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PRESS RELEASE FROM CNW GROUP

Sierra Metals Announces 2013 Fourth Quarter And Annual Financial Results And Declares Q1 2014 Dividend

Wednesday, March 26, 2014

VANCOUVER, March 26, 2014 /CNW/ - (TSX:SMT) (BVL:SMT) ("Sierra Metals" or the "Company") is pleased to report the filing of its audited Financial Statements and Management Discussion and Analysis ("MD&A") for 2013. All amounts are presented in US dollars unless otherwise stated. For the full Financial Statements or MD&A please visit the Company's website www.sierrametals.com or SEDAR at www.sedar.com.

Daniel Tellechea, President and CEO of Sierra Metals, commented: "2013 was a year of the largest capex in our history focused on production expansion, mine development and exploration investments of $44 million in our three operating mines in Peru and Mexico. This has resulted in material reserve/resource growth and laid down the foundation for further metal output expansions, particularly for silver. The impact of higher operating rates in the latter part of 2013 in our two Mexican mines was more than offset by a decline in metal prices and lower ore grades in our Yauricocha Mine in Peru, which was mainly due to water management issues. We expect our results to improve in 2014 as we consolidate the production ramp up at our Bolivar copper mine and Cusi silver mine, implement measures to improve water management at Yauricocha and benefit from the measures undertaken to reduce operating costs, while continuing to execute the Company's investment pipeline to achieve continued growth in 2015 and beyond".

The following table sets out the selected quarterly and annual financial results:

(In thousands of dollars, unless stated) Revenue $ 36,417 $ 43,738 $ 143,538 $ 179,7951 12,95422,67815,902Non-cash depletion charge on Corona acquisition (9,241)(17,322)(57,297)(77,021)Gross profit (loss) 4,4982,192(3,154)16,494Income Tax Recovery (Expense) (2,879)(2,888)3,125(10,311)Net loss attributable to shareholders (14,330)(10,747)(33,973)(28,678)Basic and diluted loss per share ($) From continuing operations (0.09)(0.06)(0.22)(0.17) From discontinued operations -(0.01)-(0.02) Cash Cost per oz of Ag (Yauricocha)1(7.96)(13.11)(12.04)(19.44) Cash Cost per lb of Cu (Bolivar)11.722.071.701.66 Cash Cost per oz of Ag (Cusi)114.25 N.A. 15.61 N.A. (In thousands of dollars) Cash and cash equivalents $ 44,930 $ 80,244 Assets 441,029507,656 Liabilities 210,287222,711 Equity 230,742284,945 1 An explanatory note regarding non-GAAP measures is included in section 13 of the Company's MD&A.

Adjusted net income attributable to shareholders of $16.3 million or $0.10 per share for the twelve months ended December 31, 2013 compared to $34.3 million or $0.23 per share for the same period in 2012. Adjusted net income attributable to shareholders of $1.2 million or $0.01 per share for the three months ended December 31, 2013 compared to a net income of $5.9 million or $0.04 per share for the same period in 2012.

Net loss attributable to shareholders of $34.0 million or $0.22 per share for the twelve months ended December 31, 2013 compared to a loss of $28.7 million ($0.19 per share) for the same period in 2012. The increase in net losses attributable to shareholders is mainly due the decrease in adjusted EBITDA year-over-year and an impairment charge of $7.8 million in Mexico against certain exploration and evaluation assets. Net loss attributable to shareholders of $14.3 million or $0.09 per share for the three months ended December 31, 2013 compared to a loss of $10.7 million ($0.07 per share) for the same period in 2012.

A large component of the net loss every period is the non-cash effect of the acquisition of Corona in Peru, which for the twelve months ended December 31, 2013 was $57.3 million (2012- $77.0 million) and for the three months ended December 31, 2013 was $9.2 million (2012- $17.3 million). The units of production non-cash depletion charge is based on the aggregate fair value of the Yauricocha mineral property at the date of acquisition of Corona of $371.0 million amortized over the total proven and probable reserves of the mine. The Company has been successful in reducing the depletion expense year-over-year as a result of the increase in the mineral reserves at Yauricocha based on the NI 43-101 reports dated October 2012 and November 2013.

