Exhibit 99.1

SIERRA METALS INC.

Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022 and 2021

(unaudited)

1 | Page

November 14, 2022

Management’s Responsibility for Financial Reporting

Management is responsible for the preparation of the unaudited condensed interim consolidated financial statements. These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

The Board of Directors of the Company is responsible for ensuring that Management fulfills its responsibilities for financial reporting. The Board of Directors carries out this responsibility through its Audit Committee, which is composed of three members. The committee meets various times during the year and at least once per year with the external auditors, with and without Management being present, to review the financial statements and to discuss audit and internal control related matters.

The Audit Committee reviews the results of the condensed interim consolidated financial statements prior to their submission to the Board of Directors for approval. The condensed interim consolidated financial statements have not been audited.

“Luis Marchese”	“Ed Guimaraes”
Luis Marchese	Ed Guimaraes
Chief Executive Officer	Chief Financial Officer

2 | Page

Sierra Metals Inc.

Condensed Interim Consolidated Statements of Financial Position

As at September 30, 2022 and December 31, 2021

(In thousands of United States dollars, unaudited) 

	Note	September 30, 2022			December 31, 2021
		$			$
ASSETS
Current assets:
Cash and cash equivalents			13,690			34,929
Trade and other receivables	3		15,129			37,122
Income tax receivable			13,842			4,857
Prepaid expenses			3,027			2,538
Inventories	4		25,699			26,677
			71,387			106,123
Non-current assets:
Property, plant and equipment	5		258,657			289,615
Deferred income tax			1,764			1,086
Total assets			331,808			396,824
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities	6		50,494			44,308
Income tax payable			724			7,444
Loans payable	7		62,279			24,855
Decommissioning liability			3,092			1,012
Other liabilities			7,143			11,183
			123,732			88,802
Non-current liabilities:
Loans payable	7		25,000			55,949
Deferred income tax			21,775			26,824
Decommissioning liability			13,508			17,140
Other liabilities			3,796			3,477
Total liabilities			187,811			192,192
EQUITY
Share capital	8		233,518			232,915
Accumulated deficit			(135,133	)		(74,086	)
Other reserves			9,906			10,420
Equity attributable to owners of the Company			108,291			169,249
Non-controlling interest	9		35,706			35,383
Total equity			143,997			204,632
Total liabilities and equity			331,808			396,824

Contingencies (Notes 7 and 15)

Basis of presentation and going concern (Note 2) 

Subsequent events (Note 16)

Approved on behalf of the Board and authorized for issue on November 14, 2022: 

“Oscar Cabrera”	“Koko Yamamoto”
Oscar Cabrera	Koko Yamamoto
Chairman of the Board	Chairperson of the Audit Committee

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

3 | Page

Sierra Metals Inc.

Condensed Interim Consolidated Statements of Income (Loss)

For the three and nine months ended September 30, 2022 and 2021 

(In thousands of United States dollars, except per share amounts, unaudited)

		Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021
	Note	$			$			$			$
Revenue	14		38,787			60,701			145,969			209,774
Cost of sales
Mining costs	10		(36,740	)		(37,287	)		(118,828	)		(109,953	)
Depletion, depreciation and amortization	10		(9,747	)		(12,316	)		(28,195	)		(34,289	)
			(46,487	)		(49,603	)		(147,023	)		(144,242	)
Gross profit (loss) from mining operations			(7,700	)		11,098			(1,054	)		65,532
General and administrative expenses			(5,644	)		(6,881	)		(16,460	)		(18,064	)
Selling expenses			(1,830	)		(2,209	)		(6,039	)		(7,787	)
Asset impairment	5		(32,000	)		-			(32,000	)		-
Income (loss) from operations			(47,174	)		2,008			(55,553	)		39,681
Other expenses and losses			(1,115	)		(1,460	)		(1,079	)		(2,163	)
Foreign currency exchange gain (loss)			147			800			(1,415	)		303
Interest expense and other finance costs			(1,381	)		(1,016	)		(3,098	)		(2,759	)
Derivative instruments gains			-			-			-			451
Income (loss) before income tax			(49,523	)		332			(61,145	)		35,513
Income taxes (expense) recovery:			2,409			(4,059	)		421			(24,401	)
Current tax expense			2,417			(3,053	)		(5,223	)		(23,720	)
Deferred tax recovery			(8	)		(1,006	)		5,644			(681	)
			2,409			(4,059	)		421			(24,401	)
Net income (loss)			(47,114	)		(3,727	)		(60,724	)		11,112
Net income (loss) attributable to:
Shareholders of the Company			(46,150	)		(4,815	)		(61,047	)		7,353
Non-controlling interests	9		(964	)		1,088			323			3,759
			(47,114	)		(3,727	)		(60,724	)		11,112
Weighted average shares outstanding (000s)
Basic			163,934			163,428			163,768			163,225
Diluted			163,934			163,428			163,768			164,271
Basic income (loss) per share			(0.28	)		(0.03	)		(0.37	)		0.05
Diluted income (loss) per share			(0.28	)		(0.03	)		(0.37	)		0.04

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

4 | Page

Sierra Metals Inc.

