Sierra Metals Swings to $9.3 Million Profit in 2014, from $34 Million Loss in 2013

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Researched by Industrial Info Resources (Sugar Land, Texas)--Sierra Metals Incorporated (Vancouver, Canada) expects its capital expenditures (capex) to range from $30 million to $40 million this year, but company officials cautioned on Friday those numbers could be trimmed if commodity prices remain depressed. The company, which operates three precious and base metals mines in Latin America, reported fiscal-year 2014 net income of $9.3 million, compared with a net loss of nearly $34 million in 2013. Revenues for 2014 totaled $172.6 million, up from $143.5 million in 2013.

Sierra Metals reported nearly $3.4 million in fourth-quarter 2014 net income, compared with a loss of $14.3 million in the same quarter of 2013. Revenues for the quarter totaled $40.8 million, up from $36.4 million in fourth-quarter 2013.

Industrial Info is tracking eight active Sierra Metals projects worth $183 million. This includes four projects in Mexico, with a total investment value of $53 million, and four projects in Peru, with an investment value of $130 million. Two projects worth $66 million are under construction, three projects worth $31 million are in engineering, and three projects worth $86 million are in the planning phases, where plenty of factors could alter their timing or outcome.

The planned expansion of the Chumbe Concentrator Plant at the Yauricocha Underground Polymetallic Mine in Peru has a total investment value of $60 million. The project would expand production to 3,330 tons per day from 2,500 tons per day. Sierra Metals is working on the project with Peru's Sociedad Minera Corona SAC, with construction kickoff planned for first-quarter 2016, and completion in fourth-quarter 2016.

Capex for 2014 totaled $40 million. Chief Financial Officer Ed Guimaraes said during the company's earnings conference call that Sierra Metals spent $15.9 million on the Yauricocha Mine, $7.4 million on its Bolivar Mine operations in Mexico, and $16.7 million on its Cuci operations in Mexico.

Chief Executive Officer Audra Walsh said increased production in 2014, combined with lower operating costs, helped the company swing into a profit. The company saw record production in 2014, exceeding its guidance for silver, gold, lead and zinc. Copper production also increased but was within guidance, she said.

Sierra Metals reported it produced 11.79 million silver equivalent ounces last year, up from 9.44 million in 2013. Gold production totaled 9,457 ounces, up from 6,736 in 2013. Total copper production for the year was 22.64 million pounds, up from 15.9 million pounds in 2013.

However, commodity prices began to fall in late 2014 and have remained low this year so far, Walsh said. Guimaraes said the company could "trim back" its capex budget if prices remain low for the year.

Completion of a power line connecting the Bolivar Mine in Mexico to the regional grid this year is expected to reduce costs. Walsh said the cost of operating back-up generators at the site was as much as $1.2 million last year.

Changes in currency exchange rates due to the stronger U.S. dollar also have impacted earnings, Walsh said.

Thomas Robyn, vice president of exploration, said he expects the company's exploration and drilling program to total $9 million this year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.