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SOUTH32 LIMITED - Hermosa project update

Release Date: 17/01/2022 08:50
Code(s): S32     PDF:  
Wrap Text
Hermosa project update

South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
south32.net


17 January 2022

HERMOSA PROJECT UPDATE
              Conference call at 11.00am Australian Western Standard Time, details overleaf.

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) is pleased to provide an update following
completion of a pre-feasibility study (PFS) for the Taylor Deposit, which is the first development option
at our 100% owned Hermosa project located in Arizona, USA.

The PFS results support Taylor’s potential to be the first development of a multi-decade operation,
establishing Hermosa as a globally significant producer of metals critical to a low carbon future,
delivering attractive returns over multiple stages. An initial development case demonstrates a
sustainable, highly productive zinc-lead-silver underground mine and conventional process plant, in the
first quartile of the industry cost curve [footnote 1].

The Taylor Deposit will progress to a feasibility study, including work streams designed to unlock
additional value by optimising operating and capital costs, extending the life of the resource and further
assessing options identified to target a carbon neutral operation. Completion of the feasibility study and
a final investment decision to construct Taylor are expected in mid CY23.

Separately, a scoping study [a] for the spatially linked Clark Deposit has confirmed the potential for a
separate, integrated underground mining operation producing battery-grade manganese, as well as zinc
and silver. Clark has the potential to underpin a second development stage at Hermosa, with future
studies to consider the opportunity to integrate its development with Taylor, potentially unlocking
further operating and capital efficiencies.

While exploration drilling to date has been focused on the Taylor and Clark Deposits, we have continued
to complete surface geophysics, soil sampling and other exploration programs across our land package.
This work has resulted in the definition of a highly prospective corridor including Taylor and Clark as
well as the Peake and Flux exploration targets [b] which will be prioritised for drill testing in CY22.

Further details of the Taylor PFS are contained in the attached report and accompanying presentation.

South32 Chief Executive Officer, Graham Kerr said: “The Taylor Deposit provides an important first
development option for our Hermosa project in Arizona, USA. The project has the potential to
sustainably produce the metals critical for a low carbon future across multiple decades from different
deposits.

“Completing the pre-feasibility study for the Taylor Deposit is an important milestone that demonstrates
its potential to be a globally-significant and sustainable producer of base and precious metals in the
industry’s first cost quartile. Beyond Taylor, Clark offers the potential to realise further value from our
investment in Hermosa through the production of battery-grade manganese, a mineral designated as
critical in the United States.

“Additional exploration targets around Taylor and Clark are indicative of further upside while the
broader land package contains highly prospective areas for polymetallic and copper mineralisation.

“We are designing the Taylor Deposit to be our first ‘next generation mine’, using automation and
technology to minimise our impact on the environment and to target a carbon neutral operation in line
with our goal of achieving net zero operational carbon emissions by 2050.

“The future development of Taylor provides a platform from which to realise Hermosa’s immense
potential. It will further strengthen our portfolio and align with the already substantial growth in
production of metals critical to a low carbon future that we have embedded in the portfolio over the
past six months.”

(a) The references to the scoping study in respect of the Clark Deposit are to be read in conjunction with the cautionary statement in
footnote 2 (can be viewed on page 18 in the full announcement available on the NSM).
(b) The references to the Exploration Target for the Hermosa project (including Peake) are to be read in conjunction with the
cautionary statement in footnote 3 (can be viewed on page 18 in the full announcement available on the NSM

Conference call
South32 will hold a conference call at 11.00am Australian Western Standard Time (2.00pm Australian
Eastern Daylight Time) on 17 January 2022 to provide an update of the Hermosa project including Q&A,
the details of which are as follows:

Conference ID
Please pre-register for this call at link.

Website
A replay of the conference call will be made available on the South32 website.


HERMOSA PROJECT

Hermosa is a polymetallic development option located in Santa Cruz County, Arizona, and is 100%
owned by South32. It comprises the zinc-lead-silver Taylor sulphide deposit (Taylor Deposit), the zinc-
manganese-silver Clark oxide deposit (Clark Deposit) and an extensive, highly prospective land package
with the potential for further polymetallic and copper mineralisation. Hermosa is well located with
excellent access to skilled people, services and transport logistics.

We have completed a PFS for the Taylor Deposit, our first development option at Hermosa. The Taylor
Deposit is a large, carbonate replacement massive sulphide deposit which extends to a depth of
approximately 1,200m over an approximate strike length of 2,500m and width of 1,900m. The Mineral
Resource estimate for the Taylor Deposit is 138Mt, averaging 3.82% zinc, 4.25% lead and 81 g/t silver
[footnote 4]. The deposit remains open at depth and laterally, offering further exploration potential.

The preferred mine design applied to the PFS is a dual shaft access mine which prioritises higher grade
mineralisation early in the mine’s life. The mining method is longhole open stoping, with the geometry
of the orebody enabling the operation of multiple concurrent mining areas. This supports our
assumption of an initial 22 year resource life [footnote 5] with high mining productivity. Ramp up to
nameplate capacity [c] of up to 4.3 million tonnes per annum (Mtpa) [footnote 7] is expected to be
achieved in a single stage. The process design applies a conventional sulphide ore flotation circuit
producing separate zinc and lead concentrates with substantial silver credits.

In addition to the current Mineral Resource estimate for Taylor, we have defined an Exploration Target
ranging from 10 to 95Mt [footnote 3] indicating the potential for further exploration upside. The
exploration opportunity at Taylor includes depth and extensional opportunities as well as new prospects
in proximity to the deposit. We have identified an Exploration Target at depth to the Taylor Deposit
known as Peake, with initial drilling results returning copper and polymetallic mineralisation. Further
drilling at Peake is planned in CY22.

Separately, we have completed a scoping study for the spatially linked Clark Deposit, confirming the
potential for an underground mining operation producing battery-grade manganese, as well as zinc and
silver. We are undertaking a PFS for Clark to increase our confidence in the mining and processing
assumptions of a preferred development option and customer opportunities in the rapidly growing
battery-grade manganese markets.

The Clark Deposit is interpreted as the upper oxidised, manganese-rich portion of the mineralised
system that hosts Taylor. As we advance both our Taylor and Clark studies, we maintain the option to
merge this work and assess an integrated underground mining operation. While such a scenario would
require separate processing circuits to produce base and precious metals, and battery-grade
manganese, an integrated development has the potential to unlock further operating and capital
efficiencies.

Our third focus at Hermosa remains on unlocking value through exploration of our regional scale land
package. Through the completion of surface geophysics, soil sampling, mapping and interpretation of
recently acquired data, we have identified a highly prospective corridor which will be prioritised for
future drilling. Within this corridor, we plan to drill the Flux prospect following receipt of required
permits, anticipated in the second half of CY22. The Flux prospect is located down-dip of a historic
mining area that has the potential for carbonate hosted, Taylor-like mineralisation [footnote 8].

__________________________
(c) The references to all Production Targets and resultant financial forecast information in this announcement is to be read in
conjunction with the cautionary statement in footnote 6 (can be viewed on page 18 in the full announcement available on the NSM).
The key facts and material assumptions to support the reasonable basis for this information is provided in Annexure 2 of this
announcement.

STRATEGIC ALIGNMENT

We continue to actively reshape our portfolio for a low carbon future, investing in opportunities that
increase our exposure to base and precious metals, with strong demand fundamentals and low carbon
production intensity. The Taylor Deposit is our most advanced development option at the Hermosa
project, which has the potential to provide a multi-decade platform at the operation that would further
improve the Group’s exposure to the metals required for the transition to a low carbon future.

SUSTAINABLE DEVELOPMENT

Sustainable development is at the heart of our purpose at South32 and forms an integral part of our
strategy. The Taylor Deposit has been designed as our first “next generation mine” using automation
and technology to drive efficiencies, minimise our impact and reduce carbon emissions. We have
completed initial work programs and studies with respect to our communities, cultural heritage,
environment and water, and any future development at Hermosa will be consistent with our approach
to sustainable development.

The Taylor Deposit has been designed as a low-carbon operation, with the feasibility study to target the
further potential to achieve carbon neutrality. This may be achieved through identified options to access
100% renewable energy from local providers, and the potential use of battery electric vehicles and
underground equipment. The development of the Taylor Deposit would be consistent with our
commitment to a 50% reduction in our operational carbon emissions by FY35 and net zero by 2050.

CAPITAL MANAGEMENT FRAMEWORK

A final investment decision for the Taylor Deposit and its potential tollgate to construction will be
assessed within our unchanged capital management framework. Our framework, which prioritises
investment in safe and reliable operations, an investment grade credit rating and returns to
shareholders via our ordinary dividends, also seeks to establish and pursue options that create enduring
value for shareholders, such as capital investments in new projects. Our preferred funding mechanism
for any future developments at Hermosa will be consistent with our commitment to an investment
grade credit rating through the cycle that supports our strong balance sheet.

PFS HIGHLIGHTS

The PFS results demonstrate Taylor’s potential to be a globally significant producer of green metals
critical to a low carbon future, in the first quartile of the industry cost curve. Taylor has the potential to
underpin a regional scale opportunity at Hermosa, with ongoing activities to unlock additional value
from the Clark Deposit and exploration opportunities across the regional land package.

•   Our initial development scenario outlines the potential for a large scale, highly productive
    underground mine
     -    Dual shaft access which prioritises higher grade ore in early years
     -    Proposed mining method is low technical risk, employing longhole open stoping with paste
          backfill
     -    Single stage ramp-up to nameplate production of up to 4.3Mtpa
     -    Conventional sulphide ore flotation circuit

•   Potential to be a globally significant producer of metals for a low carbon future
     -    PFS estimates annual average production ~111kt zinc, ~138kt lead and ~7.3Moz silver
          (~280kt zinc equivalent (ZnEq) [footnote 9], with output ~20% higher across the years of
          steady state production [footnote 10]
     -    Zinc is used in renewable energy infrastructure such as solar and wind for energy conversion
          and to protect against corrosion; silver is a key element used in solar panels; while lead
          demand is expected to be supported by its use in renewable energy storage systems

•   Potential for a low cost operation in the industry’s first quartile
     -    Average Operating unit costs ~US$81/t ore milled (all-in sustaining cost (AISC) [footnote 11]
          ~US$(0.05)/lb ZnEq) benefitting from high underground productivity

•   Directs capital to establish a multi-decade base metals operation and platform for growth at
    Hermosa
     -    Project capital of ~US$1,230M (direct) and ~US$470M (indirect) to establish the first
          development option
     -    Low sustaining capital ~US$40M per annum
     -    Potential to realise capital efficiencies through an integrated development of Taylor and Clark

•   A large Mineral Resource with substantial exploration potential
     -    Taylor Deposit supports an initial resource life of ~22 years, and remains open at depth and
          laterally
     -    10 to 95Mt Exploration Target identified, indicating the potential for further exploration
          upside
     -    Copper-lead-zinc-silver mineralisation intercepted at the proximal Peake prospect

•   Pursues the sustainable development of critical metals
     -    We are investing in local programs and partnerships that reflect the priorities of our
          communities
     -    We are committed to working with Native American tribes to protect cultural resources
     -    We have completed key biodiversity, ecosystem and water studies
     -    We are pursuing a pathway to net zero carbon emissions with identified options for renewable
          energy


FURTHER OPPORTUNITIES TO UNLOCK VALUE

Reflecting the early stage nature of the project we have identified numerous opportunities to unlock
further value at Taylor that will be pursued prior to a final investment decision. Opportunities identified
include the potential to:

•    Extend the resource life, which is underpinned by the current Taylor Mineral Resource estimate
     and does not include the further potential identified in our Exploration Target.
•    Reduce operating costs through:
     -    Further optimisation of the mining schedule, power consumption and comminution circuit;
     -    Supplying smelters in the Americas to realise a material reduction in transport costs; and
     -    Adopting emerging technologies and further automation opportunities, targeting enhanced
          productivity.
•    Reduce capital costs through further optimisation of the shaft design, construction and
     procurement.
•    Achieve a carbon neutral operation through access to 100% renewable energy from local suppliers.
•    Integrate the underground development with the Clark Deposit.

NEXT STEPS

Taylor will now progress to a feasibility study which is targeted for completion in mid CY23. To maintain
the preferred development path in the PFS, critical path items including construction and installation of
infrastructure to support additional orebody dewatering is planned to commence in H2 FY22. Total pre-
commitment capital expenditure associated with dewatering of approximately US$55M is expected in
H2 FY22, with further investment expected in FY23. This expenditure is included in the growth capital
estimate in Table 1 below.

The PFS assumes a single stage ramp-up to the nameplate production rate. Based on the PFS schedule,
and subject to a final investment decision and receipt of required permits, shaft development is
expected to commence in FY24. First production is targeted in FY27 with surface infrastructure, orebody
access, initial production and tailings storage expected on patented lands which require state-based
approvals. Surface disturbance and additional tailings storage on unpatented land will require
completion of the National Environmental Policy Act (NEPA) process with the United States Forest
Service (USFS). The project may benefit from the classification of metals found at Hermosa as critical
minerals in the United States. Zinc is proposed to be added as a critical mineral by the U.S. Geological
Survey while manganese (found at the Clark Deposit) already has this designation.