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

For the three and nine months ended September 30, 2022 and 2021

(In thousands of United States dollars, unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
		$			$			$			$
Net income (loss)		(47,114	)		(3,727	)		(60,724	)		11,112
Other comprehensive income (loss)
Items that may be subsequently classified to net loss:
Currency translation adjustments on foreign operations		(300	)		(317	)		(490	)		(375	)
Total comprehensive income (loss)		(47,414	)		(4,044	)		(61,214	)		10,737
Total comprehensive income (loss) attributable to:
Shareholders		(46,450	)		(5,132	)		(61,537	)		6,978
Non-controlling interests		(964	)		1,088			323			3,759
Total comprehensive income (loss)		(47,414	)		(4,044	)		(61,214	)		10,737

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

5 | Page

Sierra Metals Inc.

Condensed Interim Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2022 and 2021

(In thousands of United States dollars, unaudited)

	Common Shares				Other			Retained earnings			Total attributable			Non-controlling		Total
	Shares		Amounts		reserves			(accumulated deficit)			to shareholders			Interest		shareholders' equity
				$		$			$			$			$		$
Balance at January 1, 2022		163,428,150		232,915		10,420			(74,086	)		169,249			35,383		204,632
Exercise of RSUs		513,315		603		(603	)		-			-			-		-
Share-based compensation expense				-		579			-			579			-		579
Total comprehensive income (loss)				-		(490	)		(61,047	)		(61,537	)		323		(61,214	)
Balance at September 30, 2022		163,941,465		233,518		9,906			(135,133	)		108,291			35,706		143,997

	Common Shares				Other			Retained earnings			Total attributable		Non-controlling			Total
	Shares		Amounts		reserves			(accumulated deficit)			to shareholders		Interest			shareholders' equity
				$		$			$			$		$			$
Balance at January 1, 2021		162,810,553		230,980		11,840			(41,820	)		201,000		39,208			240,208
												-					-
Exercise of RSUs		617,597		1,935		(1,935	)		-			-		-			-
Share-based compensation expense		-		-		1,039			-			1,039		-			1,039
Dividends paid to non-controlling interest		-		-		-			-			-		(6,356	)		(6,356	)
Total comprehensive income (loss)		-		-		(375	)		7,353			6,978		3,759			10,737
Balance at September 30, 2021		163,428,150		232,915		10,569			(34,467	)		209,017		36,611			245,628

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

6 | Page

Sierra Metals Inc.

Condensed Interim Consolidated Statements of Cash Flows 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unaudited)

		Three months ended September 30,						Nine months ended September 30,
	Note	2022			2021			2022			2021
			$			$			$			$
Cash flows from operating activities
Net income (loss) from operations			(47,114	)		(3,727	)		(60,724	)		11,112
Decomissioning liabilities settled
Items not affecting cash:
Depletion, depreciation and amortization			9,765			11,739			28,381			35,548
Share-based compensation			253			315			579			1,039
Asset impairment	5		32,000			-			32,000			-
Loss on disposals and write-offs			48			947			778			947
Interest expense and other finance costs			968			1,142			2,243			2,814
Income tax expense (recovery)			(2,409	)		4,059			(421	)		24,401
Unrealized foreign currency exchange loss (gain)			(279	)		651			(533	)		(2	)
Operating cash flows before movements in working capital			(6,768	)		15,126			2,303			75,859
Net changes in non-cash working capital items	13		11,069			8,704			25,076			12,698
Decomissioning liabilities settled			(102	)		(73	)		(655	)		(431	)
Income tax paid			(3,556	)		(8,107	)		(20,601	)		(25,898	)
Cash generated from operating activities			643			15,650			6,123			62,228
Cash flows used in investing activities
Capital expenditures			(8,675	)		(19,837	)		(31,223	)		(53,888	)
Cash used in investing activities			(8,675	)		(19,837	)		(31,223	)		(53,888	)
Cash flows generated from (used in) financing activities
Proceeds from the term loan facility	7 (b)		12,500			-			25,000			-
Repayment of Senior Secured Corporate Credit facility with BCP			(6,250	)		(6,250	)		(18,750	)		(12,500	)
Loan interest paid			(699	)		(785	)		(1,728	)		(2,478	)
Repayment of leases			(227	)		-			(685	)		-
Dividends paid to non-controlling interest			-			(6,356	)		-			(6,356	)
Cash generated from (used in) financing activities			5,324			(13,391	)		3,837			(21,334	)
Effect of foreign exchange rate changes on cash and cash equivalents			(6	)		(236	)		24			(191	)
Increase (decrease) in cash and cash equivalents			(2,714	)		(17,814	)		(21,239	)		(13,185	)
Cash and cash equivalents, beginning of period			16,404			76,102			34,929			71,473
Cash and cash equivalents, end of period			13,690			58,288			13,690			58,288

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

7 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

1 Description of business and nature of operations

Sierra Metals Inc. (“Sierra Metals” or the “Company”) was incorporated under the Canada Business Corporations Act on April 11, 1996, and is a Canadian and Peruvian listed mining company focused on the production, exploration and development of precious and base metals in Peru and Mexico. The Company’s key priorities are to generate strong cash flows and to maximize shareholder value.

The Company’s shares are listed on the TSX, NYSE American Exchange, and the Bolsa de Valores de Lima (“BVL”) and its registered office is 161 Bay Street, Suite 4260, Toronto, Ontario, M5J 2S1, Canada.

