Sierra Metals Inc.

Good morning, everyone. Thank you for joining our call today.

Some housekeeping items before I pass the call to Ernesto Balarezo, our CEO; and Jean Pierre Fort, our CFO. The accompanying presentation for today's call is available for download from the Company's website at sierrametals.com.

Yesterday's press release, the financial statements and the MD&A are all posted on our website and on SEDAR+. I would like to note that this earnings call contains forward-looking information that is based on the company's current expectations, estimates and beliefs and we will also use terms that are non-IFRS performance measures.

Please review our 2024 disclosure materials for the risks associated with these forward-looking information and the use of non-IFRS performance measures. Please note that all other amounts mentioned on today's call are in US dollars unless otherwise noted and that all unit cash costs and all-in sustaining costs are on a copper equivalent payable pound basis.

I would now like to turn the conference over to Ernesto Balarezo, Chief Executive Officer for Sierra Metals. Please, Ernesto, go ahead.

Thank you, Alia. Let me begin, as we always do, by discussing our Company's number one priority, safety.

As seen on Slide Four, our focus is to continuously ensure we provide a workplace environment where all our employees and contractors are safe. This includes a continuous improvement approach to safety.

This slide shows the many programs and initiatives conducted in the quarter that reinforces our commitment to decision-making guided by safety and sustainable mining. Without a doubt, 2024 was a tremendous year for Sierra Metals.

A year ago, we outlined the initiatives included on this slide. And through the hard work and dedication of the entire team, I am proud to state that we have delivered or surpassed all of our goals during this past year.

Some of the major highlights include. The publication of our updated mineral reserve and resource estimates at both our mines.

The updated report indicates that both our mines have significant reserves and resources to ensure long mine lives and provide a foundation for future growth plans. The development below the 1120 level at Yauricocha was completed on time and on budget in Q4.

You have heard me repeatedly say in the past that development below the 1120 level would be a game changer, not only for the mine, but also for the company. Early in Q4, we achieved targeted capacity throughput rates of 3,600 tonnes per day and more.

While we are permitted to mine 3,600 tonnes per day, the permit provides for a 10% overage allowance, allowing us to grow nearly 4,000 tonnes per day, which we have consistently been achieving. I'll remind everyone, mining below the 1120 level has given us access to a large ore body that we know very well, which has led to the increased throughput rates and hence increase metal production.

Meanwhile, I'd be remissed not to also say that Bolivar, with a series of targeted and high-impact initiatives completed in 2024, has consistently been producing at its capacity of 5,000 tonnes per day and beyond. Refinancing our long-term debt into a $95 million facility significantly enhance our working capital and financial flexibility while providing the necessary funding to execute our growth strategy.

This refinancing was an instrumental part of the company's improved cash generation profile going forward. However, in 2025, as the company is now in a stronger position, we will continue to explore better terms for our credit facility.

This leads me to Slide Six, where we see the impact of the improved production rates. We released our 2024 production results on January 15 and our financial results yesterday.

I assume everyone has had an opportunity to review them. So I will not be going into detail but we'll instead provide the following highlights.

On a consolidated basis, throughput rates in 2024 were 11% higher than in 2023. These higher throughput rates led to higher copper, zinc and silver production with copper production being 10% higher in 2024.

As a result, I'm pleased to say that we exceeded 2024 production guidance this year. Turning to Slide Seven, where we show the 2024 guidance range as compared to 2024 actual results.

And while this slide is very busy, the key highlight is that overall, we exceeded our 2024 production guidance this year. I'm very proud of the team for their commitment throughout the year in achieving this terrific accomplishment in a safe and responsible manner.

Now specifically, a few comments on the fourth quarter. Throughput in Q4 2024 was a record 798,000 tonnes, 18% higher than in Q4 2023.

This was driven by Bolivar operating at 10% higher throughput rates and Yauricocha now primarily mining below the 1120 level increasing throughput rates by 31%. Yauricocha's Q4 2024 production of copper, zinc and silver were 29%, 28% and 20% respectively higher than Q4 2023 with gold production flat and lead production lower by 4% on a quarter-over-quarter basis.

When comparing Bolivar's Q4 2024 production to Q4 2023, copper was flat, silver was 9% higher and gold lower by 19%. Moving on to Slide Nine.

