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Voice of the Commonwealth - The Global Influencer

Voice of the Commonwealth - The Global Influencer

Experts debate viability of Hermosa project claiming investors are blind to coming zinc boom

PERTH (CU)_South32 is an Australian mining and metals company which was spun out of BHP Billiton in 2015. Now the spin-off company is looking to join BHP and fellow mining giant Rio Tinto in the US state of Arizona, to build clean energy infrastructure. As part of its $US1.7 billion Hermosa project, South32 is looking to tap into the zinc-lead-silver sulphide deposit named Taylor, which is smaller and less contentious than BHP and Rio’s Resolution Copper project.

However, on Monday, the Perth-based mining company revealed that Taylor would cost more to build than previously anticipated, while its operating costs would also be about 60 per cent higher than previously projected, raising the question whether the mine would in fact be viable. However, South32’s chief executive Graham Kerr is of the view that the viability of the mine will be underpinned by zinc prices which are expected to become more attractive than most investors expected.

“Zinc and silver are far more attractive in a world that needs ‘green’ metals, particularly if you believe in the 1.5 degree [global temperature rise] scenario where demand for those will significantly increase,” he said. “It means that primary zinc demand will effectively be two times – it will go to 24 million tonnes. He added that the supply of the essential mineral is expected to fall by about 3.5 per cent by 2030 as a result of “mine depletion, lower average grades, lower approval pathways and constraints to supply”.  “We think it is something the market does not understand,” Kerr noted.

Metals and minerals like copper, lithium and nickel are typically looked at by investors as the best ways to be exposed to the de-carbonisation trend through the mining sector, but the South32 CEO insisted that zinc should be added to this list. “Everyone including ourselves likes the look of copper… I think there is equally as strong a story in zinc, but the market is much more fragmented and when you think about where a lot of zinc supply comes from, I think they are areas of higher risk as well,” he said. “There is going to be a strong demand for new material and the reality is for that to occur you are going to have to induce new projects and those projects are going to be more and more challenging.”

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