South32 prepares to shutter Mozal aluminium | Australian Markets
South32 will begin standing down contractors and put together to shutter its Mozal aluminium plant in Mozambique, saying there may be little probability a deal may be reached to secure reasonably priced energy to run the operations.
The Perth-headquartered combined metals miner revealed a month in the past it may very well be pressured to pull the plug as a result of years of talks with the southern African nation’s authorities to keep the smelter working past March 2026 had failed to ship an settlement.
The majority of electrical energy for Mozal has been generated in Mozambique by Hidroeléctrica de Cahora Bassa, a hydro-electric energy generator owned by the federal government.
Under the settlement, electrical energy from Eskom is provided to Mozal when HCB is unable to meet all of the operation’s electrical energy necessities.
S32 famous in its March-quarter report that there are at present no viable different suppliers of renewable vitality on the required scale.
In an replace to the market on Thursday, the miner mentioned talks continued however “these engagements do not provide confidence that Mozal will secure sufficient and affordable electricity beyond March 2026”.
Shares within the $13 billion miner had plunged as a lot as 5.7 per cent shortly earlier than the close to $2.88, making it the day’s greatest loser on the S&P/ASX200.
S32 mentioned it could now restrict investment in Mozal, stop pot relining and begin standing down related contractors from this month. It expects Mozal to be positioned on care and upkeep when the present energy deal expires.
Chief govt Graham Kerr mentioned it was not viable for Mozal to operate underneath costs that will make it “internationally uncompetitive”.
“Without sufficient and affordable electricity supply, we expect the operation will be placed on care and maintenance at the end of the current agreement in March 2026,” Mr Kerr mentioned.
“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.
“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.”
The smelter final financial 12 months turned over more than $800 million.
S32 has a 63.7 per cent stake within the project, which produced 87,000 tonnes of aluminium within 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 curiosity.
S32 mentioned its present financial 12 months share of manufacturing was forecast to be about 240,000t, reflecting fewer pots in operation because it stops pot relining and operations persevering with solely to March subsequent 12 months.
It additionally anticipated to e book a $US372m ($568m) charge in its FY25 financials, together with a $US339m writedown of property, plant and gear.
“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,” S32 mentioned.
“The impairment reduces Mozal’s carrying value to $US68m, with the impairment to be excluded from FY25 underlying earnings, in accordance with our accounting policies.”
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