3 days ago
South32 prepares to shutter Mozal aluminium smelter in Mozambique as it struggles to secure power deal
South32 will start standing down contractors and prepare to shutter its Mozal aluminium plant in Mozambique, saying it has little confidence it can reach a deal to secure affordable electricity to run the operations.
The Perth-headquartered mixed metals miner revealed a month ago it could be forced to pull the plug after years of talks with the southern African nation's government to power the smelter beyond March 2026 failed to deliver an agreement.
The majority of electricity for Mozal has been generated in Mozambique by the Hidroeléctrica de Cahora Bassa, a hydro-electric power generator owned by the Mozambique government.
Under the agreement, electricity from Eskom is supplied to Mozal when HCB is unable to meet all of the operation's electricity requirements.
In an update to the market on Thursday, the miner said talks continued but there appeared little hope of a resolution.
'These engagements do not provide confidence that Mozal will secure sufficient and affordable electricity beyond March 2026,' it said.
'As a result, we will limit investment in Mozal, stopping pot relining and standing down associated contractors starting this month.
'Without access to sufficient and affordable electricity, we expect that Mozal will be placed on care and maintenance at the end of the current agreement.'
The smelter last financial year turned over more than $800 million.
South32 has a 63.7 per cent stake in the project, which produced 87,000 tonnes of aluminium in the March quarter.
The Industrial Development Corporation of South Africa holds 32.4 per cent and the Government of the Republic of Mozambique has a 3.9 per cent interest.
South32 said its current financial year share of production was forecast to be about 240,000t, reflecting fewer pots in operation as it stops pot relining and operations continuing only to March 2026.
It also expected to book a $US372m ($568m) charge in its FY25 financials, including $US339m of property, plant and equipment.
'The impairment reflects our assessment that the most likely scenario is for Mozal to operate until the end of the current electricity supply agreement and be placed on care and maintenance in March 2026,' South32 said.
'The impairment reduces Mozal's carrying value to $US68m, with the impairment to be excluded from FY25 underlying earnings, in accordance with our accounting policies.'
