South32 in $145m Alaska base metals exploration venture

Diversified miner South32 stepped up its exploration work, investing $145m (R2bn) in a joint venture searching for economically viable mineral deposits in northern Alaska.

Toronto-listed Trilogy Metals and South32, which has listings in Australia, the UK and SA, will each own half of the new joint-venture company.

Trilogy will contribute all its assets to the joint venture and South32 the $145m in cash, of which $87.5m will be retained in the new company towards funding exploration work. The balance of $57.5m will be loaned back to South32, which will then make payments to the joint venture as needed to advance exploration.

Trilogy has two advanced projects in proximity to each other in an area 470km northwest of Fairbanks.

The first prospect is called Arctic, which has copper, zinc and lead. There is also gold and silver in the deposit.

“Investing in exploration to create shareholder value is integral to our group’s strategy,” said South32 CEO Graham Kerr.

By setting up the joint venture, it would be “another important milestone as we reshape and improve our portfolio, by adding high-quality copper and base metals development options,” he said.

A technical report released in 2018 after a pre-feasibility study was done at Arctic noted the metals could be economically recovered. The cost of the project was estimated at $780m, with a two-year period to pay that capital back.

“The conclusions of test work conducted both in 2012 and 2017 indicate that the Arctic materials are well-suited to the production of high-quality copper and zinc concentrates using flotation techniques which are industry standard,” the report said.

“The lead concentrate is also shown to be rich in precious metals, which has some advantages in terms of marketability of this material.”

The resource estimate at Arctic shows indicated resources of 36-million tonnes, with 3% copper — which is a high number by industry standards around the world — 4.2% zinc and 0.73% of lead.

Additional exploration and technical work towards a definitive feasibility study could lower the cost of the project as well as increase the size of the resource base.

Based on the pre-feasibility study, the project has a post-tax net present value at an 8% discount rate of $1.4bn and an internal rate of return of 33%.

The second project, Bornite, is a copper and cobalt deposit and it less advanced than Arctic.

seccombea@businesslive.co.za