Shares in mining giant South32 (ASX:S32) are down 2.36 per cent to $3.73 at 1.50pm AEST after it warned of a $1.3 billion hit on its Hermosa project's zinc-lead-silver Taylor sulphide deposit.
"The Hermosa project has the potential to sustainably produce commodities critical for a low-carbon future, from multiple development options, for decades to come," said South32 chief executive Graham Kerr.
The impairment reflects the impact of delays due to Covid-19, significant dewatering requirements and current inflationary pressures on its August 2018 Arizona acquisition. "We are disappointed by the delays," Graham Kerr added.
It will result in a carrying value of $1.01 billion for Hermosa as at June 30, while the carrying value of the Clark deposit on site remains at $482 million and its regional exploration land package is unchanged at $519 million.
South32 reported strong year-on-year growth in aluminum, copper and manganese, setting three annual production records.
The market's response to South32's announcement reflects the challenges faced by mining companies in navigating the uncertainties brought on by the pandemic and inflationary pressures. The implications of these developments on the broader mining sector will depend on the industry's ability to adapt and strategise effectively to maintain sustainable growth in the face of ongoing global challenges.