On November 4, 2022 the Company filed an application to delist its shares from NYSE American Exchange and the Bolsa de Valores de Lima (“BVL”). The final day of trading on the NYSE is November 14, 2022 with shares to be suspended from trading before market-open on November 15, 2022. The Company is continuing to pursue its BVL delisting and suspension from trading is anticipated later during the year.

The Company owns an 81.84% interest in Sociedad Minera Corona S.A (“SMC”), operating the polymetallic Yauricocha Mine in Peru. The shares of SMC are listed on the BVL. The Company also owns a 100% interest in the Bolivar and Cusi Mines in Mexico. In addition to its producing mines, the Company also owns various exploration projects in Mexico and Peru.

2 Significant accounting policies

The significant accounting policies used in the preparation of these condensed interim consolidated financial statements are as follows:

(a) Basis of preparation

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021. The Company’s significant accounting policies were presented in note 2 to the consolidated financial statements for the year ended December 31, 2021 and have been consistently applied in the preparation of these condensed interim consolidated financial statements.

These condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on November 14, 2022.

(b) Basis of consolidation

These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries, which are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date that control commences until the date that control ceases.

Non-controlling interests represent equity interests in subsidiaries owned by outside parties. Changes in the parent company’s ownership interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

8 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

(c) Going concern

On October 18, 2022, the Company announced that it was facing liquidity challenges as a result of the unexpected flooding events at its Mexican operations and the suspension of operations at the Yauricocha Mine, following the mudslide incident in September 2022.

As a result of these events the Company breached certain debt covenants as at September 30, 2022, related to the Senior Secured Corporate Credit Facility (Note 7) with Banco de Credito del Peru (BCP), requiring the Company to reclassify $37.0 million as short-term loan. The Company is seeking accommodation from the lending banks in the form of waivers for this non-compliance. If the Company is unable to obtain such waivers for the current and any potential future breaches of its debt covenants, it could materially and adversely affect the Company’s future operations, cash flows, earnings, results of operations, financial condition and the economic viability of its projects.

At the end of Q3 2022, the Company reported a negative working capital of $52.3 million and cash and cash equivalent balance of $13.7 million and a net loss from operations, excluding impairment charges of $15.1M and $23.5M for the three and nine-month periods ended September 30, 2022, respectively.

The conditions described above indicate the existence of material uncertainties that cast substantial doubt on the Company’s ability to realize its assets and discharge its liabilities in the normal course of business and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern.

The Company’s ability to continue as a going concern is dependent on its ability to repay or refinance its current loans and obtain the necessary financing to advance its exploration projects and meet its ongoing corporate overhead costs. Although the Company has been successful in obtaining debt or equity financing in the past, there is no assurance that it will be able to do so in the future or that such arrangements will be on terms advantageous to the Company. These consolidated financial statements are prepared on a going concern basis which assumes that the Company will continue for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, these consolidated financial statements do not include adjustments to the recoverability and classification of recorded asset and liabilities and related expenses that might be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business at amounts different from those in the accompanying consolidated financial statements. Such adjustments could be material.

The Company is considering various financing and corporate development opportunities and is currently in negotiations with the lending banks to extend the repayment terms of its senior secured credit facility.

The Company has secured short-term credit facilities with certain Peruvian Banks over the past several weeks and is in the process of finalizing prepayments with certain off-takers on the sale of its 2023 copper concentrates from the Bolivar Mine. There is no guarantee that these prepayments will be finalized.

9 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

(d) Subsidiaries

The principal subsidiaries of the Company and their geographical locations as at September 30, 2022 are as follows:

Name of the subsidiary	Ownership interest			Location
Dia Bras EXMIN Resources Inc.		100	%		Canada
Sociedad Minera Corona, S. A. (“Corona”) 1		81.84	%		Perú
Dia Bras Peru, S. A. C. (“Dia Bras Peru”) 1		100	%		Perú
Dia Bras Mexicana, S. A. de C. V. (“Dia Bras Mexicana”)		100	%		México
EXMIN, S. A. de C. V.		100	%		México
Servicios de Produccion Y Extraccion de Chihuahua, S.A. de C.V		100	%		México

¹The Company, through its wholly owned subsidiary Dia Bras Peru, holds an 81.84% interest in Corona, which represents 92.33% of the voting shares. The Company consolidates Corona’s financial results and records a non-controlling interest for the 18.16% that it does not own. 

3 Trade and other receivables

	September 30,		December 31,
	2022		2021
	$		$
Trade receivables		5,139		27,001
Sales tax receivables		9,990		10,121
		15,129		37,122

4 Inventories

	September 30,		December 31,
	2022		2021
	$		$
Stockpiles		1,678		4,092
Concentrates		3,526		3,630
Supplies and spare parts (net of obsolescence provision)		20,495		18,955
		25,699		26,677

Cost of sales are comprised of production costs and depletion, depreciation and amortization, and represent the cost of inventories recognized as an expense for the three and nine-month periods ended September 30, 2022 and 2021 of $46,487 and $147,023 (2021 - $49,603 and $144,242), respectively. Supplies and spare parts inventory as at September 30, 2022 is stated net of a provision of $5,606 (as at December 31, 2021 - $6,396) to write down inventories due to obsolescence or infrequent use. During the three and nine months ended September 30, 2022, the Company wrote down stockpiles and concentrate inventory to their net realizable values (“NRV”), recording a charge of $2,295 and $7,513 (2021 - $1,386 and $2,127), respectively, which is included in the mining costs as disclosed in note 10.

