Sierra Metals Inc.

Cormark Research: Sierra Metals upgrade to 2.50 CAD target price

Share article on

Investment Thesis:

Sierra Metals stands out for its: (1) historically high margin polymetallic production, (2) low overall debt leverage, and (3) high organic growth potential. After the changes in Management in 2015, we suggest investors revisit the name and are comfortable Yauricocha and the company have now turned the corner operationally.

Highlights:
• Esperanza – The Value Proposition From Brownfield Exploration

Yesterday, SMT provided an update and hosted a conference call to discuss development plans at all three of its producing mines. For us, the highlights from the call were: (1) Esperanza’s maiden resource/reserve is likely to grow and is increasingly important to Yauricocha’s mine plan, (2) each mine still offers high brownfield exploration potential (as demonstrated by the Esperanza discovery), and (3) Management has a much better handle on operations after a challenging transitional period late last year.

Expect Performance To Continue To Improve Into 2017

For Q2, we saw a continuation of the improvement seen in Q1 as Yauricocha’s throughput remained at design and EBITDA recovered. However, these improvements were outdone by the updates at the Esperanza zone which is already beginning to feed the Yauricocha mill. With the higher grade (4% CuEq) ore from Esperanza and better metals prices (ex-copper), we now expect to see a much stronger back half to 2016. 

Upgrade To Buy Rating, Increase Target To C$2.50 From C$1.95
To Management’s credit, the company has done a good job at both improving operations and outlining a clear exploration strategy to add value at each mine. With the shares still trading at a discount (5.5x EV/EBITDA) and much higher confidence in operations and the balance sheet, we are upgrading Sierra Metals to a Buy from Buy  



New Videos Sierra Metals Inc.


Endeavour Silver Releases 2016 Annual Review and Sustainability Report

This marks the fifth consecutive year the company has reported on its sustainability initiatives, including the last four under the GRI G4...

Endeavour Silver Corp.

US Gold Corp Stakes 102 Additional Claims at the Keystone Project to Significantly Expand the Nevada Gold Exploration Project

  • Increases property claims by 27% following favorable results from 2016 field exploration program
  • 479 total mining claims represent approximately 15...
US Gold Corp.

Alabama Graphite Appoints Auburn University Professor Emeritus Dr. Robert Cook, P.G. as Strategic Advisor

Dr. Cook is one of America’s most accomplished professional geologists, with more than 40 years of experience in both the state of Alabama and...

Alabama Graphite Corp.