After falling steadily from near $18 per ounce in May, spot silver prices have rebounded recently, including closing ahead for the sixth straight day on Tuesday at $15.32. Still, silver recently hit its lowest level since late in 2009 and remains in a downtrend since printing an intraday record high of $49.82 in April 2011, keeping speculation alive about companies’ abilities to produce and produce profitably.
Toronto-based Sierra Metals Inc. (TSX:SMT) said on Wednesday morning that it generated record production in the second quarter. Although cheaper silver prices cut into revenue and net income, the company was profitable in the quarter and reversed a loss from Q1 to be profitable for the first half of 2015.
Sierra Metals is focused on precious and base metals from its Yauricocha Mine in Peru, its Bolivar Mine and Cusi Mine in Mexico. Additionally, the company is exploring several other targets, including four projects at its Yauricocha property in Northern Peru and two projects in Mexico.
During the second quarter, Sierra Metals processed a record 483,374 tonnes of ore, versus 430,766 in the second quarter of 2014, with higher throughput at all three mines. At 911,019, silver production was also a record, climbing 21% from 750,283 in Q2 2014. The company cited increased head grades, improved throughput and continued ramp-up at Bolivar, as well as connection of a new power line at Bolivar, as reasons for the jump in production. Silver equivalent ounces for the quarter totaled 3.12 million ounces (up from 2.91 million in Q2 2014), marking the best quarter in Sierra’s Metals’ history. Copper equivalent rose to 20.76 million pounds from 19.4 million pounds in the year prior quarter.
For all of 2015, the company has provided silver production guidance in the range of 3.144 million to 3.668 million ounces. With 1.81 million silver ounces produced in the first half, Sierra Metals is on track to meet the higher end of guidance.
Revenue of $45.9 million during the quarter was nearly flat compared to $45.6 million in the second quarter last year, as increased production offset an 18%decline in silver prices. Net income attributable to shareholders of $1.2 million, or $0.00 per share, for Q2 2015 compared to net income attributable to shareholders of $2.4 million, or $0.01 per share in Q2 2014.
In the first six months of the year, revenue was $80.61 million, down from $87.25 million in the first half of 2014. Net income attributable to shareholders was $542,000, or $0.00 per share, compared to $4.47 million, or $0.03 per share, in the same period last year.
The company ended the first half of 2015 with $29.83 million in cash and cash equivalents.
"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," said Mark Brennan, President and CEO of Sierra Metals, in today’s statement.
Shares of SMT, which are typically traded thinly, were down a penny at $1.05 shortly before Wednesday's closing bell.