PFS SUMMARY RESULTS

Key PFS outcomes are summarised below. Given the project’s early stage nature, the accuracy level in
the PFS for operating costs and capital costs is -15% / +25%. The cost estimate has a base date of H1
FY22. Unless stated otherwise, currency is in US dollars (real) and units are in metric terms.

Table 1: Key PFS outcomes
                  Nameplate production capacity                        Mtpa                        ~4.3
                  Resource life                                        Years                       ~22
                  Head grades (average)                               %, g/t            4.1% Zn, 4.5% Pb, 82 g/t Ag
                  Annual payable zinc production (average /             kt                     ~111 / ~130
                  steady state [footnote 10])
Production
                  Annual payable lead production (average /             kt                     ~138 / ~166
                  steady state)
                  Annual payable silver production (average /          Moz                      ~7.3 / ~8.7
                  steady state)
                  Annual payable ZnEq production [footnote              kt                     ~280 / ~340
                  9] (average / steady state)

Operating         Operating unit costs (per tonne ore milled)          US$/t                       ~81
costs             Operating unit costs (per lb ZnEq)                US$/lb ZnEq                  ~(0.71)

                  Direct growth capital                               US$M                        ~1,230
Capital
                  Indirect growth capital                             US$M                         ~470
expenditure
                  Sustaining capital (annual average)                 US$M                         ~40



TAYLOR DEPOSIT PFS

The PFS for the Taylor Deposit provides confirmation that it is a technically robust project that has the
potential to deliver an attractive return on investment. The PFS is based on an underground zinc-lead-
silver mine development using longhole open stoping and a conventional sulphide ore flotation circuit
producing separate zinc and lead concentrates, with silver by-product credits. The preferred
development scenario is based on a mining and processing rate of up to 4.3Mtpa, with a resource life
of approximately 22 years.

The PFS was completed with input from consultants including Fluor for the process plant and on-site
infrastructure, SRK Consulting for geological and technical reviews, Stantec for mining studies,
NewFields for hydrogeology, Montgomery & Associates for dewatering and tailings, Black and Veatch,
and BQE for water treatment design and CPE for off-site roads. The PFS has been subject to an
independent peer review.

Mineral Resource estimate

The Taylor Deposit is a carbonate replacement style zinc-lead-silver massive sulphide deposit. It is
hosted in Permian carbonates of the Pennsylvanian Naco Group of south-eastern Arizona. The Taylor
Deposit comprises the upper Taylor sulphide (Taylor Mains) and lower Taylor deeps (Taylor Deeps)
domains that have a general northerly dip of 30° and are separated by a low angle thrust fault.

The Taylor Mineral Resource estimate is reported in accordance with the JORC Code (2012) at
138Mt, averaging 3.82% zinc, 4.25% lead and 81 g/t silver with a contained 5.3Mt of zinc, 5.9Mt of lead
and 360Moz of silver. The Mineral Resource estimate is reported using a net smelter return (NSR) cut-
off value of US$80/t for material considered extractable by underground open stoping methods.

The Taylor Deposit has an approximate strike length of 2,500m and a width of 1,900m. The stacked
profile of the thrusted host stratigraphy extends 1,200m from near-surface and is open at depth and
laterally. It is modelled as one of the first carbonate replacement deposit occurrences in the region, with
all geological and geochemical information acquired to date being consistent with this model.

Figure 1: Taylor Mineral Resource (image can be viewed in the full announcement available on the
NSM)




Exploration Target

The Taylor Mineral Resource is within a highly prospective mineralised system and is open at depth and
laterally, offering the potential for further exploration upside.
We have completed work aimed at developing an unconstrained, spatial view of the Exploration Target
at the Taylor Deposit, considering extensional and near-mine exploration potential.

The Hermosa project has sufficient distribution of drill data to support evaluation of the size and quality
of Exploration Targets. Tables of individual drill hole results are provided in Annexure 1 of this
announcement, as well as a listing of the total number of holes and metres that support the assessment
of the Exploration Target size and quality.

The tonnage represented in defining Exploration Targets is conceptual in nature. There has been
insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result
in the determination of a Mineral Resource. It should not be expected that the quality of the Exploration
Targets is equivalent to that of the Mineral Resource.

Estimations were performed using resource range analysis, in which deterministic estimates of potential
volumes and grades are made over a range of assumptions on continuity and extensions that are
consistent with available data and generic models of carbonate replacement, skarn and vein styles of
mineralisation.

The estimates are supported by exploration results from prospects in and around the Taylor Mineral
Resource. These results are all of carbonate replacement, skarn, and vein styles of mineralisation and
are currently explored at varying degrees of maturity and exploration drilling density.

Outcomes for the Exploration Target are provided in Table 2 below. The mid case Exploration Target is
approximately 45Mt.

Table 2: Ranges for the Exploration Target for Taylor sulphide mineralisation (as at 31 December 2021)

                             Low Case                               Mid Case                                  High Case

                            %         %        g/t                     %         %      g/t                   %        %     g/t
                 Mt                                           Mt                                        Mt
                            Zn        Pb       Ag                      Zn        Pb     Ag                    Zn       Pb    Ag

Sulphide         10        3.8        4.2      81             45      3.4        3.9    82              95    3.6      4.0   79


Notes:
a)     Net smelter return cut-off (US$80/t): Input parameters for the NSR calculation are based on South32’s long
       term forecasts for zinc, lead and silver pricing, haulage, treatment, shipping, handling and refining charges.
       Metallurgical recovery assumptions are 90% for zinc, 91% for lead, and 81% for silver.
b)     All masses are reported as dry metric tonnes (dmt). All tonnes and grade information have been rounded to
       reflect relative uncertainty of the estimate, hence small differences may be present in the totals.



Peake prospect

Our drilling programs at the Taylor Deposit have focused on improving confidence in the mine plan for
the potential development, extending the resource and testing near-mine exploration prospects.

As part of our work on near-mine exploration targets, we have intersected the skarn hosted copper-
lead-zinc-silver Peake prospect, located south of the Taylor Deposit at a depth of approximately 1,300-
1,500m. To date, 13 drill holes have been completed at Peake, a deeper zone prospective for copper
mineralisation, returning results that intersected copper, lead, zinc and silver. The geological model
interpreted from these results and other recently acquired data indicates the potential for a continuous
structural and lithology-controlled system connecting Taylor Deeps and Peake. Further exploration
drilling is planned in CY22.

Selected exploration drilling results from the Peake prospect are shown in Table 3 below.

Table 3: Selected Peake drilling results
                  From          To                       Width              Zinc    Lead       Silver        Copper
  Hole ID                                 Cut off
                   (m)          (m)                       (m)               (%)      (%)       (ppm)           (%)
                 1279.2       1389.0      0.2% Cu       109.7               0.1     0.3         15            0.62
  HDS-540                                                       Including
                 1303.6       1309.7      0.2% Cu         6.1               0.2     0.4         61            3.48
                
                 1308.2       1384.7      0.2% Cu        76.5               0.2    0.4           25           1.52
                                                                Including
  HDS-552        1309.9       1328.6      0.2% Cu        18.8               0.1    0.2           40           2.77
                                                                  And
                 1364.3       1384.7      0.2% Cu        20.4               0.1    0.3           37           2.44
                 1322.2       1374.6      0.2% Cu        52.4               0.1    1.1          105           1.73
                                                                Including
                 1322.2       1346.0      0.2% Cu        23.8               0.1    0.8           81           3.32
                                                                Including
  HDS-661
                 1322.2       1330.1      0.2% Cu        7.9                0.1    0.4           81           7.89
                 1386.8       1460.6      0.2% Cu        73.8               0.5    0.7           67           1.06
                                                                Including
                 1399.6       1410.3      0.2% Cu        10.7               0.7    1.5          227           2.84
  HDS-717        1456.6       1466.7      0.2% Cu        10.1               0.5    1.0           78           2.57



All exploration drilling results from the Peake prospect are shown in Table 4 below. All drill intersections
used to define the Exploration Target are included in Annexure 1 of this announcement.

Table 4: All Peake drilling results
                  From           To                    Width            Zinc       Lead        Silver        Copper
  Hole ID                                 Cut off
                   (m)          (m)                     (m)             (%)         (%)        (ppm)           (%)
  HDS-535                                            No significant intersection
                 1279.2       1389.0      0.2% Cu       109.7               0.1    0.3           15            0.62
                                                                Including
  HDS-540
                 1303.6       1309.7      0.2% Cu        6.1                0.2    0.4           61            3.48
                 1469.7       1488.0      0.2% Cu       18.3                0.0    0.0           10            0.63
  HDS-545                                            No significant intersection
  HDS-549        1169.5       1175.6      0.2% Cu        6.1                1.5    1.6          312            1.92
                 1100.6       1111.6      0.2% Cu       11.0                0.0    0.2           10            0.39
  HDS-551        1254.9       1280.8      0.2% Cu       25.9                0.0    0.0           10            0.54
                 1294.5       1372.8      0.2% Cu       78.3                0.0    0.1           10            0.51
                 1265.8       1273.9      0.2% Cu        8.1                0.2    0.5           27            0.39
                 1308.2       1384.7      0.2% Cu       76.5                0.2    0.4           25            1.52
                                                                Including
  HDS-552        1309.9       1328.6      0.2% Cu       18.8                0.1    0.2           40            2.77
                                                                  And
                 1364.3       1384.7      0.2% Cu       20.4                0.1    0.3           37            2.44
                 1478.9       1484.8      0.2% Cu        5.9                1.0    1.5           57            0.41
  HDS-557                                            No significant intersection
                 1298.4       1305.2      2% ZnEq        6.7                0.6    3.4          249            0.89
                 1322.2       1374.6      0.2% Cu       52.4                0.1    1.1          105            1.73
                                                                Including
                 1322.2       1346.0      0.2% Cu       23.8                0.1    0.8           81            3.32
  HDS-661
                                                                Including
                 1322.2       1330.1      0.2% Cu        7.9                0.1    0.4           81            7.89
                 1386.8       1460.6      0.2% Cu       73.8                0.5    0.7           67            1.06
                                                                Including
  
                 1399.6       1410.3      0.2% Cu      10.7            0.7         1.5         227             2.84
                                                                And
                 1424.0       1446.9      0.2% Cu       22.9               0.5     0.6          45             1.24
                 1555.1       1573.1      0.2% Cu        18                3.2     1.4          87             0.37
                 1316.4       1329.2      0.2% Cu       12.8               3.4     4.4          137            0.95
  HDS-662
                 1540.8       1546.7      2% ZnEq        5.9               5.9     2.1          250            0.45
                 1580.1       1591.8      0.2% Cu       11.7               0.1     0.0          16             0.95
  HDS-663
                 1615.9       1651.1      0.2% Cu       35.2               1.1     0.1          27             0.56
                 1343.6       1353.6      2% ZnEq       10.1               3.8     3.5          61             0.47
                 1384.7       1395.4      0.2% Cu       10.7               2.7     2.9          38             1.03
                 1405.9       1415.2      0.2% Cu        9.3               0.5     0.7          11             0.26
                 1421.3       1452.1      0.2% Cu       30.8               0.7     0.8          22             0.59
                 1463.6       1509.7      0.2% Cu       46.0               0.4     0.5          21             0.43
  HDS-691        1540.6       1549.3      0.2% Cu        8.7               0.3     0.9          51             0.61
                 1563.9       1581.3      0.2% Cu       17.4               0.2     0.2          23             0.55
                 1662.7       1677.9      0.2% Cu       15.2               2.8     1.1          155            1.19
                 1683.4       1692.6      2% ZnEq        9.1               1.5     0.3          45             0.13
                 1732.0       1735.2      2% ZnEq        3.2               6.2     0.3          107            0.18
                 1994.6       1997.4      2% ZnEq        2.7               1.7     0.3          54             0.08
                 1065.3       1072.4      0.2% Cu        7.2               3.5     2.7          22             0.21
                 1306.1       1318.3      0.2% Cu       12.2               1.8     1.8          63             0.82
                 1444.1       1466.7      0.2% Cu       22.6               1.7     1.7          46             1.38
                                                              Including
  HDS-717
                 1456.6       1466.7      0.2% Cu       10.1               0.5     1.0          78             2.57
                 1517.9       1522.2      2% ZnEq        4.3               3.0     1.8          49             0.03
                 1718.6       1727.0      0.2% Cu        8.4               1.0     0.1          39             1.99
                 1754.1       1763.3      2% ZnEq        9.1               1.4     0.5          42             0.13
  HDS-763        1429.8       1439.6      2% ZnEq        9.8               2.3     0.1           3             0.02


Figure 2: Peake prospect (image can be viewed in the full announcement available on the NSM)



Mining

The PFS design for Taylor is a dual shaft mine which prioritises early access to higher grade
mineralisation, supporting ZnEq average grades of approximately 12% [footnote 9] in the first five years
of the mine plan. The proposed mining method, longhole open stoping, maximises productivity and
enables a single stage ramp-up to our preferred development scenario of up to 4.3Mtpa. In the PFS
schedule, shaft development is expected to commence in FY24 with first production targeted in FY27
and nameplate production in FY30.

