South32 (ASX: S32) – South32 Hermosa Project Update 41

South32 Limited has updated investors on the Taylor project, the first stage of its Hermosa zinc-lead-silver development in Arizona, with the company confirming both notable cost increases and extended timeline but maintaining that the project’s underlying fundamentals remain robust. The capital expenditure guidance for Taylor has been revised upward to approximately US$3,300 million, reflecting scope changes including the addition of a decline access system, revised shaft construction costs, higher inflation, and elevated input costs for materials such as steel and piping.

The timeline adjustments reflect broader industry challenges. First production is now expected in the second half of financial year 2028, with nameplate capacity to be reached by the end of financial year 2031. South32 attributed these delays to contractor performance and productivity challenges in shaft construction, with the company noting that targeted remedial measures will only partially offset the impact of this underperformance. Despite these headwinds, the company has extended the initial operating life of Taylor by five years to approximately 33 years from final investment approval, underpinned by successful infill drilling programs that have confirmed the deposit’s resource longevity.

The economic case for Taylor remains compelling. At updated assumptions, the project is forecast to generate steady-state EBITDA of approximately US$650 million annually and a net present value of around US$3,100 million. These returns increase materially at current spot commodity prices, with steady-state EBITDA rising to approximately US$800 million per annum and NPV reaching approximately US$4,500 million, demonstrating the significant leverage a long-life, large-scale zinc project offers to metal prices. The strength of these economics is notable given the elevated capex guidance and reflects both the quality of the mineral resources and the project’s positioning as a low-cost, long-life producer.

Additional positive developments support the project’s value creation potential. The Peake deposit, which sits adjacent to Taylor, has seen its Mineral Resource estimate increase by 32 percent to 33 million tonnes, positioning Peake as a future source of copper production and mine life extension. Recently completed study work for the Clark deposit has confirmed the feasibility of using Clark’s decline infrastructure to provide additional access to the Taylor orebody, enabling early production ahead of shaft commissioning and increasing ore handling capacity by approximately 25 percent relative to design capacity.

Investors will monitor progress on several fronts, particularly the resolution of shaft construction challenges and whether the company can achieve its revised production timeline. The scale of capex increases and the timing of first production both carry execution risk, though the extended mine life and strong commodity price sensitivity provide reassurance on long-term returns. This announcement is price sensitive and has been flagged as material by the ASX.

View the full ASX announcement (PDF)

About South32 Limited (ASX: S32)

South32 Limited is a diversified metals and mining company headquartered in Perth, Australia. The company produces bauxite, alumina, aluminum, copper, silver, lead, zinc, and manganese through operations across multiple segments including Worsley Alumina, Brazil Alumina, Sierra Gorda, Cannington, and others. It operates globally with assets in Australia, South Africa, Brazil, Chile, Mozambique, Colombia, and the United States.

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