Sierra Metals Produces Record 3.1 Million Silver Equivalent Ounces in Q2-2015

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1 NEWS RELEASE Sierra Metals Produces Record 3.1 Million Silver Equivalent Ounces in Q /12/2015 Subsequent to quarter end, successfully refinanced US$48 million Corona Acquisition Credit Facility, providing increased financial flexibility to the Company Record silver equivalent production for the second consecutive quarter Record throughput for the second consecutive quarter with increases at all three Mines On track to meet 2015 production guidance Conference call to be held Monday August 17, 2015 at 10:00 AM Eastern Daylight Time (All amounts expressed in US Dollars unless otherwise noted) TORONTO, Aug. 12, 2015 /CNW/ - Sierra Metals Inc. (TSX:SMT)(BVL:SMT) ("Sierra Metals" or the "Company") today reported revenue of $45.9 million and adjusted EBITDA of $18.3 million on record throughput of 483,374 tonnes and record silver equivalent production of 3.1 million ounces, for Q The Company continued to maintain its status as a low-cost producer by maintaining its low operating costs again this quarter. Mark Brennan, President and CEO of Sierra Metals, stated: "Despite the pervasive decline in commodity prices, strong metal production and operating cost control contributed to another strong quarter of cash flow generation and financial performance for the Company." He continued, "We are focused on unlocking the significant economic potential that we believe to be available at all three of our producing Mines while continuing to deliver solid production and financial returns for our shareholders during the remainder of 2015 and beyond." The following displays selected unaudited financial information for the three and six months ended June 30, 2015: Three Months Ended Six Months Ended (In thousands of dollars, except per share and cash cost amounts) June 30, 2015 June 30, 2014 June 30, 2015 June 30,

2 Operating Ore Processed / Tonnes Milled 483, , , ,331 Silver Ounces Produced 911, ,283 1,810,710 1,478,495 Copper pounds produced (000's) 6,508 5,697 12,992 11,426 Lead pounds produced (000's) 11,116 12,005 23,232 24,185 Zinc pounds produced (000's) 13,019 13,457 23,480 26,189 Gold ounces produced 2,177 2,499 4,838 4,984 Silver Equivalent Ounces Produced (000's)1 3,115 2,910 6,165 5,776 Copper Equivalent Pounds Produced (000's)1 20,761 19,402 41,097 38,505 Cash Cost per Tonne Processed $ $ $ $ Cash Cost (recovery) per silver payable ounce (Yauricocha)2 $ (14.42) $ (19.67) $ (10.97) $ (20.33) Cash Cost per copper payable pound (Bolivar)2 $ 1.37 $ 1.51 $ 1.45 $ 1.54 Cash Cost per silver payable ounce (Cusi)2 $ 8.46 $ 5.29 $ 8.16 $ 7.96 Financial Revenues $ 45,867 $ 45,578 $ 80,607 $ 87,252 Adjusted EBITDA2 $ 18,249 $ 21,340 $ 32,239 $ 38,520 Operating cash flows before movements in working capital $ 18,796 $ 21,249 $ 33,461 $ 38,692 Adjusted net income attributable to shareholders2 $ 7,274 $ 9,466 $ 11,353 $ 16,626 Net income attributable to shareholders $ 1,209 $ 2,382 $ 542 $ 4,469 Cash and cash equivalents $ 29,829 $ 42,100 $ 29,829 $ 42,100 Working capital $ 22,747 $ 23,186 $ 22,747 $ 23,186 Shareholders 2

3 Earnings per share ("EPS") - basic $ 0.00 $ 0.01 $ 0.00 $ 0.03 Adjusted EPS2 $ 0.04 $ 0.06 $ 0.07 $ 0.11 Weighted average shares outstanding for the periods 161, , , ,923 (1) Silver equivalent ounces and copper equivalent pounds were calculated using the following metal prices: $20/oz Ag, $3.00/lb Cu, $0.85/lb Pb, $0.95/lb Zn, $1,250/oz Au. (2) This is a non-ifrs performance measure, see Non-IFRS Performance Measures section of the MD&A. Financial Update Revenue from metals payable of $45.9 million in Q2 2015, were consistent with $45.6 million in Q The increase in plant throughput at all three Mines, along with the increase in silver and copper grades and recoveries of all metals, except copper, at Yauricocha help offset the decreases in the prices of silver (-18%), copper (-12%), lead (-7%) and gold (-9%) in Q compared to Q Also, there was a build-up of concentrate inventory at the end of Q that was sold during Q which resulted in higher revenues during the quarter. Cash cost (recovery) per silver payable ounce for Q was $(14.42) compared to $(19.67) in Q at Yauricocha, cash cost (recovery) per copper payable pound was $1.37 compared to $1.51 in Q at Bolivar and cash cost (recovery) per silver payable ounce was $8.46 compared to $5.29 in Q at Cusi. The increase in cash costs at Yauricocha during Q was due to the reduction of by-product credits which were the result of the lower metal prices discussed previously, lower zinc head grades, partially offset by the increase in silver payable ounces during the quarter. Bolivar's cash costs decreased due to an increase in copper payable pounds and lower cash costs of production which helped offset the decline in copper and silver prices during Q The increase in costs at Cusi was due to higher production costs incurred, and lower by-product credits due to lower lead and gold head grades and realized metal prices. This was partially offset by the increase in silver payable ounces and byproduct credits due to higher plant throughput. Net income attributable to shareholders of $1.2 million, or $0.00 per share, for Q compared to net income attributable to shareholders of $2.4 million, or $0.01 per share in Q The decrease in net income is due to the decrease in metal prices previously discussed, an increase in operating costs, general and administrative costs and income tax expense in Q compared to Q Adjusted EBITDA of $18.3 million for Q decreased compared to $21.3 million in Q The decrease in adjusted EBITDA in Q is due to the decrease in metal prices and the increase in operating and general and administrative costs. A large component of the net income for every period is the non-cash depletion charge in Peru, which was $7.5 million in Q compared to $9.1 million in Q The non-cash depletion charge is based on the aggregate fair value of the Yauricocha mineral property at the date of acquisition of Corona of $371.0 million amortized over 3

