Sierra Minerals Earns
US$611,837 in Q1 2009 (US$0.01 Per Share)
TORONTO, ONTARIO--(MARKET
WIRE)--May 15, 2009 -- Sierra Minerals Inc. (Toronto:SIM.TO
-
News) ("Sierra" or the "Company") today announced its unaudited
financial results for the three months ended March 31, 2009. The
consolidated interim financial statements along with management's
discussion and analysis are available on SEDAR at
www.sedar.com and on the Company's website at
www.sierraminerals.ca. All currency references are to United
States dollars unless otherwise noted.
Q1 2009 - Highlights
- Net earnings for the first quarter were $611,837 or $0.01 per
share versus Q1 2008 earnings of $680,739 or $0.01 per share.
- Ounces produced rose 9% to 4,599 compared to 4,232 in Q1 2008.
- Ounces sold rose 5% to 4,911 compared to 4,661 in Q1 2008.
- Realized gold price per ounce was $909 compared to $904 in Q1
2008.
- Revenue increased to $4,496,701 from $4,380,013 in Q1 2008.
- Cost of sales per ounce was $572 in Q1 2009 vs. $527 in Q1 2008
but fell 7% from $615 in Q4 2008.
- Proceeds from non-brokered private place of $1,360,769
(C$1,730,000) received during Q1 2009.
- Cash and cash equivalents balance at March 31, 2009 was
$1,033,697
- Total of working capital deficiency plus debt declines by
$1,943,556 in Q1 2009 from $2,294,421 as at December 31, 2008 to
$350,865 as at March 31, 2009.
Commentary
Michael Farrant, President and CEO of Sierra Minerals, made the
following comments in relation to the 2009 first quarter results:
"On June 30, 2008, we had a working capital deficiency of $3.3
million, including our debt. During the past nine months we have
managed to reduce this amount to approximately $350,000. We are
extremely pleased with what we were able to accomplish during the
first quarter as $2.0 million of this reduction came during Q1 2009.
This was done in part through raising $1.4 million by way of a
non-brokered private placement and $0.6 million through operating
cash flow. A further $0.3 million of operating cash flow funded our
capital expenditures. We paid off two of our debt arrangements and
successfully renegotiated the Warman loan. Subsequent to the end of
the quarter we also delivered on our promise to obtain an
independent mineral resource estimate for our Cerro Colorado mine in
compliance with National Instrument 43-101 standards. 170,144 ounces
of gold are estimated to be contained in 9.7 million tonnes at an
average grade of 0.55 grams per tonne gold ("g/t Au") in measured
and indicated categories with an additional 74,177 ounces of gold
estimated to be contained in 5.6 million tonnes at an average grade
of 0.41 g/t Au in an inferred category, at a 0.25 g/t Au cut-off. We
can now comfortably increase annualized production rates to 30,000
ounces of gold knowing that we will have a number of years of
production ahead of us. We were also able to lower our cash cost per
ounce of gold sold from $615 in Q4 2008 to $572 in Q1 2009. We sold
gold at an average of $909 per ounce during the quarter giving us a
margin of $337 per ounce on each ounce of gold sold. At our current
market capitalization of approximately $12.0 million, the value of
our entire Company could be realized through the sale of
approximately 35,600 ounces of gold at these margins. This leaves
incredible upside for us to increase shareholder value as we expect
to produce well in excess of this level over the life of the mine. I
am extremely excited about our prospects moving forward and proud of
our accomplishments to date."
