Alpayana Comments on the Separation Agreements Entered into by Sierra Metals Inc. and Certain of its Officers

LIMA, Peru, July 18, 2025 /CNW/ - Alpayana S.A.C. ("Alpayana") wishes to comment on certain disclosure made by Sierra Metals Inc. ("Sierra" or the "Company") in its Management Information Circular dated June 23, 2025 (the "Circular"), which was filed to SEDAR+ on July 8, 2025.

In the Circular (on page 57) , Sierra disclosed that on May 12, 2025, Sierra entered into separation agreements (each, a "Separation Agreement") with each of the following named executive officers ("NEOs") of Sierra: ERNESTO BALAREZO (CEO), JEAN PIERRE FORT (CFO), RAJESH VYAS (Vice President, Corporate Controller), ALBERTO CALLE (Vice President, Human Resources) and PATRICIA KOSA (Vice President). In connection with such Separation Agreements, Sierra disclosed that it made one-time payments in the aggregate of approximately US$3 million (less applicable withholding taxes) to the NEOs.

Alpayana wishes to clarify that it neither supported nor endorsed the entering into of the Separation Agreements by Sierra, nor any change of control payments made pursuant thereto, and is concerned with Sierra's actions for the following reasons:

1. The Separation Agreements Have the Effect of Removing the "Double Trigger" Mechanism Under the NEO Employment Agreements 

Right after Alpayana launched its take-over bid of Sierra (the "Bid"), Sierra, with the board of directors' support, entered into or amended its change of control agreements with the NEOs providing for millions of dollars of change of control payments to be payable to such NEOs if they were terminated without cause within 12 months of a change of control (i.e. a "double trigger" mechanism).

On the date Alpayana took control of the Company, through the Separation Agreements, Sierra and its incumbent management team, endorsed by the board of directors (comprised by Miguel Aramburu, Robert M. Neal, Roberto Maldonado, Beatriz Orrantia and Wendy Kaufmann) have effectively amended such NEO change of control agreements to remove the "double trigger" mechanism provided for thereunder, and provided themselves unilaterally with the ability to terminate such persons and trigger their change of control payments, without Alpayana's consent.

The result of such amendment, is that Alpayana has been deprived of its right to determine whether it would retain the current NEOs, such that the change of control payments would not have been triggered.

2. The Change of Control Payments Should Not have Been Made Given Sierra's Liquidity Issues

Alpayana raised liquidity concerns with respect to Sierra throughout the duration of the Bid. Alpayana identified such risks for shareholders in its take-over bid circular, including by flagging Sierra's high and expensive debt load and high corporate expenses.

Alpayana is concerned with Sierra's decision to enter into the Separation Agreements in order to trigger the change of control payments, as the Company already had a weak balance sheet and outsized corporate expenses prior to the Bid. Consequently, any further siphoning of cash to Sierra's NEOs is highly inappropriate and not in the best interests of the Company.

Indeed, in a letter sent on June 11, 2025, legal counsel to the Special Committee of Sierra, instructed by the board of directors of Sierra, expressly informed Alpayana that Sierra Metals was short of liquidity and was managing its cash so as to meet unavoidable obligations.

Sierra Metals is short of liquidity and is managing cash so as to meet unavoidable obligations. Mindful of all of the company's stakeholders, including minority shareholders of its Peruvian subsidiary, Sociedad Minera Corona, Sierra Metals has restricted the amounts to be properly transferred from Corona to the legal limits.  Accounts payable have increased by $14 million in Sierra Metals' wholly owned Mexican subsidiary, negatively impacting relationships with critical local suppliers and other Mexican stakeholders.

3. Sierra Delayed the Disclosure of the Separation Agreements

Alpayana is concerned that Sierra failed to immediately disclose on May 12, 2025 that it had entered into the Separation Agreements, as this is material information to Sierra and its shareholders. Sierra instead chose to wait almost two months to disclose the information to the public, and buried the information in its Circular, which was filed to SEDAR+ on July 8, 2025.

Sierra seems to have developed a practice of burying and delaying the disclosure of material information, as it also failed to provide full and timely disclosure of the first amendments that were made to the employment agreements of certain officers of the Company following the commencement of the Bid.

The Directors' Circular of Sierra dated January 13, 2025 (the "Directors' Circular") states that Sierra entered into executive employment agreements, "as amended", that provide for change of control payments. No date of such amendments was stated in the Directors' Circular and shareholders were not aware that such amendments occurred after the launch of the Bid in order to increase the payments received by management. Such amendments were never press released and Sierra still has not publicly disclosed the date on which such amendments were made.

Moreover, the Circular disclosure does not address whether any separation agreements or change of control payments were made to employees or officers of Sierra who are not NEOs of Sierra. Alpayana will not be able to confirm whether any further change of control payments were made, until it receives access to Sierra's records following the meeting of Sierra shareholders on July 29, 2025.

4. No Valid Purpose for the Separation Agreements

Since the commencement of the Bid, Sierra made not one, but two amendments to the employment agreements of certain of its officers, each time ostensibly to retain employees. As stated by Sierra in its Notice of Change to the Directors' Circular dated May 5, 2025, Sierra determined to make the first set of amendments to the employment agreements of certain officers of the Company, to provide such officers with adequate protection in the event that such officers were terminated without cause within 12 months of a change of control and to ensure the continued retention of such officers as a result of the Bid.

In the Circular, Sierra discloses that it determined to enter into the Separation Agreements for "continuity of management" (i.e. the exact same reason). In Alpayana's view, this suggests that there was no valid purpose for entering into the Separation Agreements, other than to force the payment of the change of control payments to such employees and effectively remove the double trigger mechanism.  

ABOUT ALPAYANA

Alpayana Canada Ltd. ("Alpayana Canada") is a Canadian wholly-owned subsidiary of Alpayana and was incorporated for the sole purpose of making the offer to purchase all of the issued and outstanding common shares of Sierra. 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 has revenues in excess of US$500 million and a robust balance sheet.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This document contains "forward-looking statements" (as defined under applicable securities laws). These statements relate to future events and reflect Alpayana Canada's 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 Alpayana's intentions with respect to any change of control payments, the Separation Agreements or the pursuit of remedies relating thereto. 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 Alpayana 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.

SOURCE Alpayana S.A.C.

For further information, please contact: Shorecrest Group, the Depositary and Information Agent for the take-over bid, by telephone at 1-888-637-5789 (North American Toll-Free Number), 647-931-7454 (outside North America) or by email at [email protected].