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The Toronto-based company is pinning its hopes on the newly discovered, high grade Esperanza area at its Yauricocha polymetallic mine in Peru to enable the operation to expand capacity to 3,000t/d from the current 2,500t/d by 2017, Brennan told BNamericas.
Work on a modernization program to mechanize mining at the aging underground operation in Lima region's Yauyos province is scheduled for completion in the third quarter of this year, he said. Yauricocha, previously mined by state company Centromín, has been operating for 65 years.
In Mexico, the company aims to expand treatment capacity at its Bolívar mine to 4,000t/d from 3,000t/d within 18 months, the CEO said. Operations at Sierra's other Mexican mine, the 600t/d Cusi, will remain stable after posting its first profitable quarter in Q1, Brennan said.
"We're committed to the strategy of higher grade production, and with the discovery at Esperanza, it affords us the opportunity to grow our production as well," he said in an interview on the sidelines of the International Gold Symposium in Lima. Exploration at Bolívar "is looking like it's going to yield some very good results. From that perspective, I think Bolívar will grow."
Sierra's first quarter silver output dropped to 588,000oz from 900,000oz a year earlier, while copper fell to 5.8Mlb (2,631t) from 6.5Mlb, lead declined to 8.3Mlb from 12.1Mlb and gold slid to 2,236oz from 2,661oz. Zinc production rose to 10.9Mlb from 10.5Mlb.
Sierra is "working both sides right now" to balance cost reduction with its efforts to make production more efficient during the low price cycle, Brennan said. The company's cash costs climbed to US$41.57/t of ore processed in the quarter from US$38.05/t a year earlier even as silver prices fell 9% and those of copper and zinc both declined 19%.
Silver prices have rebounded 18% so far this year from a six-year low of US$14/oz at the end of 2015 as fund managers alarmed by negative central bank interest rates turn to the metal as an investment haven, Brennan said. Silver is also headed for a third year of market deficit due to declining global output, according to traders such as Sprott Asset Management.
About 25% of Sierra's production is silver, 5% gold and the rest copper, zinc and lead, the CEO said.
"There are some very good arguments. It looks like silver has a good future," Brennan said. "We can only hope we'll see that from the base metals at some time in the future, but I don't think they have quite a rosy picture as the precious metals."
Sierra last year shuffled its CEO, COO, exploration VP and director of corporate development, and refinanced a US$48mn loan with Banco de Crédito del Perú that was originally extended to fund the company's acquisition of Peruvian polymetallic miner Minera Corona in 2011.
Sierra posted a US$5.1mn first quarter loss compared with a US$667,000 loss a year earlier as sales dropped to US$23.7mn from US$34.7mn. The company set 2016 production guidance at 43.2-53.4Mlb zinc, 26.7-32.9Mlb lead, 24.4-30.1Mlb copper, 2.6-3.2Moz silver and 9,100-11,200oz gold. Sierra in 2015 produced 42.1Mlb zinc, 42.2Mlb lead, 23.2Mlb copper, 3.1Moz silver and 9,066oz gold.
The company is also developing the Adrico (gold), Victoria (copper-silver), Ipillo (polymetallic) and San Miguel exploration projects in Peru in addition to the Bacerac (silver) and La Verde (gold) projects in Mexico.