10 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

5 Property, plant and equipment

Cost	Plant and equipment			Mining properties		Assets under construction			Exploration and evaluation assets			Total
	$			$		$			$			$
Balance as of January 1, 2021		300,545			479,402		52,461			38,558			870,966
Additions		4,137			16,830		36,825			17,410			75,202
Change in estimate of decomissioning liability		(3,870	)		-		-			-			(3,870	)
Disposals		(8,033	)		-		(3	)		(1,312	)		(9,348	)
Transfers		20,414			2,345		(17,508	)		(5,251	)		-
Balance as of December 31, 2021		313,193			498,577		71,775			49,405			932,950
Additions		5,416			7,786		7,257			11,051			31,510
Change in estimate of decomissioning liability		(1,305	)		-		-			-			(1,305	)
Disposals		(5,366	)		-		-			(649	)		(6,015	)
Transfers		9,567			1,693		-			(11,260	)		-
Balance as of September 30, 2022		321,505			508,056		79,032			48,547			957,140

Accumulated depreciation	Plant and equipment			Mining properties		Assets under construction		Exploration and evaluation assets		Total
	$			$		$		$		$
Balance as of January 1, 2021		203,438			365,742		-		-		569,180
Depletion, depreciation and amortization		29,327			16,747		-		-		46,074
Disposals		(6,919	)		-		-		-		(6,919	)
Impairment		9,588			20,828		-		4,584		35,000
Balance as of December 31, 2021		235,434			403,317		-		4,584		643,335
Depletion, depreciation and amortization		18,815			9,566		-		-		28,381
Disposals		(5,233	)		-		-		-		(5,233	)
Impairment		11,046			15,448				5,506		32,000
Balance as of September 30, 2022		260,062			428,331		-		10,090		698,483
Net Book Value - September 30, 2022		61,443			79,725		79,032		38,457		258,657
Net Book Value - December 31, 2021		77,759			95,260		71,775		44,821		289,615

The Company performs impairment indicators assessments for its property, plant and equipment at all sites, using life of mine (“LOM”) plans at the end of each quarter. These LOMs incorporate current operational practices, long term metal prices based on recent analyst consensus and productivity assumptions, based on recent operating experience at the mines. The LOMs are not a National Instrument 43-101 technical report, but management’s best estimate of future expected cash flows.

During Q3 2022, the Company’s market capitalization was significantly below its net book values, and after assessing factors such as production, metal prices, and changes in the mine plans, management concluded that further impairment tests were required for the Bolivar and Cusi CGUs.

Bolivar impairment: The Bolivar CGU has been underperforming since 2021 due to various operational challenges mainly related to lack of development and insufficient ventilation. The anticipated turnaround projected for 2022 has been slower than expected. Metal prices declined during Q3 2022 resulting in further drop in profitability of the Bolivar CGU. The Company updated the LOM using updated information from the mine performance, required capex, metal prices and discount rate as the key assumptions, and concluded that an impairment of $25.0 million was required for the Bolivar CGU.

Future forecasted copper prices were obtained from independent sources and range between $3.62 and $4.03 per pound during the lifetime of the CGU. All other assumptions remaining the same, if the prices used by management were to decrease by 10%, the Company would have to recognise an additional impairment of $36.4 million.

A discount rate of 12.32% was estimated based on the Bolivar’s weighted average cost of capital, considering the nature of the assets being valued and their specific risk profile. If the discount rate applied to the cash flow projections had been 100 basis points higher, the company would have to recognize an additional impairment charge of $2.3 million.

Cusi impairment: On December 31, 2021, management, based on the uncertainties around the ability of the Company to expand the production levels and higher production costs at the Cusi cash generating unit (“CGU”), developed three LOM scenarios at different throughput levels, incorporating alternative design approaches and processing methods. The company assigned weighted probabilities to each of these scenarios to estimate the Fair Value Less Costs of Disposal (“FVLCD”) as on December 31, 2021 and concluded that a $35.0 million impairment was required for the Cusi CGU. The key assumptions used to forecast the cash flows included the silver price and the weighted average of the scenarios considered. On September 30, 2022, the Company updated the three production scenarios using the most current metal prices, mining cost capex and discount rate assumptions as of that date and revisited the probabilities assigned to each of the scenarios. The scenarios reflected the potential for Cusi to expand its production in the future. Based on the updated information, management concluded that an additional impairment of $7.0 million was required for the Cusi CGU as of September 30, 2022.

11 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

Future forecasted silver prices were obtained from independent sources and range between $21.39 and $22.42 per ounce during the lifetime of the CGU. All other assumptions remaining the same, if the prices used by management were to decrease by 10%, the Company would have to recognise an additional impairment of $14.4 million.

