On January 17, 2022, South32 announced the completion of the Prefeasibility Study (PFS) on the Taylor deposit, one of several exploration deposits on their privately owned land in the Patagonia Mountains collectively known as the Hermosa Project. The PFS is an early-stage analysis of a potential mining project, designed to give company stakeholders the basic information they need before deciding to invest in a project.
As the Hermosa Project design continues to develop, the timeframes, plans, and processes are subject to change depending upon the complexity, public opinion, capabilities and priorities and other factors outside of the mine’s control, according to Pat Risner, Hermosa Project President, in an interview with the PRT on January 18, 2022. During the next phase of the studies, the mine will generate a full picture of what the mining and processing operations will look like at Hermosa. According to Risner, they intend to engage the community for feedback on their intended approach to minimize impacts.
PFS STUDY RESULTS
The study estimates yearly average production of 111,000 tons of zinc, 138,000 tons of lead, and 7.3 million ounces of silver, with a resource life of 22 years, a capital expenditure of $1.23 billion in direct costs and $470 million in indirect cost to develop the Taylor deposit. The study suggests the deposit could be potentially developed as a large scale, highly productive underground mine expected to ramp up to production of up to 4.3 million tons per year.
South32 expects to complete a full feasibility study in mid-2023 before making a final investment decision to develop the Taylor deposit. A scoping study on the Clark Deposit confirmed the potential for a separate, integrated underground mining operation to produce battery-grade manganese as well as zinc and silver and could be the second development stage at Hermosa. The Peake and Flux exploration targets will be prioritized for drill testing this year subject to receipt of permits. The pre-feasibility study calls for active mining to begin in 2027.
Risner identifies the next step as the construction and installation of infrastructure to support additional orebody dewatering, beginning the second half of this year.
Approximately $55 million is committed for 2022 with further investment in FY 23. Next would be the dewatering operations. Risner stated, “The dewatering shifts water from one part of the environment to the other. It is treated after discharge and then re-enters the environment further downstream.” Subject to the final investment decision and receipt of required permits, sinking shafts to get down to the orebody is expected to commence in fiscal year 2024.
According to Risner, “No chemicals are involved in mining underground. It’s pretty conventional; we blast the rock, we load and haul it into underground crushers, then hoist it to the surface and feed it into a processing plant on-site.” The ore is then ground into finer particle size and fed to enclosed flotation tanks which use air, water, and chemicals to separate rock from ore.
This process creates metal concentrates which are transported in sealed containers on trucks to a transportation hub, and then most likely via railroads and/or ships to smelters for melting into metals. South32 will bear the mining and transportation costs. The smelters purchase the concentrates and sell the metals for end use. According to Risner, the company will identify a range of smelters and transportation methods in the feasibility study and firm up who they will sell to. “The vast majority of the smelting capacity is in Europe and Asia, but there is smelting capacity in North America as well,” Risner said, and identified Mexico as a possibility. There are no active smelters in the United States and no guarantee any of the metals will end up in the U.S. With the Clark deposit. South32 would aim to produce battery grade manganese to be sold in the U.S. market.
TRANSPORTING THE ORE CONCENTRATE:
THE SHORT-TERM ROUTE
As the trucks begin to roll out of the mine in FY 2027, they will travel from Harshaw Road to the Cross Creek Connector (CCC) where South32 purchased private land to construct the road to connect to SR82. Trucks will travel east on SR82 then North on SR83 to Interstate 10 to the Port of Tucson for transportation by rail to the next destination. “That route has access to SR82,” Risner said, “but we talked to the community about that being only a short-term route for the early years of operation, essentially the way we get to SR82.” Risner commented that the mine does not need any more permits to construct the CCC; however, the mine will need to work with ADOT on the intersection with SR82. The CCC will be a cement-treated base to reduce dust and will take 18 to 24 months to complete. The start date is yet to be determined.
THE LONG-TERM ROUTE
Although the pre-feasibility study makes no mention of building a road through Flux Canyon, Risner stated that the County is looking at the possibility of constructing a railhead facility near Rio Rico and looking beyond the Cross Creek Connector for the long-term. He believes that Flux Canyon, to SR82, to a railhead in Rio Rico would be their first preference and it would keep all the economic activity in Santa Cruz County. “If we go out Flux Canyon, we avoid Patagonia completely, we avoid SR82 and SR83 out toward Sonoita completely and it gets us to a railhead so that we can go to multiple ports. We also have the option, if we go out Flux Canyon to SR82, to transport all the way to Guaymas, Mexico,” he added. The road through Flux Canyon would be within the county right of way, require federal permitting, and would be fully funded by South32.
HOW LONG IS SHORT TERM?
Risner, unable to provide a ball-park number, stated, “I have been asked that a lot and it’s a difficult one to answer because the reason is we have to build a road. Any route out Flux Canyon requires a federal permitting approval, we have to do a NEPA (National Environmental Policy Act) with the Forest Service and we wouldn’t be able to construct anything through Flux Canyon until we have worked our way through that process.” NEPA requires environmental reviews to consider potential impacts. “The timing to get through that process is highly variable,” Risner said. I think it is safe to say that the transportation in the early production would need to go CCC (and SR82 and SR83) and once federal approvals are in place, we would seek to build out Flux Canyon.
ABOUT THE TRUCKS
Risner estimated that initial ore hauling would start at 30 trucks per day, ramping up to a peak of 85 trucks a day departing the mine, for a total of 170 trucks roundtrip each day at projected capacity. Trucks will haul one container at a time, weighing 22 tons loaded. According to Risner, the gross vehicle weight on each loaded truck will be less than 80,000 pounds and within ADOT requirements. The mine seeks to become a carbon free operation with a target date of 2050 and is proposing the use of electric trucks. It is unclear at what time the electric trucks might be available to deploy during the production period.
IMPACT ON TOURISM IN EASTERN SCC
Risner was asked what he would say to people engaged in tourism and hospitality related businesses who are concerned that the trucks on SR82 and SR83, the only two major access roads to eastern SCC, will result in a decline of tourists who enjoy the journey on these scenic roads as much as the destination. Risner responded, “Part of that is why we looked at other routes to try to minimize the time we go that route and the advantage of Flux Canyon to the railhead minimizing the time the trucks are on public roads.
TRANSPARENCY AND COMMUNITY ENGAGEMENT
Risner was asked if he would be willing to share a copy of the mine’s proposed agreement that was submitted to the County recently, resulting in a public outcry over transparency and potential impacts on the community. The agenda item was ultimately removed from the Board of Supervisors Agenda. The proposal concerns a donation of land to the County from the mine as well as a proposal to grant the mine a temporary easement through a county owned parcel. Risner declined to share a copy of the proposal stating, “The County is still considering that agreement, and so from our perspective it would be premature to not honor something that the County is still reviewing.”.
HOW WILL THE MINE IMPACT EVERYDAY LIFE FOR THE PEOPLE OF EASTERN SCC AND WHAT HAPPENS TO THE CHARACTER OF OUR COMMUNITY?
Risner responded, “The fact that the PFS has been released, we are in a much better position than we have been to engage in conversations and dialog with local stakeholders on what this means.” (As of 2/1, the full PFS has not been released, but merely a 40 page synopsis.) “We hear concerns about traffic and water loud and clear,” he continued, “it gives us more information to engage in conversations and we are very committed to that. We have the community advisory panel up and running that meets every 3rd Wednesday of the month and those meetings are open to anybody. We are going to have another round of community open houses maybe sometime in March, all dependent on what happens with COVID. We are also helping to fund the economic study that is being done now in Patagonia on the impacts of eco-tourism.”