Ore is expected to be mined in an optimised sequence concurrently across four independent mining
areas, crushed underground and hoisted to the surface for processing. The mine design contemplates
two shaft stations, one for logistics and access, and the other for material handling. The primary haulage
material handling level is expected to be located at a depth of approximately 800m.

The operation would be largely resourced with a local owner-operator workforce, with a mining fleet
consisting of jumbo drills, rock bolters, production drills, load, haul and dump machines and haulage
trucks. Taylor’s feasibility study will evaluate the potential use of battery electric underground
equipment and trucks within the mining fleet, bringing further efficiency benefits, reducing diesel
consumption and carbon emissions.

Processing

The PFS process plant design is based on a sulphide ore flotation circuit to produce separate zinc and
lead concentrates, with silver by-product credits. The flowsheet adheres to conventional principles with
a primary crusher, crushed ore bins, comminution circuit, sequential flotation circuit, thickening and
filtration. Tailings are processed by either filtration and drystacking, or by converting to paste and
returning them underground. Approximately half of the planned tailings will be sent underground as
paste fill, reducing the surface environmental footprint.

Pre-flotation and pre-float concentrate cleaning steps have been included in the plant design to prevent
magnesium oxide and talc from affecting flotation performance and concentrate quality. Jameson cell
technology is proposed to be used in place of some traditional mechanical flotation cells to enhance
recoveries. Once filtered, concentrate would be loaded directly into specialised bulk containers.

The PFS processing facility has design recoveries of 90% for zinc and 91% for lead, and target concentrate
grades of 53% for zinc and 70% for lead. Silver primarily reports to the lead concentrate, with a design
recovery of 81%. The zinc concentrate is considered mid-grade with relatively high silver content for
zinc, and the lead concentrate is considered high-grade. Indicative production rates in the PFS are shown
in Figure 3.

Figure 3: Payable ZnEq production and head grade (image can be viewed in the full announcement
available on the NSM)

The PFS mine ramp-up enables nameplate capacity to be reached in FY30. Annual average payable
production is ~111kt zinc, ~138kt lead and ~7.3Moz silver (~280kt ZnEq [footnote 9]). Production over
the steady state years (FY30 to FY44) is expected to be approximately 20% higher, averaging ~130kt
zinc, ~166kt lead and ~8.7Moz silver (~340kt ZnEq [footnote 9]).

Site infrastructure

PFS capital includes estimates for non-processing infrastructure, including required tailings, power and
water infrastructure.

Figure 4: Site infrastructure (image can be viewed in the full announcement available on the NSM)

The tailings storage facilities (TSF) have been designed in accordance with South32’s Dam Management
Standard, with our approach being consistent with the International Council on Mining and Metals
(ICMM) Tailings Governance Framework. We are also progressing work on compliance with the Global
Industry Standard on Tailings Management. Approximately half of the tailings produced will be
thickened and filtered and sent back underground as paste backfill, reducing the surface environmental
footprint. The remaining filtered tailings will be placed in one of two dry stack TSFs. The first facility is
located on patented land and is an expansion to the existing TSF which was constructed as part of the
voluntary remediation program completed in CY20. This already completed work established a state-of-
the-art dry stack facility which will provide initial tailings capacity to support the commencement of
operations. The PFS contemplates a second purpose-built facility on unpatented land, requiring Federal
permits.

Future site power needs are expected to be met through transmission lines connecting to the local grid.
Grid power is currently generated from a combination of coal, natural gas and renewables including
solar, hydro and wind power. We have commenced discussions in relation to securing 100% renewable
energy for the project, with options for grid-based renewable energy as well as new solar power projects
to be advanced through the feasibility study.

Orebody dewatering is a critical path activity in the PFS schedule and capital expenditure has been
committed to support construction and the installation of its related infrastructure, commencing from
H2 FY22. The hydrogeological studies completed in the PFS and the design of the required water wells
and infrastructure have been completed to feasibility-stage standards to support the execution of these
early works.

Water treatment requirements are expected to met through two proposed water treatment plants
(WTP). WTP1 is already installed and treatment upgrades are expected to be commissioned in Q3 FY22,
while WTP2 is expected to be commissioned in Q4 FY23.

Logistics

Hermosa is well located with existing nearby infrastructure for both bulk rail and truck shipments to
numerous North American ports. The transportation of concentrates is expected to be a combination
of trucking to a rail transfer facility (for subsequent rail transfer to port) and directly to port, for shipping
to Asian and European smelters. Specialised bulk containers will be used to eliminate dust exposure
from the time of load out until discharge to the ocean vessel. The expected trucking route in the PFS
includes the construction of a connecting road to a state highway and other upgrades to road
infrastructure.

PFS shipping costs assume transportation of concentrate to Asia and Europe. During feasibility we will
continue to investigate the potential to supply smelters in the Americas, substantially lowering our
assumed transport logistics and shipping costs.

Operating cost estimates

The PFS includes estimates for mining, processing, general and administrative operating costs.

Mining costs (~US$35/t ore processed) include all activities related to underground mining, including
labour, materials, utilities and maintenance. Processing costs (~US$13/t ore processed) include
consumables, labour and power. General and administrative costs (~US$10/t ore processed) include
head office corporate costs and site support staff. Other costs (~US$23/t ore processed) include
shipping and transport (~US$16/t ore processed), marketing and royalties, with private net smelter
royalties averaging 2.4% (~US$4/t ore processed).

Average PFS operating unit costs of ~US$81/t ore processed (~US$77/t at steady state production)
reflect the high productivity rates expected from concurrently mining multiple independent
underground areas and the benefit from access to local, skilled service providers.

Average PFS Operating unit costs expressed on a zinc equivalent basis of ~US$(0.71)/lb and AISC
[footnote 11] of ~US$(0.05)/lb place the Taylor Deposit in the first quartile of the industry cost curve1.

Table 5: Operating unit costs – $t/ore processed

Item                                                                                             US$/t ore processed
Mining                                                                                                     ~35
Processing                                                                                                 ~13
General and administrative                                                                                 ~10
Other (including royalties)                                                                                ~23
Total                                                                                                      ~81

Table 6: Operating unit costs – $/lb ZnEq

Item                                                                                                    $/lb ZnEq
Mining                                                                                                    ~0.51
Processing                                                                                                ~0.19
General and administrative                                                                                ~0.15
Other (including royalties)                                                                               ~0.33
Operating unit costs                                                                                      ~1.18
Lead and silver credits                                                                           ~(1.89) [footnote 12]
Zinc equivalent operating unit costs                                                                     ~(0.71)

Capital cost estimates

Direct PFS capital expenditure estimates to construct Taylor are shown below. The construction period
following a final investment decision is expected to be approximately four years. Indirect costs include
contingency, owner’s and engineering, procurement, and construction management (EPCM) costs to
support the project. The Group will also continue to incur ongoing costs for work being undertaken
across the broader Hermosa project that will be separately guided.

Table 7: Growth capital expenditure (from 1 January 2022)
Item                                                                                                   US$M


Mining                                                                                                 ~565

Surface facilities                                                                                     ~440

Dewatering                                                                                             ~225

Direct costs                                                                                          ~1,230

Indirect costs (including contingency)                                                                 ~470

Total                                                                                                 ~1,700


Mining capital expenditure includes the shafts (~US$310M), development, mobile equipment and
infrastructure. Surface facilities includes the processing plant (~US$350M), tailings and utilities. The
capital estimate reflects assumptions for key inputs including steel, cement and labour as at H1 FY22.

Additional capital is included in the PFS estimates for critical path orebody dewatering. The direct capital
expenditure estimate of US$225M includes expenditure directly attributable to water wells and a
second required water treatment plant. A further ~US$140M of owner’s costs across the period of
dewatering are included within indirect costs (~US$470M).

Further value engineering work in the feasibility study will target a potential reduction in capital costs
through further optimisation of the shaft design, construction and procurement.

Sustaining capital expenditure is expected to average approximately US$40M per annum and
primarily relates to mine development.

Development approvals

The Hermosa project’s mineral tenure is secured by 30 patented mining claims totaling 228 hectares
that have full surface and mineral rights owned by South32. The patented land is surrounded by 1,957
unpatented mining claims totaling 13,804 hectares. The surface rights of the unpatented mining claims
are administered by the USFS under multiple-use regulatory provisions.

The initial PFS mine development and surface infrastructure, including the processing plant, on-site
power and the first TSF are designed to be located on patented mining claims. As a result, construction
and mining of the Taylor Deposit can commence with approvals and permits issued by the State of
Arizona. Several required permits for dewatering are already held, with the timeframe to receive the
remaining State-based approvals expected to take up to approximately two years. Surface disturbance
and additional tailings storage on unpatented land will require completion of the NEPA process with the
USFS, in order to receive a Record of Decision (RoD). The ramp-up to nameplate production assumed in
the PFS could take longer than contemplated if the RoD was delayed, as production may need to be
slowed so tailings capacity could be restricted to patented lands until the RoD is received.

Our approach to sustainability at Hermosa

Sustainable development is at the heart of our purpose at South32 and forms an integral part of our
strategy. Our commitment to sustainable development is embedded in the approach we are adopting
at Taylor.
We have developed a comprehensive stakeholder identification, analysis and engagement plan. Our key
stakeholders include local communities within Santa Cruz County, Native American tribes with historic
affiliation around the project area, and county, state and federal government agencies.

Partnering with local communities

We have developed a community investment plan for Hermosa. Key investment initiatives include a
South32 Hermosa Community Fund developed in partnership with the Community Foundation for South
Arizona, community sponsorships and grants to community programs that reflect the priorities of the
communities around Hermosa. In addition to community investment programs, we have established
local procurement and employment plans designed to provide direct economic benefits for our
communities.
Preserving cultural heritage

We are committed to working with Native American tribes who have a historic affiliation with the area
around the Hermosa project. While there are no Native American trust lands near Hermosa, historic
habitation or use of the region by Indigenous Peoples may establish culturally significant connections.
We have completed initial surveys for cultural resources on both our patented lands and unpatented
mining claims and will continue to engage with Native American tribes who have historic affiliations to
gain a more thorough understanding of sensitive cultural resources.

Managing our environmental impact

An environmental management plan (EMP) has been developed for Hermosa that is consistent with the
South32 Environment Standard. Key aspects of the EMP include baseline studies, risk assessments and
mapping of key features with respect to biodiversity, ecosystems and water. The baseline studies have
included several biological studies and surveys, including for species listed under the Endangered
Species Act (ESA) and USFS sensitive species, as well as monitoring of surface water, ground water and
air quality. The ongoing collection, analysis and modelling of baseline information and survey data will
align with the South32 Environment Standard and support the required permits and approvals for
Hermosa.
Hermosa is in a semi-arid environment, with most rainfall occurring in the “monsoon” season of July
through October. Water resource monitoring and management plans have been developed to support
an understanding of the baseline conditions and numerical modelling of surface and groundwater
resources. Additional studies are planned for completion as part of the Taylor feasibility study.

Targeting net zero carbon operational emissions

Taylor has been designed as a low carbon operation, with the primary sources of carbon emissions being
residual diesel consumption and grid power. We have identified several opportunities to improve this
starting position, with active discussions to secure 100% renewable energy for site power and the
feasibility study to include further evaluation of the potential use of battery electric vehicles and
underground mining equipment. We are testing technology solutions to support this, with a trial of
electric vehicles planned at our Cannington zinc-lead-silver mine during FY22 and our ongoing
participation in the Electric Mine Consortium [footnote 13].

Commodities for a low carbon future

The proposed development of Taylor is consistent with our focus on reshaping our portfolio for a low
carbon future, increasing our exposure to base and precious metals and reducing our carbon intensity.

The metals produced at Taylor are expected to play a role in supporting global decarbonisation. Zinc
demand is expected to benefit from an increase in renewable energy infrastructure such as solar, where
it allows for higher energy conversion, and wind, given its use in protecting key elements from corrosion.
Silver is used in solar panels due to its superior electrical conductivity and has higher intensity of use in
electric vehicles compared to internal combustion engine (ICE) cars. In the medium term, the ongoing
growth in ICE vehicles sales will continue to see demand for lead-acid batteries grow, with lead demand
also expected to be supported by its use in renewable energy storage systems.

Taylor project summary

Key PFS assumptions and outcomes are summarised below.

