Sierra Metals provides operations update

• HIGHLIGHTS BROWNFIELD AND DEVELOPMENT PROGRAMS AT ITS THREE OPERATING MINES
  
  
• Q2 CONFERENCE CALL / WEBCAST TODAY at 10:30 EDT

TORONTO, Aug. 17, 2016 /CNW/ - Sierra Metals Inc. (TSX: SMT) (BVL: SMT) ("Sierra Metals" or "the Company") provides an operating update on the development and brownfield programs at its Yauricocha Mine in Peru and its Bolivar and Cusi Mines in Mexico.

Mark Brennan, President and CEO of Sierra Metals stated "We have been working diligently to aggressively increase high grade tonnage at all of our mines. The brownfield programs currently underway are yielding very positive initial results as highlighted by our Esperanza discovery." He continued "Other targets are moving ahead very positively and we hope to provide greater disclosure over the coming months as drilling assays and QAQC standards are completed."

Yauricocha Mine, Peru

Sierra is nearing the completion of the first phase of its operational improvements program at the Yauricocha Mine. The improvements have had a very positive effect with metal production improving dramatically in Q2 over Q1 2016 and Q4 2015.

In the second quarter of 2016 the Company saw production increase by 24% despite only a 4% increase in throughput compared to Q1 2016. The Company's focus on the production of higher quality NSR tonnage, along with the upturn in metal prices, has contributed to a significant increase in revenues and adjusted EBITDA in Q2 2016 versus the previous two quarters.

The Company will continue to focus on operational improvements in the coming year even as key aspects of the program have been completed. These efforts are also expected to further help improve the Company's operating margins and cash flow generation.

On the Exploration front, the Company recently released its updated Reserves and Resource statement, including a Maiden Resource for the recently discovered Esperanza zone (please see press release dated August 11, 2016) and is proud to report that first production ore has also been delivered from the Esperanza Zone. Management believes Esperanza is still in the early stages of delineation and that our aggressive brownfield exploration program will continue to add betterquality tonnage to resources at Yauricocha.

Esperanza is a good contributor already to Yauricocha but is just one of many high value brownfield targets the Company is currently evaluating.  Numerous other development and brownfield exploration targets are currently being tested and explored at the Yauricocha property, as further detailed below.

Central mine zone

Definition drilling targeting 16 metres below the 1020 level at the Catas stope, further definition drilling targets to the 970 level for the Antacaca Sur, Antacaca and Rosaura stopes. This definition drilling provides for continued production this year and into part of next year.

Mascota

Definition drilling program to target preparation for production up to 32 metres below the 1070 level. All definition drilling on the 1070 level is normally carried out to the intrusive contact.

During recent drilling to the intrusive contact area, one Mascota hole intersected positive sulphide mineralization containing chalcopyrite, galena, sphalerite and pyrite mineralization. This prompted additional holes to be drilled in the same area to determine the continuity of the mineralization. These additional holes were successful in encountering more sulphide mineralization. Future plans are in place to develop an additional drilling program to expand these targets. (In addition to base metal sulphide mineralization, drilling has encountered copper mineralization in this area which exhibits similar characteristics to a prior mined out high grade copper zone named Cuye).

In addition to this area, drilling has encountered zones parallel to Mascota as well as Esperanza which have sulphide mineralization. These definition programs continue to provide brownfield opportunities in areas immediately adjacent to currently mined zones.  We plan to release these drilling results in the coming weeks as assays and QAQC are completed.

Cachi Cachi

Definition drilling completed on targets Angelita, Carlita, Elisa to 16 metres below the 820 level. Deeper drilling at the Cachi Cachi zone is planned to define mineralization below the 820 level down to the 920 level. Targets in this Brownfield program are Manuelita, Raquelita, Carmencita and Privasadora. All are known high grade zones that the mine uses to regulate mill feed head grade.

Cuerpos Pequenos

Definition drilling continues on small high grade stopes, Sur Medio 1, Sur Medio2, Butz, Contacto Oriental and Contacto Occidental.

Exploration targets internal to mine areas: Esperanza, areas parallel to Esperanza and a potential future Porphyry zone are being targeted currently.

Esperanza Zone

Drilling continues on the 1070 level horizon at the Esperanza zone. These holes are flat holes designed to delineate the Esperanza zone on this level. Once complete this will be followed up with a drill program at depth below the 1070 level as well as to the North and South of known intersections.

In order to define the area to the North of the known intersections on the Esperanza zone a program of drilling is slated in the immediate future for the 720 level located to the north at the north end of the Yauricocha tunnel. This drilling will be conducted from the 720 level horizon and will be drilled to the South with the objective to target mineralization which could continue from known zones towards Cachi Cachi.

Past drilling on the 1070 level while drifting towards the Esperanza zone have resulted in sulphide mineralization intercepts prior to encountering the Esperanza zone.  Assay information for this intermediate area as well as the main zone is pending from the ALS labs in Lima. Once information is available this will be disseminated in future news releases.

