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) has tipped the deposit 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 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 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 has warned of a near $1.3-billion noncash impairment expense with regard to the Taylor zinc/silver/lead deposit in its 2023 financial results.

Recently completed study work has confirmed that the Taylor deposit and the Clark battery-grade manganese deposits could be developed independently, offering the potential for multiple long-life operations in critical minerals.

For accounting purposes, the company is now required to separately assess each deposit and regional exploration land packages, which has resulted in the group’s financial statements for 2023 having to include a noncash impairment of $1.3-billion.

Following the impairment expense, the carrying value of Hermosa is estimated at $1-billion, with $482-million for the Taylor deposit, while the carrying value of the Clark deposit and regional exploration land package is unchanged at about $519-million.

South32 has said that since the acquisition of the Hermosa project, in 2018, several factors have negatively impacted on the value of the Taylor deposit, including Covid-19-related restrictions curtailing development activity during 2020 and 2021. Significant dewatering requirements to allow for safe access to the orebody have further delayed the timeline to first production, and required an investment of $365-million for critical path orebody dewatering.

While the feasibility study is under way, South32 expects higher preproduction capital expenditure, compared with PFS estimates, reflecting significant inflationary pressure in current estimates for key inputs including steel, cement and electrical components.

Nonetheless, South32 CEO Graham Kerr has said that the company continues to see substantial opportunity to unlock additional value across its Taylor and  Clark deposits, and its highly prospective regional exploration package, which is not included in the current impairment assessment.

The feasibility study for Taylor remains on track, and will benefit from a 41% increase in the measured mineral resource. The Taylor deposit remains open in several directions, offering the potential for further growth, Kerr has said.

Taylor has mineral resource of 153-million tonnes, averaging 3.53% zinc, 3.83% lead and 77 g/t silver.

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.