Shares in South32 plunged on Thursday after the mining giant revealed a significant cost blowout and delays at its Hermosa project in Arizona.
Cost overrun details
The company announced that the capital cost for the Hermosa project has increased by approximately $300 million, pushing the total budget to over $2 billion. The revised estimate was attributed to higher construction costs, labour shortages, and supply chain disruptions.
Impact on timeline
South32 also confirmed that the first production from the project, which was originally expected in late 2026, has been pushed back to mid-2027. The delay is due to additional time required for engineering and procurement activities.
Market reaction was swift, with South32 shares falling more than 5% in early trade on the Australian Securities Exchange. Analysts said the cost blowout and delay were worse than expected, and several brokers downgraded their ratings on the stock.
CEO comments
South32 chief executive officer Graham Kerr said the company was disappointed with the revised outlook but remained confident in the long-term value of the Hermosa project. “We are taking the necessary steps to address the challenges and deliver the project safely and efficiently,” he said.
Project background
The Hermosa project is a critical minerals development focused on producing zinc, lead, and silver. It is considered one of the most important mining projects in the United States for battery metals. South32 acquired the project in 2021 and has since faced several hurdles, including permitting delays and rising costs across the mining sector.
Investors will now focus on the company’s upcoming quarterly production report, due next week, for further updates on cost management and operational performance.
