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Hello, everyone, and welcome to the Sierra Metals Third Quarter 2022 Consolidated Financial Results. My name is Drew, and I'll be coordinating your call today. During today's presentation, if you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad. If ou change your mind please press star followed by 2. I would now like to turn the call over to Christiana Papadopoulos Manager of Investor Relations. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Sierra's Third Quarter 2022 Results Call. On today's call, we are joined by Luis Marchese, our CEO; and Ed Guimaraes, our CFO. Today's call will be followed by a question-and-answer period. The accompanying presentation for Dada's call is available for download on the webcast or from the company's website at sierrametals.com. Yesterday's press release, the financial statement. -- are all posted on today's website. I would like to note that this earnings call contains forward-looking information that is based on the company's current expectations, estimates and beliefs. This forward-looking information is subject to a number of risks, uncertainties and other factors. Actual results could differ materially from our conclusions, forecasts or projections as reflected in the forward-looking information. Additionally, information about material factors that could cause or assumptions that were applied in bring a conclusion or making a forecast or projection as reflected in the forward-looking information is contained in the company's annual information form, which is publicly available on SEDAR or EDGAR via the 40-F or on the company's website. Please note that all dollar amounts mentioned on today's call are in U.S. dollars unless otherwise noted. Before turning the call over to our CEO, is Marchese; followed by Ed Guimaraes, our CFO. I would like to note that the earnings press release that was disseminated late yesterday evening has since been amended with the newly filed and disseminated version. The corrections refer to footnote #3, following the first table in the press release that should read that the company is seeking accommodation from lending banks in the form of waivers for its noncompliance. In addition, there was a sentence added to the impairment charge section, noting that LOM are not a National Instrument 43-101 technical report, but management's best estimates of future expected cash flows. I would also like to note that it is the company's current intention to not disclose developments with respect to the special committee process unless and until the Board of Directors of Sierra Metals has approved a specific transaction or material steps or otherwise determines that disclosure if necessary. We will not be taking questions after a strategic process, which is being overseen in a diligent transparent inclusive and comprehensive manner by a special committee of the Board of Directors. Luis?
Thank you, Christina, and good morning, everyone. Before we begin, I would like to convey our heartfelt and balances to the families of the meetings involved in the tragic mines event that occurred at our Jauricocha mine in September. Our thoughts continue to be with our families and the low funds during this difficult time. Sierra's primary objective remains the safety and well-being of all employees and contractors. And as such, we continue to work through our safety assurance program at demand. Looking at the slide 5 for a review of operational highlights. As you may have read in our Q3 results and the press release, the challenges during the quarter had a significant impact on the company's operations. We just under 3 weeks left in the quarter, we experienced a statin losses at Jauricocha with 3 contract workers lotteries as a result of the mudslide. As a result of the actions and the blocking that took place at the mines mantras in the days that followed by a local community in an unrelated matter, mining activity was suspended for the remainder of the quarter and into Q4. The mine is now in a transition to full production. The aricocha mine had a 17% decrease in throughput when compared to Q3 2021. In addition to the decline in throughput, ongoing restricted access to non-permitted areas of debt impacted grades in nonmetals and provided a 31% decrease in corporate equivalent production. -- oligos production also declined during the quarter when compared to Q3 2021. Underground flooding in the Northwest zone during most of the quarter, in addition to the operational restrictions due to limited ventilation resulted in a further delay in the production ramp-up at Voliva. -- idea gold grades have improved by 9% and 159%, respectively, when compared to the third quarter of 2021, but were not enough to offset the 38% increase in throughput, resulting in a 16% decline in corporate equivalent pounds produced. At Cusi, on the other hand, when compared to the same quarter last year, a 7% increase in throughput and improved precious metal grades provided a 22% increase in sugar equivalent ounces produced. While the underground flooding event at proceeds during the second quarter is now under control, access to the lower levels of the mine was truly limited at the beginning of Q3. Throughput was slightly lower than in Q2, but it was offset by higher rates in all metals, resulting in a 32% increase in silver equivalent ounces produced. On a consolidated