Table 8: Taylor PFS assumptions

Mining
Mineral Resource estimate                   138Mt averaging 3.82% zinc, 4.25% lead and 81g/t silver
Resource life                               ~22 years
Mining method                               Longhole open stoping with paste backfill
Mined ore grades                            Zinc 4.1%, Lead 4.5%, Silver 82g/t

Processing
Mill capacity                               ~4.3Mtpa
Concentrates                                Separate zinc and lead concentrates with silver credits
Zinc recoveries (in zinc concentrate)       ~90%
Lead recoveries (in lead concentrate)       ~91%
Silver recoveries (in lead concentrate)     ~81%
Metal payability                            Zinc ~85%, Lead ~95%, Silver ~95% (in lead concentrate)
Zinc concentrate grade                      ~53%
Lead concentrate grade                      ~70%

Payable metal production
Zinc                                        ~2.4Mt (~111kt annual average)
Lead                                        ~3.0Mt (~138kt annual average)
Silver                                      ~160Moz (~7.3Moz annual average)
Zinc equivalent [footnote 9]                ~6.2Mt (~280kt annual average)

Capital costs
Direct capital expenditure                  ~US$1,230M
Indirect capital expenditure                ~US$470M
Sustaining capital expenditure              ~US$40M annual average

Schedule
First production                            FY27
Steady state production                     FY30-FY44

Operating costs
Mining costs                                ~US$35/t ore processed
Processing costs                            ~US$13/t ore processed
General and administrative costs            ~US$10/t ore processed
Other operating unit costs                  ~US$23/t ore processed (incl. royalties)
Operating unit costs                        ~US$81/t ore processed
Zinc equivalent operating unit cost         ~(US$0.71/lb) ZnEq (incl. lead and silver credits)
All-in sustaining cost [footnote 11]        ~(US$0.05)/lb ZnEq (incl. lead and silver credits)

Fiscal terms
Corporate tax rate [footnote 14]            ~26%
Royalties                                   Average 2.4% private net smelter royalties


CLARK DEPOSIT SCOPING STUDY

Clark is a manganese-zinc-silver oxide deposit located adjacent, and up-dip of the Taylor Deposit, which
has a Mineral Resource estimate of 55 million tonnes, averaging 9.08% manganese, 2.31% zinc and 78
g/t silver using a NSR cut-off of US$175/t [footnote 4] in accordance with the JORC Code. The Clark
Deposit is interpreted as the upper oxidised, manganese-rich portion of the mineralised system, with
the resource extending from near surface to a depth of approximately 600m.

The Clark Deposit has the potential to underpin a second development at Hermosa. We recently
completed a scoping study [footnote 2] for the Clark Deposit which has confirmed viable flowsheets to
produce battery-grade manganese, in the form of electrolytic manganese metal (EMM) or high purity
manganese sulphate monohydrate (HPMSM). Clark has advanced to a PFS for a potential underground
mine development using longhole open stoping accessed from existing patented mining claims. The PFS
is designed to increase confidence in our technical and operating assumptions and customer
opportunities in the rapidly growing battery-grade manganese markets. The first phase of the PFS is
expected to be completed in late CY22, at which point a preferred development pathway will be
selected. Many areas of the PFS, including mine planning, hydrogeology, infrastructure, sustainability
and permitting will benefit from work completed in the Taylor PFS.

Our study work will also review the potential to pursue an integrated development of Taylor and Clark.
An integrated development would comprise underground mining operations for Taylor and Clark with
separate processing circuits to produce base and precious metals, and battery-grade manganese. An
integrated development has the potential to realise operating and capital efficiencies.

Figure 5: Clark and Taylor deposits (image can be viewed in the full announcement available on the
NSM)

REGIONAL EXPLORATION

Our third area of focus at Hermosa is unlocking value through exploration of our highly prospective
regional land package. Since our initial acquisition, we have increased our tenure by 66%, consolidating
our position in the most prospective areas. We have completed surface geophysics, soil sampling,
mapping and other exploration activity, resulting in the definition of a highly prospective corridor across
our land package which will be prioritised for future testing.

Within this highly prospective corridor, we plan to drill test the Flux prospect in the second half of CY22
following the receipt of required permits. The Flux prospect is located down-dip of an historic mining
area in carbonates that could host Taylor-like mineralisation [footnote 8]. Our ongoing exploration
strategy will focus on identifying, permitting and drilling new exploration targets across the land
package while continuing to refine our understanding of the regional geology.

Figure 6: Regional exploration (image can be viewed in the full announcement available on the NSM)


FOOTNOTES

1.   Based on Taylor’s estimated all-in sustaining costs (AISC) in the PFS and the Wood Mackenzie Lead/Zinc Asset Profiles.
     AISC includes operating unit costs (including royalties), treatment and refining charges (TCRCs), and sustaining capital
     expenditure.
2.   Clark Deposit scoping study cautionary statement: The scoping study referred to in this announcement is based on low-
     level technical and economic assessments and is insufficient to support estimation of Ore Reserves or to provide
     assurance of an economic development case at this stage, or to provide certainty that the conclusions of the scoping
     study will be realised. The study is based on 60% Indicated and 40% Inferred Mineral Resources (refer to footnote 4 for
     the cautionary statement).
3.   Competent Persons Statement and cautionary statement – Exploration Results and Exploration Target: The information
     in this announcement that relates to Exploration Results and Exploration Targets for Hermosa (including Peake) is based
     on information compiled by David Bertuch, a Competent Person who is a Member of The Australasian Institute of Mining
     and Metallurgy and is employed by South32. Mr Bertuch has sufficient experience that is relevant to the style of
     mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent
     Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources
     and Ore Reserves’. Mr. Bertuch consents to the inclusion in the report of the matters based on his information in the
     form and context in which it appears. The JORC Table 1 (sections 1 and 2) related to the Exploration Results and
     Exploration Targets is included in Annexure 1. In respect of those Exploration Targets, the potential quantity and grade
     is conceptual in nature. There has been insufficient exploration to determine a Mineral Resource and there is no
     certainty that further exploration work will result in the determination of Mineral Resources.
4.   Mineral Resource Statements for the Taylor and Clark deposits: The information in this announcement that relates to
     Mineral Resources for the Taylor and Clark deposits is extracted from South32's FY21 Annual Report (www.south32.net)
     published on 3 September 2021. The information was prepared by a Competent Person in accordance with the
     requirements of the JORC Code. South32 confirms that it is not aware of any new information or data that materially
     affects the information included in the original market announcement, and that all material assumptions and technical
     parameters underpinning the estimates in the relevant market announcement continue to apply and have not
     materially changed. South32 confirms that the form and context in which the Competent Person's findings are
     presented have not been materially modified from the original market announcement.
5.   Resource life is estimated using Mineral Resources (extracted from South32’s FY21 Annual Report published on 3
     September 2021 and available to view on www.south32.net) and Exploration Target (details of which are available in
     this announcement) converted to a run-of-mine basis using conversion factors, divided by the nominated run-of-mine
     production rate on a 100% basis. Whilst South32 believes it has a reasonable basis to reference this resource life and
     incorporate it within its Production Targets, it should be noted that resource life calculations are indicative only and do
     not necessarily reflect future uncertainties such as economic conditions, technical or permitting issues. Resource life is
     based on our current expectations of future results and should not be solely relied upon by investors when making
     investment decisions.
6.   Production Targets Cautionary Statement: The information in this announcement that refers to the Production Target
     and forecast financial information is based on Measured (20%), Indicated (62%) and Inferred (14%) Mineral Resources
     and Exploration Target (4%) for the Taylor Deposit. All material assumptions on which the Production Target and
     forecast financial information is based is available in Annexure 1. The Mineral Resources underpinning the Production
     Target have been prepared by a Competent Person in accordance with the JORC Code (refer to footnote 4 for the
     cautionary statement). All material assumptions on which the Production Target and forecast financial information is
     based is available in Annexure 2. There is low level of geological confidence associated with the Inferred Mineral
     Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral
     Resources or that the Production Target will be realised. The potential quantity and grade of the Exploration Target is
     conceptual in nature. In respect of the Exploration Target used in the Production Target, there has been insufficient
     exploration to determine a Mineral Resource and there is no certainty that further exploration work will result in the
     determination of Mineral Resources or that the Production Target itself will be realised. The stated Production Target
     is based on South32's current expectations of future results or events and should not be solely relied upon by investors
     when making investment decisions. Further evaluation work and appropriate studies are required to establish sufficient
     confidence that this target will be met. South32 confirms that inclusion of 18% tonnage (14% Inferred Mineral Resources
     and 4% Exploration Target) is not the determining factor of the project viability and the project forecasts a positive
     financial performance when using 82% tonnage (20% Measured and 62% Indicated Mineral Resources). South32 is
     satisfied, therefore, that the use of Inferred Mineral Resources and Exploration Target in the Production Target and
     forecast financial information reporting is reasonable.
7.   Preferred case design capacity based on Taylor PFS outcomes.
8.   Flux Exploration Target: The information in this announcement that relates to the Exploration Target for Flux is extracted
     from “South32 Strategy and Business Update” published on 18 May 2021 and is available to view on www.south32.net.
     The information was prepared by a Competent Person in accordance with the requirements of the JORC Code. South32
     confirms that it is not aware of any new information or data that materially affects the information included in the
     original market announcement. South32 confirms that the form and context in which the Competent Person’s findings
     are presented have not been materially modified from the original market announcement.
9.   Payable zinc equivalent was calculated by aggregating revenues from payable zinc, lead and silver, and dividing the total
     revenue by the price of zinc. Average metallurgical recovery assumptions are 90% for zinc, 91% for lead and 81% for
     silver in lead concentrate. FY21 average index prices for zinc (US$2,695/t), lead (US$1,992/t) and silver (US$25.50/oz)
     (excluding treatment and refining charges) have been used.
10.  Based on steady state production years (FY30 to FY44).
11.  AISC includes Operating unit costs (including royalties), TCRCs and sustaining capital expenditure.
12.  Lead and silver credits are calculated using FY21 average index prices for lead (US$1,992/t) and silver (US$25.50/oz).
13.  South32 is a founding member of the Electric Mine Consortium, which aims to accelerate progress towards a fully
     electrified zero carbon, zero particulates, mine. More information is available at www.electricmine.com.
14.  Federal tax of 21.0% and Arizona state tax of 4.9% of taxable income, subject to applicable allowances. Hermosa has an
     opening tax loss balance of approximately US$83M as at 30 June 2020. Property and severance taxes are also expected
     to be paid. Based on the PFS schedule, we expect to commence paying income taxes from FY29.


About us

South32 is a globally diversified mining and metals company. Our purpose is to make a difference by
developing natural resources, improving people’s lives now and for generations to come. We are trusted
by our owners and partners to realise the potential of their resources. We produce bauxite, alumina,
aluminium, metallurgical coal, manganese, nickel, silver, lead and zinc at our operations in Australia,
Southern Africa and South America. With a focus on growing our base metals exposure, we also have
two development options in North America and several partnerships with junior explorers around the
world.



     Investor Relations
     Alex Volante                                                   Tom Gallop
     T      +61 8 9324 9029                                         T     +61 8 9324 9030
     M      +61 403 328 408                                         M     +61 439 353 948
     E      Alex.Volante@south32.net                                E     Tom.Gallop@south32.net



     Media Relations
     James Clothier                                                 Jenny White
     M     +61 413 391 031                                          T     +44 20 7798 1773
     E     James.Clothier@south32.net                               M     +44 7900 046 758
                                                                    E     Jenny.White@south32.net

Further information on South32 can be found at www.south32.net.




Approved for release by Graham Kerr, Chief Executive Officer
JSE Sponsor: UBS South Africa (Pty) Ltd
17 January 2022


Forward-looking statements

This release contains forward-looking statements, including statements about trends in commodity
prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies
and objectives of management; capital costs and scheduling; operating costs; anticipated productive
lives of projects, mines and facilities; and provisions and contingent liabilities. These forward-looking
statements reflect expectations at the date of this release, however they are not guarantees or
predictions of future performance. They involve known and unknown risks, uncertainties and other
factors, many of which are beyond our control, and which may cause actual results to differ materially
from those expressed in the statements contained in this release. Readers are cautioned not to put
undue reliance on forward-looking statements. Except as required by applicable laws or regulations, the
South32 Group does not undertake to publicly update or review any forward-looking statements,
whether as a result of new information or future events. Past performance cannot be relied on as a
guide to future performance. South32 cautions against reliance on any forward looking statements or
guidance, particularly in light of the current economic climate and the significant volatility, uncertainty
and disruption arising in connection with COVID-19.



Annexure 1: JORC Code Table 1

HERMOSA PROJECT – EXPLORATION RESULTS

The following table provides a summary of important assessment and reporting criteria used for the
reporting of Taylor sulphide exploration results for the Hermosa project, which is located in southern
Arizona, USA (Figure 1), in accordance with the Table 1 checklist in The Australasian Code for the
Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition)
on an ‘if not, why not’ basis.

Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections.)

