ASX-, LSE- and JSE-listed South32 has increased the estimated capital expenditure (capex) requirement for the Taylor zinc/lead/silver project – the first development at its larger Hermosa project, in Arizona, in the US – from $2.16-billion to $3.3-billion.

The Taylor project was approved for development in February 2024 and is being developed as an underground mine with a conventional 4.3-million-tonne-a-year process plant.

South32 in February of this year launched an assessment of the Taylor project milestones and capex estimates.

The higher capex estimate is owing to scope changes, with the addition of decline access; revised shaft construction costs; materially higher inflation; industry-wide increases in key input costs such as steel, piping, concrete and electrical; and US tariffs.

“Our updated assessment of project execution has reaffirmed Taylor’s potential to deliver our shareholders attractive returns from its long-life, low-cost production of zinc, silver and lead,” says South32 CEO Graham Kerr.

“Based on our updated assumptions, Taylor continues to demonstrate its quality, with expected steady-state earnings before interest, taxes, depreciation and amortisation (Ebitda) of about $650-million a year and a net present value (NPV) of about $3.1-billion.

“Demonstrating the significant leverage to prices this long-life, high-quality project will deliver for years to come, these returns increase further to steady-state Ebitda of about $800-million a year and an NPV of about $4.5-billion, at spot commodity prices,” he adds.

South32 points out that, from February 2024 to date, the Taylor ore reserve has increased by 52% to 99-million tonnes, while the mineral resource has increased by 10% to 169-million tonnes.

The Taylor project’s life-of-mine has also increased from 28 to 33 years and the LoM production by 17% to 10.4-million tonnes zinc-equivalent, comprising 3.7-million tonnes of zinc, 4.6-million tonnes of lead and 247-million ounces of silver.

Average yearly steady-state production is now estimated at 346 000 t of zinc-equivalent, comprising 123 000 t/y of zinc, 155 000 t/y of lead and 8.2-million ounces a year of silver.

The broader Hermosa project includes the Taylor project, as well as the Peake copper deposit located south of Taylor, the Clark battery-grade manganese deposit and an extensive, highly prospective land package with the potential for further polymetallic and copper mineralisation.

Kerr notes that the Taylor deposit remains open in several directions, providing further growth potential, with life extensions beyond the mine plan of operations subject to future regulatory approvals.

He adds that, at the adjacent Peake deposit, continued exploration success has underpinned a 32% increase in its mineral resource estimate to 33-million tonnes, supporting the company’s expectation that Peake will become a source of future copper production and mine life extension within the Taylor development.

Recently completed study work for the co-located Clark deposit has, meanwhile, also confirmed the opportunity for additional Taylor orebody access from Clark’s decline infrastructure, improving operational flexibility and unlocking value across the LoM.

Kerr says this approach will enable first production ahead of shaft commissioning and increase ore handling capacity by about 25%, providing potential to increase production above current design capacity.

First production is expected in the second half of the 2028 financial year and nameplate capacity is expected to be achieved in 2031, reflecting the company’s revised expectation for shaft construction, owing to contractor performance and productivity challenges.

South32 cautions, however, that while targeted measures have been implemented to improve shaft construction productivity, the company’s latest assessment has determined that these measures will only partially mitigate the impact of contractor underperformance.