Mozal Aluminium smelter's future uncertain as South32 struggles with electricity negotiations

South32 will report an impairment from its Mozal Aluminium Smelter in Mozambique due to an inability to negotiate a new electricity agreement over the past six-years.

The announcement appeared to send South32’s share price reeling Monday morning, with its price down by 4.43% to R34.92. A year ago, the share was trading at R44.75.

Mozal Aluminium is located near Maputo, Mozambique. The smelter produces high-quality primary aluminium for domestic and export markets. Mozal contributes approximately 3% of Mozambique’s GDP and is a significant industrial employer, providing jobs for thousands of employees and contractors.

South32 said in a statement that its production guidance from the plant was under review, and an associated impairment expense would be recognised in the group’s 2025 financial results.

Electricity is supplied to Mozal under an agreement that expires in March 2026. Historically, the majority of electricity for Mozal has been generated in Mozambique by the hydro-electric power generator, Hidroeléctrica de Cahora Bassa (HCB), 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 requirements.

“We have been working with the government of Mozambique, HCB, and Eskom for the last six years to secure electricity supply to Mozal beyond March 2026. To date, Mozal has been unable to agree on an affordable electricity price tariff,” South32 said.

HCB had also recently indicated that drought conditions had 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,” the group said.

“We are assessing the carrying value of Mozal given the increased uncertainty regarding future electricity supply and expect to recognise an impairment expense in our 2025 results. We will provide the quantum of the impairment expense when this assessment is completed,” the group said.

It said they would continue to engage with the Mozambique government, HCB, and Eskom to secure affordable electricity supply to operate Mozal beyond March 2026 and maintain its significant contribution to the economy of Mozambique.

South32 holds 63.7% of Mozal, the Industrial Development Corporation of South Africa holds 32.4%, and the Mozambique government holds 3.9%.

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