The group noted that the move resulted from a botched negotiation to receive more affordable electricity after the current month.
According to a statement, the mining firm had been trying to negotiate supplies to the Mozal smelter located outside of Maputo, the country’s capital, for six years with the Mozambican government and Eskom Holdings SOC Ltd., the state-owned power utility in neighboring South Africa.
“This is not the outcome we wanted,” South32 Chief Executive Officer Graham Kerr said, disclosing that South32 placed the operation into a state of care and maintenance yesterday and that employee-separation costs will amount to approximately $60 million.
As seen on Bloomberg, Mozal gets its electricity supply from Eskom’s Cahora Bassa hydroelectric facility in Mozambique.
With the expiration of the initial special pricing agreements, energy-intensive companies in both nations are facing significant challenges to their viability.
Only 11 of South Africa’s 66 smelting factories remain operational due to rising electricity costs and erratic supplies.
South Africa’s Industrial Development Corp. owns 32.4% of Mozal, while the Mozambican government owns the remaining 63.7%.
Mozal is now in charge of selling the alumina, which it receives from the Worsley refinery in Australia, to third parties at index-linked pricing.
Then, the company expressed the same concern, noting that the Mozal plant would become unviable under a proposed new tariff set to replace its existing rate early in 2026.
Rob Jackson, South32’s vice president of supply, had revealed that negotiations were in a stalemate, and the most likely scenario is for Mozal to continue operating until the current electricity supply agreement expires, after which it would be placed on care and maintenance in March 2026.
The impact of the Mozal smelter closure
A closure would jeopardize the careers of 2,500 workers and contractors in a country already plagued by high youth unemployment, according to Bloomberg.
Aluminium was Mozambique’s third-largest export last year, accounting for $1.1 billion, all of which came from Mozal. South32 has already recorded a $372 million write-down related to the potential closure.
If Mozal closes, approximately 950 megawatts of power may be freed up.
