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SOUTH32 LIMITED - Hermosa Project Mineral Resource Estimate Declaration

Release Date: 12/05/2020 08:00
Code(s): S32     PDF:  
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Hermosa Project – Mineral Resource Estimate Declaration

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

12 May 2020
 South32 Limited

                       Hermosa Project – Mineral Resource Estimate Declaration

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) is pleased to report for the first time
a Mineral Resource estimate for the Clark Deposit which forms part of its 100% owned Hermosa
project located in Arizona, USA (Appendix 1 – Figure 1). The Clark Mineral Resource estimate (Table
A) is reported in accordance with the JORC Code (2012) at 55 million tonnes, averaging 2.31% zinc
(Zn), 9.08% manganese (Mn) and 78g/t silver (Ag).

The Clark Deposit is interpreted as the upper oxidised, manganese-rich portion of the mineralised
system that contains the previously reported Taylor Mineral Resource estimate. A scoping study to
advance our understanding of the processing and end-market opportunities for the Clark Deposit is
underway, while a pre-feasibility study for the separate development of the Taylor Deposit is due for
completion in the September quarter 2020.

South32 Chief Executive Officer, Graham Kerr said “The declaration of a Mineral Resource estimate
for the Clark Deposit marks another important milestone for the Hermosa project, following our initial
Mineral Resource estimate for the Taylor Deposit in June 2019.

“When completed, the Taylor Deposit pre-feasibility study is expected to further de-risk our investment
by demonstrating its ability to deliver strong shareholder returns over many decades. The Clark
Deposit provides an additional option to realise longer term value from within the broader land

“With ongoing exploration programs testing possible extensions to the Taylor Deposit and newly
identified prospects in the regional land package, we expect this work to reaffirm our view that
Hermosa is one of the most exciting base metals projects in the industry.”

The Hermosa project is a polymetallic development option located in Santa Cruz county, Arizona and
is 100% owned by South32. It comprises the zinc-lead-silver Taylor Deposit, the zinc-manganese-
silver Clark Deposit and an extensive, highly prospective land package with potential for discovery of
zinc and copper mineralisation.

Full details of this update are contained in the attached report.

Appendices prepared in connection with this report have been submitted to UK Listing Authority
(UKLA) national storage mechanism and are available for inspection at or are otherwise available on South32’s website at

        Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012.
About South32

South32 is a globally diversified mining and metals company. We produce bauxite, alumina,
aluminium, energy and 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. 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.



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                                    E


Rebecca Keenan                                                Jenny White
T +61 8 9324 9364                                             T +44 20 7798 1773
M +61 402 087 055                                             M +44 7900 046 758
E                                  E

                                                                                   JSE Sponsor: UBS South Africa (Pty) Ltd
                                                                                                            12 May 2020

                    Table A: Mineral Resource estimate for the Clark Deposit as at 12 May 2020 in 100% terms
                    Measured Mineral                Indicated Mineral              Inferred Mineral
                                                                                                             Total Mineral Resource
                       Resource                         Resource                      Resource
  Type        Mt          %     %      g/t     Mt       %      %        g/t   Mt      %       %       g/t    Mt       %       %      g/t

                         Zn     Mn     Ag              Zn     Mn        Ag            Zn     Mn       Ag             Zn      Mn      Ag
                -         -      -      -
 Oxide                                         33      2.49   9.39   56       22     2.04    8.64     110    55     2.31    9.08    78

  Total         -         -      -      -
                                               33      2.49   9.39   56       22     2.04    8.64     110    55     2.31    9.08    78

1. Cut-off grade: NSR of US$175/t.
2. Input parameters for the NSR calculation are based on South32’s long term forecasts for zinc, manganese and silver pricing; haulage,
   treatment, shipping, handling and refining charges. Metallurgical recovery assumptions are consistent across geological domains and
   are approximately 62% for zinc, 80% for manganese and 81% for silver. 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

Estimate of Mineral Resource for the Clark Deposit

South32 confirms the first time reporting of the Mineral Resource estimate for the Clark Deposit as at
12 May 2020 (Table A).
The estimates of Mineral Resources are reported in accordance with the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 (JORC Code) and the
Australian Securities Exchange Listing Rules. This report summarises the information contained in the
JORC Code Table 1 which is included in Appendix 1 to this report. The breakdown of the total Mineral
Resource estimate into the categories specified in the JORC Code is contained in Table A.