Summary of financial and operating results
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Three months ended
March 31,
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2009 2008
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Gold ounces - produced 4,599 4,232
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Gold ounces - sold 4,911 4,661
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Average realized gold price ($/oz.) $ 909 $ 904
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Total cash costs per ounce sold ($/oz.) (a) $ 572 $ 527
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Metal sales $4,496,701 $ 4,380,013
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Cost of sales (b) $2,841,498 $ 2,509,455
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Accretion, depreciation, depletion and amortization $ 271,668 $ 309,385
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Mine operating earnings $1,383,535 $ 1,561,173
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Net earnings for the period $ 611,837 $ 680,739
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Earnings per share (basic and diluted) $ 0.01 $ 0.01
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Cash flow provided by operating activities before
Changes in non-cash working capital $ 858,974 $ 1,240,668
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Cash flow (used in) provided by operating
activities $ (16,819) $ 1,130,476
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March 31, December 31,
2009 2008
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Cash and cash equivalents $1,033,697 $ 740,360
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Working capital deficiency $ (350,865) $(1,844,421)
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Long-term debt in addition to working capital
deficiency $ - $ (450,000)
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(a) See "Supplemental Information on Non-GAAP Financial Measures"
(b) Cost of sales excludes, accretion, depreciation, depletion and
amortization
Revenue from metal sales increased 3% in the first quarter of
2009 compared to the first quarter of 2008 from $4,496,701 to
$4,380,013 as of result of a 5% rise in the number of ounces sold
from 4,661 to 4,911 and a modest 1% increase in the average realized
price of gold sold from US$904 to US$909 per ounce.
First quarter 2009 production was 4,599 ounces compared to 4,232
in the first quarter of 2008. Cost of sales was $572 per ounce sold
for the first quarter of 2009 compared to $527 for the first quarter
of 2008. While costs were higher than the same period last year,
this represents a drop of $43 per ounce from the fourth quarter of
2008. Cost of sales excluding the royalty was $549 per ounce for the
quarter.
General and administrative costs for the quarter were $264,434
compared to $343,342 during the first quarter of 2008. $93,827 in
exploration expenditures were incurred during the quarter compared
to $nil in the first quarter of 2008. Interest expense for the first
quarter of 2009 was $39,025 compared to $61,004 in 2008. Lower
interest costs were primarily the result of successful loan
renegotiations resulting in the forgiveness of some interest and
lower loan balances. The Company incurred a foreign exchange gain
during the first quarter of 2009 of $13,942 primarily related to the
a slight strengthening of the Canadian dollar relative to the US
dollar following the raising of Canadian dollar funds through the
private placement. This compares to a loss of $30,680 during the
first quarter of 2008. Non-cash gain on settlement relates to
certain amounts included in accounts payable at December 31, 2008
that were forgiven during the first quarter through successful
negotiations with the other party.
Cash flow used in operating activities for the first quarter of
2009 was $16,819 compared to cash flow provided by operating
activities of $1,130,476 in the first quarter of 2008. This
reduction is primarily the result of using operating cash flow to
strengthen the balance sheet. During the first quarter of 2008, the
Company reduced accounts payable and accrued liabilities by $991,881
and interest payable by $188,703. During the first quarter of 2008,
the majority of the cash flow from operations was put back into
capital expenditures.
Liquidity and Capital Resources
Cash and cash equivalents increased during the quarter from
$740,360 as at December 31, 2008 to $1,033,697 as at March 31, 2009.
The Company reduced its working capital deficiency plus debt during
the quarter by $1,943,556 to $350,865.
During Q1 2009, the Company successfully paid off the Warman II
loan ($105,000 including principal and interest) and paid off the
Aggra Performance Ltd. loan ($112,516 including principal and
interest). $20,000 was also paid toward the Piggott loan including
principal and interest. The Warman I loan was successfully
renegotiated commensurate with the Company making payments of
$190,000 against outstanding interest and $500,000 against
outstanding principal. The loan now stands at $1,450,000 and bears
interest at 8% with first scheduled loan repayment of $150,000 due
on or before June 30, 2009. Sierra expects to make this payment out
of operating cash flow.
During Q1 2009, the Company successfully raised $1,360,769
(C$1,730,000) through a non-brokered unit financing at $0.20 per
unit. Each unit consisted of one common share and one half of one
common share purchase warrants, each full warrant entitling the
holder to purchase an additional common share at $0.30 until
February 27, 2011. Sierra issued 8,000,000 common shares and
4,000,000 common share purchase warrants prior to March 31, 2009 in
connection with the closing of the first tranche and issued a
further 650,000 common shares and 325,000 common share purchase
warrants subsequent to March 31, 2009 in connection with the closing
of the second tranche. Following the closing of the second tranche,
the Company now has 80,128,331 common shares outstanding.