A discount rate of 12.32% was estimated based on the Cusi’s weighted average cost of capital, considering the nature of the assets being valued and their specific risk profile. If the discount rate applied to the cash flow projections had been 100 basis points higher, the company would have to recognize an additional impairment charge of $1.8 million.

6 Accounts payables and accrued liabilities

	September 30,		December 31,
	2022		2021
	$		$
Trade payables		31,401		28,436
Other payables and accrued liabilities		19,093		15,872
		50,494		44,308

All accounts payable and accrued liabilities are expected to be settled within 12 months

12 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

7 Loans payable

		September 30,		December 31,
		2022		2021
		$		$
Current Portion
Senior Secured Corporate Credit Facility with Banco de Credito del Peru (“BCP”)	(a)		62,279		24,855
			62,279		24,855
Long term Portion
Senior Secured Corporate Credit Facility with Banco de Credito del Peru (“BCP”)	(a)		-		55,949
Term loan from BCP and Santander	(b)		25,000		-
Total long term portion			25,000		55,949
Total loans payable			87,279		80,804

a) On March 11, 2019, the Company entered into a six-year senior secured corporate credit facility (“Corporate Facility”) with BCP that provided funding of up to $100 million effective March 8, 2019. The Corporate Facility provided the Company with additional liquidity and the financial flexibility to fund future capital projects in Mexico as well as corporate working capital requirements. The Company also used the proceeds of the new facility to repay existing debt balances. The most significant terms of the agreement were:

● Term: 6-year term maturing March 2025

● Principal Repayment Grace Period: 2 years

● Principal Repayment Period: 4 years

● Interest Rate: 3.15% + LIBOR 3M

The Corporate Facility is subject to customary covenants, including consolidated net leverage and interest coverage ratios and customary events of default. The Company defaulted on certain debt covenants at the end of Q3 2022 and hence the entire amount of this credit facility has been reclassified as current as at September 30, 2022. The Company is seeking accommodation from the lending banks in the form of waivers for this non-compliance.

Interest is payable quarterly and interest payments began on the drawn and undrawn portions of the facility starting in June 2019. During the nine months ended September 30, 2022, the Company made interest payments of $1,564 (2021 - $2,478).

On February 17, 2020, BCP entered into a syndication agreement with Banco Santander S.A for $30.0 million of this credit facility. BCP continues to remain as the principal lender and there were no changes to the terms and conditions of the original agreement. Principal payments on the amount drawn from the facility began in June 2021. The loan is recorded at amortized cost and is being accreted to face value over 6 years using an effective interest rate of 3.26%.

b) On June 7, 2022, Corona, a subsidiary of the Company, received an approval for a $25.0 million credit facility from BCP and Banco Santander S.A to refinance the quarterly installments payable in 2022 by the Company. Accordingly, $12.5 million was used to repay the two installments that became due during the first half of the year. An additional $12.5 million was taken in the second half of the year to repay the September 2022 installment of the original credit facility and the anticipated payment in December 2022. This loan facility carries an annual variable interest rate of Secured Overnight Financing Rate (“SOFR”) (3 months) + 3.65%. During the nine months ended September 30, 2022, the Company made interest payments of $164 (2021 - $nil).

13 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

8 Share capital and share-based payments

(a) Authorized capital

The Company has an unlimited amount of authorized common shares with no par value.

(b) Restricted share units (“RSUs”)

The changes in RSU’s issued during the nine months ended September 30, 2022 and the year ended December 31, 2021 was as follows:

	Number of RSUs
	September 30,			December 31,
	2022			2021
Outstanding, beginning of period		1,045,831			1,409,058
Granted		1,235,534			617,187
Exercised		(513,315	)		(617,597	)
Forfeited		(189,328	)		(362,817	)
Outstanding, end of period		1,578,722			1,045,831

On June 30, 2020, the Company’s shareholders approved the RSU plan, whereby RSUs may be granted to directors, officers, consultants or employees at the discretion of the Board of Directors. The RSU plan provides for the issuance of common shares from treasury upon the exercise of vested RSUs at no additional consideration. There is no cash settlement related to the vesting of RSU’s as they are all settled with equity. The current maximum number of common shares authorized for issue under the RSU plan is 5% of the number of issued and outstanding common shares of the Company at the time of grant. The RSUs have vesting conditions determined by the Board of Directors, and the vesting conditions are non-market conditions and are not performance based.

During the nine months ended September 30, 2022, the Company granted RSU’s totaling 1,235,534 which had a fair value of C$1.10 based on the closing share price at grant date. RSUs exercised during the nine months ended September 30, 2022 had a weighted average fair value of C$2.30 (2021 – C$1.81) and the RSUs forfeited had a weighted average fair value of C$2.41 (2021 – C$2.17). As at September 30, 2022, the weighted average fair value of the RSUs outstanding is C$1.56 (as at December 31, 2021 – C$2.63).

(c) Deferred Share Units (“DSUs”)

On June 10, 2022, the Compensation Committee approved a director’s retainer, whereby the members of the Company’s board were entitled to 2/3^rd of their annual retainer in the form of DSUs. These DSUs have a vesting schedule of 25% each quarter and would vest completely prior to the next Annual General Meeting. Accordingly, on June 11, 2022, the Company issued 818,853 DSUs which had a weighted average fair value of C$1.17.

