SMTS - Sierra Metals (SMTS)(SMT:CA) - Solid 2Q21 Results Continuing Colorado Expansion
Updated Bolivar preliminary economic assessment. Sierra Metals released results from an updated preliminary economic assessment (PEA) for the company’s Bolivar Mine that reflects both an increase in production capacity from 5,000 tonnes per day to 10,000 tonnes per day in 2024, and the incremental benefit of iron ore concentrate production. Both the updated PEA and a previous study, dated October 19, 2020, contemplated a mine life of 14 years. The full technical report will be available within 45 days.Favorable comparison. Compared to the prior PEA which also contemplated an increase in production capacity to 10,000 tonnes per day, net after-tax present value increased to US$361 million, compared to US$283 million based on an 8% discount rate. Net after-tax cash flow is expected to increase to US$650 million from US$521 million, with life of mine and sustaining capital cost increasing a modest $28 million to $345 million. Total operating cost for the life of mine is expected to be ~US$1.1 billion, or US$25.62 per tonne milled and US$1.50 per pound of copper equivalent.Robust growth outlook. We expect the company to exit 2021 with aggregate capacity of 9,800 tonnes per day across all three mines. Longer-term expansions could increase capacity to nearly 18,000 tonnes per day by year-end 2024. Yauricocha mine capacity could be increased to 5,500 tonnes per day while throughput capacity at the Bolivar and Cusi mines could double to 10,000 and 2,400 tonnes per day, respectively. Work has started on the iron ore processing plant which is expected to be completed in early 2022. The plant will produce 500 thousand tonnes per year of 62% iron ore fines.Rating remains Outperform. In our opinion, Sierra Metals offers an attractive valuation and favorable long-term growth outlook driven by the company’s increasing production profile. We think the company is well-positioned to benefit from growing demand for its metals driven by economic growth, increased infrastructure spending, and for use in clean energy and renewable power technologies. Read More >>