RCKS talk

Monday, February 27, 2017 Derek Macpherson

SMT Makes High Grade Discovery at Cusi


Download Report

Sierra Metals Inc. (TSX:SMT, BVL:SMT) announced the discovery of a new high grade silver zone within the Santa Rosa de Lima structure at its Cusi mine in Mexico. Given the significantly higher average grade of today’s results over Cusi’s resource grade, we believe this discovery could materially improve this mine’s economics in the same way the discovery of the Esperanza zone was for Sierra’s Yauricocha mine in Peru. We expect this discovery to add value to the Cusi asset and potentially positively impact the mine’s cash flow in the near term. However, in light of that Cusi only contributed 6% of Sierra’s consolidated Q4 2016 AgEq production, the impact of this discovery on Sierra’s overall cash flow is likely to be limited. However, this discovery may allow Sierra to monetize this asset. We continue to expect that Sierra’s performance in 2017 is going to be underpinned by operational improvements at Yauricocha, which in our view is key to enhancing the company’s value and positioning to bring about the necessary capital structure changes.


High grade results highlight the new potential for Cusi. The NW-SE ranging Santa Rosa de Lima structure was identified as a high priority target following drilling in 2012 and is likely contained within a regional structure that extends along ~64 km, thereof a 12 km segment likely passes through the Cusi property. Today’s results returned a weighted average grade of 387.0 g/t AgEq over 2.55m, which is significantly higher than Cusi’s resource grade of 246.8 g/t AgEq (I + I). The results were highlighted by hole Cusi-6 which returned 1,243 g/t AgEq over 1.50m and Cusi-14 which returned 1,154 g/t AgEq over 3.10m. Considering that the company is already sourcing development feed from this new zone, we expect this discovery to positively impact Cusi’s cash flow in the near term and improve the mine’s economics.

Follow up drilling underway. Sierra commenced a 15km drill campaign in Q4 2016 targeting an area defined by the 2012 drill holes. With ~79% now drilled, the drill campaign is expected to be completed by the end of Q1 2017. The current drilling targets an area that is 1km x 500m (Figure 1) and drilling to date demonstrates that mineralization is consistent across the targeted area and at a depth of 150 to 550m. The zone remains undrilled to the NW and SE of the current study area and Sierra anticipates conducting follow-up drill programs to potentially expand the zone along the entire 12 km. We expect the zone to increase the size and grade of Cusi’s current resource.




Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
 
Red Cloud Klondike Strike Inc.
79 Wellington St. W. Suite 1630, PO Box 148
Toronto ON, M5K 1H1

Priced as of prior trading day's market close, EST (unless otherwise noted).
All values in USD unless otherwise noted.

Disclaimer
Red Cloud Klondike Strike Inc. is registered as an Exempt Market Dealer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, and the Yukon. Part of Red Cloud Klondike Strike Inc.'s business is to connect mining companies with suitable investors that qualify under available regulatory exemptions (the "Red Cloud KS Business"). Red Cloud Klondike Strike Inc., its affiliates and associates, and their respective officers, directors, representatives, researchers and members of their families (collectively, "Red Cloud KS") may hold positions in the companies mentioned in this publication and may buy or sell, or buy and sell their securities or securities of the same class on the market or otherwise. Additionally, Red Cloud KS may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
Red Cloud KS has prepared this publication for general information purposes only, NOT as part of the Red Cloud KS Business. This document should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided by Red Cloud KS for the purposes of this publication has been derived from sources believed to be accurate, but cannot be guaranteed. Opinions or analysis contained in this publication may be subject to change and Red Cloud KS does not undertake to advise the reader of such changes. This publication does NOT take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud KS will not treat recipients of this publication as customers or clients by virtue of having viewed this report.

Company Specific Disclosure Details
Sierra Metals Inc. - TSX:SMT, BVL: SMT - 2

1) A member of Red Cloud KS team has visited/viewed material operations of the issuer.
2) In the last 12 months, Red Cloud KS has been retained under a service or advisory agreement by the subject issuer.
3) In the last 12 months, Red Cloud KS has received compensation for investment banking services.
4) Red Cloud KS or a member of the Red Cloud KS team or household, has a long position in the shares and/or the options of the subject issuer.
5) Red Cloud KS or a member of the Red Cloud KS team or household, has a short position in the shares and/or the options of the subject issuer.
6) Red Cloud KS or a member of the Red Cloud KS team own more than 1% of any class of common equity of the subject issuer.
7) A member of Red Cloud KS team or a member’s household serves as a Director or Officer or Advisory Board Member of the subject issuer.

 

SUBSCRIBE TO HEAR FROM US

Gain access to exclusive mining industry research reports as well as additional mining industry information, promotional materials, press releases and news.

RCKS Talk Daily Analysis
RCKS News
LATEST POST
CATEGORIES
RELATED TAGS
ARCHIVES

 

RISK WARNING:

Red Cloud Klondike Strike Inc. is registered as an Exempt Market Dealer (EMD) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, and Yukon.

 

By accessing this website you agree to be bound by our Terms of Use and Privacy Policy.

 

Red Cloud Klondike Strike Inc. connects mining companies with suitable investors that qualify under available regulatory exemptions. For example, in Canada, according to National Instrument 45-106, Prospectus and Registration Exemptions. Similar laws and regulations apply in other jurisdictions. Companies presented on this website are considered to be highly speculative and, as such, are suitable only for purchasers who can tolerate the highest level of risk including the loss of their entire investment.

© Copyright 2017 Red Cloud Klondike Strike Inc. All rights reserved.