Organically Operating to a Higher Level

Q: Why did the company change its name from Dia Bras to Sierra Metals?
A: Established in Mexico, Dia Bras was a junior company looking for growth opportunities. We changed our name to Sierra Metals as a management strategy. The company now has many projects in Mexico with approximately 90,000ha of mining concessions, which puts us among the companies with the largest concession areas. We also acquired two assets in Mexico, Cusihuiriachi (Cusi) and Bolivar, and later acquired Minera Corona in Peru.
Q: How does your company manage its assets to reach their full potential?
A: To know whether an asset can grow organically and make a profit requires more than drilling. We are developing an aggressive exploration program with a strategic position in one of the most important geological environments in the country. Cusi is in the oriental flank of the Sierra Madre Occidental. Deposits along this mountain range amount to about 90 percent of the mineral deposits in the country. Ore deposits in this area also contain metals like copper, silver and gold, which can be classified as either epithermal or mesothermal. Bolivar holds copper, and the copper we work with falls under the epithermal category.
Bolivar and Cusi mines are operating at low production levels. Bolivar is yielding 2,500t/d while Cusi yields 650t/d. At these levels, companies become more susceptible to price variability trends on fixed costs like energy consumption and employee salaries. Our goal is to increase Cusi’s production to 1,200t/d. The plant’s reconditioning has allowed us to duplicate production while simultaneously working on a second expansion that should be finished by the end of this year, to yield 2,400t/d. This will allow us to protect the company from cost fluctuations and prepare us to find further profit in our assets.
From an initial estimate of a couple million tons, new measurements have found approximately 7 million tons of reserves. This means that we have tripled our available resources, which allows us to consider a production expansion. Cusi is a silver deposit with a small amount of gold and lead with mining lots spread over 14,000ha, which means it has mine veins that run for nearly 14km. Its potential could surpass 7 million tons, reaching even 10 or 12 million tons.
Q: How do you ensure the company’s growth strategy complies with its business model?
A: Our business model is supported by three pillars: the security of our workers, environmentally friendly practices and corporate social responsibility. If we can achieve equilibrium among our pillars while maintaining excellent relationships with the three levels of government, we can consolidate our medium-term vision. The mining industry represents inherent risks because its activities destabilize the natural equilibrium of the ground. We need to be prepared with the techniques that artificially guarantee this stability through support, team training and modern equipment. We are changing the previous methodology from traditional mining to mechanized mining. While this mechanization is not as automatized as in Europe, we can take this technology to the plant and the mine. We would like to implement more mechanized advancements in our projects in Mexico to grow in the next three years. This situation is similar at a plant constructed by the Mexican government to support local miners in the area. We acquired this asset and increased its value. The construction of this asset was not optimal, and we are trying to improve the quality of the installation at Cusi. We would like to relocate the plant to the mine to centralize operations. These are the medium-term plans for our current operations.
Copper produced at Bolivar falls under the epithermal category. Its production is associated with gold and silver byproducts. Bolivar had a production of 2,500t/d. Last year the company completed a plant expansion that boosted the yield to 4,500t/d. This production allowed us to reduce operational costs and to improve our cash flow.