14 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

9 Non-controlling interest

Set out below is the summarized financial information of our subsidiary Corona which has a material non-controlling interest (note 2(b)). The information below is before intercompany eliminations.

Summarized balance sheet
	September 30,		December 31,
	2022		2021
	$		$
Current
Assets	106,523		97,988
Liabilities	(27,607	)	(38,845	)
Total current net assets	78,916		59,143
Non-current
Assets	177,731		178,610
Liabilities	(59,519	)	(42,558	)
Total non-current net assets	118,212		136,052
Net assets	197,128		195,195

Summarized income statement
	For the three months ended September 30,						For the nine months ended September 30,
	2022			2021			2022			2021
		$			$			$			$
Revenue		25,086			44,353			92,935			137,108
Income before income tax		(4,837	)		14,116			1,944			43,056
Income tax expense		(469	)		(8,034	)		(162	)		(22,265	)
Total income (loss)		(5,306	)		6,082			1,782			20,791
Total income (loss) attributable to non-controlling interests		(964	)		1,088			323			3,759
Dividends paid to non-controlling interests		-			(6,356	)		-			(6,356	)

Summarized cash flows
	For the three months ended September 30,						For the nine months ended September 30,
	2022			2021			2022			2021
		$			$			$			$
Cash flows from operating activities
Cash generated from operating activities		966			22,102			16,439			64,218
Net changes in non cash working capital items		4,323			2,257			11,398			(1,719	)
Decomissioning liabilities settled		(102	)		(73	)		(655	)		(362	)
Income taxes paid		(2,636	)		(5,632	)		(17,053	)		(18,118	)
Net cash generated from operating activities		2,551			18,654			10,129			44,019
Net cash used in investing activities		(4,456	)		(12,164	)		(15,127	)		(25,885	)
Net cash used in financing activities		(660	)		(34,925	)		(15,672	)		(39,025	)
Effect of foreign exchange rate changes on cash and cash equivalents		(10	)		(28	)		1			(50	)
Increase (decrease) in cash and cash equivalents		(2,575	)		(28,463	)		(20,669	)		(20,941	)
Cash and cash equivalents, beginning of period		14,776			72,549			32,870			65,027
Cash and cash equivalents, end of period		12,201			44,086			12,201			44,086

10 Expenses by nature

Mining costs include mine production costs, milling and transport costs, royalty expenses, site administration costs but not the primary mine development costs which are capitalized and depreciated over the specific useful life or reserves related to that development and ore included in depreciation and amortization. The mining costs for the three and nine months ended September 30, 2022 and 2021 relate to the Yauricocha, Bolivar and Cusi Mines.

15 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

Mining costs

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
		$		$		$		$
Employee compensation and benefits		7,682		7,410		21,593		22,629
Third party and contractors costs		19,428		16,329		64,053		52,234
Depreciation		9,747		12,316		28,195		34,289
Consumables		8,021		8,748		26,184		25,626
Changes in inventory and other		1,609		4,800		6,998		9,464
		46,487		49,603		147,023		144,242

11 Segment reporting

The Company primarily manages its business on the basis of the geographical location of its operating mines. The Company’s operating segments are based on the reports reviewed by the senior management group that are used to make strategic decisions. The Chief Executive Officer considers the business from a geographic perspective considering the performance of the Company’s business units. The corporate division only earns income that is considered to be incidental to the activities of the Company and thus it does not meet the definition of an operating segment; as such it has been included within “other reconciling items.”

The reporting segments identified are the following:

● Peru – Yauricocha Mine

● Mexico – Bolivar and Cusi Mines

The following is a summary of the reported amounts of net income (loss) and the carrying amounts of assets and liabilities by operating segment:

	Peru			Mexico			Mexico			Canada
	Yauricocha Mine			Bolivar Mine			Cusi Mine			Corporate			Total
Nine months ended September 30, 2022	$			$			$			$			$
Revenue (1)		92,935			34,024			19,010			-			145,969
Production cost of sales		(63,841	)		(39,279	)		(15,708	)		-			(118,828	)
Depletion of mineral property		(4,528	)		(4,612	)		(1,636	)		-			(10,775	)
Depreciation and amortization of property, plant and equipment		(10,424	)		(5,459	)		(1,536	)		-			(17,420	)
Cost of sales		(78,793	)		(49,350	)		(18,880	)		-			(147,023	)
Gross profit (loss) from mining operations		14,142			(15,326	)		130			-			(1,054	)
Income (loss) from operations		4,339			(45,958	)		(9,197	)		(4,737	)		(55,553	)
Loss on spin out of Plexmar net assets														-
Interest expense and other finance costs		(2,267	)		(73	)		(41	)		(717	)		(3,098	)
Other income (expense)		(2,225	)		744			416			(14	)		(1,079	)
Foreign currency exchange gain (loss)		(1,028	)		433			242			(1,062	)		(1,415	)
Income (loss) before income tax		(1,181	)		(44,854	)		(8,580	)		(6,530	)		(61,145	)
Income tax expense		(162	)		461			122			-			421
Net income (loss) from operations		(1,343	)		(44,393	)		(8,458	)		(6,530	)		(60,724	)

	Peru		Mexico		Canada		Total
September 30, 2022	$		$		$		$
Total assets		220,159		110,650		998		331,808
Non-current assets		179,144		81,242		35		260,421
Total liabilities		132,715		35,225		19,871		187,811

(1) Includes provisional pricing adjustments of: $(3,739) for Yauricocha, $(2,902) for Bolivar, and $(324) for Cusi.