basis, throughput was 25% lower, acquired corporate growing production was 24% lower than the third quarter of last year. Turning to Slide 6. I -- the accumulation of operational losses and negative cash flows, primarily from our Mexico operations, coupled with the suspicion of mini activity that recounted during this quarter, ultimately put the company in a difficult liquidity position. On October 18, we filed a press release in our shareholders and stakeholders of the outlook for the company and the formation of the special committee made up of the Board's independent directors and the initiation of a strategic review process. The special committee continues as mandated to explore, review and consider all options to optimize the operations of the company and possible financing, restructuring and strategic options in the best interest of the company. In taking prudent steps to our cash conservation on October 25, we announced the company's decision to delist from the NYSE American and the BDL. This decision was not made lightly as we recognize the challenges is present to many of our smaller shareholders. The listing was something that we have been contemplated for some time, given the costs associated with this list. The decision to move ahead with listing from the exchanges coincided with the news that the company was facing financial and liquidity issues. The final day of trading in the NYSE American was November 14, 2022, which shares means opened for tailing today before the market comments traded. We are continuing to pursue the BVL with the listing and suspension from training is anticipated later during the year. We will provide an update on a final trading date on the PDL once this has been confirmed. Turning to Slide 7 and looking at our current focus as we continue to deal with existing challenges. At Arcata, we are focused on our comprehensive safety assurance process following the AC. Food production will only resume once this process is completed. Drilling remains focused on operates for the mines to identify additional new mineable areas within the permitted level of the mine. In addition to... You can start... Flowing that took place during the quarter is under control. We continue to work with operational constraints due to limited ventilation. The mine plan is refocused into Bolivar Northwest and development into higher-grade Tinet is ongoing. Other operational improvements in the whole process are also ongoing. In fee drilling a development to reduce backlog and increase the knowledge and availability of ore continues. Husi with the underground flowing under control. The goal remains to continue to mine depth and continue with operational improvements that are in process. Across all 3 mines, we are certainly focused on sustainable cost management while dealing with inflationary pressures. Now I will turn to Ed to review the third quarter financial highlights.
Thanks, Luis, and good morning, everyone. Turning to Slide 8. The company's financial results were impacted by the operational setbacks experienced in Q3. For the quarter, we reported a 25% decrease to our consolidated throughput and a 24% decrease in consolidated copper equivalent production compared to the third quarter of 2021. Metal prices continued to decline during the quarter and combined with lower production, the revenues from metals payable decreased 36% when compared to Q3 2021. Adjusted EBITDA for the quarter was negative $3.9 million. We reported the net loss attributable to shareholders for Q3 of $46.2 million or negative $0.28 per share, which includes an impairment charge of $32 million for the quarter. Given the company's reduced market capitalization, declining metals prices, lower production and profitability, the company performed an impairment analysis on all 3 of its mines using the life of mine or long analysis. The analysis of the life of mine is not a 43-101 technical report, but management's best estimate for future expected cash flows. The analysis of the Mexican operations concluded that an impairment charge of $25 million and $7 million is required for bolivianos, respectively. An updated life of mine analysis for Yauricocha did not require an impairment as of September 30, 2022. The -- we reported an adjusted net loss of $10.7 million or negative $0.07 per share and finished the quarter with approximately $13.7 million in cash. Our 3-month revenue mix by metal continues to be led by copper at 39%, followed by silver and zinc at 21% and 26%, respectively. Levingold continue to contribute equally to revenue at 7% and in line with previous quarters. Looking at the average realized prices compared to Q3 2021. Global recession fears sparked by interest rate hikes and declining demand continued to drive metal prices lower. -- resulting in a 17% decline in copper in Q3 2022. -- silver, gold and lead also declined by 2%, 3% and 16%, respectively. -- think, on the other hand, increased by 10% during the third quarter. Turning now to Slide 9 to review the balance sheet, financing and liquidity highlights for the quarter. The company reported $13.7 million in cash as of September 30, 2022. Total debt at the end of the second quarter was $87.3 million, which includes $62.3 million owing on the senior secured corporate facility with Banco de Credito Peru or BCP, and $25 million for the corona term loan with BCP and Santander, which was arranged