Arias Resource Capital Publishes Information Circular to Highlight the Urgent Case for Change at Sierra Metals

Arias Resource Capital Fund II L.P. and Arias Resource Capital Fund II (Mexico) L.P. (the “

Nominating Shareholders

”), together with other affiliates of Arias Resource Capital and its principal (together with the Nominating Shareholders, “

ARC

”) today announced that they have published and mailed an information circular (the “

Circular

”) to draw attention to the critical need for change at the Board of Sierra Metals Inc. (“

Sierra

” or the “

Company

”) (TSX: SMT). The Circular highlights the strengths of ARC’s nominee slate who bring a deep understanding of the geologic potential of Sierra’s Yauricocha, Bolivar and Cusi mines as well as prior experience managing these assets. Shareholders will also find ARC’s 5-Point Plan to bring Sierra back to profitability and restore shareholder value with the urgency it deserves.

The Circular details irrefutable facts about the destruction of shareholder value in Sierra over the past two years under the incumbent Sierra Board. This includes rapid decline in revenue and profitability, ore throughput dropping to the levels seen during the height of the COVID-19 pandemic, negative working capital, and the inability to meet debt obligations which has pushed the financially distressed Company towards insolvency.

When ARC representatives left the Sierra Board in mid-2021, the Company was on a growth trajectory. Sierra, however, has performed abysmally under the watch of the incumbent Board. ARC believes that the Board has failed to perform its fiduciary duties and is not interested in the urgent turnaround of the Company and restoration of shareholder value. This is further proven by the fact that two strategic reviews in as many years have not yielded any result that would boost shareholder confidence.

Left with no choice, on May 1, 2023, the Nominating Shareholders proposed five highly qualified nominees – J. Alberto Arias, Derek White, Daniel Tellechea, Ricardo Arrarte, and Alonso Checa (the “ARC Nominees”) – for election to the Board at Sierra’s annual general and special meeting scheduled for June 28, 2023 (the "2023 AGM"). This is to ensure a reconstituted Board that is incentivized to swiftly turnaround the Company and maximize returns for all shareholders. ARC owns around 27% of issued and outstanding shares of Sierra, while the entire incumbent Board combined owns less than 1%.

A copy of the Circular is available under Sierra’s profile on SEDAR at www.sedar.com and at www.ProtectYourSierraInvestment.com, where ARC’s press releases and other relevant case for change documents are available.

Shareholders can also call or text Kingsdale Advisors on 1.888.370.3955 (toll free in North America), or email [e-mail], or chat with an advisor on www.ProtectYourSierraInvestment.com for more information.

ADVISORS

ARC has retained Kingsdale Advisors as its strategic shareholder and communications advisor and, should ARC commence a formal solicitation of proxies, its strategic shareholder advisor and proxy solicitation agent. ARC has retained Stikeman Elliott LLP as its legal advisor.

ABOUT ARC

Arias Resource Capital, founded in 2007, is a Miami-based private equity firm in the metals sector that invests in critical materials empowering the clean energy revolution.

CAUTIONARY NOTES AND FORWARD-LOOKING STATEMENTS

This news release contains forward-looking information within the meaning of applicable securities laws (“forward-looking statements”) and are prospective in nature. These forward-looking statements are not based on historical facts, but rather on current expectations and may include projections about future events and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates", "plans", "will", “may”, “should”, “could”, “believes”, “potential” or “continue” and similar expressions, or the negative thereof. Forward-looking statements in this news release include, without limitation, statements regarding the potential benefits, contributions and development of the ARC Nominees and the expected impact and results of Sierra’s strategic review process and Sierra’s corporate governance practices. There are numerous risks and uncertainties that could cause actual results and ARC’s plans and objectives to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements in this news release, including, without limitation, the risks described under the headings such as “Cautionary Statement – Forward Looking Information” and "Risk Factors" in Sierra’s annual information form dated March 28, 2023 for its fiscal year ended December 31, 2022, and other risks identified in Sierra's filings with Canadian securities regulatory authorities which are available under Sierra’s profile on SEDAR at www.sedar.com. The forward-looking statements speak only as of the date hereof and, other than as required by applicable law, ARC undertakes no duty or obligation to update or revise any forward-looking information or statements contained in this news release as a result of new information, future events, changes in expectation or otherwise.

