South32 Ltd (ASX: S32) shares are falling on Monday morning.
In early trade, the mining giant's shares are down 1% to $3.16.
Image source: Getty Images
Why are South32 shares falling?
Investors have been selling the diversified miner's shares this morning despite the release of a positive announcement. It appears that broad market weakness has offset the good news.
According to the release, the Hermosa project in Arizona, United States, has been selected for a US$166 million award negotiation from the US Department of Energy (DOE).
Management notes that Hermosa's Clark deposit is currently the only advanced project in the United States with a clear pathway to produce battery-grade manganese from locally sourced ore for the North American electric vehicle battery market.
The grant from the DOE's Battery Materials Processing and Battery Manufacturing program would support the potential development of a commercial-scale manganese production facility.
This could be a big boost to the project. It notes that on a cost-share basis and subject to final negotiation, the full grant would contribute 30% of the cost of the manganese production facility.
'Significant opportunity'
While it remains subject to further study, management believes the construction of the facility and the development of Clark represents a "significant opportunity" to establish a North American supply chain of battery-grade manganese in a phased approach in line with market development.
South32 is engaging with potential customers to advance product qualifications for battery manufacturing. This includes potential agreements for future supply following the signing of multiple non-binding memorandums of understanding.
Construction of a decline at Clark to enable bulk sampling through a demonstration plant and further underground exploration is now underway.
Management commentary
South32's CEO, Graham Kerr, was pleased with the news. He said:
We welcome this grant from the US Department of Energy, which recognises Clark's potential to supply battery-grade manganese to the emerging North American market. Hermosa represents a regional scale project with the potential to produce commodities critical to a low-carbon future across multiple deposits for decades to come.
Following final investment approval earlier in the year, construction of our large-scale, long-life Taylor zinc-lead-silver project is progressing as planned. Our investment in Taylor will unlock value for future growth options, including Clark, by establishing significant shared infrastructure. In addition to Taylor and Clark, we are continuing further exploration programs at Peake to test the potential for a continuous copper system connecting Peake and Taylor.
Following today's decline, South32 shares are now down 5% over the last 12 months.
