• Alpayana is increasing its offer from C$0.85 per Sierra Share to C$1.11 per Sierra Share despite Sierra's restatement, balance sheet weaknesses, high production costs, and lack of strategic optionality.
• Alpayana´s track record has demonstrated its ability to operate and generate value from old underground mines with low grade complex operations. Alpayana is uniquely positioned to extract synergies with its current operations, to reduce corporate expenses and eliminate Sierra's high expensive debt.
• If the Offer is successful, Alpayana will i) undertake further transactions to secure 100% of the Sierra Shares and ii) launch a tender offer for the shares of Corona, as required under Peruvian securities laws at a fair price in accordance with Peruvian securities laws.
• Alpayana Canada's Offer is not impacted by the Shareholder Rights Plan.
• Alpayana has obtained the Peruvian and Mexican regulatory approvals necessary to acquire Sierra.
• Alpayana is waiving the minimum tender condition requiring 66 2/3% of Sierra Shares to tender to the Offer and the conditions related to the financial metrics set out in the 2024 financial statements.
• Alpayana does not own and at no point did Alpayana own any shares of Sierra and Alpayana is not acting jointly or in concert with any shareholders.
• The Increased Offer Price is best and final and expires on April 25, 2025.

TORONTO, April 2, 2025 /CNW/ - Alpayana S.A.C. ("Alpayana") wishes to provide an update on its all-cash offer (the "Offer") to acquire all the issued and outstanding common shares (the "Sierra Shares") of Sierra Metals Inc. ("Sierra") through its Canadian wholly-owned subsidiary ("Alpayana Canada" or the "Offeror").

ALPAYANA'S INCREASED OFFER IS BEST AND FINAL

Alpayana has determined to improve its Offer, and today announces an increase to the price of the Offer from C$0.85 per Sierra Share to C$1.11 per Sierra Share (the "Increased Offer Price") and an extension of the expiry date of the Offer to April 25, 2025. Alpayana does not intend to make any further price increases to the Offer and if the Offer is not successful, Alpayana intends to let the Offer expire and will focus on other inorganic opportunities. The Offer will remain open for acceptance until 5:00 p.m. (Toronto time) on April 25, 2025.

The Increased Offer Price represents a strong premium of approximately:

• 64% to the 30-day volume weighted average trading price of C$0.676 per Sierra Share on the TSX over the 30 trading days ended December 13, 2024 (being the last trading day prior to the announcement of Alpayana's intention to make the Offer);
  
  
• 44% to the closing price of C$0.770 per Sierra Share on the TSX on December 13, 2024 (being the last trading day prior to the announcement of Alpayana's intention to make the Offer); and
  
  
• 41% to the closing price of the Sierra Share on the TSX on April 2, 2025, being the last trading day prior to this announcement.

Shareholders who have already tendered their Sierra Shares to the Offer prior to today's announcement of the Increased Offer Price will automatically benefit from the Increased Offer Price if the remaining conditions are satisfied or waived, as applicable, and the Offer is successful.

SIERRA FACES SIGNIFICANT CHALLENGES AND NO REPORTED STRATEGIC OPTIONALITY

The Increased Offer Price represents an opportunity for shareholders to receive compelling, immediate and certain value. The Offer is compelling given the significant near and long-term risks and challenges Sierra faces.

Sierra is entering into a hostile macro-economic and local and international political environment with a vulnerable balance sheet and lack of scale. Sierra has high levels of expensive debt, a large working capital shortfall, an unpaid US$56.1 million obligation to its publicly listed subsidiary, Minera Corona S.A. ("Corona"), and high corporate expenses; along with being one of the highest cost per pound copper producers in the industry. Given Sierra's thin margins, it is vulnerable to withstanding any potential unexpected production, labor, social, political, regulatory and/or macro challenges.

Sierra also disclosed in its 2024 annual financial statement a restatement of its publicly released quarterly financial statements for 2024 and 2023. The audited 2024 results include a net adjustment to decrease inventory by approximately US$7.8 million and a corresponding increase in Cost of Sales by approximately US$5.3¹ million for nine months ended on September 30, 2024. This raises questions concerning the reliability of Sierra's 2025 guidance. As a result of the identified error, the adjusted EBITDA for the first nine months of 2024 was reduced from US$51.3 million to US$45.9² million and net income was reduced from US$8.7 million to US$5.0 million³.

There is a strong risk that if the Offer expires, Sierra shareholders may suffer further dilution potentially through another private placement. No announcement has been made by Sierra of any other potential offers for Sierra. Additionally, regulatory approvals in both Peru and Mexico are necessary for an acquisition of Sierra to take place; Alpayana has already secured these approvals. Alpayana expects that Sierra may need to undertake a capital raise of more than US$60 million just to normalize its working capital position. Sierra may also require additional fresh capital increases to reduce its expensive debt load and continue to fund its high Capex. This may result in further dilutive private placements, similar to the private placement undertaken in October 2023 at C$0.38 per share.