Criteria                  Commentary
Sampling techniques        •    The drilling that supports the exploration results is located outside
                                of the current Taylor Mineral Resource estimate declared as at 30
                                June       2021      in    the      South32        Annual       Report.
                                A total of 53 diamond drill holes (HQ/NQ) totalling 73,632 metres
                                have been drilled across the Taylor sulphide mineralisation. In order
                                to define mineralisation continuity, the drilling information used to
                                inform the resource is used for geological interpretation of the
                                exploration results. In addition, the geological model also reflects
                                input from near-surface reverse circulation (RC) drilling. All drilling is
                                at       predominantly      1.5m      (5’)      intervals      on        a
                                half core basis.
                           •    A heterogeneity study is yet to be concluded to determine sample
                                representivity.
                           •    Core is competent and sample representivity is monitored using
                                predominantly quarter or half core field duplicates submitted at a
                                rate of approximately 1:40 samples. Field duplicates located within
                                mineralisation envelopes demonstrate 70–90% performance to
                                within 30% of original sample splits.
                           •    Core assembly, interval mark-up, recovery estimation (over the 3m
                                drill string) and photography all occur prior to sampling and follow
                                documented procedures.
                           •    Sample size reduction during preparation involves crushing and
                                splitting of HQ (95.6mm) or NQ (75.3mm) half-core.
Drilling techniques        •    Data used for exploration results is based on logging and sampling of
                                HQ diamond core, reduced to NQ in areas of difficult drilling. Triple
                                and split-tube drilling methods were also employed in cases where
                                conditions required these mechanisms to improve recovery.
                           •    All drill core has been oriented using the Boart Longyear ‘Trucore’
                                system since mid-August 2018. In Q3 FY20, acoustic televiewer data
                                capture was implemented for downhole imagery for the majority of
                                drilling to improve orientation and geotechnical understanding.
                                Structural measurements from oriented drilling have been
                                incorporated in geological modelling to assist with fault
                                interpretation.
Drill sample recovery      •   Prior to October 2018, core recovery was determined by summation
                               of individual core pieces within each 3m drill string. Recovery for the
                               drill string has since been measured after oriented core alignment
                               and mark-up.
                           •   Core recovery is recorded for all diamond drill holes. Recovery of
                               holes for the ranging and targeting exercise exceeds 96%.
                           •   Poor core recovery can occur when drilling overlying oxide material
                               and in major fault zones. To maximise recovery, drillers vary speed,
                               pressure and composition of drilling muds, reduce HQ to NQ core
                               size and use triple tube and ‘3 series’ drill bits.
                           •   When core recovery is compared to Zn, Pb and Ag grades for both a
                               whole data set and within individual lithology, there is no discernible
                               relationship.
                           •   Correlation analysis suggests there is no relationship between core
                               recovery and depth except where structure is considered. There are
                               isolated cases where lower recovery is localised at intersections of
                               the Taylor sulphide carbonates with a major thrust structure.
Logging                    •   The entire length of core is photographed and logged for lithology,
                               alteration, structure, rock quality designation (RQD), and
                               mineralisation.
                           •   Logging is both quantitative and qualitative; there are a number of
                               examples including estimation of mineralisation percentages and
                               association of preliminary interpretative assumptions with
                               observations.
                           •   All logging is peer reviewed against core photos and in the context
                               of current geological interpretation and surrounding drill holes
                               during geological model updates.
                           •   Logging is to a level of detail to support the exploration results.
Sub-sampling               •   Sawn half core and barren whole core samples are taken on
techniques and                 predominantly 1.5m intervals for the entire drill hole after logging.
sample preparation             Mineralisation is highly visual. Sampling is also terminated at litho-
                               structural and mineralogical boundaries to reduce the potential for
                               boundary/dilution effects at a local scale.
                           •   Sample lengths can vary between 0.75m and 2.3m. The selection of
                               the sub-sample size is not supported by sampling studies.
                           •   Sample preparation has occurred offsite at an ISO17025-certified
                               laboratory since the Taylor sulphide deposit discovery. This was
                               initially undertaken by Skyline until 2012, then by Australian
                               Laboratory Services (ALS). Samples submitted to ALS are generally 4–
                               6kg in weight. Sample size reduction during preparation involves
                               crushing of HQ (95.6mm) or NQ (75.3mm) half or whole core,
                               splitting of the crushed fraction, pulverisation, and splitting of the
                               sample for analysis. A detailed description of this process is as
                               follows:
                               o The entire half or whole core samples are crushed and rotary
                                     split in preparation for pulverisation. Depending on the
                                     processing facility, splits are done via riffle or rotary splits for
                                     pulp samples.
                               o Fine crushing occurs until 70% of the sample passes 2mm mesh.
                                     A 250g split of finely crushed sub-sample is obtained via rotary
                                     or riffle splitter and pulverised until 85% of the material is less
                                     than 75µm. These 250g pulp samples are taken for assay, and
                                     0.25g splits are used for digestion.
                           •   ALS protocol requires 5% of samples to undergo a random
                               granulometry QC test. Samples are placed on 2 micron sieve and
                               processed completely to ensure the passing mesh criteria is
                               maintained. Pulps undergo similar tests with finer meshes. Results
                               are loaded to an online portal for review to client.
                           •   Sample preparation precision is also monitored with blind laboratory
                               duplicates assayed at a rate of 1:50 submissions.
                           •   Coarse crush preparation duplicate pairs show that 80% of all Zn and
                               Ag pairs for sulphide mineralisation report within +/-20% of original
                               samples. Performance drops off for Pb mineralisation, with less than
                               70% of duplicates reporting within the +/-20% limits.
                           •   More than 85% of pulp duplicates report within a 10% variance for
                               Zn and Ag within all pulp duplicates. Performance for Pb is
                               demonstrably poorer, similar to the preparation duplicates, with less
                               than 80% of all pulp duplicates reporting within this tolerance.
                           •   Sub-sampling techniques and sample preparation are adequate for
                               providing quality assay data for declaring exploration results but will
                               benefit from planned studies to optimise sample selectivity and
                               quality control procedures.
Quality of assay data      •   Samples of 0.25g from pulps are processed at ALS Vancouver using
and laboratory tests           ME-ICP61, where these are totally digested using a four-acid method
                               followed by analysis with a combination of Inductively Coupled
                               Plasma – Mass Spectrometry (ICP-MS) and Inductively Coupled
                               Plasma – Atomic Emission Spectroscopy (ICP-AES) determination for
                               33 elements. Overlimit values for Ag, Pb, Zn, and Mn utilise OG-62
                               analysis. In November 2020, Hermosa switched to the analytical
                               method ME-MS61 for the four acid 48 element assay for additional
                               elements and improved detection limits alongside the addition of
                               overlimit packages of S-IR07 for S and ME-ICP81 for Mn. Digestion
                               batches of 36 samples plus four internal ALS control samples (one
                               blank, two CRM, and one duplicate) are processed using a four-acid
                               digestion. Analysis is done in groups of three larger digestion
                               batches. Instruments are calibrated for each batch prior to and
                               following the batch.
                           •   ALS internal QA/QC samples are continuously monitored for
                               performance. In the case of a blank failure, for example, the entire
                               batch is redone from the crushing stage. If one CRM fails, data
                               reviewers internal to ALS examine the location of the failure within
                               the batch and determine how many samples around the failure
                               should be reanalysed. If both CRMs fail, the entire batch is rerun. No
                               material failures have been observed from the data.
                           •   Coarse and fine-grained certified silica blank material submissions,
                               inserted at the beginning and end of every work order of
                               approximately 200 samples, indicate a lack of systematic sample
                               contamination in sample preparation and ICP solution carryover.
                               While systematic contamination issues are not observed for the
                               blanks, the nature of the blanks themselves and suitability for use in
                               QA/QC for polymetallic deposits is in question.
                               o Failures for blanks are noted at greater than ten times detection
                                    limit or recommended upper limit for the certified blank
                                    material for each analyte, failures range from 0% for Ag
                                    (>5ppm), 1% for Cu (>10ppm), 3.5% for Pb (>20ppm), and 7.5%
                                    for Zn (>20ppm), and indicate that the blanks themselves are
                                    not truly suited for polymetallic deposits. In particular, a coarse
                                    blank submitted from 2017–2018 demonstrated consistent
                                    contamination above detection limits for Zn, Cu, Mn, and other
                                    elements. This has since been replaced with a better
                                    performing coarse blank of the end of 2018.
                               o The nature of the blanks and the failures observed are very low
                                    for Ag and Cu, and failures for blanks for Zn and Pb are in the
                                    hundreds of ppm. No consistent bias has been observed and the
                                    magnitude of impacts at the low end for the blanks are very
                                    limited. It is not likely to impact the exploration results.
                           •    A range of certified reference materials (CRM) are submitted at a
                                rate of 1:40 samples to monitor assay accuracy. The CRM failure rate
                                is very low, ranging from 0.1% to 1.3% depending on analyte,
                                demonstrating reliable laboratory accuracy.
                            •   External laboratory pulp duplicates and CRM checks have been
                                submitted to the Inspectorate (Bureau Veritas) laboratory in Reno
                                from November 2017 to 2018 and resumed in March 2021 at a rate
                                of 1:100 to monitor procedural bias. Between 84% and 89% of
                                samples for Zn, Pb and Ag were within expected tolerances of +/-
                                20% when comparing three-acid (Inspectorate) and four-acid (ALS)
                                digest methods. No significant bias was determined.
                            •   The nature and quality of assaying and laboratory procedures are
                                appropriate for supporting disclosure of exploration results.
Verification of             •   Core photos of the entire hole are reviewed by alternative company
sampling and                    personnel (modelling geologists) to verify significant intersections
assaying                        and finalise geological interpretation of core logging.
                            •   Sampling is recorded digitally and uploaded to an Azure SQL project
                                customised database (Plexer) via an API provided by the ALS
                                laboratory and the external laboratory information management
                                system (LIMS). Digital transmitted assay results are reconciled upon
                                upload to the database.
                            •   No adjustment to assay data has been undertaken.
Location of data            •   Drill hole collar locations are surveyed by registered surveyors using
points                          a GPS Real Time Kinematic (RTK) rover station correlating with the
                                Hermosa project RTK base station and Global Navigation Satellite
                                Systems with up to 1cm accuracy.
                            •   Downhole surveys prior to mid-August 2018 were taken with a
                                ‘TruShot’ single shot survey tool every 76m and at the bottom of the
                                hole.           From          20         June         2018          to
                                14 August 2018, surveys were taken at the same interval with both
                                the single shot and a Reflex EZ-Gyro, before the Reflex EZ-Gyro was
                                used exclusively.
                            •   The Hermosa project uses the Arizona State Plane (grid) Coordinate
                                System, Arizona Central Zone, International Feet. The datum is
                                NAD83 with the vertical heights converted from the ellipsoidal
                                heights to NAVD88 using GEOID12B.
                            •   All drill hole collar and downhole survey data was audited against
                                source data.
                            •   Survey collars have been compared against a one-foot topographic
                                aerial map. Discrepancies exceeding 1.8m were assessed against a
                                current aerial flyover and the differences attributed to surface
                                disturbance from construction development and/or road building.
                            •   Survey procedures and practices result in data location accuracy
                                suitable for mine planning.
Data spacing and            •   Drill hole spacing ranges from 60m to 600m. The spacing supplies
distribution                    sufficient information for assessment of exploration results.
                            •   Geological modelling has determined that drill spacing is sufficient
                                to establish the degree of geological and grade continuity necessary
                                to support review of exploration results.
Orientation of data in      •   For geological modelling, mineralisation varies in dip between
relation to geological          30°NW in the upper Taylor Sulphide domain and between 20°N and
structure                       30°N in the lower Taylor Deeps and the Peake Copper-Skarn
                                prospect. Most drilling is oriented vertically and at a sufficiently high
                                angle to allow for accurate representation of grade and tonnage
                                using three-dimensional modelling methods.
                            •   There is indication of sub-vertical structures, possibly conduits for or
                                offsetting mineralisation, which have been accounted for at a
                                regional scale through the integration of mapping and drilling data.
                                Angled, oriented core drilling introduced from October 2018 is
                                designed to improve understanding of the relevance of these
                                structures to mineralisation.
Sample security            •    Samples are tracked and reconciled through a sample numbering
                                and dispatch system from site to the ALS sample distribution and
                                preparation facility in Tucson. The ALS LIMS assay management
                                system provides an additional layer of sample tracking from the
                                point of sample receipt. Movement of sample material from site to
                                the Tucson distribution and preparation facility is a combination of
                                ALS dedicated transport and project contracted transport.
                                Distribution to other preparation facilities and Vancouver is
                                managed by ALS dedicated transport.
                           •    Assays are reconciled and results processed in an Azure SQL project
                                customised database (Plexer) which has password and user level
                                security.
                           •    Core is stored in secured onsite storage prior to processing. After
                                sampling, the remaining core, returned sample rejects and pulps are
                                stored at a purpose-built facility that has secured access.
                           •    All sampling, assaying and reporting of results are managed with
                                procedures that provide adequate sample security.
Audits or reviews          •    CSA Global audited the sampling methodology and database for the
                                FY21 Mineral Resource estimate and noted that the sampling and
                                QA/QC measures showed the database to be adequate.
                           •    An internal database audit was undertaken in February 2019 for
                                approximately 10% of all drilling intersecting sulphide mineralisation
                                (24 of 242 holes). Data was validated against original data sources
                                for collar, survey, lithology, alteration, mineralisation, structure,
                                RQD and assay (main and check assays). The overall error rates
                                across the database were found to be very low. Isolated issues
                                included the absence of individual survey intervals and minor errors
                                in collar survey precision. All were found to have minimal impact on
                                resource estimation.
                           •    Golder and Associates completed an independent audit of the
                                exploration results including QA/QC of reported drillholes outside
                                the FY21 Taylor Sulphide Mineral Resource estimate, adherence to
                                the Resource Range Analysis process, inputs, assumptions and
                                outcomes. Outcomes are considered appropriate for public
                                reporting of exploration results.



