The tailings extension is part of a staged expansion designed to increase the mine's output from 3,000 tonnes per day to 5,500tpd in 2021, which would offer a 486% return on investment according to a June preliminary economic assessment.
Yesterday, the company said authorities had not approved the environmental impact assessment for the initial tailings expansion, to increase output 20% to 3,600tpd.
Sierra would seek a review and said it was "optimistic" of a positive outcome.
"While we are disappointed, we do not believe this decision was made with all the facts," president and CEO Igor Gonzales said.
"Management believes that once all the correct information is reviewed, we will receive a positive response from authorities.
"We are confident that the current permit delay in Peru will be resolved as we are in compliance with the permit requirements."
Sierra said the delay "may not significantly impact the future production plans" at Yauricocha and added that its separate expansion plans at its Bolivar and Cusi mines in Mexico were on track.
The company reported revenue from metals payable of US$53 million for the September quarter, up 4% year-on-year due to higher throughput, despite lower metal prices.
It has pushed for operational improvements at its three mines and reported a significant decrease in all-in sustaining costs of 19.3%, 31.9% and 63.3% at Yauricocha, Bolivar and Cusi respectively.
Sierra started this quarter with more than $29 million in cash and equivalents.
Its shares were unchanged yesterday at C$3.05, compared with its 52-week range of $2.68-$3.85, capitalising it at $498 million.