At our Bolivar Mine, we processed 453,000 tonnes of ore in Q4, which represented a 13% and 10% increase from Q3 2024 and Q4 2023 respectively. During the quarter, Bolivar had a consistent performance achieving an average daily throughput rate of 5,173 tonnes.

The increased throughput rates were a result of harvesting the many targeted high-return investments completed in the year. This includes operational improvements in the grinding and flotation circuits in the plant.

In the mine, this included developing and increasing the number of operating stopes from three to nine prior to year-end. This allow the mine to blend material from multiple areas ensuring a more stable blend of ore to the processing plant.

As a result, the Bolivar Mine met guidance for the 2024 copper production and exceeded guidance on silver and gold, primarily driven by 10% higher throughput rates when compared to 2023. For the year 2024, Bolivar's cash cost of $2.50 was below 2024 guidance range of $2.56 to $2.72.

The all-in sustaining cost was $3.21, which was also below the 2024 guidance range of $3.28 to $3.36. A priority for us is to continually replace and grow our mineral research and resources in Bolivar.

Nearly 44,000 meters were drilled during 2024 with the objectives to recategorize resources in various ore bodies throughout the deposit and to replace the ore mine during the year 2024. At Bolivar, ongoing near mine exploration and district scale study work has the potential to significantly expand the resource at the mine as well as providing additional upside through perspective opportunities.

The most recent discoveries of El Gallo, Dulce and Marian ore bodies are a great indication of the potential and continuation of the deposit. This work will provide a strong foundation for our ambitious growth plans to increase production rates in the coming years at Bolivar.

Moving on to Slide 13. Mining primarily below the 1120 level in Q4 at Yauricocha allow the mine to have access to new developments and new mining zones, thereby increasing tonnage.

Yauricocha's Q4 2024 average throughput rates of 33,945 tonnes per day was an impressive 31% higher than the same quarter a year ago. Head grades were similar quarter-over-quarter but are expected to improve as the mining development opens access to the higher-grade Esperanza copper zone.

The increase in copper recovery was primarily due to improvements in the processing cycle resulting from higher extraction volumes. As a result, Yauricocha made guidance for the 2024 copper production and exceeded guidance on silver and gold, all primarily driven by 10% higher throughput rates when compared to 2023.

For the year 2024, Yauricocha's cash cost of $3.39 was within 2024 guidance range of $3.31 to $3.41. All-in sustaining cost of $3.73 was below 2024 guidance range of $3.75 to $3.86.

With 95% of Yauricocha's mineral reserves and resources below the 1120 level and also open at depth in all directions, we will continue to exploit this area for most of our production. Additionally, operating below the 1120 level gives Sierra Metals the opportunity to meaningfully explore the area more rapidly and efficiently from the underground with the goal of increasing the life of mine and improving mine sequencing.

Replacing mineral reserves and resources is equally as important at Yauricocha as it is at Bolivar. In 2024, over 20,000 meters of diamond drilling was carried out in mineralized zones above the 1120 level of the central mine area with the main objective to replace mineral resources depleted during 2024 by finding new mineralized bodies and exploring extension of the known areas.

On the surface, we undertook geomechanical prospecting work with the aim of locating new areas with geological potential in the various carbonate replacement deposits skarn and porphyry systems nearby. We also conducted 7,000 meters of diamond drilling in the Triada, Alida and Yauricocha oriental targets.

So we've been actively exploring the high potential around our mine and confident that we will be adding more resources at Yauricocha. So as you can see, much was accomplished across the operations in 2024.

The foundation has been laid for even a stronger 2025. Now over to Jean Pierre to present the financial highlights of the year.

Thank you, Ernesto. Given the vast improvements at the operational level that Ernesto just summarized, I'm happy to highlight that we have had a strong financial performance in 2024.

Let me take you through some of the most important highlights. As indicated on the Slide 16, we achieved record revenues in 2024.

Revenues were over $272 million during the year, an increase of 19% over 2023 due to the production improvements at Yauricocha and Bolivar mines accompanied by higher metal prices. We continue to generate cash flows as evidenced by the following.

An adjusted EBITDA from continuing operations of $74.2 million for 2024, a significant increase of 44% from the $51.5 million in 2023. In the fourth quarter of 2024 alone, we generated an adjusted EBITDA of $26.6 million, an impressive increase of 98% from the same quarter a year ago, driven by Yauricocha as it reached full capacity in Q4 2024.