ADDITIONAL INFORMATION CONCERNING ARC’S PROPOSED BOARD NOMINEES

The ARC Nominees will be nominated to serve as new independent directors of the Board until the next annual meeting of shareholders of the Company, or until their successors are elected or appointed in accordance with applicable law. The table below sets out, in respect of each of the ARC Nominees, his or her name, province or state and country of residence, and his or her principal occupation, business or employment within the five preceding years. None of the ARC Nominees have any compensation arrangement with ARC or associated companies in connection with their nominations and services, should they be elected, as directors on the Company’s Board.

Name Province/State, Country of Residence	Present Principal Occupation, Business or Employment and in Five Preceding Years	Number of Common Shares of Sierra Beneficially Owned or Controlled
J. Alberto AriasFlorida, USA	Portfolio Manager of Arias Resource Capital Management LP.Non-Executive Chairman, Board of Directors (September 2019 to present) of Largo Inc.Non-Executive Chairman (March 2013 to January 2021) and director (November 2008 to July 2021) of Sierra.Director (December 2016 to January 2020) of Cautivo Mining Inc.	Mr. Arias beneficially owns, or exercises control or direction over, 717,110 shares of Sierra.In addition, Mr, Arias is the sole director of each of the general partner of the Nominating Shareholders, and indirectly controls Arias Resource Capital Management LP. As such, Mr. Arias may be deemed to share voting and dispositive power with respect to securities of the Company held by these entities (30,064,883 common shares held by Arias Resource Capital II L.P.; 1,706,040 common shares of Sierra held by Arias Resource Capital Fund II (Mexico) L.P.; 696,437 common shares of Sierra held by Arias Resource Capital Management LP; and 10,558,154 common shares of Sierra held by Arias Resource Capital GP Ltd.), but he disclaims any beneficial ownership of any such securities, except to the extent of his pecuniary interest therein.
Derek WhiteBritish Columbia, Canada	President and Chief Executive Officer of Ascot Resources Ltd.	Nil.
Daniel TellecheaArizona, USA	Interim Chief Executive Officer (February 2023 to present) of Largo Inc.Independent Consultant (July 2014 to February 2023).	177,542 common shares of Sierra.
Alonso Checa Lima, Peru	Private Equity Executive and Director of Arias Resource Capital Management LP.	Nil.
Ricardo ArrarteLima, Peru	Director of Arias Resource Capital Management LP. Director (April 2019 to July 2021) of Sierra.Chief Executive Officer (August 2017 to present) of Cautivo Mining Inc.	Nil.

Other Boards of Reporting Issuers

As of the date hereof, the ARC Nominees currently serve as directors of other reporting issuers as follows:

ARC Nominee	Other Reporting Issuer
J. Alberto Arias	Largo Inc.
Derek White	Battery Mineral Resources Corp., Minto Metals Corp.
Daniel Tellechea	Largo Inc.
Alonso Checa	N/A
Ricardo Arrarte	N/A

Other Information Concerning the ARC Nominees

To the knowledge of ARC and other than as described below, none of the directors or officers of ARC, or any joint actors, associates or affiliates of the foregoing, or any of the ARC Nominees or their respective associates or affiliates, has: (a) any material interest, direct or indirect, in any transaction since the commencement of the Company’s most recently completed financial year or in any proposed transaction which has materially affected or will materially affect the Company or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at Sierra’s 2023 AGM, other than the re-constitution of the Board or as disclosed in accordance with applicable law.

