South32 takes $118 million hit as Mozambique’s Mozal smelter shuts down

South32, a globally diversified mining and metals company, expects to absorb $118 million in extraordinary costs after suspending operations at Mozambique’s Mozal aluminum smelter, underscoring how rising electricity prices are reshaping Africa’s metals industry.

The  company said the charges followed the decision to place Mozal—Mozambique’s largest industrial facility into care and maintenance on March 15, after failing to secure commercially viable electricity supplies.

Production at the smelter declined 30% during the fiscal year ended June 30, while sales fell 22%, reflecting the impact of the shutdown.

The company said the total charge includes $33 million in severance payments and contract termination costs, alongside $89 million in inventory, raw material and consumable write-downs linked to the suspension of operations.

Electricity pricing became the decisive factor

Electricity represents about one-third of Mozal’s operating costs, making power pricing critical to the smelter’s profitability.

South32 said it had sought an electricity tariff close to $51 per megawatt-hour, but negotiations failed after the only formal proposal came in at nearly $100 per megawatt-hour, a level the company described as economically unsustainable.

Mozal consumes around 950 megawatts of continuous baseload electricity, historically supplied by Hidroeléctrica de Cahora Bassa through South Africa’s Eskom transmission network. The long-term supply agreement expired in March, while drought conditions at the Cahora Bassa reservoir further tightened regional electricity availability.

Strategic review continues

South32, which owns 63.7 percent of Mozal, said it could restart production if electricity pricing becomes competitive and broader market conditions improve.

Headquartered in Perth, Australia, South32 is a globally diversified mining and metals company producing aluminum, copper, silver, zinc and manganese for international markets. 

The company operates major mining assets across Australia, Southern Africa and the Americas and is listed on both the Johannesburg Stock Exchange (JSE) and the Australian Securities Exchange (ASX).

Listed on the Johannesburg Stock Exchange (JSE) and the Australian Securities Exchange (ASX), South32 is a leading manganese producer through its operations in Australia, including GEMCO, and South Africa.

South32 is also among the world’s leading manganese producers through its Australian operations, including GEMCO, and its South African business.

While the company continues to evaluate long-term options for Mozal, the smelter remains under South32’s ownership, making its future dependent largely on affordable electricity and improving market conditions.