Results of Mining Operations
Cerro Colorado Gold Mine (100% ownership)
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Three months ended
March 31,
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2009 2008
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Operating Statistics
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Tonnes mined 1,024,364 861,125
Waste 630,931 503,201
Ore - placed on leach pad 393,433 357,924
Grade (g/t Au) 0.75 0.63
Gold ounces placed on the pad 9,534 7,305
Gold ounces - produced 4,599 4,232
Gold ounces - sold 4,911 4,661
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Financial Data
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Metal sales $ 4,496,701 $ 4,380,013
Cost of sales 2,841,498 2,509,455
Depreciation, depletion and amortization 261,464 302,160
Accretion 10,204 7,225
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Mine operating earnings before
exploration and income taxes 1,383,535 1,561,173
Exploration 93,827 -
Income taxes 376,905 413,282
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Net segment earnings $ 912,803 $ 1,147,891
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Capital expenditures $ 282,283 $ 949,158
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Gold production for the quarter was 4,599 ounces compared to
4,232 in year earlier period representing a 9% increase over Q1
2008. Average grade mined during the first quarter of 2009 increased
to 0.75 g/t Au compared to 0.63 g/t Au in the year earlier period.
Tonnes mined increased 19% over the prior year quarter due to
improvements in truck fleet availability. As a result, gold ounces
placed on the leach pad increased 31% from 7,305 in Q1 2008 to 9,534
in Q1 2009.
Subsequent to the end of the quarter, Sierra purchased three
additional CAT773B haul trucks in excellent condition at auction for
$315,600 including the cost of transportation to the mine. These
trucks have arrived at site and are being scheduled into mining
operations. They augment the existing fleet of three CAT773B and two
CAT769C haul trucks. The addition of these trucks almost doubles the
hauling capacity of the mining fleet at Cerro Colorado and was
necessary in order to ramp mining rate up to 30,000 ounces on an
annualized basis.
Coincident with plans to expand mining rates, capital
improvements continue to be made to the plant in order to be able to
process at an annualized rate of 30,000 ounces. There are now 24
carbon columns in circuit, up from 18 with a plan to increase to
this number to 30. Increasing the gold production at the Cerro
Colorado mine is now the Company's primary initiative. Sierra
continues to target production of approximately 25,000 ounces of
gold in 2009 as mining rates increase and plant upgrades are
completed.
As noted earlier, subsequent to the end of the quarter, the
Company announced its initial National Instrument 43-101 mineral
resource estimate for the Cerro Colorado gold mine.
Mineral Resource Estimate Cerro Colorado Mine - 0.25 g/t Au
Cut-Off
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Measured + Indicated Inferred
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Cut-off Avg. Contained Avg. Contained
Grade Tonnes Grade Gold Tonnes Grade Gold
(g/t Au) (000's) (g/t Au) (ounces(1)) (000's) (g/t Au) (ounces(1))
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0.25 9,706 0.55 170,144 5,599 0.41 74,177
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(1) Mineral resources that are not mineral reserves do not have
demonstrated economic viability. The estimate of mineral resources may
be materially affected by environmental, permitting, legal, title,
taxation, sociopolitical, marketing or other relevant issues.
(2) ounces calculated using the following conversion rate: 1 troy ounce
equals 31.103 grams
This initial current mineral resource estimate has been completed
Michelle Stone, P.Geo., of CCIC. Ms. Stone has reviewed pertinent
geological information in sufficient detail to support the data
incorporated in the mineral resource estimate. Ms. Stone is an
Independent Qualified Person as defined under NI 43-101 and is
responsible for the mineral resource estimate presented in this
release.
Corporate Development
During Q1 2009, the Company also received an unsolicited business
combination proposal from Treasury Metals Inc. ("Treasury"), who
currently owns approximately 8% of Sierra (see news release February
2, 2009). In response to this bid and in order to appropriately deal
with other corporate development initiatives and matters, the Board
of Directors unanimously approved the formation of a Strategic
Review Committee comprised of three independent directors (see news
release March 5, 2009). After reviewing the merits of the proposal
put forth by Treasury, the Board of Directors unanimously rejected
the proposal as inadequate and determined that it was not fair from
a financial point of view to the shareholders of Sierra or in the
best interests of Sierra.