On October 31, 2022, Sierra confirmed receipt of the LOI submitted by Kolpa, among others, including the Nominating Shareholders. The LOI, as supplemented after the date thereof, outlined indicative terms for a proposed business combination of Kolpa and Sierra and concurrent financing by an investment firm.

Penalties or Sanctions

To the knowledge of ARC, as at the date hereof, none of ARC’s proposed board nominees, has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable security holder in deciding whether to vote for an ARC Nominee.

Individual Bankruptcies

To the knowledge of ARC, none of ARC’s proposed board nominees is, at the date hereof, or has been, within ten (10) years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that individual.

Corporate Cease Trade Orders or Bankruptcies

To the knowledge of ARC and other than as described below, no ARC Nominee is, at the date hereof, or has been, within ten (10) years prior to the date hereof: (a) a director, chief executive officer or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days (each, an "order"), in each case that was issued while the ARC Nominee was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to an order that was issued after the ARC Nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; (b) a director or executive officer of any company that, while such ARC Nominee was acting in that capacity, or within one (1) year of such ARC Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (c) someone who became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such ARC Nominee.

Mr. Arias served as a member of the board of directors for Colossus Minerals Inc. (“Colossus”) less than one year from March 2013 to January 2014. On January 14, 2014, Colossus announced it had approved the filing of a notice of intention to make a proposal under the Bankruptcy and Insolvency Act (Canada), to enable the company to pursue a sale process and restructuring with the benefit of creditor protection and under court supervision. On March 13, 2014, the Ontario Superior Court of Justice (in Bankruptcy and Insolvency) approved a proposal and plan of reorganization that was unanimously accepted by the creditors of Colossus.

Mr. Tellechea served as a director of Mercator Minerals Ltd. (“Mercator”) from April 5, 2012 to September 4, 2014. On August 26, 2014, Mercator and its wholly owned subsidiary, Creston Moly Corp., filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act (Canada). On September 9, 2014, the official receiver issued a Certificate of Assignment in Bankruptcy for Mercator, effective from the date of bankruptcy, being September 5, 2014.

ADDITIONAL INFORMATION

In connection with the Nominating Shareholders’ solicitation of proxies in respect of Sierra’s 2023 AGM, the Nominating Shareholders have filed and mailed the Circular to Sierra shareholders and intend to file and mail a form of proxy in due course.

Any solicitation made by ARC will be made by it and not by or on behalf of the management of Sierra. All costs incurred for any solicitation will be borne by ARC, provided that, subject to applicable law, ARC may seek reimbursement from Sierra of ARC’s out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with any successful result at a meeting of Sierra shareholders. Proxies may be solicited by ARC pursuant to an information circular sent to shareholders after which solicitations may be made by or on behalf of ARC by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of ARC, who will not be specifically remunerated therefor. ARC may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. ARC may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on its behalf, which agents would receive customary fees for such services. In particular, ARC has engaged Kingsdale Advisors (“Kingsdale”) to act as ARC’s shareholder and communications advisor and, should ARC commence a formal solicitation of proxies, to act as its strategic shareholder advisor and proxy solicitation agent to solicit proxies in the United States and Canada. Pursuant to this engagement, Kingsdale will receive an initial fee of C$150,000, plus a customary fee for each call to and from shareholders. Proxies may be revoked by instrument in writing by a shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law and the articles or by-laws of Sierra. None of ARC nor, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect: (i) in any transaction since the beginning of Sierra’s most recently completed financial year or in any proposed transaction that has materially affected or would materially affect Sierra or any of its subsidiaries; or (ii) by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on by Sierra at the 2023 AGM, other than the election of directors to the board of Sierra or as disclosed in accordance with applicable law.

Sierra trades on the Toronto Stock Exchange under the symbol “SMT”. Sierra’s head office is located at 77 King Street West, Suite 400, Toronto, Ontario M5K 0A1.

CONTACT

Andrew SidnellVice President, Special SituationsKingsdale [e-mail]