TORONTO, Oct. 27,
2022 /CNW/ - Compañia Minera
Kolpa ("Kolpa"), a polymetallic mining company in
Peru, today announced that it
delivered of a letter of intent ("LOI") to the board of
directors of Sierra Metals Inc. ("Sierra") (TSX: SMT) (NYSE
American: SMTS) (BVL or Bolsa de Valores de
Lima: SMT) outlining indicative terms for a strategic
transaction with Sierra, and a concurrent financing aimed at
solving Sierra's current financial and operational
challenges.
The financing will be provided by a strategic investment firm
that is not an affiliate of Kolpa or its shareholders. The
transactions have the full support of Sierra's largest shareholder,
affiliates of Arias Resource Capital that together own
approximately 27% of the issued and outstanding Sierra common
shares. The proposed transactions also have the support of
the Kolpa shareholders, Arias Resource Capital Fund II L.P. and
Arias Resource Capital Fund II (Mexico) L.P. (together, "ARC Fund II")
and GR Holding S.A.
The proposed strategic transaction would entail the operational
merger of Kolpa and Sierra assets in Peru, following a business combination
transaction that will result in Sierra owning all of the shares or
assets of Kolpa (the "Kolpa Transaction").
Kolpa is a cash-flowing, private mining company which operates
the Huachocolpa Uno mine, a 1,800 tpd+ capacity, high quality
underground polymetallic asset in the prolific Huachocolpa region
in Peru with a history of
continuous operations since 1948. Given the proximity and
similarity of the Huachocolpa Uno mine to Sierra's Yauricocha Mine
in Peru, Kolpa anticipates
significant operating and administrative synergies between the two
operations that will reduce overall costs at each mine. These
potential synergies are particularly valuable, given the current
operating problems at the Yauricocha Mine. In addition, Kolpa
expects the experience and knowledge of key executives and
operators at Kolpa, many of whom previously worked at Sierra, to
contribute significantly to the turnaround of the Yauricocha and
Bolivar mines. As part of the Kolpa Transaction, the Sierra shares
would be valued at a premium to their current 5-day volume weighted
average price on the Toronto Stock Exchange. The Kolpa Transaction
would create a high quality precious and base metals producer with
significant growth potential located in top-tier mining
jurisdictions of Peru and
Mexico.
Concurrent with the Kolpa Transaction, Kolpa's financing
partner proposes to purchase unsecured convertible debentures that
would be convertible into common shares of Sierra (the
"Financing Transaction" and, together with the Kolpa
Transaction, the "Transactions"). The terms of such
debentures are subject to negotiation. With a financing package in
place, Kolpa expects that Sierra's current financial hardship could
be resolved, subject to due diligence and full understanding of
Sierra's situation.
Kolpa and its financing partner are prepared to expeditiously
complete their due diligence review of Sierra, its subsidiaries and
projects, allow Sierra to complete its due diligence review of
Kolpa and the Huachocolpa Uno mine, and complete negotiations of
definitive documentation in respect of the Transactions. The
closing of the Transactions will be subject to customary
conditions. An expeditious transaction would quickly relieve Sierra
and its shareholders of the company's current financial hardship
and unlock tremendous value for all of Sierra's shareholders.
J. Alberto Arias, Founder of
Arias Resource Capital, former Chairman of Sierra and a director of
Kolpa stated, "The proposed transformational transaction is
instrumental to quickly resolve Sierra's liquidity and operating
challenges, and has our full support, as the largest Sierra
shareholder. Our deep understanding of Sierra's operations,
as an early founder of the company and former controlling
shareholder makes our team, in our view, best-qualified to bring
Sierra back to the track record of excellence it previously had and
beyond, with profitable growth and value creation for all its
shareholders."
This press release concerning the business and affairs of Sierra
is being issued in response to the Sierra press release dated
October 18, 2022 announcing its
liquidity challenges and retention of financial and legal advisers
and its press release dated October 25,
2022 disclosing its intent to delist from the NYSE American
and BVL exchanges. As Sierra's largest shareholder, ARC Fund
II supports greater transparency in this process and more frequent
updates from Sierra.
About ARC Fund II and ARC
Arias Resource Capital ("ARC"), founded in 2007, is a
Miami-based private equity firm
that invests in the metals and mining sector. ARC Fund II is the
largest shareholder of Sierra and the largest shareholder of
Kolpa.
About Kolpa
Kolpa is a cash-flowing, mining company which operates the
Huachocolpa Uno mine, a 1,800 tpd+ capacity, high quality
underground polymetallic asset in the prolific Huachocolpa region
in Peru with a history of
continuous operations since 1948 and that is currently going under
a fully funded expansion to 2,500 tpd. Kolpa generates
approximately a third of its revenue from copper and silver and two
thirds from lead and zinc.
Important Information
This communication does not constitute a proxy statement or
solicitation of a proxy, an offer to buy or solicitation of an
offer to sell any securities. This communication relates to a
proposal that ARC and Kolpa have made to Sierra in respect of the
Transactions. In furtherance thereof and subject to future
developments, Sierra may file documents with the Securities and
Exchange Commission (the "SEC"). This communication is not a
substitute for any document that Sierra may file with the SEC in
connection with the Transactions. Investors and security holders of
Sierra are urged to read any documents filed with the SEC carefully
in their entirety if and when they become available, as they will
contain important information about the Transactions.
Forward-Looking Statements
This press release contains forward-looking information within
the meaning of Canadian and United
States securities legislation. Forward-looking statements
are statements that are not historical facts and may include
projections and estimates and their underlying assumptions,
statements regarding plans, objectives, intentions and expectations
with respect to future financial results, events, operations,
services, product development and potential, and statements
regarding future performance. Forward-looking statements are
generally identified by the words "expects", "anticipates",
"believes", "intends", "estimates", "plans", "will be" and similar
expressions. These forward-looking statements include, without
limitation, statements regarding the Transactions. Although
ARC and Kolpa believe that the expectations reflected in such
forward-looking statements are reasonable, investors are cautioned
that forward-looking information and statements are subject to
various risks and uncertainties, many of which are difficult to
predict and generally beyond the control of Sierra, ARC, and Kolpa,
that could cause actual results and developments to differ
materially from those expressed in, or implied or projected by, the
forward-looking information and statements, including, without
limitation, the risks described under the heading "Risk Factors" in
the Company's annual information form dated March 16, 2022 for its fiscal year ended
December 31, 2021 and other risks
identified in Sierra's filings with Canadian securities regulators
and the SEC, which filings are available at www.sedar.com and
www.sec.gov, respectively. The forward-looking statements speak
only as of the date hereof and, other than as required by
applicable law, ARC and Kolpa do not undertake any obligation to
update or revise any forward-looking information or statements.
SOURCE Compañia Minera Kolpa