Sierra Minerals Inc.
TSX : SIM

Sierra Minerals Inc.

November 14, 2008 18:55 ET

Sierra Minerals Posts Record Quarterly Revenue: Quarterly Earnings Increase 109%

TORONTO, ONTARIO--(Marketwire - Nov. 14, 2008) - Sierra Minerals Inc. (TSX:SIM) ("Sierra" or the "Company") today announced its unaudited financial results for the three and nine months ended September 30, 2008. The consolidated interim financial statements along with management's discussion and analysis are available on SEDAR at www.sedar.com and on the Company's website at www.sierraminerals.ca. All currency references are to Canadian dollars unless otherwise noted.

Q3 2008 - Highlights

- Net earnings for the third quarter increased 109% to $685,470 or $0.01 per share versus Q3 2007 earnings of $328,096 or $nil per share.

- Year to date net earnings rise 48% to $950,494 versus $641,972 in 2007.

- Ounces sold rise 18% to 5,569 compared to 4,730 in Q3 2007.

- Realized gold price per ounce rises 23% to US$857 vs. US$696 in Q3 2007.

- Revenue rises 44% to a record $5,021,601 from $3,493,924 in Q3 2007.

- Cost of sales per ounce fell to US$597 in Q3 2008 vs. US$704 in Q2 2008.

- Cash flow from operations in the third quarter was $539,318 resulting in a cash and cash equivalent balance at September 30, 2008 of $530,287.

- Year to date cash flow from operations rises 113% to $2,749,083 compared to $1,290,423 in the first nine months of 2007.

- Working capital deficiency declines $847,242 in the third quarter.

CEO commentary

Michael Farrant, President and CEO of Sierra Minerals, made the following comments in relation to the 2008 third quarter results:

"We are extremely pleased with the Company's third quarter results which resulted in our highest ever quarterly metals sales revenue. This translated into significant year-over-year increases in earnings and cash flow. As expected, our operating cost per ounce sold has returned to a level below $600 per ounce. During the quarter we also made gains in strengthening our balance sheet. We remain on target to produce approximately 20,000 ounces of gold this year."

"These results confirm my belief that Sierra Minerals has the fundamentals from which to grow and despite market turmoil, can deliver positive earnings and cashflow. I believe this also speaks very positively towards the Company's operating ability and the recent addition of Phil Davies as Chief Operating Officer."

"These strong results give us a tremendous starting point upon which to build a significant gold producer. Despite the troubles in the global economy, it is an extremely exciting time for both management and our shareholders to be involved with Sierra Minerals."

Summary of financial and operating results



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Three months ended Nine months ended
September 30, September 30,
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2008 2007 2008 2007
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Gold ounces - produced 5,111 5,287 14,627 13,512
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Gold ounces - sold 5,569 4,730 15,229 12,235
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Average realized gold
price ($/oz.) US$857 US$696 US$886 US$681
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Total cash costs per
ounce sold ($/oz.)(a) US$597 US$500 US$619 US$464
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Metal sales $ 5,021,601 $ 3,493,924 $ 13,205,929 $ 9,379,570
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Cost of sales(b) $ 3,522,566 $ 2,522,803 $ 9,791,154 $ 6,443,680
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Accretion, depreciation,
depletion and
amortization $ 177,703 $ 181,407 $ 606,947 $ 563,283
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Mine operating earnings $ 1,321,332 $ 789,714 $ 2,807,828 $ 2,372,607
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Net earnings for
the period $ 685,470 $ 328,096 $ 950,494 $ 641,972
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Earnings per share
(basic and diluted) $ 0.01 $ 0.00 $ 0.01 $ 0.01
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Cash flow provided by
operating activities $ 539,318 $ 262,788 $ 2,749,083 $ 1,290,423
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(a) See "Supplemental Information on Non-GAAP Financial Measures"
(b) Cost of sales excludes, accretion, depreciation, depletion and
amortization


Revenue from metal sales increased 44% in the third quarter of 2008 compared to the third quarter of 2007 from $3,493,924 to $5,021,601 primarily as of result of an 18% rise in the number of ounces sold from 4,730 to 5,569 and a 23% increase in the average realized price of gold from US$696 to US$857.

