Name of the Project
Hermosa zinc/lead/silver project.

Location
Santa Cruz County, Arizona, in the US.

Project Owner/s
South32.

Project Description
Hermosa is a polymetallic development comprising the zinc/lead/silver Taylor sulphide deposit, the zinc/manganese/silver Clark oxide deposit and an extensive, highly prospective land package with the potential for further polymetallic and copper mineralisation.

Taylor
A prefeasibility study (PFS) on the Taylor deposit has tipped it to be the first development of a multidecade operation, establishing the project as a globally significant producer of metals critical to a low carbon future. The deposit is being designed as South32’s first ‘next-generation mine’, with automation and technology used to minimise its impact on the environment and target a carbon neutral operation, in line with South32’s goal of achieving net-zero operational carbon emissions by 2050.

The deposit has total mineral resources of 138-million tonnes grading at 3.82% of zinc, 4.25% lead and 81 g/t silver.

The PFS is based on a dual-shaft underground zinc/lead/silver mine development using longhole open stoping and a conventional sulphide ore flotation circuit, producing separate zinc and lead concentrates, with silver by-product credits. The PFS estimates average production of 111 000 t/y of zinc, 138 000 t/y of lead and 7.3-million ounces a year of silver, with the current resource supporting a mine life of 22 years and a nameplate capacity of 4.3-million tonnes.

Clark
The Clark manganese/zinc/silver oxide deposit, located adjacent to and up-dip of the Taylor deposit, has the potential to underpin a second development stage at Hermosa. The deposit has a mineral resource estimate of 55-million tonnes averaging 9.08% manganese, 2.31% zinc and 78% g/t silver. A scoping study has confirmed the potential for a separate, integrated underground mining operation producing battery-grade manganese, as well as zinc and silver.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
Not stated.

Capital Expenditure
$1.23-billion.

Planned Start/End Date
According to the PFS production schedule, first ore is expected in the 2027 financial year, with a single-stage ramp-up to nameplate production expected in the 2030 financial year.

Latest Developments
South32’s has reported that it remains confident that costs at its Hermosa project will not increase.

South32 CEO Graham Kerr has said that the prefeasibility study (PFS) on the Taylor deposit, at Hermosa, was completed at a time when the US Construction Cost Index had peaked; therefore, capital cost estimates contained within the PFS were elevated.

“Since that time, we have seen the index decline, and we have actually seen it level off . . . and from that perspective we have a reasonable degree of confidence about where we see the capital cost coming in for Taylor.”

Work to update the estimated capital costs, ahead of a final investment decision at the project in mid-2023, has resulted in costs coming in well within the previous estimates, Kerr has said.

“Obviously it is something that we will watch closely as we finalise the feasibility study over the next three to four months,” Kerr has noted.

South32 has also confirmed the opportunity for Hermosa’s Clark deposit to supply battery-grade manganese into the growing North American electric vehicle supply chain.

Clark has the potential to underpin a second development stage at Hermosa, with future studies to consider the opportunity to integrate its development with Taylor, potentially unlocking further operating and capital efficiencies.

South32 remains on track for initial pilot plant production at Clark in mid-2023 to deliver the first qualification samples of battery-grade manganese to potential customers.

The miner has, meanwhile, deferred some capital expenditure (capex) for the full 2023, decreasing its spending target by $105-million, to A$1.14-billion.

Growth capex at Hermosa has declined by $40-million for 2023, to $250-million, as the company renegotiated commercial supply agreements for long-lead items. The miner expects to invest $154-million in the project in the second half of the year as it continued to build infrastructure to support critical path orebody dewatering and advance study work for the Taylor and Clark deposits.

Key Contracts, Suppliers and Consultants
Fluor (process plant and on-site infrastructure); SRK Consulting (geological and technical reviews); Stantec (mining studies); NewFields (hydrogeology studies); Montgomery & Associates (dewatering and tailings); Black and Veatch, and BQE (water treatment design); and CPE (off-site roads).

Contact Details for Project Information
South32, email InvestorRelations@south32.net.