Sierra Metals to Spin Out Cautivo Mining as New Public Entity

TORONTO, Feb. 22, 2017

On the completion of the Spin-out, Cautivo who are the developer of the properties' main asset will be its indirect interest in the Las Lomas Project (the "Las Lomas Project") consisting of approximately 32,000 hectares of greenfield exploration properties located in northern Peru.

Mark Brennan, President and CEO of Sierra Metals commented: "Sierra Metals is committed to an ongoing program of maximizing value for Sierra shareholders. After completing an extensive review of the Company's assets in Peru, Sierra Metals decided to spin-out to existing shareholders its 100% owned Las Lomas Project. The Las Lomas Project is not considered to be part of the Company's core focus and management, as well as the Board of Directors, believe the value of the Las Lomas Project is not being fully reflected in the current share price of Sierra Metals.  The Spin out of properties reduces concession maintenance cost to Sierra Metals and allow for the accelerated exploration and development of properties by Cautivo Mining and thus enhancing value for Sierra shareholders."

On January 12^th, Sierra Metals wholly-owned subsidiary, Cautivo Mining Inc. who are the developers of the properties, filed a preliminary prospectus with the securities regulatory authorities for the purpose of qualifying the distribution by Sierra Metals to holders of Sierra's common shares of all of the issued and outstanding common shares in the capital of Cautivo as a return of capital and to effect a rights offering under which recipients of Cautivo Shares will be entitled to purchase additional Cautivo shares. The exercise price for the rights offering will be determined prior to the filing of Cautivo's final prospectus.  The effect of the distribution and the rights offering will be to spin-out Cautivo as a standalone public company and to capitalize Cautivo to enable it to pursue its business plan.

Certain details of the distribution and the rights offering, including the number of Cautivo shares to be received by shareholders of the Company for each Sierra share held, the number of rights to be distributed, the subscription price for Cautivo shares under the rights offering, the total size of the rights offering and the timing of the distribution and the rights offering have not been finalized. These details will be contained in the final prospectus. Complete details of the distribution and the rights offering, including the tax treatment of the distribution, will also be contained in the final prospectus which will be sent to each holder of Sierra shares and will be made accessible on SEDAR at www.sedar.com under Cautivo's profile.

Quality Control

All technical data contained in this news release has been reviewed and approved by Gordon Babcock, P.Eng., Chief Operating Officer and a Qualified Person under National Instrument 43-101 – Standards of Disclosure for Mineral Projects.