Management has received expressions of interest from a number of
parties with respect to exploring the merits of undertaking a
corporate transaction. The Company continues to evaluate certain of
these opportunities but offers no guarantee as to the successful
completion of a transaction.
About Sierra Minerals
Sierra Minerals is a Canadian based gold production and
exploration company. The Company owns and operates the Cerro
Colorado Gold Mine in Sonora, Mexico. All gold production is
un-hedged and the Company expects to produce approximately 25,000
ounces of gold in 2009. The Company's exploration pipeline includes
an extensive regional land package which covers over 34,000 hectares
in Sonora, Mexico. Further information about Sierra Minerals and the
Cerro Colorado Gold Mine can be found on the Company's website at
www.sierraminerals.ca.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This news release includes "forward-looking information", as such
term is defined in applicable securities laws. The forward-looking
information includes, without limitation, the success of exploration
activities and other similar statements concerning anticipated
future events, conditions or results that are not historical facts
including the extent of future production from the Cerro Colorado
Gold Mine. These statements reflect management's current estimates,
beliefs, intentions and expectations; they are not guarantees of
future performance. The Company cautions that all forward looking
information is inherently uncertain and that actual performance may
be affected by a number of material factors, many of which are
beyond the Company's control. Such factors include, among others,
risks and uncertainties relating to exploration and development; the
ability of the Company to obtain additional financing; the Company's
limited operating history; the need to comply with environmental and
governmental regulations; political and economic instability and
general civil unrest in Mexico, if any; potential defects in title
to the Company's properties; fluctuations in currency exchange
rates; fluctuating prices of commodities; operating hazards and
risks; competition; and other risks and uncertainties, including
those described in the Company's other regulatory filings filed with
the Canadian Securities Administrators and available at
www.sedar.com. Accordingly, actual future events, conditions and
results may differ materially from the estimates, beliefs,
intentions and expectations expressed or implied in the
forward-looking information. All statements are made as of the date
of this news release and the Company is under no obligation to
update or alter any forward-looking information.
SUPPLEMENTAL INFORMATION ON NON-GAAP FINANCIAL MEASURES
Cash Costs
The Company's MD&A often refers to cash costs per ounce, a
non-GAAP performance measure in order to provide investors with
information about the measure used by management to monitor
performance. This information is used to assess how well the
producing gold mine(s) are performing compared to plan and prior
periods, and also to assess the overall effectiveness and efficiency
of gold mining operations. "Cash cost" figures are calculated in
accordance with a standard developed by The Gold Institute, which
was a worldwide association of suppliers of gold and gold products
and included leading North American gold producers. The Gold
Institute ceased operations in 2002, but the standard is still an
accepted standard of reporting cash costs of gold production in
North America. Adoption of the standard is voluntary and the cost
measures presented herein may not be comparable to other similarly
titled measures of other companies. Costs include mine site
operating costs such as mining, processing, administration,
royalties and production taxes, but are exclusive of amortization,
reclamation, capital, exploration and development costs. These costs
are then divided by ounces of gold sold to arrive at the total cash
costs per ounce of gold sold. The measure, along with sales, is
considered to be a key indicator of a company's ability to generate
operating earnings and cash flow from its mining operations.
These gold cash costs differ from measures determined in
accordance with GAAP. They are intended to provide additional
information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP. These measures are not necessarily indicative of net earnings
or cash flow from operations as determined under GAAP.
The following table provides a reconciliation of total cash costs
per ounce sold for the Cerro Colorado gold mine to the cost of
sales, excluding accretion, depreciation, depletion and amortization
as per the unaudited interim consolidated statements of operations.
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Three months ended
March 31,
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(unaudited) 2009 2008
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Cost of sales (excluding accretion, depreciation,
depletion and amortization) $ 2,841,498 $ 2,509,455
Silver by-product credit (31,331) (55,273)
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$ 2,810,167 $ 2,454,182
Gold ounces sold 4,911 4,661
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Total cash costs ($/oz. sold) $ 572 $ 527
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Breakdown of cost per ounce sold
Direct operating costs $ 555 $ 507
Non-cash amortization of deferred stripping - 13
2.5% NSR Royalty 23 19
Less: silver by-product credits (6) (12)
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Total cash costs ($/oz. sold) $ 572 $ 527
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