Power deal threatens future of South32's Mozal aluminium smelter in Mozambique
Years of talks with the southern African nation's government to power the smelter beyond March 2026 have so far failed to yield a deal for the project, which last financial year turned over more than $800 million.
South32 has a 63.7 per cent stake in Mozal, 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 has kept full-year guidance unchanged at 350,000t.
But on Monday it said guidance for FY26 was now under review because of the uncertainty over a new contract and warned it would book an associated impairment against the value of Mozal in this year's accounts.
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 Mozal's electricity requirements.
South32 said it had been working with the government, HCB and Eskom for the past six years to secure electricity supply once the current contract expires.
'To date, Mozal has been unable to agree an affordable electricity price tariff,' it said.
'HCB has also recently indicated that drought conditions have the potential to impact its electricity generation and capacity to deliver sufficient hydro-electric power to Mozal. These factors have resulted in increased uncertainty regarding future electricity supply to Mozal.
'We are continuing to engage with the Government of the Republic of Mozambique, HCB and Eskom on securing affordable electricity supply to enable Mozal to operate beyond March 2026 and maintain its substantial contribution to the economy of Mozambique.'
In its March-quarter report, South32 said there are currently no viable alternative suppliers of renewable energy at the required scale.
Mozal generated $812m of revenue for South32 for the 2024 financial year, but slumped to an underlying earnings loss of $30m.
The miner last year had to content with the impact of civil unrest in the country following a presidential election in October that sparked protests over claims the result was rigged.
South32 also owns the Hillside aluminium smelter in neighbouring South Africa, which is on track to produce 720,000t this financial year.
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