4 the total proven and probable reserves and measured and indicated resources of the mine. The Company has been successful in reducing the depletion expense year over year as a result of the increase in the mineral reserves at Yauricocha based on the NI reports dated October 2012, November 2013 and March Cash flow generated from operations before movements in working capital of $18.8 million for Q compared to $21.3 million in Q Cash and cash equivalents of $29.8 million as at June 30, 2015 compared to $41.3 million at the end of The Company received US$ 6.0 million in payments for concentrates on July 1, 2015, which was the main reason for the decrease in cash and increase in trade receivables as at June 30, 2015 compared to December 31, Cash and cash equivalents have decreased by $11.4 million during the first six months of 2015 due to the capital expenditures incurred in Mexico and Peru of $(20.2) million, dividends paid to noncontrolling interest of $(0.9) million and repayment of loans and credit facilities of $(12.3) million, offset by $14.2 million of operating cash flow and proceeds from the issuance of a credit facility in Mexico of $8.0 million. Refinancing of Corona Acquisition Credit Facility Subsequent to the end of the second quarter Sierra Metals successfully refinanced the remaining US$48 million due on the Corona Acquisition Credit Facility with Banco de Credito del Peru ("BCP") effective August 7, Significant amendments to the facility include: The remaining $48M due on the facility is split into 2 tranches: Tranche 1, in the amount of $24M has quarterly principal repayments of $1.25M beginning in November 2016 and ending in August 2020 Tranche 2, in the amount of $24M has no quarterly principal repayments and to be repaid in full in August 2020 One year principal repayment grace period Reduced Interest rate equal to 3.65% plus 3M LIBOR vs previous rate of 4.15% plus 3M LIBOR Term of the facility extended for 5 Years The cost of this restructuring was $0.36M equal to 0.75% of the restructured loan amount. This was a very successful refinancing for the Company as almost $20M of debt principal repayments are no longer due for the remainder of 2015 and Additionally, quarterly principal repayments thereafter have been reduced from $3.4M to $1.25M. Operational Update Total tonnes of ore processed of 483,374 in Q2 2015, a Company record, compared to 430,766 in Q2 2014, representing a 12% increase, highlighted by higher throughput at all three Mines - Bolivar (24%), Cusi (18%) and Yauricocha (2%). Silver production of 911,019 ounces in Q2 2015, also a Company record, compared to 750,283 in Q2 2014, representing an increase of 21%. The increase in silver production was a result of increases in silver head grades and recoveries and plant throughput at the Yauricocha Mine, combined with the increase in silver head 4

5 grades and plant throughput at the Cusi and Bolivar Mines. The continued ramp-up at Bolivar and the connection of the new power line during March 2015 contributed to the increased production during Q The Company is on pace to meet 2015 production guidance for all metals, as well as silver equivalent ounces and copper equivalent pounds, and expects to stay within its capital expenditure guidance Guidance Metal Production Q Actual H Actual Low High Ore Processed/tonnes milled 483, ,781 1,805,000 2,105,000 Silver ounces 911,019 1,810,710 3,144,000 3,668,000 Copper pounds (000's) 6,508 12,992 21,000 24,300 Lead pounds (000's) 11,116 23,232 44,300 51,800 Zinc pounds (000's) 13,109 23,480 41,900 48,900 Gold ounces 2,177 4,838 11,200 13,000 Silver equivalent ounces (000's)(1) 3,115 6,165 10,800 12,600 Copper equivalent pounds (000's)(1)(2) 20,761 41,097 72,000 84,000 Capital expenditures ($ millions) $ 11.9 $ 20.2 $ 30.0 $ 40.0 (1) Silver equivalent ounces and copper equivalent pounds were calculated using the following metal prices: $20/oz Ag, $3.00/lb Cu, $0.85/lb Pb, $0.95/lb Zn, $1,250/oz Au. (2) Copper equivalent pounds has been added to the fiscal 2015 guidance as Management believes it is a useful measure to provide comparability between the Company's production and their peers Project Development Update During Q2 2015, the Company's drilling objectives at Yauricocha were to define ore zones for operational planning and exploration. At Yauricocha, definition drilling was done from two locations during Q2 2015: 1) Rosaura Level 920, 55.3 metres ("m") in one hole to complete the hole that totaled m. The hole cut 4.5 m true width of polymetallic mineralization averaging 3.25% copper; 2) Mascota Level 1020, 2,062.8 m in 16 holes. These holes cut 5

