Exclusive: South32 CEO Sees “Basin” Scale Opportunity in
Arizona Mining

Issue 184, July 2017

Arizona Mining's Taylor zinc discovery in the US has “basin” scale potential, Graham Kerr, the chief executive of Perth-based mining giant South32, told Global Mining Observer in an interview at Lords cricket ground on Thursday.

South32 paid around $80m for a 15 per cent stake in Arizona Mining in May, sending its shares sharply higher. “Certainly we believe there's an opportunity there to actually develop a new basin over time,” Graham Kerr said, in his first public comments on the investment. “We've got a 15 per cent stake today and we'd like to work with the management team there to see if we can help them fulfil its potential.”

The Taylor discovery was at the centre of a controversy over manganese levels in its zinc concentrate at the end of last year, but Kerr said that was not an issue for South32, which is one of the world's largest manganese producers. “We don't see it as a big obstacle to be perfectly honest and we'll work through it over time.”

It is the first time that South32 has made an equity investment since it was spun-out of BHP Billiton two years ago. “It's our first equity stake,” Kerr said, “everything's new but we thought this was a great opportunity.”

South32's chief financial officer Brendan Harris has previously told the Financial Review that Taylor is “arguably one of the best discoveries in the industry since the turn of the century.” Kerr is meanwhile sitting on one of the strongest balance sheets in mining, reporting cash levels of $1.5bn for the quarter ending March.

South32, which is named after a line of latitude linking the group's mines in Australia and South Africa, also boasts a A$14bn ($11bn) market cap. Its share price has surged with metal prices, more than tripling since January last year to £1.59 on Friday. Arizona last traded in Toronto at C$2.85, valuing the company at C$859m ($662m), up 16 per cent since South32 bought its stake at C$2.45.

Kerr did not rule out a full takeover of Arizona Mining, as South32 aims to gradually transition its portfolio away from coal and towards base metals. “The project's still got a way to go. The 15 per cent gives us no right to do anything more than anyone else. We'll continue to work with the management team and again, see what the potential of the resource is and go from there.”

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