Diversified miner South32 warned its shareholders yesterday that it would have a nearly $1.3 billion (R23.4bn) non-cash impairment expense on the Taylor zinc/silver/lead deposit, at its Hermosa project in Arizona.
Its shares dived on the news and by 4.22pm were at 3.16% lower at R45.10.
The group said at its Hermosa project, recently completed study work had confirmed that its Taylor zinc-lead-silver and Clark battery-grade manganese deposits could be developed independently, offering the potential for multiple long-life operations in critical minerals.
"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,“ it said.
As a result of this assessment, the group’s 2023 financial year financial statements would include a non-cash impairment expense of $1.3bn about the Taylor deposit. The impairment expense would be excluded from the 2023 financial underlying earnings, by its accounting policies.
Following the impairment expense, the carrying value of Hermosa at the end of June would be around $1bn, with $482 million for the Taylor deposit, while the carrying value of the Clark deposit and regional exploration land package was unchanged at around $519m.
South32 CEO Graham Kerr said the Hermosa project had 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-19, 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% 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.
Meanwhile, the group also released its quarterly report for June 2023, flagging that it had a strong finish to the year, with group copper equivalent production growing 9% in the quarter underpinned by a return to stable operations following adverse weather and other temporary impacts in the prior quarter.
“Aluminium production increased by 14% in the 2023 financial year, as Hillside Aluminium achieved record production, and we benefited from our investments in low-carbon aluminium capacity at Mozal Aluminium and Brazil Aluminium,” it said.
Australia Manganese and South African manganese achieved annual production records, delivering a 4% increase in manganese production in financial year 2023 (FY23).
“Illawarra Metallurgical Coal achieved revised FY23 production guidance, with improved longwall performance delivering a 21% increase in metallurgical coal production in the June 2023 quarter,” South32 said.
Looking ahead, Kerr said: “We are well placed to continue to capitalise on the global energy transition. We expect to deliver further production growth in aluminium and base metals in the 2024 financial year, and our high-quality development options have the potential to further strengthen our long-term supply of critical minerals.”
BUSINESS REPORT