South32 shares fall in Sydney as hikes US project spending plan
South32 Ltd on Thursday outlined plans to hike capital investment in its US operations.
In response, shares in the Perth, Australia-based mining company closed down 5.4% to A$4.03 on Thursday in Sydney.
South32 now expects growth capital expenditure in the region of $3.30 billion at the Taylor zinc-lead-silver project in Arizona, compared with the $2.16 billion estimate provided in the feasibility study. Sustaining capital expenditure has been revised to $50 million per year from $30 million, and operating unit costs to $100 per tonne from $86, ‘reflecting general inflation and higher assumed energy costs’.
‘Our updated assessment of project execution has reaffirmed Taylor’s potential to deliver to shareholders attractive returns,’ South32 said on Thursday.
It upped its estimate for Taylor’s initial operating life by 5 years to 33 years, since final investment approval, noting that ‘the deposit remains open in several directions, providing further growth potential’.
The life-of-mine extension is subject to regulatory approval. The company is eyeing a 17% increase in life-of-mine production to 10.4 million tonnes of zinc equivalent.
South32 also noted a 32% increase in its mineral resource estimate at the nearby Peake deposit, with the current estimate at 33 million tonnes. The Taylor ore reserve estimate is 99 million tonnes, and the Taylor mineral resource estimate is 169 million tonnes, both up from South32’s previous expectations.
Looking ahead, South32 expects Taylor’s steady-state earnings before interest, tax, depreciation and amortisation to be $650 million per year, with a net present value of $3.10 billion. The company sees these metrics rising to $800 million and $4.50 billion, respectively.
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