Geology and geological interpretation

The Clark Deposit within the Hermosa project (Appendix 1 – Figure 2) is the oxidised portion of a
carbonate replacement deposit (CRD) style, massive sulphide deposit. It is hosted in Mesozoic
Hardshell volcanic rocks and underlying Permian carbonate rocks of the Pennsylvanian Naco Group
of south-eastern Arizona (Appendix 1 - Figure 3).

The zinc-manganese-silver oxide mineralisation of the Clark Deposit is interpreted to be an up-dip
extension of the zinc-lead-silver sulphide Taylor Deposit, although of different mineralogy and
geochemistry. Mineralisation primarily spans the contact between the Hardshell volcanic rocks and
the underlying Concha carbonate stratigraphy for approximately 1.3km from near surface down a
general northwest dip of 30° to where it abuts the Taylor sulphide mineralisation. The 800m lateral
extent of mineralisation at the Clark Deposit has not been closed off by drilling.

Drilling techniques

Initial drilling of the Clark Deposit conducted by ASARCO between 1950-1991 utilised three different
drilling methods of rotary air hammer (RH) (91 holes), diamond core (DDH) (22 holes), and reverse
circulation (RC) (one hole). Wildcat Silver, later becoming Arizona Minerals Inc (AMI), drilled 165 RC
and 267 DDH drill holes between 2007 to 2018. South32 drilling continued to extend the drill footprint
at both the Clark and Taylor deposits following the acquisition of AMI in August 2018, adding an
additional 31 DDH drill holes to the total drill hole database considered for this Mineral Resource

Four AMI and three South32 DDH drill holes twinned ASARCO RH drilling to validate geology and
assay data.

The geological model is based on data from 579 drill holes of various styles including RH, RC, and
DDH of HQ (95.6mm) or NQ (75.3mm) diameter (Appendix 1 - Figure 4), all drilled from surface of
which 311 intersect the mineralisation at the Clark Deposit and were utilised in the Mineral Resource
estimation (Appendix 1 - Figure 5).

Sub-vertical drilling was undertaken until August 2018 and 259 of these holes were utilised in the
estimation. Since August 2018 all holes were angled between 60°and 85° to maximise the
mineralisation intersection angle. Core orientation was introduced from October 2018 to incorporate
structural measurements into geological modelling for stratigraphic and fault interpretation.
Sampling and sub-sampling techniques

Details of the sampling procedures are unknown for the ASARCO drilling campaigns of 1950-1991,
however sample lengths were predominantly 1.5m (5’), ranging between 6cm and 6m. AMI drill holes
were sampled at nominal 1.5m (5’) intervals or terminated at litho-structural boundaries for DDH,
producing a sample range between 15cm and 2m. Diamond drill core was sampled by hydraulic
splitting until 2013, from then onwards a core saw was used for sampling. RC holes were drilled wet
by AMI, with cleaning of the holes between 5’ sample intervals.

AMI and South32 samples were submitted for preparation at external certified laboratories in Tucson
(Skyline Laboratories and Australian Laboratory Services (ALS)) and Reno (Inspectorate
Laboratories). Preparation involved crushing of the sample, a rotary split portion for each sample, and
pulverisation to generate pulps for assay. Specific preparation methods vary between laboratories
and drilling campaigns. Since 2014, samples have been prepared by ALS Minerals Tucson and
involve drying, crushing the entire sample to more than 70% passing 2mm, rotary splitting to achieve
a 250g subsample and pulverizing to greater than 85% passing 75µm.

Sample analysis method

AMI re-analysed 4,272 ASARCO pulp samples at Skyline Laboratories in 2006 to validate the copper,
lead, zinc, and manganese assay results using inductively-coupled plasma and atomic absorption
spectrometry (ICP-AAS). Silver and gold fire assays of a second split from each pulp were undertaken
by Assayers Canada in Vancouver.

AMI drill samples taken between 2007-2012 were prepared at Skyline Labs and analysed by ICP for
copper, lead, zinc, and manganese. Silver assays of 250g duplicate pulps for all samples were sent to
Assayers Canada from 2006-2009 (fire assays) and Inspectorate Laboratories in Reno for 2010-2012
(fire assay with AAS finish).

Over 2013-2014, AMI identified a low bias for silver reported by fire assay through a quality control
program using in-house standards. A re-assay of 8,078 samples from 188 holes mostly from the Clark
Deposit was undertaken by ALS Minerals using a four-acid digest and ICP-AAS. These replaced the
original fire assay silver results in the database.

