South32 tapped for US$166M funding for Arizona manganese plant

South32’s (LSE: S32; ASX: S32) Hermosa project in Arizona has been tapped for a U.S. government grant of up to US$166 million, part of the U.S. energy department’s plans to invest US$3 billion into the domestic battery manufacturing sector, announced Friday.

Located in the Patagonia Mountains, about 80 km southeast of Tucson, the Hermosa project is targeted to produce two federally designated critical minerals — zinc and manganese — from the Taylor sulphide and Clark oxide deposits,  respectively.

Taylor represents the project’s first stage, targeting first production in fiscal 2027. It has the potential to become one of the world’s largest, lowest-cost zinc producers, with a nameplate capacity of 4.3 million tonnes annually and unit costs of US$86 per tonne of ore processed, according to its feasibility study. Its initial mine life is estimated at 28 years.

Following the delivery of the feasibility study, the board of South32 approved an investment of US$2.16 billion to fund the construction of key infrastructure for the mine, which had already begun last year. Also last year, Hermosa became the first mining project added to the U.S.’ FAST-41 permitting process designed to promote faster development of clean energy assets.

The infrastructure at the zinc mine would support future potential development of other deposits at the site, including the battery-grade manganese deposit at Clark, which is subject to further study, South32 said. 

Manganese facility

The DOE funding, once negotiated and secured, would provide 30% of the cost of its proposed commercial-scale manganese production facility, the Australian miner said in a release on Friday.

While the facility’s location is yet to be determined, it will be in southern Arizona, South32 added. Construction for the manganese decline to enable bulk sampling through a demonstration plant and further underground exploration are continuing on schedule, with access targeted for the end of 2025.

The funding follows a US$20 million award to the Hermosa project earlier this year from the Department of Defense’s Defense Production Act Investment (DPAI) program to help accelerate the domestic production of battery-grade manganese.

“This project has the potential to provide a reliable, lower carbon and cost-effective domestic option for manganese products within the electric vehicle battery supply chain that currently relies entirely on foreign imports,” Pat Risner, president of South32 Hermosa said.

South32 says Hermosa could be scaled up as the only fully integrated source of battery-grade manganese (HPMSM) for EV battery chemistries sufficient to supply the emerging North American market. Based on a third-party life cycle assessment, production from its deposit at Hermosa is projected to be the lowest carbon impact project in manganese chemicals in North America.

The U.S. has not mined any manganese since the 1970s, and more than 95% of the current production of battery-grade manganese is currently in China, according to company estimates.