SMTS - Sierra Metals (SMTS)(SMT:CA) - Thoughts Ahead of Second Quarter Production and Financial Results
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. We expect the company to release second quarter production results this week after which we will update our financial estimates.Update on strategic review process. At the latest, Sierra Metals expects to provide an update on its strategic review during its second quarter investor call on August 10. Recall that in January, Sierra Metals began a process to explore and evaluate potential strategic alternatives, including the sale of all or part of the company, a sale of some of the assets of the company, a merger or other business combination with another party, or other strategic transactions. We have provided some of our thoughts about it in this note.Robust growth outlook. In June, the company received an Informe Tecnico Minero permit that will allow the Yauricocha mine to operate at a higher capacity of 3,600 tonnes per day and so we expect the company will 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.Rating is Outperform. Sierra’s recent share price performance has been negatively impacted by the protracted Presidential election in Peru. In our view, the company offers a robust growth outlook and an attractive valuation. At this point, we think it is likely that leftist candidate Mr. Pedro Castillo will be declared the winner. While taxes will likely go up, we believe Mr. Castillo could be more pragmatic than some believe, and we think political turbulence could subside over time. That being said, we would be concerned if he were to significantly strengthen political ties with China. Read More >>