6 multiple zones of potentially-economic polymetallic and oxide mineralization. Mine development at Bolívar during Q2 totaled 1,241 m. Most of these meters (969 m) were developed to prepare stopes for the Fierro Mine. The Gallo Mine was developed 272 m; 213 m to prepare stopes, and the rest to provide access between the Fierro and Gallo Mines. The Company also continues to explore the La Sidra vein over a strike length of 1,300 m. During Q2 2015, 3,362 m were drilled in 30 holes. During Q2 2015, at the Cusi property, mine development drilling totaled 2,040 m while exploration drilling totaled 876 m in various veins. Exploration Update At Yauricocha, the Company initiated basic property scale mapping and sampling as a result of a five-year agreement which gives the Company permission to explore the surface of the community's lands within the Yauricocha property boundary. Initial results from sampling of a gossan zone along Yauricocha Fault 2 has returned highly-anomalous silver and lead. Conference Call Webcast Sierra Metals' senior management will host a conference call on Monday, August 17th, 2015 at 10:00 AM (E.D.T.) to discuss the Company's second quarter 2015 financial and operating results. Via Webcast: A live audio webcast of the meeting will be available on the Company's website The webcast along with presentation slides will be archived for 180 days on Via phone: For those who prefer to listen by phone, dial-in instructions are below. To ensure your participation, please call approximately five minutes prior to the scheduled start time of the call. Participant Number (Toll Free Peru): Participant Number (Toll Free North America): (888) Participant Number (International): (647) Conference ID: Replay Archive: A replay of the conference call will be available until 23:59 pm (E.D.T.) on Monday, August 24, 2015 and can be accessed using the following dial-in numbers: Encore Toll Free Dial in Number: Encore Local Dial in Number: Encore ID:

7 Sierra Metals AGM Voting Results At the request of the Toronto Stock Exchange, Sierra Metals is hereby reconfirming that the nominees listed in the Management Information Circular dated May 6, 2015 for the Company's Annual and Special Meeting of Shareholders (the "Meeting") held on June 10, 2015 were all elected as directors of the Company. Detailed results of the vote for the election of directors held at the Meeting are set out below: Outcome of Vote Common Shares Voted (including proxy vote) For Withheld 108,815,154 (99.29%) 779,669 (0.71%) J. Alberto Arias Mark Brennan Douglas F. Cater Steven G. Dean Igor Gonzales Diego Miranda Philip Renaud 109,552,154 (99.96%) 109,552,225 (99.96%) 109,552,225 (99.96%) 109,552,225 (99.96%) 106,477,399 (97.16%) 42,669 (0.04%) 42,598 (0.04%) 42,598 (0.04%) 42,598 (0.04%) 3,117,424 (2.84%) 109,551,225 (99.96%) 43,598 (0.04%) For further information regarding the voting results for other matters considered and approved by the shareholders at the Meeting, please see the Company's news release dated June 11, 2015 and the Company's Report of Voting Results, both of which have been filed on SEDAR at About Sierra Metals Sierra Metals Inc. is a Canadian mining company focused on precious and base metals from its Yauricocha Mine in Peru, its Bolivar Mine and Cusi Mine in Mexico. In addition, Sierra Metals is exploring several precious and base metal targets in Peru and Mexico. Projects in Peru include Adrico (gold), Victoria (copper-silver) and Ipillo (polymetallic) at the Yauricocha property in the province of Yauyos and the San Miguelito gold properties in Northern Peru. Projects in Mexico include Bacerac (silver) in the state of Sonora, and La Verde (gold) at the Batopilas property in the state of Chihuahua. The Company's shares trade on the Bolsa de Valores de Lima and the Toronto Stock Exchange under the symbol "SMT". Forward-Looking Statements Except for statements of historical fact contained herein, the information in this press release may constitute "forward-looking information" within the meaning of Canadian securities law. Statements containing forwardlooking information express, as at the date of this news release, the Company's plans, estimates, forecasts, projections, expectations or beliefs as to future events or results. These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, 7

8 while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available at SOURCE Sierra Metals Inc. regarding Sierra Metals, please visit or contact: Mike McAllister, Director, Corporate Development, Sierra Metals Inc., or 1 (416) , info@sierrametals.com; Ed Guimaraes, CFO, Sierra Metals Inc., 1 (416) ; Mark Brennan, President & CEO, Sierra Metals Inc., 1 (416)