South32 has taken a non-cash impairment expense for Hermosa project of ~US$1,300M in relation to the Taylor deposit. The impairment expense will be excluded from FY23 Underlying earnings.
Current value of the Hermosa project as at 30 June 2023 will be ~US$1,001M, with ~US$482M for the Taylor deposit . The carrying value of the Clark deposit and regional exploration land package is unchanged at ~US$519M.
The impairments were as a result of the following:
* Covid-19 restrictions impacting development and access
* Significant dewatering requirements to allow safe access to the orebody further delayed the timeline to first production and required an investment of ~US$365M for critical path orebody dewatering
* Expected higher pre-production capital expenditure compared to pre-feasibility study estimates as result of rising input prices including steel, cement and electrical components
Interestingly, South32 paid US 1.3 billion to acquire Arizona mining in 2018 for the Hermosa deposit.
Still it appears Graham Kerr still sees a few positives
“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.
“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 per cent increase in the Measured Mineral Resource announced today. The Taylor deposit remains open in several directions, offering the potential for further growth.
“Beyond Taylor, Clark is well positioned to supply high-purity manganese sulphate monohydrate (HPMSM) for the electric vehicle supply chain in North America, creating a second development option at Hermosa.
“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.”
Mining is a tough industry!
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