South32 is a company that has really caught my eye lately. The strategy of investing in aluminium production that is mined using 100% renewable energy feels smart to me. The company's interest extend way beyond aluminium, as evidenced by the latest announcement.
I haven't bought shares just yet, but I'm strongly considering adding this to my "green metals" portfolio. I like to invest thematically and this would sit in the same bucket as Sibanye-Stillwater.
The latest news from South32 is that it has completed a pre-feasibility study for the Taylor Deposit, a zinc-lead-silver deposit. Zinc is used for energy conversion and protection against corrosion in renewable energy infrastructure, silver is used in solar panels and lead is used in renewable energy storage systems.
The deposit is located in Arizona in the US and is part of the Hermosa project, which is wholly-owned by South32. It has good access to infrastructure for rail and truck shipments to several North American ports.
The company sees this project as having the potential to be a multi-decade operation with metals that are relevant to a low carbon future. Importantly, the work done on Taylor thus far suggests the potential for a low-cost operation in the industry's first quartile of the cost curve.
The next step is a feasibility study, which will culminate in a final investment decision in approximately 18 months from now. From that point, the construction period will be approximately four years if everything goes ahead.
The first development option requires USD1.7 billion in capital expenditure. This is split across mining, surface facilities and dewatering costs. A contingency has been built in as well. I found it interesting to note that the pre-feasibility study has an accuracy level for costs that is described as "-15% / +25%" - that shows how difficult this industry really is.
The Taylor Resource is estimated to have low sustainable capital requirements of USD40 million per annum. The initial resource life is estimated to be 22 years.
The feasibility will also consider options available to make this a carbon neutral operation. This could be achieved through grid-based renewable energy or new solar power projects, for example.
A scoping study at the nearby Clark Deposit has confirmed the potential for a battery-grade manganese operation, as well as zinc and silver. There is the potential to integrate the Taylor and Clark operations in future.
Further work in the corridor will include drill testing at the Peake and Flux exploration targets, which is expected to take place this year.
The Taylor Deposit would be South32's first "next generation mine" in line with its target of achieving net zero operational carbon emissions by 2050. This ties in with my green metal thesis and has made me even more interested in adding this company to my portfolio.
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