16 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

	Peru			Mexico			Mexico			Canada
	Yauricocha Mine			Bolivar Mine			Cusi Mine			Corporate			Total
Nine months ended September 30, 2021	$			$			$			$			$
Revenue (1)		137,108			55,385			17,281			-			209,774
Production cost of sales		(61,635	)		(30,982	)		(17,336	)		-			(109,953	)
Depletion of mineral property		(8,534	)		(4,262	)		(1,254	)		-			(14,050	)
Depreciation and amortization of property, plant and equipment		(10,801	)		(6,779	)		(2,659	)		-			(20,239	)
Cost of sales		(80,970	)		(42,023	)		(21,249	)		-			(144,242	)
Gross profit (loss) from mining operations		56,138			13,362			(3,968	)		-			65,532
Income (loss) from operations		45,220			5,288			(6,374	)		(4,453	)		39,681
Derivative gains		-			-			451			-			451
Interest expense and other finance costs		(1,820	)		(61	)		(19	)		(859	)		(2,759	)
Other income (expense)		(2,636	)		366			115			(8	)		(2,163	)
Foreign currency exchange gain (loss)		(46	)		140			43			166			303
Income (loss) before income tax		40,718			5,733			(5,784	)		(5,154	)		35,513
Income tax expense		(22,265	)		(1,623	)		(513	)		-			(24,401	)
Net income (loss) from operations		18,453			4,111			(6,298	)		(5,154	)		11,112

	Peru		Mexico		Canada		Total
September 30, 2021	$		$		$		$
Total assets		286,382		158,413		1,454		446,249
Non-current assets		170,927		149,972		34		320,933
Total liabilities		144,520		26,826		29,275		200,621

(1) Includes provisional pricing adjustments of $(3,295) for Yauricocha, $(2,332) for Bolivar, and $(794) for Cusi.

	Peru			Mexico			Mexico			Canada
	Yauricocha Mine			Bolivar Mine			Cusi Mine			Corporate			Total
Three months ended September 30, 2022	$			$			$			$			$
Revenue (1)		25,086			10,112			3,589			-			38,787
		-			-			-			-
Production cost of sales		(20,087	)		(12,998	)		(3,655	)		-			(36,740	)
Depletion of mineral property		(1,428	)		(1,981	)		(1,265	)		-			(4,673	)
Depreciation and amortization of property, plant and equipment		(3,569	)		(1,654	)		150			-			(5,074	)
Cost of sales		(25,084	)		(16,633	)		(4,770	)		-			(46,487	)
Gross profit (loss) from mining operations		2			(6,521	)		(1,181	)		-			(7,700	)
Income (loss) from operations		(3,372	)		(35,569	)		(6,378	)		(1,855	)		(47,174	)
Interest expense and other finance costs		(1,030	)		(35	)		(9	)		(307	)		(1,381	)
Other income (expense)		(1,621	)		391			116			(1	)		(1,115	)
Foreign currency exchange gain (loss)		291			452			258			(854	)		147
Income (loss) before income tax		(5,732	)		(34,761	)		(6,013	)		(3,017	)		(49,523	)
Income tax expense		1,830			373			206			-			2,409
Net income (loss) from operations		(3,902	)		(34,388	)		(5,807	)		(3,017	)		(47,114	)

(1) Includes provisional pricing adjustments of: $1,397 for Yauricocha, $(1,586) for Bolivar, and $(514) for Cusi. 

17 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

	Peru			Mexico			Mexico			Canada
	Yauricocha Mine			Bolivar Mine			Cusi Mine			Corporate			Total
Three months ended September 30, 2021	$			$			$			$			$
Revenue (1)		44,353			11,302			5,046			-			60,701
Production cost of sales		(19,037	)		(11,854	)		(6,396	)		-			(37,287	)
Depletion of mineral property		(3,636	)		(1,646	)		(460	)		-			(5,742	)
Depreciation and amortization of property, plant and equipment		(2,567	)		(3,166	)		(841	)		-			(6,574	)
Cost of sales		(25,240	)		(16,666	)		(7,697	)		-			(49,603	)
Gross profit (loss) from mining operations		19,113			(5,364	)		(2,651	)		-			11,098
Income (loss) from operations		15,518			(7,987	)		(3,854	)		(1,669	)		2,008
Derivative gains		-			-			-			-			-
Interest expense and other finance costs		(704	)		(29	)		(13	)		(270	)		(1,016	)
Other income (expense)		(1,628	)		105			66			(3	)		(1,460	)
Foreign currency exchange gain (loss)		78			607			134			(19	)		800
Income (loss) before income tax		13,264			(7,304	)		(3,667	)		(1,961	)		332
Income tax expense		(8,034	)		3,511			464			-			(4,059	)
Net income (loss) from operations		5,230			(3,793	)		(3,203	)		(1,961	)		(3,727	)

(1) Includes provisional pricing adjustments of: $(2,166) for Yauricocha, $(1,349) for Bolivar, and $(503) for Cusi.

