South32’s Sierra Gorda copper mine in Chile. Image: South32
ARI was on hand for a recent fireside chat with South32 CEO Graham Kerr, who reflected on how the major mining company has gotten to where it is today.
South32, which was demerged from BHP in 2015, describes itself as a “globally diversified mining and metals company” and is now transitioning to become a key manganese producer in the US.
The company’s future is certainly bright, but chief executive officer Graham Kerr admitted South32 initially had a portfolio that could only be described as a “mixed bag”.
“Within BHP, there are lots of assets that have a lot of opportunity for development in the future that weren’t quite getting the love or systems they needed,” he said during a fireside chat at a recent Melbourne Mining Club luncheon.
“For me, the demerger was a great opportunity for both companies to be better than what they were together. (And) both companies have continued to change and evolve.”
South32’s commodity mix included energy coal, metallurgical coal and manganese, with nickel, lead, silver, zinc and aluminium also featuring in the portfolio.
It was from this position that Kerr and his colleagues set about finding potential in base metals.
Eight years on, the company’s portfolio has changed a lot since Kerr sat in the first South32 meeting with then-chairman David Crawford.
“We certainly had a belief for what assets belonged in South32 and what assets didn’t belong in South32,” Kerr said.
“If you take a step back, what we did actually recognise is if you look at the world today, with a lot of the M&A activity that occurred in the prior two decades, most of the mid-tier mining companies had disappeared.
“So part of the advantage of South32 was it’s a mid-tier-sized mining company … and for a mid-tier company, you only need one or two great discoveries or one or two great acquisitions and you can fundamentally change the nature of the group and create a lot of value for your stakeholders.
“It was clear some commodities had a more attractive future than others. We talked about wanting copper and we did talk about expanding our zinc and nickel presence, and those commodities in particular have been far more attractive in a world of decarbonisation.”
Those discussions laid the foundations for South32 as the company transitioned its portfolio and projects to be largely based in the Americas.
The US Government’s recent endorsement of the Hermosa project, located in southern Arizona, has meant South32 could become the country’s primary manganese producer.
Hermosa, which has the potential to produce manganese and zinc, has been added to the FAST-41 project list, which is designed to create better processes for complex critical infrastructure projects. Hermosa is one of the first mining projects to join the program, which could assist it with obtaining federal permits for the development of South32’s Taylor and Clark deposits, both of which are located within the Hermosa project.
According to Kerr, once the Taylor and Clark projects are up and running, South32’s portfolio composition will rise to 85 per cent base metals, with majority of the company’s value in the Americas.
“The inclusion of Hermosa as the first mining project added to the FAST-41 process is an important milestone that recognises the project’s potential to strengthen the domestic supply of critical minerals in the US,” Kerr said. “The project presents a significant opportunity to sustainably produce commodities critical to a low-carbon future.”
South32 is advancing a Clark feasibility study, with a pilot plant recently commencing production. A feasibility study for the Taylor deposit is expected to be completed later this year.
A key part of the project will see South32 engage with local communities to ensure the project has flow-on benefits to the surrounding area.
“Becoming a covered FAST-41 project will make the rigorous federal environmental review and permitting process for this project more transparent, predictable and inclusive for all stakeholders,” South32 Hermosa president Pat Risner said.
“We are committed to working closely with the US Forest Service, cooperating agencies, Native American tribes, and local stakeholders in Santa Cruz County in Arizona to develop this project in a way that benefits the community, minimises impact on the environment, and creates opportunities across the region.”
Alongside its US assets, South32 also has growth options in South America, including a bright future for its Sierra Gorda copper mine in Chile.
South32 purchased a 45 per cent stake in Sierra Gorda in February 2022, but while the company has long been keen to boost its copper presence, it took time to warm up to Sierra Gorda.