Corona does not appear to have the net worth to spin-off the Sierra obligation and Sierra does not appear to have the cash flows to repay Corona unless Sierra issues additional capital. If the Offer expires, Sierra will be asked to repay the obligation to Corona at fair market terms.

Sierra's reported Net Debt/EBITDA and FV/EBITDA are not reliable indicators in this case since they fail to recognize (i) that Sierra only owns 82% of Corona, and (ii) Sierra's very high interest costs and high Capex affects debt service capacity and available income for dividends.

SUBSEQUENT ACQUISITION TRANSACTION AND CORONA OFFER

If Alpayana Canada acquires less than 90% of the Sierra Shares under the Offer, Alpayana Canada intends to pursue further means of acquiring the remaining Sierra Shares not deposited under the Offer as permitted under Canadian securities laws, including, without limitation, causing one or more special meetings to be called of the then shareholders to consider a statutory arrangement or other transaction at the Offer price which would allow Alpayana Canada to acquire 100% of the Sierra Shares. An arrangement transaction requires approval by 66 2/3% of those shareholders that vote to approve the transaction and once approved, will be binding on all shareholders.

Alpayana does not own and at no point did Alpayana own any shares of Sierra and Alpayana is not acting jointly or in concert with any shareholders.

If Alpayana Canada is successful in acquiring more than 50% of the Sierra Shares, then in accordance with Peruvian securities laws, Alpayana will launch a local public tender for all issued and outstanding shares of Corona, at a price that meets all Peruvian securities regulations.

SHAREHOLDER RIGHTS PLAN HAS NO IMPACT ON THE OFFER 

While the board of Sierra has adopted a shareholder rights plan (without shareholder approval) effective December 30, 2024 (the "Rights Plan"), such Rights Plan has no impact on Alpayana's Offer as our Offer is a "permitted bid" under the Rights Plan and, therefore, will not trigger the dilutive effects of the Rights Plan. Alpayana has obtained confirmation from Sierra to this effect as well. As a result, Alpayana will be permitted to acquire any Sierra Shares deposited under its Offer.

WHY ALPAYANA LAUNCHED AN UNSOLICITED OFFER

Alpayana has a strong history with Sierra. The shareholders of Alpayana are minority investors in Corona, a publicly traded subsidiary of Sierra.

1. It can be argued that Sierra effectively simulated directed dividends from Corona to Sierra through loans approved by Sierra representatives. These remain as unpaid obligations of Sierra due to Corona in the aggregate amount of US$56.1 million. The interest rate on such obligation of Sierra is lower than the interest rate Sierra obtained from its lenders.
   
   
2. In addition, in January 2023, Alpayana submitted a non-binding offer to the then Chair of Sierra's board to participate in a capitalization of Sierra, which offer was not made public. Shortly after the submission of a confidential letter in connection with the non-binding offer, the price of the Sierra Shares increased substantially and, as a result, Alpayana determined that it was unable to continue to pursue its offer.

Alpayana believes that making the offer directly to shareholders is the most effective, transparent and efficient way for shareholders to have a compelling opportunity to determine what is best for their investment. The Offer will provide shareholders with the ability to realize immediate and certain value for their Sierra Shares.

OFFER CONDITIONS

Alpayana Canada is waiving the condition that more than 66 2/3% of the outstanding Sierra Shares (on a fully diluted basis) be tendered to the Offer (the "Minimum Tender Condition"). Further, Alpayana Canada confirms that it has agreed to waive the conditions of the Offer that Sierra achieve certain financial metrics for and as at the year ended December 31, 2024, which metrics are further detailed in the Offer to Purchase and Circular filed under Sierra's SEDAR+ profile at www.sedarplus.ca and at www.sierrametalscashoffer.com (the "Financial Conditions"). Alpayana Canada also confirms that the condition to the Offer that PricewaterhouseCoopers LLP, as auditor to Sierra, deliver an unqualified audit opinion has been met. Alpayana also confirms that it has received the requisite Peruvian and Mexican regulatory approvals.

Assuming the remaining customary conditions of the Offer, including the statutory minimum tender condition of 50%, are satisfied as of the expiry of the deposit period, Alpayana Canada expects to take-up and pay for all Sierra Shares deposited and not withdrawn under the Offer at that time and to extend the expiry date of the Offer in accordance with applicable Canadian securities laws.

The Offer remains open for acceptance until 5:00 P.M. (Toronto Time) on April 24, 2025. Shareholders are encouraged to tender their Sierra Shares under the Offer prior to the expiry time to secure this best and final offer. A delay in tendering could ultimately result in dilution and/or financial uncertainty.

