SMTS - Sierra Metals (SMTS)(SMT:CA) - Trimming Estimates Based on Modestly Lower 2021 Production Expectations
Trimming 2021 production expectations. While Sierra is expected to meet its forecasted production guidance ranges, we now forecast silver, gold, copper, lead, and zinc production of 4.4 million ounces, 11.5 thousand ounces, 45.6 million pounds, 32.7 million pounds, and 105.0 million pounds, respectively. Our estimates are now closer to the midpoints of the company’s guidance for each metal. The company’s operations and ability to develop higher grade ore bodies have been hindered by the pandemic’s impact on Sierra’s work force. Upside to our estimates may depend on the negative impacts of the pandemic abating.Updating estimates. We have modestly lowered our 2021 EPS and EBITDA estimates to $0.36 and $166.1 million from $0.38 and $173.1 million, respectively. Our respective first quarter 2021 EPS and EBITDA estimates are $0.05 and $28.4 million. The reduction in our estimates reflects lower full year production and higher costs. Sierra Metals will release first quarter 2021 financial results after the market close on May 6, 2021. Management will host a webcast and investor call on May 7, 2021 at 10:30 am ET.Branching into magnetite iron ore. The company's board of directors has approved a $28 million investment in the construction of a magnetite processing plant that is expected to produce 500 thousand tonnes per year of magnetite concentrate at the company's Bolivar mine. Construction of the plant will begin in June and is expected to take six months to complete. The project will be reflected in an updated preliminary economic assessment for Bolivar.Rating remains Outperform. In our opinion, Sierra Metals offers an attractive long-term growth outlook driven by a favorable metals price outlook and 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 >>