“How many people in the room have watched Shrek with their kids before?” Kerr asked the Melbourne Mining Club audience. “There’s a bit where the donkey is talking to Shrek and says, ‘Shrek, you’re like an onion. You’ve got to take the layers off the onion to understand what you’ve actually got’.
“When the business development team first brought Sierra Gorda to me, I was probably like most other people in the market and thought, ‘This is a challenged asset. It’s got a history of having a challenging ramp-up and there’s very little information in the marketplace about it’.
“Every challenge we gave to the business development team to take a layer off that onion, they came back with more positive results.
“In the end, we became convinced that it was the right thing to do.
“We’ve had it for about a year now and we’re really happy with the acquisition. We’ve been really surprised by the upside in the asset and the quality of the people.”
Alongside its Chile presence, South32 is also involved in earn-in agreements with two emerging copper exploration projects in Argentina – Chita Valley and Don Julio.
South32 recently exercised its earn-in right to acquire a 50.1 per cent interest in the Chita Valley project following a three-year exploration partnership with Minsud Resources Corp.
The major miner signed an earn-in agreement with Sable Resources to explore Don Julio in 2021, with drilling advancing at the project.
Kerr said Argentina could be a copper jurisdiction to keep an eye on in years to come.
“Argentina’s become an interesting location,” he said.
“When we first started doing some work there, we were probably the only ones. You’ve got BHP there, you’ve got Barrick there, you’ve Glencore there – everyone’s sort of pouring money into that jurisdiction at the moment.
“If you look at where it is, it’s on the other side of the Chile mountains where basically all the copper is.
“So I think that’s an area that’s going to develop pretty quickly.”
Whether it’s the Hermosa project in the US, a suite of emerging projects in South America, or any other ‘future-facing’ asset in South32’s portfolio, the company has plenty of avenues to be part of the world’s decarbonisation narrative in the years to come.
And given South32’s strong track record of project execution and expansion, the company’s shareholders can rest assured their stock is in the right place.
This feature appeared in the June–July edition of Australian Resources & Investment.
The evolution of South32
South32’s Sierra Gorda copper mine in Chile. Image: South32
ARI was on hand for a recent fireside chat with South32 CEO Graham Kerr, who reflected on how the major mining company has gotten to where it is today.
South32, which was demerged from BHP in 2015, describes itself as a “globally diversified mining and metals company” and is now transitioning to become a key manganese producer in the US.
The company’s future is certainly bright, but chief executive officer Graham Kerr admitted South32 initially had a portfolio that could only be described as a “mixed bag”.
“Within BHP, there are lots of assets that have a lot of opportunity for development in the future that weren’t quite getting the love or systems they needed,” he said during a fireside chat at a recent Melbourne Mining Club luncheon.
“For me, the demerger was a great opportunity for both companies to be better than what they were together. (And) both companies have continued to change and evolve.”
South32’s commodity mix included energy coal, metallurgical coal and manganese, with nickel, lead, silver, zinc and aluminium also featuring in the portfolio.
It was from this position that Kerr and his colleagues set about finding potential in base metals.
Eight years on, the company’s portfolio has changed a lot since Kerr sat in the first South32 meeting with then-chairman David Crawford.
“We certainly had a belief for what assets belonged in South32 and what assets didn’t belong in South32,” Kerr said.
“If you take a step back, what we did actually recognise is if you look at the world today, with a lot of the M&A activity that occurred in the prior two decades, most of the mid-tier mining companies had disappeared.
“So part of the advantage of South32 was it’s a mid-tier-sized mining company … and for a mid-tier company, you only need one or two great discoveries or one or two great acquisitions and you can fundamentally change the nature of the group and create a lot of value for your stakeholders.
“It was clear some commodities had a more attractive future than others. We talked about wanting copper and we did talk about expanding our zinc and nickel presence, and those commodities in particular have been far more attractive in a world of decarbonisation.”
Those discussions laid the foundations for South32 as the company transitioned its portfolio and projects to be largely based in the Americas.