Adjusted EBITDA of $54.5 million for the twelve months ended December 31, 2013 compared to $83.9 million for the same period in 2012. This decrease was mainly a result of lower commodity prices and lower metal production due ore grade dilution caused by water management problems at Yauricocha. Adjusted EBITDA of $12.9 million for the three months ended December 31, 2013 compared to $13.0 million for the same period in 2012.Cash flow generated from continuing operations of $26.7 million for the twelve months ended December 31, 2013 compared to $63.0 million for the same period in 2012. This decrease was mainly driven by lower adjusted EBITDA and higher uses of working capital. Cash flow generated from continuing operations of $12.4 million for the three months ended December 31, 2013 compared to $22.7 million for the same period in 2012.

Cash and cash equivalents of $44.9 million as at December 31, 2013 compared to $80.2 million at the end of 2012. Cash and cash equivalents have decreased by $35.3 million during 2013 mainly due to the capital expenditures incurred in Mexico and Peru of $44.0 million and $16.0 million of dividends paid to shareholders and non-controlling interest, partially offset by $26.7 million of operating cash flow.

Revenues of $143.5 million for the twelve months ended December 31, 2013 compared to $179.8 million for the same period in 2012. Revenues of $36.4 million for the three months ended December 31, 2013 compared to $43.7 million for the same period in 2012.

Negative by-product cash cost per ounce of silver of $12.04 at Yauricocha, by-product cash cost per ounce of silver of $15.61 at Cusi and by-product cash cost per pound of copper of $1.70 at Bolivar for the twelve months ended December 31, 2013 compared to negative by-product cash cost per ounce of silver of $19.44 at Yauricocha and by-product cash cost per pound of copper of $1.66 at Bolivar for the same period of 2012. Negative by-product cash cost per ounce of silver of $7.96 at Yauricocha, by-product cash cost per ounce of silver of $14.25 at Cusi and by-product cash cost of $1.72 per pound of copper at Bolivar for the three months ended December 31, 2013 compared to negative by-product cash cost per ounce of silver of $13.11 at Yauricocha and by-product cash cost per pound of $2.07 at Bolivar for the same period of 2012. Cash costs at Cusi for 2012 are not available because this property was not in commercial production at that time.

Total silver production of 2,560,467 ounces (''oz'') in 2013 compared to 2,620,774 oz in 2012. In-line with the previous year. In the fourth quarter of 2013 a total of 653,705 oz was produced compared to 683,938 oz for the same period of 2012. A 4% decrease year-over-year.

Total copper production of 15.9 million pounds (''lb'') in 2013 compared to 15.9 million lb in 2012. In-line with the previous year. In the fourth quarter of 2013 a total of 4.8 million lb was produced compared to 4.3 million lb for the same period of 2012. An 11% increase year-over-year. The main driver for this increase is the ramp up from 1,000 tpd to 2,000 tpd at Bolivar.

Total lead production of 38.0 million lb in 2013 compared to 35.7 million lb in 2012. A 6% increase year-over-year. In the fourth quarter of 2013 a total of 11.3 million lb was produced compared to 8.7 million lb for the same period of 2012. A 30% increase year-over-year mainly driven by higher head grades at Yauricocha in Peru.

Total zinc production of 51.7 million lb in 2013 compared to 59.0 million lb in 2012. A 12% decrease year-over-year. In the fourth quarter of 2013 a total of 13.4 million lb was produced compared to 14.7 million lb for the same period of 2012. A 9% decrease year-over-year.

Total gold production at the Yauricocha Mine was 6,736 oz in 2013 compared to 10,491 oz in 2012. A 36% decrease year-over-year. In the fourth quarter of 2013 a total of 1,665 oz was produced compared to 2,181 oz for the same period of 2012. A 24% decrease year-over-year.

Production Guidance for 2014:Copper: 22.6 million lb - 24.1 million lbLead: 31.3 million lb - 33.0 million lbZinc: 43.5 million lb - 45.8 million lb

On October 21, 2013, the Company announced that drilling at the Cusi Mine expanded the Veta Del Contacto to 250 meters along strike and 700 meters of depth. The Veta del Contacto (Promontorio) body has now been intercepted over a horizontal distance of 250 meters and a vertical distance of 700 meters. Drill hole DC13B628 cut 9.6 meters core length (3.0 meters true width) averaging 622 g/t silver. Drill hole DC13B634 cut 1.4 meters core length (1.4 meters true width) averaging 887 g/t silver. Since 2011, 34 drill holes have identified and expanded the known mineralized zones, which are open in both directions along strike and to depth.

