency of the situation you know that we can believe that we're waiting two weeks for an answer and you know it nothing's happening yet, but you know I encourage the sense of urgency to take care of these thank you.

Okay.

Thank you.

Yeah.

Thank you as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad. Please kindly stick to two questions.

We have a follow up question from Jim Young Jim. Please go ahead.

Yeah, Hi.

A lot of talk about safety and the like but you know I still do not understand what caused a mudslide at your coaching that cost at three two of their lives.

And could you. Please just help us understand what the heck happened there.

Why.

Most of that occurred.

Yeah.

Again, this was partly unexpected events.

We're looking at that.

I'll pick up the phone.

Uh huh.

Effective deal creation.

Happening I cannot point to one specific.

Condition.

But we are we are.

It was quite a number of controls that we have in place there.

We are assuring that the.

Oh, sorry, one thing it's not that we are adding additional controls that's all I can say on it.

Yeah, that's certainly where you try you can see it and we are taking all the <unk>.

Sure.

We can to avoid having anything similar.

Thank you.

Thank you. Our final question today is a follow up from Mark Fleishman Mark. Please go ahead. Your line is open.

Thank you I just had a couple of questions.

First just regarding the corporate governance.

Kind of strikes to Lee's question in terms of you know where do you when do you when and where do you draw. The line between what the board is going to do and what management can do you know in terms of these tragic events.

You know clearly the company had the ability to proactively.

And try to enhance its liquidity position.

And and the like and so I was just kind of wondering and sometimes I wonder myself you know how much more of the board can do versus what management can do.

But perhaps there are some decisions some critical decisions that that caused you know the formation of the Street's T. J committees. So wondering if you could maybe comment on the corporate governance side of things and then second.

And if we could get it.

Hard cash burn rate either on a monthly or quarterly basis. Thank you.

Hi, Hi, Mark Thank you for your questions.

The accumulation of the operational losses and negative cash flows at our Mexican operations.

When you when you add that are coupled with the suspension of.

The mining activity at the agriculture.

Mine during September and it continued beyond that in terms of the the ramp up that that ultimately put the company in a very difficult liquidity position and it was at that point.

The Special Committee was formed.

Due to explore a comprehensive inclusive.

Our full.

Full process, both operationally and financially.

So those were the developments that led to that.

We are working with the special Committee management is very much a involve.

Involved.

And with respect to your burn rate.

It's a difficult question to answer them.

Because we have the mines are the at Bolivar.

<unk> issue has.

It has been improved upon the flooding has stopped.

Stopped.

But these things are work in progress and and you already culture continues to to ramp up.

So metal prices are helping but it's very difficult to give to give you a burn rate at.

At this time well my sense is my sense is is that you know clearly your coaches on the mend and you have enough confidence in Bolivar, the that you're that you're entertaining offtake agreements. So I think it just kind of comes down to.

You know.

Acquiring the liquidity.

To kind of see it through.

Right I mean, it does seem like there's a path for improvement and so is the liquidity and the financing that's kind of a kind of a one of the major issues here right I mean in terms of obviously operations, but but it does seem like you know with Bolivar, if you're if you're confident in the offtake.

Fremont and in your coaches seems to be kind of moving back. It's just a matter of maintaining enough liquidity to get there.

Yeah.

Yeah.

I tend to agree with that statement Mark yeah. Okay. Thank you very much I appreciate this call.

Okay.

Yeah.

Thank you. This is all the questions. We have today, so I'll hand back over to the management team for any closing remarks.

Thank you operator that concludes today's call on behalf of the management team I'd like to thank all participants for joining us.

Play of today's or yesterday's webcast and today's call and all materials will be available on our website at Sierra metals Dotcom.

If there are any other further questions or concerns you may reach out to us after today's call. Thank you. Please conclude the call.

Thank you everyone for joining today's call you may now disconnect your lines and have a lovely day.

Uh huh.

Uh huh.

Okay.

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Okay.

Uh huh.

Yes.

Okay.

Right.

Yes.

Yes.

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