South32 gives nod to $2.16bn US polymetallic project Hermosa

SOUTH32 approved a $2.16bn zinc-lead-silver project in the US, as it released first-half results that saw it take a battering from a slump in nickel prices.

Citing the group’s interim results on Thursday, Bloomberg News said the Taylor deposit at the Hermosa site in Arizona is due to start production in 2027. The project is likely to have an initial operating life of around 28 years and an internal rate of return of about 12%.

The price of zinc — used as a coating to protect iron and steel from rust — has fallen by almost a quarter in the past year, but long-term demand is expected to be strong given it can be used to make electric vehicle batteries, said Bloomberg. Silver is also tied to the energy transition, as it’s an ingredient in solar panels.

“This investment is a major milestone for our business, that further reshapes our portfolio towards commodities critical to a low-carbon future,” South32 CEO Graham Kerr said in the statement. Taylor has the potential to be one of the world’s largest, lowest-cost zinc producers, he said.

Investment approval for Hermosa wa the high point of downbeat results in which South32 posted a 92% plunge in after-tax profit for the six months through December.

It isn’t alone in suffering from an almost 40% slump in nickel prices over the past year, with BHP Group, the world’s largest miner, announcing a $2.5bn impairment in the value of its Australian nickel assets, said Bloomberg.

Perth-based South32 said the average price it got for the battery metal during the half was down 34% from the previous year. Production from its Cerro Matoso nickel mine in Colombia was just 18.3 million tons in the first half, with the company targeting full-year output of 40 million tons.

“With some of our commodities facing headwinds in the half, we continued to focus on delivering cost efficiencies,” Kerr said in the earnings statement.