South32 to shut down Mozal smelter in Mozambique over failed electricity tariff agreement

• South32 has confirmed that they will begin a progressive shut down of Mozal smelter in Mozambique leading up to March 2026 after failing to agree to a viable electricity tariff renewal with the Government of the Republic of Mozambique, Hidroeléctrica de Cahora Bassa (HCB) and Eskom.

South32 said that ongoing engagements with the three parties do not provide confidence that Mozal will secure sufficient and affordable electricity beyond March 2026 when the current agreement expires.

“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,” said the mining giant in a statement.

Mozal’s FY26 production is expected to be approximately 240kt (South32 share) reflecting fewer pots in operation as we stop pot relining and operations continuing only to March 2026.

“We have completed our previously announced carrying value assessment of Mozal given the increased uncertainty regarding future electricity supply. As a result, we will recognise an impairment of US$372M (same amount post tax) for Mozal with our FY25 financial results, which includes US$339M of property, plant and equipment, US$7M of intangible assets and US$26M of raw materials and consumables. 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. The impairment reduces Mozal’s carrying value to US$68M, with the impairment to be excluded from FY25 Underlying earnings, in accordance with our accounting policies,” the company added.

Mozal Aluminium operation is the largest industrial employer in Mozambique employing around 1150 people and is made up of a smelter and transport infrastructure, located 20km west of the capital city Maputo.

South32 holds a 63.7 per cent share of Mozal Aluminium, following the acquisition of an additional 16.6 per cent share in May 2022. The Industrial Development Corporation of South Africa Limited holds 32.4 per cent, and the Government of the Republic of Mozambique holds 3.9 per cent (through preference shares).

“It is not viable for Mozal to operate under the tariff indicated. The price expectations of counterparties would make Mozal internationally uncompetitive. With care and maintenance, the most likely scenario, it is no longer appropriate to continue activities such as pot relining and we will limit further investment in Mozal,” said South32 Chief Executive Officer, Graham Kerr.

Author: Bryan Groenendaal