Why Did Sierra Metals (SMTS) Stock Go 8% Higher In After-Hours Trading?

At the time of the most recent check in after-hours Friday, shares of Sierra Metals Inc. (NYSE: SMTS), which had closed the weekend session at $0.21, were up 8.17% to $0.23.

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What caused the SMTS stock price to soar?

The stock price of Sierra Metals (SMTS) may be impacted by recent events, as the company revealed last week that a special committee made up of its independent directors (the “Special Committee”) has started a process to assess and take into account the Company’s current financial and liquidity position, operational challenges, and potential financing and restructuring options.

Operational and Financial Issues:

Due to the recently announced suspension of operations at the Yauricocha Mine, operational losses, and accumulated negative cash flows, mostly from the Bolivar and Cusi operations, Sierra Metals is experiencing liquidity issues.

  • While certain Yauricocha Mine mining activities have resumed, most of the activity is now still stalled. Full plant throughput has not yet been reached on a specific timetable.
  • Without extra assistance and more financing, SMRS’ capacity to carry on with regular activities may be affected.
  • In order to maintain the liquidity necessary to sustain operations, SMTS is continually reviewing and managing its capital, and it will continue to interact with its financial and other stakeholders.
  • The security and health of Sierra Metals’ staff members and subcontractors are still of the greatest significance.

SMTS Special Committee:

Every non-management member of the company’s board of directors is a part of the Special Committee for SMTS.

  • The Special Committee’s duty includes investigating, assessing, and taking into account options to improve Sierra Metals’ operations as well as financing, restructuring, and strategic options that are in the best interests of the Company.
  • The Special Committee is particularly interested in strategies for cash conservation, short-term finance, and liquidity.
  • To provide guidance on this process, financial and legal advisers with a focus on turnaround and restructuring issues have been retained.
  • Until and unless the board of directors of Sierra Metals has approved a specific transaction or other significant measures, or until the SMTS otherwise believes that disclosure is required, the SMTS’s present goal is to keep developments regarding the Special Committee process under wraps, decided the committee.

What SMTS has warned?

There are no certainties or guarantees as to the outcomes of the Special Committee review process, management’s attempts to ameliorate the existing situation or the effects that the process and such efforts will have on the Company’s financial and liquidity position or its operations, warns Sierra Metals (SMTS). A firm deadline for finishing the evaluation has not yet been established by SMST.

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