Third quarter 2008 production was 5,111 ounces compared to 5,287 in the third quarter of 2007. Cost of sales was US$597 per ounce sold for the third quarter of 2008 compared to US$500 for the third quarter of 2007. While costs were higher than the same period last year, this represents a US$107 drop from the second quarter of 2008. Cost of sales excluding the royalty was US$575 for the quarter.

General and administrative costs for the quarter were $236,842 compared to $288,516 during the third quarter of 2007. $248,484 in exploration expenditures were incurred or reclassified from operating costs during the quarter. Interest expense for the third quarter of 2008 was $40,553 compared to $32,088 in 2007. The Company incurred a foreign exchange loss during the third quarter of 2008 of $40,516 primarily related to the revaluation into Canadian dollars of the US dollar denominated debt. This compares to a gain of $131,723 during the third quarter of 2007 when the Canadian dollar was strengthening. Non-cash write-down, net relates to geological consulting costs incurred in 2007 that should have been expensed as exploration costs.

Cash flow from operating activities for the third quarter of 2008 was $539,318 compared to $262,788 in the third quarter of 2007. The increase reflects the strong quarterly operating results from the Cerro Colorado mine.

Liquidity and Capital Resources

Cash and cash equivalents increased during the quarter from $240,586 as at June 30, 2008 to $530,287 as at September 30, 2008. While the Company did reduce its working capital deficiency during the quarter by $847,242, it still stands at $2,529,795. The primary reason for this remains the fact that the Company's debt facilities are currently in default. The majority of the debt is held by the Company's two largest shareholders. Management is currently in the process of negotiating new terms with these lenders and while the Company cannot guarantee a successful outcome to these negotiations, management believes that it will be successful in establishing new loan agreements with its lenders. To the extent that the timing of repayment of part or all of the loans is greater than one year, these amounts would be reclassified to long-term liabilities and have an immediate impact on improving the working capital position.

Results of Mining Operations

Cerro Colorado Gold Mine (100% ownership)



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Three months ended Nine months ended
September 30, September 30,
--------------------------------------------------
2008 2007 2008 2007
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Operating Statistics
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Tonnes mined 1,115,169 919,985 2,822,497 2,261,776
Waste 594,579 608,969 1,494,688 1,470,870
Ore - placed on
leach pad 520,590 311,016 1,327,809 790,906
Grade (g/t Au) 0.55 0.73 0.56 0.82
Gold ounces - produced 5,111 5,287 14,627 13,512
Gold ounces - sold 5,569 4,730 15,229 12,235
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Financial Data
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Metal sales $ 5,021,601 $ 3,493,924 $ 13,205,929 $ 9,379,570
Cost of sales 3,522,566 2,522,803 9,791,154 6,443,680
Depreciation, depletion
and amortization 170,179 174,546 584,870 542,015
Accretion 7,524 6,861 22,077 21,268
----------- ----------- ------------ -----------
Mine operating earnings
before exploration and
income taxes 1,321,332 789,714 2,807,828 2,372,607
Exploration 248,484 - 248,484 -
Income taxes 10,025 92,208 490,584 608,815
----------- ----------- ------------ -----------
Net segment earnings $ 1,062,823 $ 697,506 $ 2,068,760 $ 1,763,792
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Capital expenditures $ 253,488 $ 320,901 $ 2,329,305 $ 1,062,394
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Production for the quarter remained consistent at 5,111 compared to the year earlier period. Average grade mined during the third quarter of 2008 dropped to 0.55 g/t Au compared to 0.73 g/t Au in the year earlier period as the cut-off grade for mining was lowered to 0.2 g/t Au. Tonnes mined increased 21% over the prior year quarter due to improvements in truck fleet availability from three out of five trucks to four out of five operating at any given time. As such, despite mining at lower grades, the Company remains on target to produce approximately 20,000 ounces of gold in 2008. The Company continues to fund all operating costs, capital additions and exploration expenditures out of cash flow from operation.

