Sierra Metals: Hostile Takeover Leaves Little Upside Despite Copper Turnaround

Summary

• Sierra Metals’ two underground mines are Yauricocha (Peru) and Bolivar (Mexico). The majority of their revenues are from copper, but silver, zinc, lead, and gold are by-products.
• Since the 2022 setbacks, SMTSF has made a promising turnaround effort. The recent Q1 showed new exploration rights over 80 000-hectare Mexican district portfolios.
• Their valuation today also seems relatively cheap and below sector medians, implying there’s still upside potential from this perspective.
• However, Alpayana’s hostile bid at C$1.15 while already owning roughly 93.8% of the shares make Sierra Metals’ privatization and delisting highly probable.
• Thus, SMTSF’s price will likely track this bid price, suggesting limited upside unless the offer is sweetened. But this is improbable, so I rate the stock a 'hold' at this point.

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Sierra Metals Inc. (SMTSF) is a Toronto-based mining company producing a mix of base and precious metals, primarily copper, silver, zinc, lead, and gold. The firm has two mining assets in Latin America: the Yauricocha mine in Peru and

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.