Cash flow generated from operating activities before movements in working capital of $69.5 million for 2024 was 60% higher than the $43.3 million achieved in 2023. This was mainly driven by both operations performing at high levels of production.

Our improved ability to generate cash flows from operations allowed the company to fund almost $60 million in capital expenditures during 2024, which were required to increase the reliability and consistency of our mines. With now the mines performing at full capacity, we expect to generate robust cash flows that will allow us to continue to reinvest and fund debt payments during 2025.

As at year-end, our net debt-to-EBITDA ratio was one times, which is manageable for a company of our size and capabilities. As seen on Slide 18, this is lower than the previous two years.

We expect the ratio to continue to improve as we deliver on operational improvements and generate even more cash from operations. Cash and cash equivalents as of December 31st, 2024, increased to $19.8 million, more than doubling from the previous $9.1 million a year ago.

This is a result of cash increasing by over $10 million during 2024 as a $65.1 million generated from operating activities and the $2.7 million generated from financing activities were offset by the $57 million used in investing activities. Investing activities were primarily focused on the mine development at both of our operations.

In summary, all of our key financial metrics are trending in the right direction. Our financial position has improved significantly on a year-over-year basis and we are well positioned to continue executing our growth plans to further enhance shareholders' value.

Financially, 2024 was a good year, and we look forward to doing even better during 2025, especially in this period of rising metal prices and our operations performing at full capacity. Back to you, Ernesto.

Thank you, Jean Pierre. Shifting now to another very integral part of our business, which is partnering with our local communities on important initiatives that benefit our neighbors.

Our focus continues to be on health, education and community entrepreneurship. Shown in this slide are some images of the events and initiatives undertaken this quarter in Mexico and Peru.

With all the success achieved in 2024, we entered 2025 with tremendous momentum. The company expects Yauricocha production in 2025 to be primarily below the 1120 level complemented by the recent discovery of a new high-grade zone in the upper part of the mine.

A number of investments made in 2024 and planned during 2025, should allow us to continue to maintain throughput rates likely closer to 4,000 tonnes per day. The expected increase in metal production should be from both higher head grades and higher throughput rates.

At Bolivar, Sierra Metals expects to successfully complete a series of initiatives in 2025 to increase throughput rates as well as access higher grades as the team works towards incorporating the new higher grade and higher tonnage ore bodies of Dulce and Marian as part of the 2025 production profile. Overall, expectations in 2025 are to reap the benefits of mining below the 1120 level at Yauricocha, while putting in place the foundation for future growth at Bolivar through expansion of the tailings facilities to allow the plant to expand towards a capacity of 7,500 tonnes per day.

On December 5th, 2024, we announced 2025 production and cost guidance, which is summarized on this slide. I won't repeat what we've already announced, but I will leave you with this one takeaway.

Everything that I just mentioned should allow us to grow production, so we will produce more copper, more zinc, more silver and more lead in 2025 than in 2024. With respect to costs, at Bolivar, we expect an increase this year relative to 2024 as we will be executing on our tailings facility project and setting the foundation for other significant projects that will allow us to expand production in the next few years.

All-in sustaining costs were $3.21 in 2024 and are expected to be in the range of $3.45 to $3.62 per copper equivalent pound in 2025. At Yauricocha costs are expected to fall dramatically.

All-in sustaining costs were $3.73 in 2024 and are expected to be in the range of $2.91 to $3.11 per copper equivalent pound in 2025. To put that in perspective, if we hit the midpoint of all-in sustaining cost guidance this year, it will be a 20% reduction compared to 2024.

Over the past two years, since new leadership took over Sierra Metals, we have stabilized operations, optimized our mines and have grown our business, but we expect more. As you can see on Slide 23, we have ambitious plans to grow production even further with a goal of increasing it by at least 63% from 2023.

This also means we expect to generate even more cash flows with EBITDA expected to be around $100 million in 2025 an impressive 76% increase over 2024 and 155% growth over 2023. Without a doubt, we have an amazing growth profile.

In summary, we will increase metal production, which combined with lower costs and higher metal prices will lead to higher margins and a very robust cash flow generation. This will allow us to accelerate our targeted high-return capital investments to secure an even stronger financial position and create further shareholder value.

While we have accomplished much in 2024, we expect 2025 and beyond to be even better. While it is business as usual across our operations, the unsolicited takeover bid has been a distraction in the market and has adversely impacted our value.