About Sierra Minerals

Sierra Minerals is a Canadian based gold production and exploration company. The Company owns and operates the Cerro Colorado Gold Mine in Sonora, Mexico. All gold production is un-hedged and the Company is on target to produce approximately 20,000 ounces of gold in 2008. Sierra is currently completing its initial NI 43-101 mineral resource estimate at Cerro Colorado. The Company's exploration pipeline includes an extensive regional land package which covers over 34,000 hectares in Sonora, Mexico. Further information about Sierra Minerals and the Cerro Colorado Gold Mine can be found on the Company's website at www.sierraminerals.ca.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This news release includes "forward-looking information", as such term is defined in applicable securities laws. The forward-looking information includes, without limitation, the success of exploration activities and other similar statements concerning anticipated future events, conditions or results that are not historical facts including the extent of future production from the Cerro Colorado Gold Mine. These statements reflect management's current estimates, beliefs, intentions and expectations; they are not guarantees of future performance. The Company cautions that all forward looking information is inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond the Company's control. Such factors include, among others, risks and uncertainties relating to exploration and development; the ability of the Company to obtain additional financing; the Company's limited operating history; the need to comply with environmental and governmental regulations; political and economic instability and general civil unrest in Mexico, if any; potential defects in title to the Company's properties; fluctuations in currency exchange rates; fluctuating prices of commodities; operating hazards and risks; competition; and other risks and uncertainties, including those described in the Company's other regulatory filings filed with the Canadian Securities Administrators and available at www.sedar.com. Accordingly, actual future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. All statements are made as of the date of this news release and the Company is under no obligation to update or alter any forward-looking information.

SUPPLEMENTAL INFORMATION ON NON-GAAP FINANCIAL MEASURES

Cash Costs

The Company's MD&A often refers to cash costs per ounce, a non-GAAP performance measure in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the producing gold mine(s) are performing compared to plan and prior periods, and also to assess the overall effectiveness and efficiency of gold mining operations. "Cash cost" figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard is still an accepted standard of reporting cash costs of gold production in North America. Adoption of the standard is voluntary and the cost measures presented herein may not be comparable to other similarly titled measures of other companies. Costs include mine site operating costs such as mining, processing, administration, royalties and production taxes, but are exclusive of amortization, reclamation, capital, exploration and development costs. These costs are then divided by ounces of gold sold to arrive at the total cash costs per ounce of gold sold. The measure, along with sales, is considered to be a key indicator of a company's ability to generate operating earnings and cash flow from its mining operations.

These gold cash costs differ from measures determined in accordance with GAAP. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These measures are not necessarily indicative of net earnings or cash flow from operations as determined under GAAP.

The following table provides a reconciliation of total cash costs per ounce sold for the Cerro Colorado gold mine to the cost of sales, excluding accretion, depreciation, depletion and amortization as per the unaudited interim consolidated statements of operations.



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(U.S. dollars unless Three months ended Nine months ended
otherwise stated) September 30, September 30,
--------------------------------------------------
(unaudited) 2008 2007 2008 2007
--------------------------------------------------
Cost of sales (excluding
accretion, depreciation,
depletion and
amortization) C$3,522,566 C$2,522,803 C$9,791,154 C$6,443,680
Divide by:
Average CDN$/US$ f/x
rate for the period 1.0411 1.0449 1.0184 1.1049
Cost of sales (excluding
accretion, depreciation,
depletion and
amortization) $3,383,504 $2,414,397 $9,614,252 $5,831,912
Silver by-product credit ($60,819) ($51,517) ($180,838) ($154,007)
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$3,322,685 $2,362,880 $9,433,414 $5,677,905

Gold ounces sold 5,569 4,730 15,229 12,235
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Total cash costs
(US$/oz. sold) $ 597 $ 500 $ 619 $ 464
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Breakdown of cost per
ounce sold
Direct operating costs $ 586 $ 493 $ 583 $ 460
Non-cash amortization of
deferred stripping - - 27 -
NSR Royalty - 2.5% of
metal sales 22 18 21 17
Less: silver
by-product credits (11) (11) (12) (13)
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Total cash costs
(US$/oz. sold) $ 597 $ 500 $ 619 $ 464
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