The US Government’s recent endorsement of the Hermosa project, located in southern Arizona, has meant South32 could become the country’s primary manganese producer.
Hermosa, which has the potential to produce manganese and zinc, has been added to the FAST-41 project list, which is designed to create better processes for complex critical infrastructure projects. Hermosa is one of the first mining projects to join the program, which could assist it with obtaining federal permits for the development of South32’s Taylor and Clark deposits, both of which are located within the Hermosa project.
According to Kerr, once the Taylor and Clark projects are up and running, South32’s portfolio composition will rise to 85 per cent base metals, with majority of the company’s value in the Americas.
“The inclusion of Hermosa as the first mining project added to the FAST-41 process is an important milestone that recognises the project’s potential to strengthen the domestic supply of critical minerals in the US,” Kerr said. “The project presents a significant opportunity to sustainably produce commodities critical to a low-carbon future.”
South32 is advancing a Clark feasibility study, with a pilot plant recently commencing production. A feasibility study for the Taylor deposit is expected to be completed later this year.
A key part of the project will see South32 engage with local communities to ensure the project has flow-on benefits to the surrounding area.
“Becoming a covered FAST-41 project will make the rigorous federal environmental review and permitting process for this project more transparent, predictable and inclusive for all stakeholders,” South32 Hermosa president Pat Risner said.
“We are committed to working closely with the US Forest Service, cooperating agencies, Native American tribes, and local stakeholders in Santa Cruz County in Arizona to develop this project in a way that benefits the community, minimises impact on the environment, and creates opportunities across the region.”
Alongside its US assets, South32 also has growth options in South America, including a bright future for its Sierra Gorda copper mine in Chile.
South32 purchased a 45 per cent stake in Sierra Gorda in February 2022, but while the company has long been keen to boost its copper presence, it took time to warm up to Sierra Gorda.
“How many people in the room have watched Shrek with their kids before?” Kerr asked the Melbourne Mining Club audience. “There’s a bit where the donkey is talking to Shrek and says, ‘Shrek, you’re like an onion. You’ve got to take the layers off the onion to understand what you’ve actually got’.
“When the business development team first brought Sierra Gorda to me, I was probably like most other people in the market and thought, ‘This is a challenged asset. It’s got a history of having a challenging ramp-up and there’s very little information in the marketplace about it’.
“Every challenge we gave to the business development team to take a layer off that onion, they came back with more positive results.
“In the end, we became convinced that it was the right thing to do.
“We’ve had it for about a year now and we’re really happy with the acquisition. We’ve been really surprised by the upside in the asset and the quality of the people.”
Alongside its Chile presence, South32 is also involved in earn-in agreements with two emerging copper exploration projects in Argentina – Chita Valley and Don Julio.
South32 recently exercised its earn-in right to acquire a 50.1 per cent interest in the Chita Valley project following a three-year exploration partnership with Minsud Resources Corp.
The major miner signed an earn-in agreement with Sable Resources to explore Don Julio in 2021, with drilling advancing at the project.
Kerr said Argentina could be a copper jurisdiction to keep an eye on in years to come.
“Argentina’s become an interesting location,” he said.
“When we first started doing some work there, we were probably the only ones. You’ve got BHP there, you’ve got Barrick there, you’ve Glencore there – everyone’s sort of pouring money into that jurisdiction at the moment.
“If you look at where it is, it’s on the other side of the Chile mountains where basically all the copper is.
“So I think that’s an area that’s going to develop pretty quickly.”
Whether it’s the Hermosa project in the US, a suite of emerging projects in South America, or any other ‘future-facing’ asset in South32’s portfolio, the company has plenty of avenues to be part of the world’s decarbonisation narrative in the years to come.
And given South32’s strong track record of project execution and expansion, the company’s shareholders can rest assured their stock is in the right place.
This feature appeared in the June–July edition of Australian Resources & Investment.