Section 2 Reporting of Exploration Results
(Criteria listed in the preceding section also apply to this section.)

Criteria                  Commentary
Mineral tenement        •  The Hermosa project mineral tenure (Figure 2) is secured by 30
and land tenure            patented mining claims totalling 228 hectares that have full surface
status                     and mineral rights owned fee simple. These claims are retained in
                           perpetuity by annual real property tax payments to
                           Santa Cruz County in Arizona and have been verified to be in good
                           standing                                                        until
                           31 August 2022.
                      •    The patented land is surrounded by 1,957 unpatented lode mining
                           claims totalling 13,804 hectares. These claims are retained through
                           payment of federal annual maintenance fees to the Bureau of Land
                           Management (BLM) and filing record of payment with the Santa Cruz
                           County Recorder. Payments for these claims have been made for the
                           period up to their annual renewal on or before 1 September 2022.
                         •   Title to the mineral rights is vested in South32’s wholly owned
                             subsidiary
                             Arizona Minerals Inc. (AMI). No approval is required in addition to
                             the payment of fees for the claims.
Exploration done by      •   ASARCO LLC (ASARCO) acquired the Property in 1939 and completed
other parties                intermittent drill programs between 1940 and 1991. ASARCO initially
                             targeted silver and lead mineralisation near historical workings of
                             the late 19th century. ASARCO identified silver-lead-zinc bearing
                             manganese oxides in the manto zone of the overlying
                             Clark Deposit between 1946 and 1953.
                         •   Follow-up rotary air hammer drilling, geophysical surveying, detailed
                             geological, and metallurgical studies on the manganese oxide manto
                             mineralisation                      between                       the
                             mid-1960s and continuing to 1991 defined a heap leach amenable,
                             low-grade manganese and silver resource, reported in 1968 and
                             updated in 1975, 1979 and 1984. The ASARCO drilling periods
                             account for 98 drill holes from the database.
                         •   In March 2006, AMI purchased the ASARCO property and completed
                             a re-assay of pulps and preliminary SO2 leach tests on the manto
                             mineralisation                to              report                a
                             Preliminary Economic Assessment (PEA) in February 2007. Drilling of
                             RC and diamond holes between 2006 and 2012 focused on the Clark
                             Deposit (235 holes) and early definition of the Taylor Deposit
                             sulphide mineralisation (16 holes), first intersected in 2010. Data
                             collected from the AMI 2006 campaign is the earliest information
                             contributing to estimation of the Taylor Deposit Mineral Resource.
                         •   AMI drill programs between 2014 and August 2018 (217 diamond
                             holes) focused on delineating Taylor Deposit sulphide
                             mineralisation, for which Mineral Resource estimates were reported
                             in compliance to NI 43-101 (Foreign Estimate) in
                             November 2016 and January 2018.
Geology                  •   The regional geology is set within Lower-Permian carbonates,
                             underlain by Cambrian sediments and Proterozoic granodiorites. The
                             carbonates are unconformably overlain by Triassic to late-
                             Cretaceous volcanic rocks (Figures 3 and 4). The regional structure
                             and stratigraphy are a result of late-Precambrian to early-Palaeozoic
                             rifting, subsequent widespread sedimentary aerial and shallow
                             marine deposition through the Palaeozoic Era, followed by Mesozoic
                             volcanism and late batholitic intrusions of the Laramide Orogeny.
                             Mineral deposits associated with the Laramide Orogeny tend to align
                             along regional NW structural trends.
                         •   Cretaceous-age intermediate and felsic volcanic and intrusive rocks
                             cover much of the Hermosa project area and host low-grade
                             disseminated silver mineralisation, epithermal veins and silicified
                             breccia zones that have been the source of historic silver and lead
                             production.
                         •   Mineralisation styles in the immediate vicinity of the Hermosa
                             project include the carbonate replacement deposit (CRD) style zinc-
                             lead-silver base metal sulphides of the Taylor Deposit and deeper
                             skarn-style copper-zinc-lead-silver base metal sulphides of the Peake
                             prospect and an overlying manganese-silver oxide manto deposit of
                             the Clark Deposit.
                         •   The Taylor Deposit comprises the overlying Taylor Sulphide, and
                             Taylor Deeps domains that are separated by a thrust fault.
                             Approximately 600–750m lateral and south to the Taylor Deeps
                             domain, the Peake copper-skarn sulphide mineralisation is identified
                             in older lithological stratigraphic units along the interpreted
                             continuation of the thrust fault (Figures 5 and 6).
                            •   The Taylor Sulphide Deposit extends to a depth of around 1,000m
                                and is hosted within approximately a 450m thickness of Palaeozoic
                                carbonates that dip 30°NW, identified as the Concha, Scherrer and
                                Epitaph Formations.
                            •   Taylor Sulphide mineralisation is dominantly constrained within a
                                tilted and thrusted carbonate stratigraphy and to a lesser degree the
                                overlying volcanic stratigraphy. The mineralising system is yet to be
                                fully drill tested in multiple directions. At Taylor, the sulphide
                                mineralisation is constrained up-dip where it merges into the
                                overlying oxide manto mineralisation of the Clark Deposit,
                                representing a single contiguous mineralising system.
                            •   The north-bounding edge of the thrusted carbonate rock is marked
                                by a thrust fault where it ramps up over the Jurassic/Triassic ‘Older
                                Volcanics’ and ‘Hardshell Volcanics’. This interpreted pre-
                                mineralising structure that created the sequence of carbonates also
                                appears to be a key mineralising conduit. The thrust creates a
                                repetition of the carbonate formations below the Taylor Sulphide
                                domain, which host the Taylor Deeps mineralisation.
                            •   The Taylor Deeps mineralisation dips 10°N to 30°N, is approximately
                                100m thick, and primarily localised near the upper contact of the
                                Concha Formation and the unconformably overlying ‘Older
                                Volcanics’. Some of the higher-grade mineralisation is also
                                accumulated along a westerly plunging lineation intersection where
                                the Concha Formation contacts the Lower Thrust. Mineralisation has
                                not been closed off down-dip or along strike.
                            •   Lateral to the Taylor Deeps mineralisation, skarn sulphide
                                mineralisation is identified in older lithological stratigraphic units
                                along the interpreted continuation of the thrust fault. This creates
                                an interpreted continuous structural and lithological controlled
                                system from the deeper skarn Cu domain into Taylor Deeps, Taylor
                                Sulphide, and associated volcanic hosted mineralisation and the
                                Clark oxide Deposit.
Drill hole Information      •   A drill hole plan (Figure 4) provides a summary of drilling collar
                                locations that support the exploration results and surface geology.
                                Figure 5 provides a drill hole plan relative to the Taylor FY21 and
                                Clark FY20 Mineral Resource domains, and the Peake copper-skarn
                                prospect. Figure 6 shows a cross section relative to key inputs in
                                Figure 5 alongside the Taylor thrust and simplified geology.
                            •   Table 1 summarises all the drill holes that support Exploration
                                Targets.
                            •   Table 2 summarises all significant intersections.
                            •   All drill hole information, including tabulations of drill hole positions
                                and depths is stored within project data files on a secure company
                                server.
                            •   Hole depths vary between 550m and 2,000m.

Data aggregation            •   Mineralisation domains were created within bounding litho-
methods                         structural zones using both manually interpreted volumes and Radial
                                Based Function (RBF) indicator interpolation of the cumulative in-
                                situ value of metal content. The metal content descriptor, “Metval”,
                                is calculated by summing the multiplication of economic analyte
                                grades for Zn, Pb, Ag and Cu, price and recovery. Metval cut-off
                                ranges for mineralisation domains range from US$5-7.5 for the
                                different litho-structural domains. Material above the Metval
                                cut-off was modelled utilising the indicator numerical model
                                function in Leapfrog Geo[TM] to create volumes.
                            •   Significant assay intercepts are reported as length-weighted
                                averages exceeding either 2% ZnEq or 0.2% Cu.
                            •   No top cuts are applied to intercept calculations.
                            •  ZnEq (%) is zinc equivalent which accounts for combined value of
                               zinc, lead and silver. Metals are converted to ZnEq via unit value
                               calculations using long term consensus metal price assumptions and
                               relative metallurgical recovery assumptions. For the Exploration
                               Target, overall metallurgical recoveries differ for geological domains
                               and                              vary                             from
                               87% to 94% for zinc, 94% to 95% for lead, and 87% to 92% for silver.
                               Exploration Target tonnage and grade is reported above an NSR that
                               accounts for payability of metals in concentrate products, which
                               depending on other factors, may decrease the total payable
                               recovered metal. Average payable metallurgical recovery
                               assumptions            are            zinc          (Zn)          90%,
                               lead (Pb) 91%, and silver (Ag) 81% and metals pricing assumptions
                               are South32’s prices for the December 2021 quarter. The formula
                               used      for      calculation      of     zinc       equivalent     is
                               ZnEq = Zn (%) + 0.718 * Pb (%) + 0.0204 * Ag (g/t).
Relationship between       •   Near vertical drilling (75–900) amounts to the majority of holes used
mineralisation widths          in the creation of the geology model. Where they intersect the low
and intercept lengths          to moderately dipping (30°) stratigraphy the intersection length can
                               be up to 15% longer than true-width.
                           •   Since August 2018, drilling has been intentionally angled, where
                               appropriate, between 60° and 75° to maximise the angle at which
                               mineralisation is intersected.
                           •   The mineralisation is modelled in 3D to appropriately account for
                               sectional bias or apparent thickness issues which may result from 2D
                               interpretation.
Diagrams                   •   Relevant maps and sections are included with this market
                               announcement.
Balanced reporting         •   Exploration results are reported considering drill holes completed
                               outside the disclosed Mineral Resource estimate as at 30 June 2021.
                               All drill hole intersections are considered in this assessment for
                               balanced reporting. A list of drill holes is included as an annexure to
                               this announcement.
Other substantive          •   Aside from drilling, the geological model is compiled from local and
exploration data               regional mapping, geochemistry sampling and analysis, and
                               geophysical surveys.
                           •   Magneto-telluric (MT) and induced polarisation surveys (IP) were
                               conducted with adherence to industry standard practices by
                               Quantec Geosciences Inc. In most areas, the MT stations were
                               collected along N–S lines with a spacing of 200m. Spacing between
                               lines is 400m. Some areas were collected at 400m spacing within
                               individual lines. IP has also been collected, both as 2D lines and as
                               2.5D swaths, collected with a variable spacing of data receivers. IP
                               surveying is ongoing over the project.
                           •   Quality control of geophysical data includes using a third-party
                               geophysical consultant to verify data quality and provide secondary
                               inversions for comparison to Quantec interpretations.
Further work               •   The following work is planned to be conducted:
                               o The deeper Peake Copper-skarn prospect will be assessed in
                                 detail.
                               o Additional drilling of the Peake Copper-skarn prospect is
                                 planned to occur in CY22, guided by the outcomes of a detailed
                                 assessment in the area adjacent to Taylor Deeps where very
                                 little drilling is completed so far.
                               o Additional ongoing drilling will assess Taylor and Taylor Deeps
                                 extensional opportunities.
                               o Exploratory drilling underneath and downdip of the historic
                                 mine workings at the Flux prospect is planned to occur in CY22,
                                 pending permit approvals.
                               o Additional geophysics over the project is ongoing.

