South32 closer to tapping Patagonia Mountains

This is the site in the Patagonia Mountains where South32 plans to conduct its operations, including the construction of a second water treatment plant for a dewatering process.

A pre-feasibility study conducted for the South32 Hermosa/Taylor underground mine in the Patagonia Mountains calls for an initial capital expenditure of $1.7 billion. It would be the largest private investment in Santa Cruz County in memory.

The report estimates the life of the mine at 22 years, but that's conservative because exploratory drilling has yet to pinpoint the limits of the available resources, Hermosa Project President Pat Risner told an advisory panel on the South32 Hermosa Project during a meeting last month in Patagonia.

"We’re looking at several decades," he said.

The panel, which holds monthly meetings that are open to the public, was assembled by the Australia-based mining giant last year, ostensibly to help South32 understand community needs and concerns about the Hermosa project. The company provided the panel with a $150,000 budget over three years for "technical assistance needs," said consultant Angela Donelson, who facilitates the panel. The group has shared input on topics ranging from water resources to route options for truck traffic. It comprises environmentalists, educators and business leaders from throughout the county.

What are they digging for?

A comprehensive economic impact study is due out this month. But based on the current value in troy ounces, the 7.3 million ounces of silver that the pre-feasibility study (PFS) estimates can be mined yearly, would yield a return on investment in about 9.5 years. Then there is the Taylor deposit: 138,000 tons of lead and 111,000 tons of zinc that the PFS says can be extracted annually with plenty of demand on the horizon.

"Taylor is the largest undeveloped zinc/lead resource in the United States and one of the largest in the world," Risner said.

But South32 has also released information on the results of a scoping or concept study on another geological find that is overlapped in part by the Taylor deposit. It's called the Clark resource. The goal is for it to come online in tandem with the larger project.

"At the time that South32 acquired Hermosa, we had sort of viewed Clark as something that might come later," Risner said.

But now, he said: "We’ve determined that there is a processing flow sheet where we can produce battery-grade manganese material from Clark which makes it quite strategic and quite important when we look at the growth in demand for manganese in electric vehicle batteries going forward. And our reaction to that is we are going to accelerate the study work on Clark. It will be going into pre-feasibility with the hope that we can over time catch it up (with Taylor) because we do see a big opportunity in developing Clark and Taylor together in an integrated way in one underground mine."

South32 released a 40-page summary of the PFS rather than the full document, leading some critics to accuse the company of hiding its complete findings. For its part, South32 says the document, prepared for the company by multiple consultants and led by Flour Engineering, might be too technical for public consumption.

Risner told the panel that the PFS "is an internal decision-making document that we provide to the senior executives of South32 and the board of South32 who decide to advance from one phase (and) to determine if it is economically viable to take it to the next phase. It is an internal document for internal decision making."

It does not contain detail sections that analyze environmental or community impact like an EIS (environmental impact statement) or an environmental assessment that you might see in a NEPA (National Environmental Policy Act) study. Those things have to be done. We will do those things in due course, but that is not what a pre-feasibility study is."

He added that there are detailed commercial and financial sections in the full report that are confidential to the company that South32 does not want to share publicly "given that there are many other players in the market that do the same kind of work that we do."

Show on the road

Risner went on a speaking circuit in February, giving presentations to local groups including the Nogales Rotary and Lions clubs; the Greater Santa Cruz County Port Authority; and the Santa Cruz County Board of Realtors.

If all goes as planned, he says, the mine will be fully operational by 2027, at which time it will be manned by between 500 and 600 direct long-term employees. That does not include indirect jobs that potentially will be created in ancillary sectors, such as retail, suppliers, logistics, (trucking and rail), engineering, environmental and geological consulting. Every mineral mining job generates 2.8 additional jobs elsewhere in the surrounding economy, according to the national mining association, Minerals Make Life.

Currently, there are about 100 employees at Hermosa, 64 percent of which are local hires and the company has committed to hiring "as many local workers as possible," Risner said.

To that end, as part of a local workforce development, South32 is engaging with area schools, the Santa Cruz County Provisional College District, Arizona at Work and Pima JTED to provide training that ultimately would feed a pipeline for employment opportunities at the mine.

