{"id":8318,"date":"2023-07-21T08:06:40","date_gmt":"2023-07-20T22:06:40","guid":{"rendered":"https:\/\/yinghuiinternational.com\/?p=8318"},"modified":"2023-07-30T08:07:43","modified_gmt":"2023-07-29T22:07:43","slug":"the-evolution-of-south32","status":"publish","type":"post","link":"https:\/\/yinghuiinternational.com\/index.php\/2023\/07\/21\/the-evolution-of-south32\/","title":{"rendered":"The evolution of\u00a0South32"},"content":{"rendered":"\n

\"\"TOM PARKER<\/a><\/p>\n\n\n\n

\"South32<\/figure>\n\n\n\n

South32\u2019s Sierra Gorda copper mine in Chile. Image: South32<\/p>\n\n\n\n

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.<\/em><\/p>\n\n\n\n

South32, which was demerged from BHP in 2015, describes itself as a \u201cglobally diversified mining and metals company\u201d and is now transitioning to become a key manganese producer in the US.  <\/p>\n\n\n\n

The company\u2019s future is certainly bright, but chief executive officer Graham Kerr admitted South32 initially had a portfolio that could only be described as a \u201cmixed bag\u201d. <\/p>\n\n\n\n

\u201cWithin BHP, there are lots of assets that have a lot of opportunity for development in the future that weren\u2019t quite getting the love or systems they needed,\u201d he said during a fireside chat at a recent Melbourne Mining Club luncheon.<\/p>\n\n\n\n

\u201cFor 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.\u201d <\/p>\n\n\n\n

South32\u2019s commodity mix included energy coal, metallurgical coal and manganese, with nickel, lead, silver, zinc and aluminium also featuring in the portfolio.  <\/p>\n\n\n\n

It was from this position that Kerr and his colleagues set about finding potential in base metals. <\/p>\n\n\n\n

Eight years on, the company\u2019s portfolio has changed a lot since Kerr sat in the first South32 meeting with then-chairman David Crawford.  <\/p>\n\n\n\n

\u201cWe certainly had a belief for what assets belonged in South32 and what assets didn\u2019t belong in South32,\u201d Kerr said. <\/p>\n\n\n\n

\u201cIf 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.<\/p>\n\n\n\n

\u201cSo part of the advantage of South32 was it\u2019s a mid-tier-sized mining company \u2026 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. <\/p>\n\n\n\n

\u201cIt 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.\u201d <\/p>\n\n\n\n

\"\"
South32 chief executive officer Graham Kerr.<\/figcaption><\/figure>\n\n\n\n

Those discussions laid the foundations for South32 as the company transitioned its portfolio and projects to be largely based in the Americas. <\/p>\n\n\n\n

The US Government\u2019s recent endorsement of the Hermosa project, located in southern Arizona, has meant South32 could become the country\u2019s primary manganese producer. <\/p>\n\n\n\n

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\u2019s Taylor and Clark deposits, both of which are located within the Hermosa project. <\/p>\n\n\n\n

According to Kerr, once the Taylor and Clark projects are up and running, South32\u2019s portfolio composition will rise to 85 per cent base metals, with majority of the company\u2019s value in the Americas. <\/p>\n\n\n\n

\u201cThe inclusion of Hermosa as the first mining project added to the FAST-41 process<\/a> is an important milestone that recognises the project\u2019s potential to strengthen the domestic supply of critical minerals in the US,\u201d Kerr said. \u201cThe project presents a significant opportunity to sustainably produce commodities critical to a low-carbon future.\u201d <\/p>\n\n\n\n

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.  <\/p>\n\n\n\n

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. <\/p>\n\n\n\n

\u201cBecoming 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,\u201d South32 Hermosa president Pat Risner said. <\/p>\n\n\n\n

\u201cWe 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.\u201d <\/p>\n\n\n\n

Alongside its US assets, South32 also has growth options in South America, including a bright future for its Sierra Gorda copper mine<\/a> in Chile.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

\u201cHow many people in the room have watched Shrek<\/em> with their kids before?\u201d Kerr asked the Melbourne Mining Club audience. \u201cThere\u2019s a bit where the donkey is talking to Shrek and says, \u2018Shrek, you\u2019re like an onion. You\u2019ve got to take the layers off the onion to understand what you\u2019ve actually got\u2019.<\/p>\n\n\n\n

\u201cWhen the business development team first brought Sierra Gorda to me, I was probably like most other people in the market and thought, \u2018This is a challenged asset. It\u2019s got a history of having a challenging ramp-up and there\u2019s very little information in the marketplace about it\u2019.<\/p>\n\n\n\n

\u201cEvery challenge we gave to the business development team to take a layer off that onion, they came back with more positive results.<\/p>\n\n\n\n

\u201cIn the end, we became convinced that it was the right thing to do. <\/p>\n\n\n\n

\u201cWe\u2019ve had it for about a year now and we\u2019re really happy with the acquisition. We\u2019ve been really surprised by the upside in the asset and the quality of the people.\u201d<\/p>\n\n\n\n

\"\"
South32\u2019s Hermosa project in southern Arizona.<\/figcaption><\/figure>\n\n\n\n

Alongside its Chile presence, South32 is also involved in earn-in agreements with two emerging copper exploration projects in Argentina \u2013 Chita Valley and Don Julio.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

The major miner signed an earn-in agreement with Sable Resources to explore Don Julio in 2021, with drilling advancing at the project.<\/p>\n\n\n\n

Kerr said Argentina could be a copper jurisdiction to keep an eye on in years to come.<\/p>\n\n\n\n

\u201cArgentina\u2019s become an interesting location,\u201d he said. <\/p>\n\n\n\n

\u201cWhen we first started doing some work there, we were probably the only ones. You\u2019ve got BHP there, you\u2019ve got Barrick there, you\u2019ve Glencore there \u2013 everyone\u2019s sort of pouring money into that jurisdiction at the moment.<\/p>\n\n\n\n

\u201cIf you look at where it is, it\u2019s on the other side of the Chile mountains where basically all the copper is. <\/p>\n\n\n\n

\u201cSo I think that\u2019s an area that\u2019s going to develop pretty quickly.\u201d<\/p>\n\n\n\n

Whether it\u2019s the Hermosa project in the US, a suite of emerging projects in South America, or any other \u2018future-facing\u2019 asset in South32\u2019s portfolio, the company has plenty of avenues to be part of the world\u2019s decarbonisation narrative in the years to come.<\/p>\n\n\n\n

And given South32\u2019s strong track record of project execution and expansion, the company\u2019s shareholders can rest assured their stock is in the right place.  <\/p>\n\n\n\n

This feature appeared in the June\u2013July edition of Australian Resources & Investment<\/a>.<\/em><\/p>\n\n\n\n

The evolution of South32<\/h1>\n\n\n\n

\"\"TOM PARKER<\/a>July 21, 2023, 8:21 am<\/p>\n\n\n\n