South32 CEO Graham Kerr
PERTH (miningweekly.com) – Diversified miner South32 on Monday warned of a near $1.3-billion non-cash impairment expense in relation to the Taylor zinc/silver/lead deposit, at its Hermosa project in Arizona, in its 2023 financial results.
The company told shareholders that recently completed study work had 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 non-cash impairment of $1.3-billion in relation to the Taylor deposit.
Following the impairment expense, the carrying value of Hermosa at the end of June would be around $1-billion, with $482-million for the Taylor deposit, while the carrying value of the Clark deposit and regional exploration land package was unchanged at around $519-million.
South32 told shareholders on Monday that since the acquisition of the Hermosa project, in 2018, a number of factors had negatively impacted the value of the Taylor deposit, including Covid-19-related restrictions curtailing development activity during 2020 and 2021, while significant dewatering requirements to allow safe access to the orebody further delayed the timeline to first production and required an investment of $365-million for critical path orebody dewatering.
Furthermore, while the feasibility study was ongoing, South32 expected higher pre-production capital expenditure compared to prefeasibility study estimates, reflecting significant inflationary pressure in current estimates for key inputs including steel, cement and electrical components.
“The Hermosa project has the potential to sustainably produce commodities critical for a low-carbon future, from multiple development options, for decades to come. We are disappointed by the delays resulting from the impact of Covid, the significant dewatering requirements and current inflationary market conditions,” South32 CEO Graham Kerr said.
“We continue to see substantial opportunity to unlock additional value across Taylor, Clark and our highly prospective regional exploration package and that optionality is not included in today’s impairment assessment.
“The feasibility study for Taylor remains on track, and will benefit from the 41% increase in the measured mineral resource announced today. The Taylor deposit remains open in several directions, offering the potential for further growth,” said Kerr.
South32 on Monday announced a mineral resource estimate for Taylor of 153-million tonnes, averaging 3.53% zinc, 3.83% lead and 77 g/t silver. The deposit remains open in several directions, offering South32 the potential for further growth.
“Beyond Taylor, Clark is well positioned to supply high-purity manganese sulphate monohydrate for the electric vehicle supply chain in North America, creating a second development option at Hermosa,” said Kerr.
“In addition, we are encouraged by the exploration options across our regional land package, including our high-priority Peake and Flux targets, with recent drilling at Peake delivering our best copper exploration results to date.”
Further exploration drilling at Peak is planned in the first half of the 2024 financial year