a good read in full
Updated Jan 17, 2022 – 7.18pm,first published at 6.07pm
South32 believes investors do not fully appreciate how attractive zinc prices will be in a carbon-constrained future, as it seeks to calm market concerns about rising costs on a $US1.7 billion ($2.35 billion) mine project in the US state of Arizona.
The land needed by South32 for its zinc, silver and lead mine named Taylor is smaller and less contentious than BHP and Rio’s Resolution Copper project. On Monday, South32 revealed Taylor would cost more to build than the previous owner expected in 2018. Once built, South32 said operating costs at Taylor would also be about 60 per cent higher than previously expected, prompting Barrenjoey analyst Glyn Lawcock to question whether the mine would be viable.
But South32 chief executive Graham Kerr said zinc prices would likely prove more attractive than most investors expected, and that would help underpin the viability of the Taylor mine.
“Zinc and silver are far more attractive in a world that needs ‘green’ metals, particularly if you believe in the 1.5 degree [global temperature rise] scenario where demand for those will significantly increase,” he said.
“It means that primary zinc demand will effectively be two times – it will go to 24 million tonnes.
“We expect to see supply fall by about 3.5 per cent by 2030 and that is driven by mine depletion, lower average grades, lower approval pathways and constraints to supply.
“We think it is something the market does not understand.”
Investors have typically looked at copper, nickel, lithium, cobalt and rare earths as the best ways to be exposed to the de-carbonisation trend through the mining sector, but Mr Kerr said investors should be adding zinc to the list.
“Everyone including ourselves likes the look of copper,” he said. “I think there is equally as strong a story in zinc, but the market is much more fragmented and when you think about where a lot of zinc supply comes from, I think they are areas of higher risk as well.
“There is going to be a strong demand for new material and the reality is for that to occur you are going to have to induce new projects and those projects are going to be more and more challenging.”
Zinc reached $US1.61 a pound on Monday, up from $US1.20 a pound a year ago.
Costings for the Taylor project were set by the Preliminary Economic Assessment (PEA) filed by US company Arizona Mining, which South32 bought in June 2018. Mr Kerr said Arizona Mining’s 2018 estimates were “promotional” in nature and South32 had always assumed the project would cost more than was suggested.
The biggest contributor to the higher cost estimate was the need to do more de-watering of the mine than previously expected.
“This is reflecting the latest market prices in the US and over the last couple of years, particularly the last six to twelve months, an increase in what some of those inflationary factors actually look like,” Mr Kerr said.
He said South32’s cost estimates assumed all of Taylor’s products would be exported to China and Europe, but costs could be lower if the products were sold to US customers.
“What we are seeing in the US is a push by Biden and the prior administration to get access to critical minerals, there is a huge opportunity in that for us,” Mr Kerr said.
cheers 
(20min delay)