In the immediate mining operations area, approximately 400 to 500 hundred meters Northeast from the Mascota and Esperanza zones, Sierra believes there exists a copper molybdenum porphyry which was identified on surface as well as underground on the 720 level. This area is under review as a drilling target and is another good example of potential for brownfield exploration.

Also, at the immediate surface of the current mine area, there are several greenfields projects which could provide future mill feed to existing operations. This year successful geochemical and mapping programs on surface have further emphasized the importance of target areas in Triada, Cachi Cachi Norte, Fortuna, Quilcaska, Felicidad and Ipillio.

There are other areas of vein systems namely Victoria and San Juan which could be future targets with strong economic potential as well.

Bolivar Mine, Mexico

The Bolivar mine has experienced continual growth in throughput at the mine from 400 tonnes per day (tpd) in 2011 to 2,500 tpd in 2015 to the current 3,000 tpd rate. Bolivar had record throughput again in Q2-2016 showing a 13% increase over the same quarter in 2015. Mining at Bolivar is currently focused at the El Gallo zone and, despite the record throughput, the average head grades and recoveries declined. Head grades are expected to follow throughput and improve in the second half of the year with future extraction taking place from potential new higher grade areas at the Bolivar property.

Highlights on different areas of the mine currently undergoing drilling programs are noted below including a brief description of zones where there are drill targets with significant upside potential (see figure 4 and 5 below).

Feeders/Breccias at El Gallo Zone to Depth

The area of El Gallo, which is the current focus of mining operations, has associated breccias and feeder zones which correspond to epithermal deposits. These breccias are composed of andesite clasts and granodiarite skarn matrix formed by calcite and quartz.  The feeders are formed by calcite-quartz veinlets with chalcopyrite nodules which are important copper bearing conduits. To date, the known dimensions of the breccias range from 60 to 120 metres in length and 20 to 25 metres in thickness, with a vertical height range of 13 to 14 metres. The feeders are known to have a depth of 150 metres below the top level of the Mina del Fierro magnetite. Drilling is currently taking place in this area and it is believed that these mineralized bodies will continue to grow at depth.

Bolivar NW (Skarn)

The area of Bolivar NW, approximately 3 kilometres to the north of existing operations at El Gallo, is understood to be a replacement deposit in stratiform Northwest – Southeast direction. It is a calcosilicate skarn, present in the deposit varying between semi massive economic mineralization with the presence of magnetite and chalcopyrite nodules. The mineralized body is being explored with diamond drilling towards the Southeast with the possible connection to the El Gallo Zone. The current defined strike length is approximately one kilometre along the structure. Management expects that at completion of the current diamond drilling program a possible expansion of the current known orebody will result.

West Bolivar (Skarn)

The West Bolivar deposit, approximately 2 kilometres Southwest of El Gallo and across a fault, is a copper-zinc skarn that has developed adjacent to a contact in the volcano-sedimentary sequence and a hidden granodiorite body.  Diamond drilling is currently taking place on known target areas. Intercepts of copper mineralization have provided positive progress on this program. The potential mineralized area covers an area approximately 240 metres long (East-West) and 300 metres (North-South).  The opportunity exists to potentially develop significant tonnage with potential economic grades.

La Sidra Structure (Vein)

The La Sidra Structure is an epithermal vein filled with polymetallic minerals approximately 5 kilometers Northwest of El Gallo. It extends longitudinally 2.5 kilometres with the dip varying from 45 to 60 degrees to the Southeast.  Diamond drilling carried out has indicated a potential mineralized zone. The exploration program includes a drill program with holes located in the Northern portion and in the Southern portion of the vein in a space of about 300 longitudinal metres where there are exposed semi-massive sulphides. The Company has completed a drill program and is awaiting third party lab results

Also, to the northeast one kilometre away at a concession called La Cascada there are appearances of supposed auriferous stockworks which warrant investigation. This zone could represent gold bearing contributions on top of the mineralization encountered at the La Sidra vein.

La Cascada is in the same mineralogical setting as the nearby Ceneguita gold mine.

Cusi Mine, Mexico

The Cusi project has realized a steady increase in silver equivalent production since inception from 90 tpd in 2012 to 600 tpd today including a 23% increase in Q2 2016 vs Q2 2015.  Cusi has seen the AISC per silver equivalent payable ounce decrease to $18.55 in Q2 2016 vs $30.64 in Q2 2015. The lower costs are mainly due to lower sustaining capital expenditures at Cusi in addition to higher silver equivalent production.  Cusi also began zinc production with production of 1.1 million pounds in the first half of 2016 helping to contribute to the increase in silver equivalent production. 

Cusi also has significant brownfield exploration upside potential similar to the Company's other Mines.  The mine is located in the prolific district of Cusihuiriachic located in central Chihuahua State. The mining area at Cusi is considered low sulfurization epithermals located within a possible caldera that contains a prominent rhyolitic body interpreted as a resurgent dome.  Key brownfield target areas within the Cusi mine include (see figure 6 below).

