Sierra Metals discovers high-grade zone at Yauricocha mine

Thursday, January 28, 2016

Canadian miner Sierra Metals, which also has operations in Mexico, said it made a discovery at its Yauricocha polymetallic operation in Peru.

The discovery is part of a drive to turn around dwindling production and earnings at the ageing mine.

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Highlights of drilling at the underground mine's Esperanza target in the Lima region's Yauyos province included 70.6m of 1.1% copper, 4.9% zinc, 2.2% lead, 0.25g/t gold and 61.2g/t silver, the Toronto-based company said in a statement.

Yauricocha, previously mined by state company Centromín, has been operating for 60 years.

The target tested for the thickest sulfide intercepts in the mine's history after the company drilled 3,922.8m in 15 drill holes through December, Sierra said. The company continues to operate two drill rigs onsite and aims to tap the orebody by the third quarter, it said.

"Esperanza is the most important discovery in the history of the Yauricocha mine," CEO Mark Brennan said in the statement. Production from the new zone "would have a positive impact on head grades in the second half of 2016 as well as on the company's cashflow," he said.

The company last year refinanced a US$48mn loan with Banco de Crédito del Perú to enable it to meet planned capex. Sierra, which last year shuffled its CEO, COO, exploration VP and director of corporate development, took out the loan to finance the company's acquisition of Peruvian poly-metallic miner Minera Corona in 2011.

Corona's third quarter profit fell to US$40,000 from US$8.2mn a year ago as sales fell by nearly half to US$17.1mn from US$32mn due to slumping metals prices.

Sierra, which plans to expand its Bolívar and Cusi mines in Mexico and Yauricocha, set 2015 production guidance at 41.9Mlb zinc, 44.3Mlb lead, 21Mlb copper, 3.14Moz silver and 11,200-13,000oz gold. Sierra in 2014 produced 54.3Mlb zinc, 48.8Mlb lead, 22.6Mlb copper, 3.15Moz silver and 9,457oz gold.

Sierra is also developing the Adrico (gold), Victoria (copper-silver), Ipillo (poly-metallic) and San Miguel exploration projects in Peru in addition to the Bacerac (silver) and La Verde (gold) projects in Mexico.