As indicated on Slide 24, you can see that Sierra Metals is undervalued when compared to our peers. This is despite the significant turnaround in our business over the past two years.

As you can see from today's presentation, we are on a path that has the potential to close that valuation gap and generate significant value for our shareholders. And most notably, in this strong metal price environment, we have the chance to really accelerate our efforts to close that valuation gap in 2025.

With that in mind, as listed in our director circular published in January, we have outlined many reasons why shareholders should continue to reject the unsolicited and opportunistic takeover offer. We ask shareholders to reject the offer and take no action at this time.

In closing, I want to congratulate the Sierra Metals team for a tremendous year. We have safely and responsibly grown our company.

We have the vision, people and assets to continue to achieve amazing things that will continue to build shareholder value. With that, I'll hand the call back to the operator to start the Q&A session.

Operator?

I'd like to congratulate your team, Ernesto, on the performance. I have a lot of questions, but I don't want to monopolize the call.

So I'll start with the first one. You have previously said that you sorted EBITDA this year could be about $130 million.

Did I mishear you what you said $100 million or something like that?

The EBITDA that we are projecting for this year, Lee. And before that, thank you for congratulating the team.

We have said it to be around US$130 million.

Right. That's what I thought.

And next year you have any present prices held and you increase your production to meet demand. What kind of potential would you have?

I think it's going to be very much steady for the next two years, Lee.

We think it will go up, no?

Well, I don't know about prices, but we are not increasing production from 2025 to 2026. So if we are basing on the same prices, the same production, I would project the same EBITDA or around the same number.

Got you. In terms of your CapEx and taxes and free cash flow what will we be looking at?

CapEx is high this year. It's around $75 million.

And it's going to probably be a little bit on the same range the next year. But after that, we should start seeing a decrease in the CapEx numbers.

Remember, we are developing the mines right now. Below the 1120, we have nothing.

We are developing a new mine and we are increasing the capacity of Bolivar as we speak. So cash flows in the next two years are going to be very much the same in line of what we have said today, but then it will be better.

Assuming for the moment, present prices maintain themselves, looking at a couple of years post your expansion, what would the earnings potential of the company be? Materially higher than it is currently, right?

Yes, higher than it's currently for sure. But I don't want to make that those projections.

I mean they're too far away right now, Lee, but definitely better.

I agree. Last question for me is I'm very confused about Alberto Arias' behavior.

I know some people have tried to reach him to buy stock. He's been selling and you and your team have been buying.

I consider that buyers smarter than the sellers, but he's not returning phone calls, he's not accepting phone calls. And he has not formally rejected anything.

What is he up to? Do you have any sense of what he's up to?

The truth, no, Lee. We cannot speculate on Arias motives at this point.

He has been selling shares consistently since late 2023, but that's it.

Well, I know people that try to reach him, frankly, for your information and he's not returning phone calls. He could have sold at higher prices earlier.

There's a time value to money. So I don't know what he's up to, but I'm very pleased with your performance and I thank you.

Thank you. Thank you, Lee.

Hello, Ernesto. Congratulations.

You and the team have done a fabulous job in bringing this company back from the dead that Alberto Arias landed into. I wanted to expand a little bit on Lee's question.

Obviously the guy who has thrown out has been selling shares, but I find it very interesting. He's only selling the fund shares, ARC Fund II.

He never sells any shares that he owns personally, which I think further creates more question marks. Have you guys heard from any of the Fund II investors as to what Alberto was up to?

I cannot speculate on what the Fund LPs are thinking about these actions that you are referring to. But what you say is right, but I cannot speculate on the motives or what the LPs of the funds are thinking about at this time.

Okay. One other question if I might.

With prices being where they are today and who knows if this is going to hold, but clearly, they're up substantially from where they were in Q4 across the board, particularly for gold and copper. It seems to me that with the production levels, you're talking about where these prices to hold, the company could do $150 million to $160 million.

Is my math wrong?

Well, I don't know about your math, but what we have said is $130 million EBITDA. Remember, we are incurring in some CapEx, high CapEx numbers, and we have a debt to repay as well.

So we are comfortable announcing and putting this as guidance at this point, Randy. But as you say, metal prices increase, then we should do better.

And then lastly given that there's four days left in the current quarter, Q1. Do you have any thoughts on how Q1 is going to look relative to Q4?

We are very much in line with our budgeted numbers. Q1 has been -- and it's been -- it's going well operationally and financially.