Figure 1: Regional location plan (image can be viewed in the full announcement available on the NSM)

Figure 2: Hermosa project tenement map (image can be viewed in the full announcement available on
the NSM)

Figure 3: Hermosa project regional geology (image can be viewed in the full announcement available
on the NSM)

Figure 4: Taylor Deposit local geology and Exploration Target collar locations (image can be viewed in
the full announcement available on the NSM)

Figure 5: Plan view of the Taylor and Clark Mineralisation Domains with exploration drill holes and the
Peake Copper-Skarn Prospect (image can be viewed in the full announcement available on the NSM)

Figure 6: Cross-section through the Taylor and Clark mineralisation domains showing exploration drill
holes, simplified geology, Taylor Thrust and the Peake Copper-Skarn Prospect – looking east (image
can be viewed in the full announcement available on the NSM)


Table 1: Hole ID, collar location, dip, azimuth and drill depth

 Hole ID        East (UTM)       North (UTM)        Elevation (m)    Dip      Azimuth      TD Depth (m)
 HDS-345        525881           3480733            1603.2           -90      0            1257.9
 HDS-353        525781           3480612            1592.8           -90      0            1701.5
 HDS-372        526061           3481515            1564.6           -90      0            1780.9
 HDS-380        526689           3480757            1580.8           -60      230          1321.9
 HDS-395        525553           3482168            1502.4           -90      0            1642.0
 HDS-420        525785           3480607            1592.8           -82      85           1372.8
 HDS-428        526180           3481454            1578.1           -75      355          1633.6
 HDS-443        526645           3480958            1525.9           -45      230          492.9
 HDS-444        526347           3481088            1566.2           -65      230          825.1
 HDS-451        526182           3481448            1579.4           -75      230          656.7
 HDS-462        526223           3481409            1574.6           -75      230          792.8
 HDS-465        526268           3481353            1569.8           -75      230          827.2
 HDS-486        527398           3480552            1602.0           -75      85           1142.1
 HDS-490        527406           3480648            1593.8           -60      70           1126.8
 HDS-491        525690           3482016            1501.9           -90      0            1595.0
 HDS-509        525701           3480691            1602.1           -90      0            1424.8
 HDS-519        525822           3480685            1602.0           -90      0            1422.2
 HDS-520        525963           3480611            1573.1           -90      0            1562.7
 HDS-524        526002           3479665            1658.8           -90      0            1220.0
 HDS-526        528068           3479975            1571.1           -65      15           1617.6
 HDS-527        526339           3480706            1542.5           -63      125          1288.4
 HDS-528        525716           3480747            1610.3           -90      0            1724.3
 HDS-530        525583           3480735            1604.3           -82      230          1446.9
 HDS-532        526001           3479666            1659.1           -60      150          1075.9
 HDS-533        526092           3480386            1627.3           -65      120          1257.6
 HDS-535        526026           3479462            1678.1           -60      190          1419.8
 HDS-536        527211           3480625            1567.4           -60      0            1206.1
 HDS-538        525878           3480741            1603.3           -70      130          1526.1
 Hole ID        East (UTM)       North (UTM)        Elevation (m)    Dip      Azimuth      TD Depth (m)
 HDS-540        526101           3480387            1627.3           -70      220          1528.9
 HDS-542        527211           3480624            1567.1           -70      0            1574.0
 HDS-545        525960           3479775            1665.7           -60      335          1427.1
 HDS-549        525585           3480738            1604.4           -78      200          1813.0
 HDS-551        525963           3479774            1665.5           -75      270          1542.6
 HDS-552        525806           3480620            1592.9           -70      165          1851.4
 HDS-553        526860           3480624            1560.5           -75      220          1524.0
 HDS-554        526992           3480642            1550.9           -65      35           1314.9
 HDS-557        525963           3479776            1665.5           -60      300          1199.1
 HDS-569        526861           3480630            1560.3           -62      205          900.1
 HDS-571        526868           3480782            1543.4           -66      45           961.0
 HDS-598        527348           3480633            1606.7           -75      333          1287.9
 HDS-605        526678           3480806            1575.7           -66      185          1468.4
 HDS-627        525814           3481856            1502.2           -60      20           1891.9
 HDS-661        525782           3480619            1593.6           -72      179          1981.2
 HDS-662        525782           3480619            1593.6           -76      190          1985.2
 HDS-663        525592           3480733            1603.6           -70      175          1980.6
 HDS-668        525817           3481856            1502.4           -60      20           1905.0
 HDS-691        525592           3480734            1603.9           -68      180          2079.0
 HDS-711        526863           3480628            1560.2           -55      218          776.3
 HDS-714        527351           3480641            1606.2           -52      73           1184.8
 HDS-715        527404           3480509            1607.7           -65      75           817.2
 HDS-717        525592           3480735            1603.9           -70      175          1782.5
 HDS-763        525971           3479591            1629.9           -78      15           1943.4
 HDS-797        526361           3481170            1560.0           -55      108          551.1

Table 2: Significant intersections

                  From            To                      Width          Zinc    Lead    Silver   Copper
   Hole ID                                 Cut off
                   (m)           (m)                        (m)          (%)       (%)    (ppm)      (%)
  HDS-345                                        No significant intersection
                  966.2         976.0      2% ZnEq          9.8         12.2      8.2     77     0.69
  HDS-353                                                Including
                  966.2         971.4      2% ZnEq          5.2         22.0      14.8   130     1.21
                  312.4         318.5      2% ZnEq          6.1          1.9      0.7     31     0.03
  HDS-372
                  458.1         463.6      2% ZnEq          5.5          4.8      2.1     90     0.04
                  878.1         880.4      2% ZnEq          2.3          2.6      1.8    362     0.33
  HDS-380
                  898.7         906.3      2% ZnEq          7.6          1.0      1.9    142     0.23
  HDS-395         448.7         454.3      2% ZnEq          5.6          3.3      3.7     55     0.08
  HDS-420         452.5         465.3      2% ZnEq         12.8          2.5      1.1     73     0.11
                  266.4         269.3      2% ZnEq          2.9          3.6      1.2    108     0.01
  HDS-428
                 1507.7        1516.5      2% ZnEq          8.8          1.5      1.8     77     0.19
  HDS-443                                        No significant intersection
                  691.0         716.6      2% ZnEq         25.6          1.4      0.7     15     0.04
                                                         Including
  HDS-444         709.3         716.6      2% ZnEq          7.3          3.1      1.2     22     0.04
                  790.0         793.1      2% ZnEq          3.1          2.5      1.2    273     0.00
                  803.1         809.5      2% ZnEq          6.4          1.5      2.1     69     0.18
                  351.1         363.3      2% ZnEq         12.2          1.4      0.5     13     0.00
  HDS-451
                                                         Including
 
                  357.8        363.3      2% ZnEq         5.5            1.9     0.8    17      0.01
HDS-462           428.9        432.2      2% ZnEq         3.4            0.9    1.3     48       0.06
HDS-465           322.6        335.6      2% ZnEq         13.0           1.0    0.4     71       0.09
                  118.0        131.7      2% ZnEq         13.7           0.1    0.9     64       0.04
                  155.4        189.6      2% ZnEq         34.1           0.1    0.6     86       0.09
HDS-486                                   Including
                  169.8        189.6      2% ZnEq         19.8           0.1    1.0     101      0.15
                  249.8        290.9      2% ZnEq         41.1           1.1    1.9     57       0.09
                  191.1        197.2      2% ZnEq         6.1            0.1    0.4     77       0.08
                  364.8        401.4      2% ZnEq         36.6           0.1    1.1     69       0.04
HDS-490                                   Including
                  379.5        399.9      2% ZnEq         20.4           0.1    1.6     97       0.05
                  442.6        450.2      2% ZnEq         7.6            5.4    0.0      4       0.00
                  381.9        400.8      2% ZnEq         18.9           13.1   8.3     137      0.39
HDS-491                                   Including
                  387.1        399.1      2% ZnEq         12.0           17.3   11.5    171      0.42
HDS-509           846.4        851.0      2% ZnEq         4.6            1.4    0.7     21       0.10
                  389.2        393.8      2% ZnEq         4.6            0.3    0.3     688      0.33
HDS-519
                  731.5        736.1      2% ZnEq         4.6            3.1    1.6     32       0.10
                  684.9        689.3      2% ZnEq         4.4            2.7    1.6     39       0.37
HDS-520           694.9       704.4       2% ZnEq         9.4            1.7    1.7     25       0.08
                 1049.0       1053.7      2% ZnEq         4.7            1.5    1.7     37       0.37
HDS-524                           No significant intersection
                   46.3         52.7     2% ZnEq          6.4            0.0    0.1     100      0.01
HDS-526
                   61.3        84.4       2% ZnEq         23.2           0.0    0.3     113      0.03
HDS-527           191.1       200.3       2% ZnEq         9.1            1.2    0.9     23       0.00
HDS-528                           No significant intersection
                  840.3       846.4       0.2% Cu         6.1            0.1    0.0     13       0.59
HDS-530           904.3       910.4       0.2% Cu         6.1            0.3    0.1     14       0.39
                 1407.6      1419.1       2% ZnEq         11.6           1.8    1.1     68       0.24
HDS-532            76.5       83.8        2% ZnEq         7.3            1.3    0.8     193      0.15
HDS-533                           No significant intersection
HDS-535                           No significant intersection
HDS-536                           No significant intersection
HDS-538          1445.4     1451.9       2% ZnEq         6.6             0.1    1.2     74       0.03
                 1279.2     1389.0       0.2% Cu        109.7            0.1    0.3     15       0.62
                                          Including
HDS-540
                 1303.6     1309.7       0.2% Cu         6.1             0.2    0.4     61       3.48
                 1469.7     1488.0       0.2% Cu         18.3            0.0    0.0     10       0.63
                  128.6      133.2       2% ZnEq         4.6             0.0    0.5     80       0.03
HDS-542
                  800.3      809.9       2% ZnEq         9.6             0.8    0.8     30       0.00
HDS-545                           No significant intersection
HDS-549          1169.5     1175.6       0.2% Cu         6.1             1.5    1.6     312      1.92
                 1100.6     1111.6       0.2% Cu         11.0            0.0    0.2     10       0.39
HDS-551          1254.9     1280.8       0.2% Cu         25.9            0.0    0.0     10       0.54
                 1294.5     1372.8       0.2% Cu         78.3            0.0    0.1     10       0.51
                  709.3      714.8       0.2% Cu         5.5             11.2   5.5     64       0.12
HDS-552          1265.8     1273.9       0.2% Cu         8.1             0.2    0.5     27       0.39
                 1308.2     1384.7       0.2% Cu         76.5            0.2    0.4     25       1.52
                 From       To                    Width                 Zinc   Lead   Silver   Copper
Hole ID                     Cut off
                   (m)      (m)                     (m)                  (%)     (%)   (ppm)      (%)
                                          Including
                 1309.9   1328.6        0.2% Cu         18.8             0.1    0.2     40       2.77
                                             And
                 1364.3   1384.7        0.2% Cu         20.4             0.1    0.3     37       2.44
                                          Including
                 1375.3   1384.7        0.2% Cu         9.5              0.1    0.3     62       4.45
                 1478.9   1484.8        0.2% Cu         5.9              1.0    1.5     57       0.41
                  315.8    340.5        2% ZnEq         24.7             3.4    3.3     266      0.32
                                          Including
HDS-553
                  315.8    325.2        2% ZnEq         9.4              3.9    8.5     654      0.81
                  332.8    340.5        2% ZnEq         7.6              5.8    0.1     40       0.03
                  181.7    197.8        2% ZnEq         16.2             0.4    5.8     139      0.06
HDS-554
                 1138.3   1140.9        2% ZnEq         2.6              3.9    6.4     152      0.03
HDS-557                           No significant intersection
HDS-569           142.3    147.2        2% ZnEq         4.9              3.6    2.4     61       0.03
                  134.4    166.4        2% ZnEq         32.0             0.7    0.8     94       0.12
HDS-571           691.6    698.9        2% ZnEq         7.3              4.7    3.4     56       0.14
                  743.3    750.7        2% ZnEq         7.5              7.6    18.5    296      0.11
HDS-598                           No significant intersection
                  447.1    452.9        2% ZnEq         5.8              2.6    0.9     116      0.19
HDS-605           512.2    531.6        2% ZnEq         19.4             0.2    1.2     51       0.08
                  842.5    845.8        2% ZnEq         3.4              2.1    2.4     196      0.30
HDS-627           349.9    354.5        2% ZnEq         4.6              15.2   14.9    459      0.21
                 1298.4   1305.2        2% ZnEq         6.7              0.6    3.4     249      0.89
                 1322.2   1374.6        0.2% Cu         52.4             0.1    1.1     105      1.73
                                          Including
                 1322.2   1346.0        0.2% Cu         23.8             0.1    0.8     81       3.32
                                             And
HDS-661
                 1322.2   1330.1         0.2% Cu         7.9             0.1    0.4     81       7.89
                 1386.8   1460.6         0.2% Cu         73.8            0.5    0.7     67       1.06
                                          Including
                 1399.6   1410.3         0.2% Cu         10.7            0.7    1.5     227      2.84
                 1555.1   1573.1         0.2% Cu         18.0            3.2    1.4     87       0.37
                 1316.4   1329.2         0.2% Cu         12.8            3.4    4.4     137      0.95
HDS-662
                 1540.8   1546.7         2% ZnEq         5.9             5.9    2.1     250      0.45
                 1580.1   1591.8         0.2% Cu         11.7            0.1    0.0     16       0.95
HDS-663
                 1615.9   1651.1         0.2% Cu         35.2            1.1    0.1     27       0.56
                 201.2    211.8          2% ZnEq         10.7            5.5    3.9     270      0.13
HDS-668          221.0    233.2          2% ZnEq         12.2            5.7    3.9     129      0.03
                 699.5    713.2          2% ZnEq         13.7            1.3    4.2     134      0.06
                 1343.6   1353.6         2% ZnEq         10.1            3.8    3.5     61       0.47
                 1384.7   1395.4         0.2% Cu         10.7            2.7    2.9     38       1.03
                 1405.9   1415.2         0.2% Cu         9.3             0.5    0.7     11       0.26
                 1421.3   1452.1         0.2% Cu         30.8            0.7    0.8     22       0.59
HDS-691          1463.6   1509.7         0.2% Cu         46.0            0.4    0.5     21       0.43
                 1540.6   1549.3         0.2% Cu         8.7             0.3    0.9     51       0.61
                 1563.9   1581.3         0.2% Cu         17.4            0.2    0.2     23       0.55
                 1662.7   1677.9         0.2% Cu         15.2            2.8    1.1     155      1.19
                 1683.4   1692.6         2% ZnEq         9.1             1.5    0.3     45       0.13
 
