SMTS - Sierra Metals (SMTS)(SMT:CA) - Lowering Expectations for 2021 Due to Negative COVID Impacts
SMTS reports second quarter production results. Compared with the prior year period, second quarter production of copper declined 1.8% to 9.5 million pounds, while silver, zinc and lead increased 66.8%, 53.8% and 24.3% to 954 thousand ounces, 21.1 million pounds and 7.9 million pounds, respectively. Gold production increased 1.8% to 2,812 ounces relative to the prior year period. Sequentially, copper and gold production increased 20.8% and 6.7%, respectively. Production of zinc, lead, and silver fell 12.4%, 11.6%, and 0.7%, respectively. Operations continue to be negatively impacted by the pandemic although management expects operations to show some improvement throughout the year and will update its full year guidance with the release of second quarter financial results.Updating estimates. We are lowering our 2021 EPS and EBITDA estimates to $0.25 and $140.5 million from $0.32 and $163.3 million, respectively, to reflect lower full year production. Based on production in the first half, we think it may be challenging for the company to achieve the low end of its production guidance for copper and zinc. Our 2022 EPS and EBITDA estimates remain $0.45 and $208.2 million, respectively, and do not yet reflect production of magnetite concentrate which provides upside to our 2022 estimates. While we hope our 2021 estimates prove conservative, we have assumed COVID impacts linger for the remainder of the year.Second quarter production and financial results. The company will release second quarter 2021 financial results after the market close on August 9 and will host an investor call on August 10 at 10:30 am ET.Rating remains Outperform. While second quarter production results were lower than our estimates, considering the operating challenges posed by COVID, production was quite resilient due to the adaptive steps taken by management. We anticipate a return to normalcy in 2022. Our rating is based on Sierra Metals’ attractive valuation and favorable long-term growth outlook. Read More >>