South32's (ASX: S32) Hermosa zinc-silver project in southern Arizona has received its final federal approval in just over two years, making it the first mining project to successfully navigate the US FAST-41 permitting process in a state where federal reviews have historically extended well beyond a decade.

The record of decision, issued in early July, marked the final regulatory milestone for the project, Pat Risner, president of South32 Hermosa, told The Northern Miner Podcast. Risner, a mining engineer who spent 26 years at BHP (NYSE, LSE, ASX: BHP) before relocating to Tucson in 2019 to assemble the project team, confirmed that no further approvals are required.

Arizona had already issued the state-level mine permit, enabling construction on private land to advance to approximately the halfway point. The federal approval governs infrastructure that crosses public land, including a high-voltage transmission line, a second access road, tailings storage facilities, and water discharge points.

"Getting a large complex mining project done in two years is a big accomplishment," Risner said. "I think it shows that FAST-41 is a very effective tool in getting these critical minerals projects permitted."

Hermosa contains one of the world's largest undeveloped zinc deposits, a battery-grade manganese deposit, and the emerging Peak copper discovery. Combined, these resources could sustain a 70-year operation yielding five federally designated critical minerals. Risner noted that the manganese deposit alone is large enough to meet entire US demand for battery-grade manganese, reinforcing the project's strategic significance as a benchmark for accelerated federal mine permitting. That significance is amplified by the fact that the US currently relies on imports for all of its manganese supply, according to US Geological Survey data, while domestic zinc mine production has declined in recent years even as demand from galvanizing and battery sectors grows.

Community Engagement and Environmental Design

Hermosa entered the FAST-41 program as a covered project in 2023 and received support through the Federal Permitting Improvement Steering Council that extended beyond a published permitting timetable. The steering council, created under the 2015 FAST Act to coordinate federal agencies on large infrastructure reviews, had previously been used primarily for transportation and energy projects. Risner explained that a dedicated US Forest Service project manager was assigned to coordinate across agencies and maintain the decision schedule, minimizing the delays that typically prolong environmental reviews.

South32 initiated engagement with local Indigenous communities in 2019, years ahead of when formal federal consultation was mandated. The company has worked individually with 12 tribes and anticipates signing a community protection and benefits agreement before year-end, incorporating environmental commitments that exceed standard permit requirements.

The project has been engineered to minimize its environmental footprint. The underground operation will employ dry-stack tailings technology and a filtration plant to recycle process water, cutting consumption to roughly half a gallon per pound of metal produced — compared with seven to 30 gallons at many historical base metal mines. Over its projected lifespan, the mine is expected to disturb approximately 750 acres, of which about 400 acres were already affected by historical mining activity.

Rising Construction Costs

The permitting achievement arrives amid inflationary pressures that have driven construction costs significantly above the estimates used when South32 approved the project in February 2024.

Risner reported that installed steel now costs approximately two-and-a-half times the original projections, while piping and concrete expenses have more than doubled. He attributed the increases to inflation, global conflicts, tariffs, and competition for materials driven by Arizona's rapidly expanding data centre and semiconductor industries. The cost pressures mirror a broader challenge across the US mining sector, where multiple critical mineral projects are advancing simultaneously under new federal incentives, intensifying competition for the same specialized labor and materials. Labour shortages and contractor performance issues have further inflated costs, pushing the total construction program beyond $2 billion, though most remaining work is now under contract.

Both production shafts are expected to reach their final depth before year-end. Underground mining is scheduled to commence in late 2026, with first production targeted for early 2028.

"We're estimating a 4-million-tonne gap between zinc supply and demand in less than 10 years," Risner said. "To put that into context, you'd have to build three Hermosas every year between now and then to close that gap."

Automation and Local Workforce

South32 is investing in automation to support both local hiring initiatives and long-term operational efficiency. The company is constructing a remote operating centre in nearby Nogales, where primary underground mining processes will be automated, semi-autonomous, or remotely controlled. The underground equipment fleet will be entirely battery-electric, which South32 describes as the mining industry's largest single order of such equipment this year.

The automation strategy underpins South32's commitment to fill at least 80% of the mine's projected 800 to 900 positions from the local workforce. Santa Cruz County ranks among Arizona's lowest in per-capita income, with unemployment near double digits. Remote equipment operation from Nogales will enable individuals without prior mining experience to train for technical roles, with the first class of electrician trainees set to graduate in August.