South32 Limited (ASX:S32) is facing a world where it has to wrap up operations at its Mozal Aluminium smelter by as soon as March next year, with the company ‘not overly confident’ it can actually secure an electricity deal with the Government of the Republic of Mozambique beyond that date.
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The Australian aluminium producer is still holding dialogues with the government, as well as Eskom and Hidroeléctrica de Cahora Bassa representatives.
However, the engagements “do not provide confidence,” the company admitted today.
(None of this is overly surprising – I called as much earlier this year.)
The biggest issue is that the majority of Mozal’s electricity is generated by the Hidroeléctrica de Cahora Bassa hydro-electric power generator owned by the Mozambique gov’t; it’s been in use since Mozal fired up.
To that end, South32 is already standing down contractors and suppliers. The company will also stop pot relining in coming weeks to prep for a 2026 mothball.
“Without sufficient and affordable electricity supply, we expect the operation will be placed on care and maintenance by the end of the current agreement, in March 2026,” South32’s chief executive, Graham Kerr, said.
“We acknowledge the impact today’s announcement will have on our people and we will support them through this process. We’re proud of Mozal’s 25-year history and its economic and social contributions to the country.
“We are hopeful a workable solution emerges that enables Mozal to operate beyond March 2026, and maintain its substantial contribution to Mozambique.”
Under this shutdown shadow, HotCopper understands South32 is also expected to book a $568 million impairment charge under its FY25 financials, which includes around US$339M worth of property, plant, and equipment.
“This impairment reduces Mozal’s carrying value to US$86M, with the impairment to be excluded from FY25 underlying earnings,” Mr Kerr explained to shareholders.
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The market response has been interesting this morning, with S32 shares actually adding +0.33% at open to sell at $3.06 each. Whether that holds remains to be seen, but investors seem to have more confidence than the company.
Last year, South32 reported that Mozal turned over more than $800 million.
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