FOR MORE INFORMATION AND HOW TO TENDER

A notice in respect of the Increased Offer Price, the waiver of the Minimum Tender Condition, the waiver of Financial Conditions and extension of the Expiry Date was provided to the Depositary and Information Agent of the Offer, Shorecrest Group. Alpayana has also finalized a notice of variation and change (the "Notice of Variation") in respect of the improved Offer, which, among other things updates certain information set out in the original Offer to Purchase and Circular. Alpayana expects that the Notice of Variation will be filed with the Canadian securities regulators today on SEDAR+ under Sierra's profile at www.sedarplus.ca and mailed to shareholders in accordance with applicable law. Except as described in the Notice of Variation, no other amendments or variations to the Offer have been made.

Alpayana encourages shareholders to read the full details of the Offer and other important information set forth in the Notice of Variation, which should be read in conjunction with the Offer to Purchase and Circular, and related offer documents. The Offer to Purchase and Circular, Notice of Variation and related offer documents are available on SEDAR+ under Sierra's profile at www.sedarplus.ca and on www.sierrametalscashoffer.com. Shareholders should consult their own tax advisors having regard to their own particular circumstances to determine the particular tax consequences to them of a disposition of Sierra Shares pursuant to the Offer, a compulsory acquisition or subsequent acquisition transaction.

Registered shareholders should complete the letter of transmittal and follow the instructions provided in the offering documents mailed to them. Shareholders who hold Sierra Shares through a broker or intermediary should promptly contact them directly and provide their instructions to tender to the Offer, including any U.S. dollar currency election.

Shareholders are reminded that the deadline to tender their Sierra Shares is April 24, 2025 by 5:00 p.m. (Toronto Time). Financial intermediaries such as banks or brokerage firms may have an earlier deadline to tender. It is recommended that you contact your intermediary in advance of the expiry time to tender Sierra Shares to the Offer.

All shareholders who have not yet tendered their Sierra Shares are urged to do so today. 

ABOUT ALPAYANA 

Alpayana Canada is a Canadian wholly-owned subsidiary of Alpayana and was incorporated for the sole purpose of making the Offer. Alpayana is a family-owned private mining company committed to the development and promotion of sustainable and responsible mining. It strives to leave a positive and meaningful legacy by prioritizing the wellbeing of its employees, the communities it impacts and the environment. Alpayana has been operating mines in Peru for over 38 years, has a successful M&A track record, and experience in developing projects with discipline and with a view on long-term intrinsic value. Alpayana is currently debt-free and has annual revenues over US$500 million.

Alpayana has retained LXG Capital as financial advisor and McCarthy Tetrault, Estudio Rebaza, Alcázar & De las Casas, and Creel, García- Cuéllar, Aiza y Enriquez Abogados as legal counsel to this transaction.

DISCLAIMERS 

This news release is for informational purposes only and does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell, any securities. The Offer was made solely by, and subject to the terms and conditions set out in, the formal Offer to Purchase and Circular (as amended by the Notice of Variation), letter of transmittal and notice of guaranteed delivery. The Offer was not made to, nor will deposits be accepted from or on behalf of, shareholders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION 

This document contains "forward-looking statements" (as defined under applicable securities laws). These statements relate to future events or future performance and reflect Alpayana Canada and Alpayana's expectations, beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements include, but are not limited to, statements regarding: the Offer, variations to the Offer, filing of the Notice of Variation, Alpayana's intentions with respect to further extensions, improvements or other amendments to the Offer, the satisfaction or waiver of certain conditions under the Offer, risks and challenges facing Sierra, the treatment of the Offer under the Rights Plan, the impact of the Rights Plan on taking up Sierra Shares, the price of Sierra Shares if the Offer expires, demand for and shareholders' ability to sell the Sierra Shares. Such forward-looking statements reflect Alpayana Canada and Alpayana's current beliefs and are based on information currently available. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", "target", "intend", "could" or the negative of these terms or other comparable terminology.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating these statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions (including slowing economic growth, inflation and rising interest rates) and the dynamic nature of the industry in which Sierra operates.

Although the forward-looking information contained in this document is based upon what Alpayana Canada and Alpayana believe are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. The forward-looking statements contained in this document are made as of the date of this document and should not be relied upon as representing views as of any date subsequent to the date of this document. Except as may be required by applicable law, Alpayana Canada and Alpayana do not undertake, and specifically disclaim, any obligation to update or revise any forward-looking information, whether as a result of new information, further developments or otherwise.

Neither Alpayana Canada, Alpayana nor any of their subsidiaries, affiliates, associates, officers, partners, employees, representatives and advisers, make any representation or warranty, express or implied, as to the fairness, truth, fullness, accuracy or completeness of the information contained in this document or otherwise made available, nor as to the reasonableness of any assumption contained herein, and any liability therefore (including in respect of direct, indirect, consequential loss or damage) is expressly disclaimed. Nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future and no reliance, in whole or in part, should be placed on the fairness, accuracy, completeness or correctness of the information contained herein.

SOURCE Alpayana S.A.C.