during Q2 to refinance the quarterly installments payable for 2022. The company's net debt balance is $73.6 million. Cash and cash equivalents decreased to $13.7 million as of September 30, 2022, due to $31.2 million used in investing activities, offset by $6.1 million generated from operating activities and $3.8 million of cash generated from financing activities. During the third quarter, the company reached certain debt covenants related to its senior secured corporate credit facility in BCP, thereby requiring the company to reclassify $37 million as a short-term loan. Consequently, reporting a negative working capital of $52.3 million at the end of the quarter. The company is seeking accommodation from the lending banks in the form of waivers for this noncompliance. The company paid its final installment of $6.7 million to BCP and Santander and is proactively engaged in discussions with the senior secured credit facility lenders. The unexpected flooding at its Mexican operations and operational restrictions due to limited ventilation at Bolivar and the mudslide events at the elicit mine or not a mutual nature and will have a temporary impact on the company's ability to generate sufficient cash to meet its financial obligations. These events have impacted the company's financial position and prior available lines of credit are now subject to further evaluation. The company has secured short-term credit to Soles with certain Peruvian banks over the past several weeks. And although there is no guarantee, the company can be in the process of finalizing repayments from an offtaker on the sale of its 2023 copper concentrates from the Bolivar mine. As Luis mentioned earlier, the company has formed a special committee of the Board of Directors to explore, review and consider options to optimize the operations, financing, restructuring and strategic options in the best interest of the company. The company has also engaged in CIBC as a financial adviser to review various strategic options. I want to reiterate that the company unless and until the Board of Directors of Sierra Metals has approved a specific transaction or material steps or otherwise the terms that disclosure is necessary -- We will not be taking questions about the strategic process, which is being overseen in a diligent, transparent, inclusive and comprehensive manner by a special committee of the Board of Directors -- turning now to Slide 8 to look at the cost breakdown for each mine. At the Jauricocho, we saw an increase to both cash and nonsustaining costs by 47% and 19%, respectively, when compared to Q3 2021 as a result of the 25% decrease in copper equivalent payable pounds. Unit costs decreased slightly relative to Q2 2022 as a result of lower cost of sales and sustaining costs. At Bolivar, again, both cash and all-in sustaining costs increased when compared to Q3 2021. And Cash profit increased by 67% and all-in sustaining costs increased by 18%, driven by higher operating costs and an 8% decrease in copper equivalent payable panels. Bolivar's Q3 2022 cash costs and all-in sustaining costs per copper equivalent pound decreased, however, from 339 and 5.49%, respectively, in Q2 of 2022. At TC, cash cost declined by 15% and all-in sustaining costs decreased by 34% when compared to the same quarter in 2021. I A decrease in unit costs as a result of lower operating costs and lower sustaining costs compared to Q3 2021 offset the 10% reduction in silver equivalent payable ounces compared to Q3 2021. With that, I will now turn the call back to Christiana.
Thanks Ed. Thats the end to the presentation portion of this call. We would now like to open the call to questions for participants. In the interest of time and fairness, we ask to can the questions to a limit of 2 or participants on opportunities. Operator, please open the...
Thank you. We will now start today's Q&A session.[Instructions] If you would like to ask a question please press star followed by 1 . If you change your mind please press star followed by 2 Our first question today comes from Leon Cooperman from Omega Family Office. Your line is now open.
Thank you. I had trouble hearing some of the comments made. So if I ask a question that you don't want to respond to, I apologize. But the stock price reflects, I think, the risk of bankruptcy and solvency or extremely dilutive equity financing. Can you -- are you far enough into this process where you could say that the market has overreacted to those kinds of risks? Or you don't know the answer at this point in time... Hello. Hello -- hello all... Did you hear the question? I didn't hear an answer in response to the question... Hello.
I think we are having technical issues. Our first question today is from Lee Cooperman from Omega Family Office.
Yes. I asked the question, I said the stock price reflects the risk of insolvency or a very dilutive financing to rescue the company. Personally, I don't think either one was likely. I'm just curious can you come comment on that issue. Do you know enough about the process to say that insolvency or a very dilutive equity financing is not being considered...
Lee unfortunately, we're having technical issues I'm unable to get management on the line. Unfortunately, we're probably going to have to end the call. I can certainly arrange a call separately for you.
Yes, you can call my cell phone, I think they have the number.
Thank you..