South32 will take a $US1.3 billon ($1.93b) hit against the value of its Hermosa project in the US, attributing the impairment to COVID-19 related disruptions, inflationary pressures and significant dewatering requirements that have delayed progress.
The WA-headquartered diversified miner on Monday said the non-cash charge, to be included in last financial year’s accounts, came after recently completed study work confirmed that its Taylor zinc-lead-silver and Clark battery-grade manganese deposits at Hermosa could be developed independently.
“Given this, for accounting purposes, we are now required to separately assess the Taylor deposit, Clark deposit and regional exploration land package, which were previously considered a single area of interest for impairment indicators,” South32 said in a statement to the Australian Securities Exchange.
The $US1.3b charge against the Taylor deposit now puts the carrying value of the Hermosa project as of June 30, 2023 at $US1b, with $US482 million for the Taylor deposit. The carrying value of the Clark deposit and regional exploration land package is unchanged at $US519m.
South32 chief executive Graham Kerr said Hermosa had the potential to 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,“ Mr Kerr said.
“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.“
Mr Kerr said the feasibility study for Taylor remains on track for the first half of this financial year, and would benefit from a 41 per cent increase in the measured mineral resource, also announced on Monday. He also noted the deposit remained open in several directions, offering the potential for further growth.
“Beyond Taylor, Clark is well positioned to supply high-purity manganese sulphate monohydrate for the electric vehicle supply chain in North America, creating a second development option at Hermosa,” he said.
“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.”