Since 2014, all samples have been prepared by ALS Tucson and analysed at ALS Vancouver using
four-acid digestion, ICP-AAS, and more recently inductively-coupled plasma and optical emission
spectrometry (ICP-OES). Quality control protocols introduced and maintained since this time comprise
certified reference material (CRM) inserted every 20 samples, field duplicates every 15m (50’), blank
material submitted at the start and end of every sample batch, coarse crush and pulp repeats every
40 samples, and third-party laboratory pulp repeats every 50 samples.

Efforts to validate ASARCO sampling over the project history comprise two campaigns of pulp re-
assay by AMI in 2006 (4,272 samples) and South32 in 2019 (3,070 samples). The findings for the
2019 re-assay program generally indicate excellent reproducibility in ICP results for zinc, manganese
and silver across grade ranges material to the Mineral Resource work. Gravimetric fire assay results
for silver at lower grades (less than 10g/t Ag) generally perform poorly against the modern ICP
results. The poor performance of these historical analytical techniques against modern results has
been well-documented in previous studies.

Minor element assays from the South32 re-assay program were also inserted into the drilling
database for historical samples where no previous analysis had been undertaken and to underpin the
estimation of these elements.
Estimation methodology

Resource estimation was conducted using ordinary kriging interpolation for three elements of
economic interest (zinc, manganese, silver) and seven elements for metallurgical or rock
characterisation (iron, lead, calcium, sulphur, magnesium, potassium, aluminium). Estimation search
criteria, nested as two passes, are consistent with geostatistical models developed for each
estimation domain according to the appropriate geological controls.

Sample selection criteria, block dimensions, and other parameters of the estimation were reviewed
against results of qualitative kriging neighbourhood analysis (QKNA). Validation includes statistical
analysis, swath plots and visual inspection.

Specific gravity measurements from drill cores were used as the basis for estimating dry bulk density
in tonnage calculations for both mineralised and non-mineralised material. Initial testing and
comparison of pre- and post-drying sample weights from a small 280 sample population within two
drill holes indicated a moisture content of 2.03%.

Mineral Resource classification

Mineral Resource classification criteria are based on the level of data informing both the geological
model and grade estimation. Grade estimation confidence is overlaid on the geological modelling
classification criteria whereby estimation parameters such as slope of regression are matched to
block estimation criteria that relates to the number and distance of data informing the estimate in
relation to semi-variogram models for each element. No Measured Mineral Resources have been
defined for the Clark Deposit due to uncertainty associated with historical drill hole data, local
variability illustrated by the South32 twin drilling program and considering the conceptual level of
process flow sheet development. Indicated Mineral Resources are estimated from at least five
samples in two drill holes with data spacing within approximately 100m and are not defined in the SE
areas of the Clark Deposit which is supported primarily by RC drilling. Inferred Mineral Resources are
constrained by the reporting of estimates to within demonstrated grade and geological continuity
ranges, and generally to the extents of the confined Mineral Resource domains.

Mining and metallurgical methods and parameters

Reasonable prospects for eventual economic extraction have been determined through assessment
of mining, processing and financial aspects at a scoping level study on the Clark Mineral Resource
estimate. The assessment outcome informs the net smelter return (NSR) cut-off value used for
reporting the Mineral Resource estimate.

Cut-off grade

The Clark Deposit of the Hermosa project is a zinc-manganese-silver deposit which uses an
equivalent NSR value as a grade descriptor. Input parameters for the NSR calculation are based on
South32’s long term forecasts for zinc, manganese and silver pricing; haulage, treatment, shipping,
handling and refining charges. Metallurgical recovery assumptions are consistent across domains and
are approximately 62% for zinc, 80% for manganese, and 81% for silver.

A dollar equivalent cut-off of NSR US$175/dmt forms the basis of assessment for reasonable
prospects for eventual economic extraction, supported by inputs detailed to scoping study level.

Competent Person’s Statement

The information in this report that relates to Mineral Resources for the Clark Deposit represents an
estimate as at 12 May 2020, and is based on information compiled by Matthew Hastings, a
Competent Person who is a Member and Chartered Professional of The Australasian Institute of
Mining and Metallurgy.

Mr. Hastings is a full-time employee of SRK Consulting (U.S.) Inc. and was engaged by South32 to
provide a Mineral Resource estimate for the Clark Deposit. Mr. Hastings has sufficient experience
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 Hastings consents to
the inclusion in this report of the matters based on his information in the form and context in which it

Additional information is contained in Appendix 1.

Date: 12-05-2020 08:00:00
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