On November 19, 2013, the Company announced that Yauricocha's mineral reserves had been increased by over 2,230,000 tonnes, representing an increase of 53.5% over the previously reported mineral reserves. The new report has an effective date of January 1, 2013. The mineral resource and mineral reserve estimate was completed by Yauricocha personnel and audited by Gustavson Associates LLC of Lakewood, Colorado.

On October 1, 2013, the Company announced its third quarterly cash dividend of approximately CAD$2.5 million, or CAD$0.016 per common share of the Company (each, a "Common Share"), payable on October 31, 2013 to the holders of the issued and outstanding Common Shares as of the close of business on October 21, 2013.

On October 1, 2013, Sierra also announced the adoption of a dividend reinvestment plan (the "Plan"). Eligible shareholders may elect to participate in the Plan commencing with the third quarterly dividend. The Plan provides a convenient and cost-effective way for eligible shareholders to acquire additional Common Shares by reinvesting cash dividends paid on their shareholdings. Highlights of the Plan include:

Common Shares issued under the Plan from treasury may be issued at a discount not to exceed 5% of the weighted average market price of the Common Shares over the ten-day period preceding the relevant dividend payment date, as further described in the Plan. The current discount has been set at 5% and shall apply until further notice by press release.

Brokerage commissions and administrative costs for the Common Shares issued under the Plan will be borne by the Company rather than shareholders participating in the Plan. However, participating beneficial shareholders may incur fees in respect of services provided by their respective nominees.

During the fourth quarter of 2013, the Company recorded an impairment charge of $7.8 million in Mexico against certain exploration and evaluation assets. The impairment charge has been recorded mainly as a result of management's decision to cancel certain mining concessions as at December 31, 2013, as management has determined that the carrying value amount is unlikely to be recovered.

The Company announces its quarterly cash dividend for the period ending March 31, 2014 of CAD$750,000 or CAD$0.005 per common share of the Company (each a "Common Share"), payable on April 30, 2014 to the holders of the issued and outstanding Common Shares as of the close of business on April 10, 2014.

The decision made by the Board of Directors to lower the dividend was driven by a potential more aggressive capital expenses program particularly at the Cusi silver mine which will be defined after the upcoming announcement of Cusi resource NI 43-101 report. Daniel Tellechea, President and CEO of Sierra Metals, commented: "In light of the strong geologic potential demonstrated at our three mines, Sierra is maintaining its aggressive capital expenditure and exploration programs despite continued metals market weakness. Consequently, we have decided to lower Sierra's cash dividend as we see more value creation in the investment of our capital resources on further high-quality growth in our silver assets."

The amount of future dividends to be declared, if any, shall be considered by the Board of Directors on a quarterly basis and will depend the Company's overall cash and operating position at the relevant time

Sierra Metals Inc. is a Canadian mining company focused on precious and base metals from its Yauricocha Mine in Peru, its Bolivar Mine and Cusi Mine in Mexico. In addition, Sierra Metals is exploring several precious and base metal targets in Peru and Mexico. Projects in Peru include Adrico (gold), Victoria (copper-silver) and Ipillo (polymetallic) at the Yauricocha Property in the province of Yauyos and the San Miguelito gold properties in Northern Peru. Projects in Mexico include Bacerac (silver) in the state of Sonora, La Verde (gold) at the Batopilas Property in the state of Chihuahua, and Las Coloradas (silver) at the Melchor Ocampo Property in the state of Zacatecas.

The Company's shares trade on the Bolsa de Valores de Lima and the Toronto Stock Exchange under the symbol "SMT".

Except for statements of historical fact contained herein, the information in this press release may constitute "forward-looking information" within the meaning of Canadian securities law. Other than statements of historical fact, all statements are "forward-looking statements", which involve various known and unknown risk and uncertainties and other factors, including market conditions that may affect the Company's ability to execute its current business plan. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available atwww.sedar.com.

SOURCE Sierra Metals Inc.

For further information:

For further information regarding Sierra Metals, please visit www.sierrametals.com or contact:

President & CEO

Sierra Metals Inc.

1 (866) 493‐9646

Senior Exploration Vice President

Sierra Metals Inc.

1 (866) 493‐9646

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