                1732.0    1735.2        2% ZnEq           3.2         6.2      0.3      107      0.18
                1994.6    1997.4        2% ZnEq           2.7         1.7      0.3       54      0.08
  HDS-711       150.6      153.9        2% ZnEq           3.4         1.9      1.0      244      0.34
                372.5      377.0        2% ZnEq           4.6         0.0      1.1       87      0.04
                410.6      415.1        2% ZnEq           4.6         0.0      1.2       65      0.02
  HDS-714
                627.9      632.5        2% ZnEq           4.6         2.1      3.6      111      0.06
                682.8      688.8        2% ZnEq           6.1         3.0      3.9      109      0.09
                119.5      127.4        2% ZnEq           7.9         0.0      1.7       53      0.05
                167.3      196.0        2% ZnEq          28.7         3.7      0.5      176      0.23
                                                             Including
                172.8      180.8        2% ZnEq           8.0         7.1      1.2      218      0.71
                300.1      342.3        2% ZnEq          42.2         2.1      1.8       94      0.09
                                                             Including
  HDS-715
                333.3      342.3        2% ZnEq           9.0         6.8      0.7       42      0.08
                563.9      575.3        2% ZnEq          11.4         3.7      3.6      188      0.16
                                                             Including
                565.4      571.5        2% ZnEq           6.1         4.5      5.4      290      0.19
                591.3      598.9        2% ZnEq           7.6         4.7      2.1       92      0.14
                780.3      787.9        2% ZnEq           7.6         0.2      0.1       96      0.01
                1065.3    1072.4        0.2% Cu           7.2         3.5      2.7       22      0.21
                1306.1    1318.3        0.2% Cu          12.2         1.8      1.8       63      0.82
                1444.1    1466.7        0.2% Cu          22.6         1.7      1.7       46      1.38
                                                             Including
  HDS-717
                1456.6    1466.7       0.2% Cu           10.1         0.5      1.0       78      2.57
                1517.9    1522.2       2% ZnEq            4.3         3.0      1.8       49      0.03
                1718.6    1727.0       0.2% Cu            8.4         1.0      0.1       39      1.99
                1754.1    1763.3       2% ZnEq            9.1         1.4      0.5       42      0.13
  HDS-763       1429.8    1439.6       2% ZnEq            9.8         2.3      0.1       3       0.02
  HDS-797                                           No significant intersection




Annexure 2: Material Assumptions for the Production Target and Forecast Financial Information

Criteria                 Commentary
Mineral Resource            •      The Production Target is based on 20% Measured, 62% Indicated, 14% Inferred
estimate for                       Mineral Resources and 4% Exploration Target. The Mineral Resources were
conversion to Ore                  declared as part of South32’s Annual declaration of resources and reserves in
Reserves                           the Annual Report published on 3 September 2021 and is available to view on
                                   www.south32.net. The details of the Exploration Target are included in this
                                   announcement (Annexure 1).
Study status                •      A pre-feasibility study has been completed for the Taylor Deposit in compliance
                                   with the AACE International Class 4 estimate standard.
                            •      A technically achievable and economically viable mine plan has been determined
                                   by the study team. Material Modifying Factors have been considered and are
                                   included in this section of the report.
Cut-off parameters          •      Taylor is a polymetallic deposit which uses an equivalent NSR value as a grade
                                   descriptor. NSR considers the remaining gross value of the in-situ revenue
                                   generating elements once processing recoveries, royalties, concentrate
                                   transport, refining costs and other deductions have been considered.
Criteria                Commentary

                           •   The elements of economic interest used for cut-off determination include silver
                               (Ag), lead (Pb) and zinc (Zn).
                           •   The cut-off strategy employed at Taylor is to optimise the NPV of the operation.
                           •   An NSR cut-off grade of US$90/tonne was used in the development of mineable
                               stope shapes.
Mining factors or          •   The mining method applied is longhole open stoping with paste backfill. This is
assumptions                    the preferred mining method based on a combination of productivity, cost,
                               resource recovery and risk of surface subsidence.
                           •   Geotechnical recommendations based on deposit geology have been used to
                               develop the stope shape dimensions.
                           •   The mining dilution is applied based on rock dilution or fill dilution dependent
                               on the location of the stope being mined. Dilution factors are applied on a stope
                               by stope basis using incremental dilution widths applied to the stope geometry.
                           •   The mining recovery factor is 95% and is applied to all ore tonnes.
                           •   Inferred Mineral Resources are incorporated into the stope designs and
                               contribute to the overall weighted grades and NSR of the stope. Inferred Mineral
                               Resources contribute approximately 14% and the Exploration Target contributes
                               4% of the total planned tonnes. A risk assessment was completed considering
                               Inferred Mineral Resources and the Exploration Target as waste to ensure that
                               the Production Target and forecast financial information as stated can be
                               achieved. Accordingly, the Company believes it has a reasonable basis for
                               reporting a Production Target including those Inferred Mineral Resources and
                               the Exploration Target.
                           •   Primary access to the orebody will be through a main shaft and a ventilation
                               shaft. Ore passes, haulage levels and ventilation raises will be established to
                               move material internally within the mine and provide ventilation and cooling.
                               Paste backfill will be produced in a surface backfill plant and distributed
                               underground via a backfill reticulation system.
                           •   The proposed mining method with modifying factors applied supports a single-
                               stage ramp-up to the preferred development scenario of up to 4.3Mt per
                               annum.
Metallurgical factors      •   The Taylor processing plant will consist of well-established processing
or assumptions                 techniques. Primary crushing will be conducted underground, and crushed ore
                               will be hoisted to the surface. Grinding will be conducted by a single-stage AG
                               mill to a size suitable for flotation. Sequential flotation will be followed by
                               pressure filtration for concentrates and tailings.
                           •   Metallurgical recovery is found to vary by geological domain and recovery ranges
                               are applied based on geologic formation. Average process recoveries are: 90%
                               for zinc in zinc concentrate; 91% for lead in lead concentrate and 81% for silver
                               in lead concentrate.
                           •   Lead is found to occur primarily as galena and zinc is found to occur primarily as
                               sphalerite with small amounts of non-sulphide zinc occurring in the geological
                               domains close to surface. Galena and sphalerite are coarse grained and easily
                               liberated for effective recovery by sequential flotation.
                           •   Manganese occurs in relatively high concentrations in gangue and can occur as
                               an inclusion of sphalerite especially in the higher geological domains. This can
                               cause manganese in zinc concentrate to exceed penalty limits for most smelters.
                               No other deleterious elements are expected to exceed penalty limits for lead or
                               zinc concentrates.
                           •   Metallurgical test work has been conducted using samples covering the ore body
                               vertically and horizontally. All metallurgical test work and the process design
                               have been reviewed by independent consultants.
Environmental              •   The project consists of patented claims surrounded by the Coronado National
factors or                     Forest and unpatented claims located within the surrounding Coronado National
assumptions                    Forest and managed by the United Sates Forest Service.
                           •   A permitting schedule has been developed for obtaining critical state and federal
                               approvals.
Criteria         Commentary

                    •   Waste rock generated from surface and underground excavations is delineated
                        into potentially acid generating (PAG) or non-acid generating (NAG) rock. All
                        PAG material will report to a lined facility as will most of the NAG material,
                        except for a limited amount that will be used for construction material.
                    •   The tailings storage facilities have been designed in accordance with South32’s
                        Dam Management Standard and consistent with the International Council on
                        Mining and Metals (ICMM) Tailings Governance Framework, in addition to the
                        Australian National Committee on Large Dams (ANCOLD) guidelines.
                    •   Tailings from processing will be filtered and stored in purpose-built, lined,
                        surface storage facilities or returned underground in the form of paste backfill.
                        An existing tailings storage facility on patented claims will be used to store
                        tailings from early operations.
Infrastructure      •   Current site activity is supported by and consists of office buildings, core
                        processing facilities, an existing tailings storage facility as part of the voluntary
                        remediation program, a water treatment plant, ponds, road networks and
                        laydown yards.
                    •   Planned infrastructure will be installed to support future operations and will
                        consist of:
                        o Dual shafts
                        o Ventilation and refrigeration systems
                        o Process comminution, flotation and concentrate loadout
                        o Tailings filtration plant and tailings storage facilities
                        o Paste backfill plant
                        o Dewatering wells, another water treatment plant and pipelines
                        o Surface shops, fuel bays, wash bays and office buildings
                        o Powerlines and substations
                        o Surface stockpile bins
                        o Underground maintenance shops and ore/waste storage
                    •   A site layout plan and construction schedule support the above listed
                        infrastructure.
Costs               •   The capital cost estimate is supported by sufficient engineering scope and
                        definition for preparation of a AACE International Class 4 estimate.
                    •   The operating cost estimate was developed in accordance with industry
                        standards and South32 project requirements.
                        o Mining costs were calculated primarily from first principles and
                             substantiated by detailed labour rate calculations, vendor-provided
                             equipment operating costs and budgetary quotations for materials and
                             consumables.
                        o Processing costs account for plant consumables/reagents, labour, power
                             and maintenance materials and tailings storage facility costs.
                        o General and administrative costs are based on current operating structures
                             and optimised based on industry benchmarks and fit-for-purpose sizing.
                             Permitting and environmental estimates are based on current permitting
                             timelines.
                    •   Commodity price forecasts for silver, lead and zinc and foreign exchange are
                        supplied by South32 Marketing. Price assumptions reflect South32’s view on
                        demand, supply, volume forecasts and competitor analysis. Price protocols will
                        not be detailed as the information is commercially sensitive.
                    •   Transportation charges have been estimated using information on trucking
                        costs, rail costs, export locations, transload capabilities and transit time
                        associated with moving concentrate from site to port to market.
                    •   Treatment and Refining Charges used for the valuation are supplied by South32
                        Marketing and reflect South32’s view on demand, supply, volume forecasts and
                        competitor analysis.
                    •   Applicable royalties and property fees have been applied using on the current
                        US federal and state rates.
Revenue factors        •   The life of operation plan derived from the pre-feasibility study provides the
                           mining and processing physicals such as volume, tonnes and grades to support
                           the valuation.
                       •   Revenue is calculated by applying forecast metal prices and foreign exchange
                           rates to the scheduled payable metal. Metal payabilities are based on contracted
                           payability terms, typical for the lead and zinc concentrate markets.
Market assessment      •   Internal price protocols reflect South32’s view on demand, supply, and stock
                           situations including customer analysis, competitor analysis and identification of
                           major market windows and volume forecasts.
Economic               •   Economic inputs are described in the cost, revenue and metallurgical factors
                           commentary.
                       •   Sensitivity analyses have been completed on metal prices, metallurgical
                           recoveries, mine operating costs, growth capital costs and use of Inferred
                           Mineral Resources and the Exploration Target to understand the value drivers
                           and impact on the valuation.
                       •   The pre-feasibility study evaluated alternate cases to assess the impact of longer
                           than expected permitting timelines and associated capital spend profiles.
Social                 •   South32 maintains relationships with stakeholders in its host communities
                           through structured and meaningful engagement activities including: community
                           forums, industry involvement, employee participation, local procurement and
                           local employment.
                       •   A Community Management Plan has been developed in accordance with the
                           South32 Community Standard and includes baseline studies, community
                           surveys, risk assessments, stakeholder identification, engagement plans, cultural
                           heritage, community investment plans, closure and rehabilitation.
Other                  •   Hermosa has developed a comprehensive risk register and risk management
                           system to address foreseeable risks that could impact the project and future
                           operations.
                       •   No material naturally occurring risks have been identified and the project is not
                           subject to any material legal agreements or marketing arrangements.

Date: 17-01-2022 08:50:00
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