Zinc and manganese are not currently mined in the United States, Risner pointed out, noting that as we enter an era of alternative energy sources at a global level, the Hermosa mine would be positioned to help meet the demand for the 3 billion tons of minerals and metals that the International Energy Agency estimates are needed to implement wind, solar and other energy technologies.

Significant expenditures of the $1.7 billion would begin in the middle of 2023, according to the PFP. So far, since the Hermosa acquisition about four years ago, South32 has invested $356 million on operations expansion and exploration expenses. Total capital spending for fiscal year ending June 2022 is $115 million and includes $55 million for dewatering.

Surrounded by water

The minerals South32 intends to take out of the ground are surrounded by groundwater. In August, the Arizona Department of Environmental Quality said it was ready to approve an aquifer protection permit that would clear the way for the company to pump the water out to access to the mineral deposits, run it through a water treatment plant and then pump the effluent – as much as 6.5 million gallons per day – into Harshaw Creek, south of the Town of Patagonia.

The creek then runs in a north-northwest direction into the town, where it connects with Sonoita Creek.

Previously, from 2017-2020, the company spent about $30 million cleaning up water from the old Asarco Trench Mine that flowed through tons of tailings left behind by that operation, and which had leached metals into a nearby gulch. The company pumped the water through a treatment plant it built on site, then poured the tailings on top of a lined facility approved by the Arizona Department of Environmental Quality in a process called dry-stacking.

Carolyn Shafer is the board chair of the Patagonia Area Resource Alliance (PARA), a grassroots mining watchdog organization. She is also a member of the Hermosa Project's advisory panel and gave an update during the meeting in Patagonia about an ongoing appeal of the ADEQ aquifer protection permit.

In the appeal, PARA raised multiple concerns about the Hermosa project, including the drawdown of the aquifer in the area and the release of the water into Harshaw Creek. Among other demands, PARA has asked for baseline data of the streambed prior to the new discharge, monthly monitoring and the public release of compliance monitoring. The group also asked that the mining company build the locations where ADEQ can monitor the flow before the dewatering process begins.

Roadways and byways

Another topic that has stirred apprehension among some in the normally quiet community involves the traffic and routes proposed by South32 during both the early phases and long-term future of the project.

According to Risner, the initial traffic count will be about 30 trucks daily, increasing to 80 trucks per day, or three to four trucks per hour. He noted that estimate represents a four-percent increase in truck traffic on SR 82, based on a survey by the Arizona Department of Transportation in 2020.

Nonetheless, the region depends on tourism and there's concern in the community about the traffic adversely affecting scenic State Routes 82 and 83, the only highways that serve Eastern Santa Cruz County.

Risner said various routes and logistics strategies are under consideration to help minimize the impact on those highways.

When trucks do start rolling in 2027, they will likely travel from Harshaw Road to the Cross Creek Connector, where South32 bought private land to construct the road to link with SR 82. The trucks will head east on SR 82 to SR 83 at Sonoita, then northward to Interstate 10 to the Port of Tucson for rail transportation to smelters or other destinations.

As the mining operation ramps up to full capacity, the plan calls for upgrading Flux Canyon Road and routing the trucks through there to SR 82 then south to Nogales and into Mexico, where they will deliver at the port of Guaymas Sonora.

The company's road plans have also stirred controversy.

Shafer, the PARA board chair, previously told the NI that the route between Harshaw Road and the Cross Creek Connecter poses a threat to the area's wildlife corridor, in addition to creating noise and potential danger from an influx of traffic. She and a number of other local residents spoke out against new industrial road-building during a County Board of Supervisors meeting on Jan. 4. The supervisors’ lack of transparency in their dealings with South32 has exacerbated suspicions as well.

Meanwhile, the mining company has had preliminary discussions with county officials, Union Pacific and Andrew Jackson, the owner of large tracts of land in north Rio Rico, on another topic: reviving an idea that surfaced several years ago to build a rail freight intermodal facility from where mine concentrate and other products could be shipped.

Railroad transport notwithstanding, ultimately the goal is to make the operation carbon free, Risner said, adding that discussions are ongoing with area energy suppliers regarding renewable sources, as well as with Tesla which is producing electric freight trucks still in prototype phase that would ride quieter and leave a smaller carbon footprint.

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