For the nine months ended September 30, 2022, 63% of the revenues ($92,935) were from eight customers based in Peru and the remaining 37% of the revenues ($53,034) were from two customers based in Mexico. In Peru, two major customers accounted for 44% and 14% of the revenues, while the two customers in Mexico accounted for 64% and 36% of the revenues.

For the nine months ended September 30, 2021, 65% of the revenues ($137,108) were from seven customers based in Peru and the remaining 35% of the revenues ($72,666) were from two customers based in Mexico. In Peru, the two major customers accounted for 76% of the revenues. In Mexico, the two customers accounted for 63% and 37% of the revenues.

As at September 30, 2022, the trade receivable balance of $5,139 includes amounts outstanding of $3,058 from the two major customers in Peru and $2,081 from the two customers in Mexico.

12 Financial instruments and financial risk management

The Company’s financial instruments include cash and cash equivalents, trade receivables, financial assets, accounts payable and accrued liabilities, and loans payable.

(a) Fair value of financial instruments

As at September 30, 2022 and December 31, 2021, the fair value of the financial instruments approximates their carrying value.

(b) Fair value hierarchy

Financial instruments carried at fair value are categorized based on a three-level valuation hierarchy that reflects the significance of inputs used in making the fair value measurements as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) 

18 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

The Company’s metal concentrate sales are subject to provisional pricing with the selling prices adjusted at the end of the quotational period. The Company’s trade receivables are marked-to-market at each reporting period based on quoted forward prices for which there exists an active commodity market.

Level 3 – inputs for the asset or liability that are not based on observable market data.

At September 30, 2022 and December 31, 2021, the levels in the fair value hierarchy into which the Company’s financial assets are measured and recognized on the Consolidated Statement of Financial Position are categorized as follows:

	September 30, 2022								December 31, 2021
Recurring measurements	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
		$		$		$		$		$		$		$		$
Trade receivables (1)		-		5,139		-		5,139		-		27,001		-		27,001
		-		5,139		-		5,139		-		27,001		-		27,001

⁽¹⁾ Trade receivables exclude sales and income tax receivables.

There were no financial liabilities measured at fair value. There were no transfers between Level 1, Level 2, and Level 3 during the nine months ended September 30, 2022 and 2021.

13 Supplemental cash flow information

Changes in working capital

	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
		$			$			$			$
Trade and other receivables		11,044			9,419			21,694			3,093
Financial and other assets		(622	)		(1,367	)		(489	)		(997	)
Inventories		(849	)		1,949			978			(4,513	)
Accounts payable and accrued liabilities		(131	)		(2,252	)		7,326			11,685
Other liabilities		1,627			955			(4,433	)		3,430
		11,069			8,704			25,076			12,698

14 Revenues from mining operations

The Company has recognized the following amounts related to revenue in the consolidated statements of income:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
		$			$			$			$
Revenues from contracts with customers		39,490			64,719			152,934			216,195
Provisional pricing adjustments on concentrate sales		(703	)		(4,018	)		(6,965	)		(6,421	)
Total revenues		38,787			60,701			145,969			209,774

The following table sets out the disaggregation of revenue by metals and form of sale:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
		$		$		$		$
Revenues from contracts with customers:
Silver		8,517		13,438		35,406		51,897
Copper		14,543		24,706		65,438		77,286
Lead		2,792		6,814		9,558		20,888
Zinc		10,682		16,416		32,699		54,802
Gold		2,956		3,345		9,833		11,322
Total revenues from contracts with customers		39,490		64,719		152,934		216,195

19 | Page

Sierra Metals Inc. 

Notes to the Condensed Interim Consolidated Financial Statements 

For the three and nine months ended September 30, 2022 and 2021
(In thousands of United States dollars, unless otherwise stated, unaudited)

15 Contingencies

The Company and its subsidiaries have been named as defendants in certain actions incurred in the normal course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of Management, these matters will not have a material effect on the consolidated financial statements of the Company.

These matters include an ongoing personal action filed in Mexico against Dia Bras Mexicana S.A de C.V (“DBM”) by an individual, Carlos Emilio Seijas Bencomo, claiming the annulment and revocation of the purchase agreement of two mining concessions, Bolívar III and IV between Minera Senda de Plata S.A. de C.V. and Ambrosio Bencomo Casavantes, and with this, the nullity of purchase agreement between DBM and Minera Senda de Plata S.A. de C.V. Carlos. Emilio Seijas Bencomo passed away in 2020 and his heirs appointed Mr. Emilio Ambrosio Bencomo Portillo as legal representative to pursue this case. On March 12, 2021, the first Civil Court of Chihuahua complied with the order of the Collegiate Court absolving DBM of all claims raised by the plaintiff. The plaintiff filed an appeal against this ruling on April 7, 2021, which was dismissed by the Second Collegiate Federal Court on April 6, 2022. The plaintiff has filed an appeal to the Supreme Court. The ruling on this appeal is pending.

16 Subsequent events

The Management has evaluated all events that occur after the financial reporting date through the date when the financial statements were issued and determined that there were no reportable subsequent events to be disclosed, other than those disclosed in the notes to the financial statements.

20 | Page