We are -- as we always do we are accomplishing what we have promised.

Okay. So earlier, you referred to the debt.

And obviously the debt you put in place a year ago or 15 months ago has given the company flexibility. But now that we're well inside of one turn of EBITDA, I would hope that we could refinance the debt at a much more reasonable price.

Do you have any idea what the timing might look like on something like that? And then the follow-on question being given the cash flow that may arise due to the higher-than-expected metals prices.

Have you given thought to a share repurchase because I can't find any other mining firm that's located in any kind of jurisdiction, Western or not, the trades as cheap as Sierra.

Yes. To answer the first question, we are on it.

We have been talking to the banks. They have not only to Peruvian banks, but elsewhere as well.

And they are interested in refinancing our debt, but they have told us to wait until this process is over. But we are on it.

We are working on that, I think we can refinance our debt. I hope good news come through during the year on this issue.

And on the stock repurchase program, it's something that is in our minds. We have talked to the board about it.

But again we need to finish this process and then take it on again. Right now we have been asked by our advisers not to do anything to let this process be over and then start business as usual on these fronts.

Okay. Thank you.

I appreciate that. I want to reiterate my congratulations to you and your team.

My appreciation for everything you guys have done to bring this company back from what Alberto Arias had done to destroy it. And if you ever find anyone who do you ever have contract with Alberto, who wants to sell his shares, please give me a call.

Thank you. Thank you so much and we'll sure do.

Thank you. What is your projected year-end debt this year?

JP?

It's going to be, Lee, around $85 million as we will be paying down around $10 million of principal.

Got you. Okay.

Thank you.

Good morning, Ernesto and team. Congratulations on the results.

I had two quick questions. One is a follow-up to an earlier question, in terms of your EBITDA estimate for $130 million, do you mind sharing with us what are your copper price estimates for 2025?

JP?

Yes, sure. Thanks for the question.

Our projected copper prices for the year are around $4.20, $4.20 per pound.

Okay. And then for gold?

$2,300.

$2,300. Okay.

Perfect. Thank you.

And then the second question in terms of the intercompany-related loan that you have with Minera Corona. Can you give us an update in terms of the timing of when you envision starting to repay that?

I know the $25 million loan was repaid but the other remaining balance remains on the balance sheet. So can you give us an update on that?

Thank you very much.

Yes, of course. That's something we have been working since the very beginning.

So as you well said, we paid down the initial $25 million that were there. Now as part of our, as Ernesto mentioned, we are in the process of refinancing our corporate debt.

As part of our corporate debt refinancing, we will draft a mechanism to be able to pay down the debt and return back to the minority shareholders in Corona, which should be done for them.

And what do you show as the pending balance right now for that loan?

It's around $55 million. But out of those only 82% goes back to Sierra Metals and the other 18% is what belongs to minority holders in Corona.

This is Ernesto again. This is a commitment I personally made to minority shareholders when I joined the company.

We are eagerly working towards getting this done. Hopefully, with the next refinancing of our debt, we can get it over and be done with it.

Fantastic. Thank you so much for the update.

Sure.

Sure. From our Spanish questions we have Julio Graciano.

He asked, what percentage of shareholders are aligned with the company's mission ambition, considering that ARC, a significant shareholder using a noncollaborative position, constantly selling shares at low prices. He also asks, are there currently any proposals for the sales merger or acquisition of Sierra Metals?

Okay. Thank you, Alia.

We are in regular contact with this and other shareholders. We believe they do not plan to tender their shares.

Regarding the other question on Sierra is undertaking a robust process to evaluate the strategic options to maximize long-term value to shareholders. Our special committee of independent directors is leading this process, and we expect that shareholders will receive a report in due course, including in respect of any opportunities that they determined to be in the best interest of the company and its stakeholders.

The status quo, I mean, business as usual is still an option. But we believe that the company's current plan and strength for our long-term strategy is much better than the Alpayana's inadequate and opportunistic bid.

We have another question, which is why are both cash costs and all-in sustaining costs at Yauricocha so much lower in 2025 than in 2024?

Thanks, Alia. Well, that's mainly driven by the increased production in Yauricocha.

Now we're at full capacity.

Okay. We have no further questions.

I'll hand the call over to Ernesto for closing comments.

Thank you, Alia, and I thank you all for taking the time to join us today. Please reach out, should you have any more questions, and have a great day, everyone and thanks again.