San Nicholas Vein

This is a structural vein on surface known longitudinally for approximately 1,300 metres with a general direction of Northwest 50 degrees Southeast. In the area of the Promontorio Mine the structure is identified on several levels and is believed to be an oxidized structure potentially containing economic material.  In the area of the Santa Edwiges Mine the structure is also identified on several levels with less oxidation and greater amounts of sulphides. Drilling is ongoing and drift development on this target has resulted in deliverable base metal contributions in zinc and lead sulphide mineralization to the Malpaso mill plant.

San Ignacio Vein

The San Ignacio structure is believed to be the continuation of the Promontorio vein on the footwall of the San Nicolas vein. The structure has a direction of Southwest 45 degrees to 80 degrees Northwest and extends up to 300 metres. This is one of the least explored structures on the surface, along strike on the vein, where there was some small scale mining. The zone is open to depth and along strike.

Moctezuma Vein

The Moctezuma vein is a breccia of crustified quartz and bands of galena – sphalerite and nodules of galena, speckled with chalcopyrite and argentite. Drilling is ongoing and the mineralized zone is detected to be 75 meters in length with average thicknesses from 1.8 to 3.0 metres.  The vein is related to the Monaco structure, which extends at least 250 metres in strike length.  It is expected to have economic grades and represents strong mineral potential.

San Antonio Vein

The San Antonio Vein is described as a crustified quartz vein with bands of argentite and galena, in contact of the footwall with a breccia of massive sulphides composed of galena, sphalerite, argentite and presents sporadically disseminated chalcopyrite. Drilling is ongoing and drifting on known zones is ongoing with the average width appearing to be 2.5 metres and the vein is recognized in vertical extent from surface to approximately 300 metres in depth. It is believed that there is potential at depth to discover further mineralization.

Potential U.S. Exchange Listing

Sierra Metals is considering a possible listing on a U.S. stock exchange to help increase volume and liquidity of the Company's shares.  In this regard, the Company has engaged legal counsel and is seeking advice on the potential alternatives.

The potential benefits of a U.S. exchange listing may include:

• Improved liquidity and trading volume
• Access to a significantly deeper pool of new capital (with a large number of U.S.-based investment funds only mandated to invest in U.S.-listed stocks)
• International investors also recognize and value a U.S. listing
• Retail capital eclipses what is currently available on the TSX

A U.S. listing is expected, among other things, to require the Company to undertake a share consolidation in order to enable the Company to satisfy certain U.S. exchange minimum listing requirements. Such share consolidation would be subject to shareholder approval, with specific particulars to be included in a management information circular to be mailed to shareholders in advance of the shareholder meeting.

A final decision to proceed with a listing on a U.S. exchange has not been made and the Company may elect not to proceed with such a listing.

Further updates will follow in due course as more information is gathered and the Company reaches a definitive decision on whether to proceed with such a listing.

Conference Call Webcast

Sierra Metals' senior management will host a conference call on Wednesday, August 17th, 2016 at 10:30 AM (E.D.T.) to discuss the Company's second quarter 2016 financial and operating results.

Via Webcast:

A live audio webcast of the meeting will be available on the Company's website

http://event.on24.com/wcc/r/1205092/8B2DB427BBE2D30AA117F723D7021AFB

The webcast along with presentation slides will be archived for 180 days on www.sierrametals.com

Via phone:

For those who prefer to listen by phone, dial-in instructions are below. To ensure your participation, please call approximately five minutes prior to the scheduled start time of the call.

Participant Number (Toll Free Peru): 0800-53-840
Participant Number (Toll Free North America): (877) 201-0168 
Participant Number (International): (647) 788-4901
Conference ID: 58593235

Quality Control

All technical data contained in this news release has been reviewed and approved by Gordon Babcock, P.Eng., Chief Operating Officer and a Qualified Person under National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

About Sierra Metals

Sierra Metals Inc. is a Canadian mining company focused on production of precious and base metals from its Yauricocha Mine in Peru, and its Bolivar Mine and Cusi Mine in Mexico. In addition, Sierra Metals is exploring several precious and base metals targets in Peru and Mexico. Projects in Peru include Adrico (gold), Victoria (copper-silver) and Ipillo (polymetallic) at the Yauricocha Property in the province of Yauyos and the San Miguelito gold properties in Northern Peru. Projects in Mexico include Bacerac (silver) in the state of Sonora and La Verde (gold) at the Batopilas Property in the state of Chihuahua.

The Company's shares trade on the Lima Stock Exchange (Bolsa de Valores de Lima) and on the TSX under the symbol "SMT".

Forward-Looking Statements

Except for statements of historical fact contained herein, the information in this press release may constitute "forward-looking information" within the meaning of Canadian securities law. Statements containing forward-looking information express, as at the date of this news release, the Company's plans, estimates, forecasts, projections, expectations or beliefs as to future events or results.  These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements unless required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available at www.sedar.com.

Neither TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

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SOURCE Sierra Metals Inc.