SOUTH32 said it had drawn a blank with the Mozambican government regarding the future of the 370,000 tons a year Mozal aluminium smelter.
The miner announced in August it would mothball the smelter in the absence of a new power deal with the state-owned utility, Hidroeléctrica de Cahora Bassa. South32 CEO Graham Kerr added there was no way back for the facility once it was shut.
“The hard thing is that with a smelter, once you put a smelter in care and maintenance, whilst it is possible to restart, it’s super expensive,” Kerr said in an interview. “It’s probably a three- to four-year journey.
“My belief is: if you shut Mozal, you never start it again. It’s just too hard.” An estimated 5,200 jobs could be affected if the smelter closes as well as hundreds of suppliers, many of them South African.
Commenting in the group’s first quarter production update on Tuesday, Kerr said that while the company was continuing to actively engage with HCB, as well as Eskom, the South African power company, “negotiations have not progressed”.
“Without the required electricity supply, we expect that Mozal Aluminium will be placed on care and maintenance at the end of the current agreement,” said Kerr. This would be in March next year which is when the current power deal ends.
South32 booked a $372m impairment on Mozal against its financial 2025 results. It stopped pot relining programme in August as a result of the uncertainty.
Discussions between HCB and South32 had been under way for six years. The current arrangement is for about 950MW, predominantly from Cahora Bassa, at a rate that inflates with Mozambique’s national PPI.
Mozambique’s offer, however, was to supply only 350MW – owing to capacity problems due to a two-year drought – for double the current tariff. This was a proposition Kerr said South32 could not absorb. “If you think about the cost structure of a smelter, it’s about a third electricity. If someone’s going to come in and roughly double your electricity price, you just don’t have a business,” he said in August.
Mozal operated near its maximum technical capacity in the first quarter in which production increaed by 3% to 93,000 tons quarter-on-quarter, said South32.
Strong quarter
Despite the stalemate in Mozambique, South32 produced a strong showing for the quarter, delivering stronger-than-expected manganese production following a recovery at its Australian operations. Shares in the world’s largest manganese producer jumped as much as 6.3% to A$3.315, their highest level since late March, according to a report by Reuters.
The diversified miner implemented a successful operational recovery plan at its Australian manganese segment and increased export shipments after Tropical Cyclone Megan damaged infrastructure last year.
The unit completed an insurance settlement related to the cyclone’s impact, securing an additional $153m under external insurance recoveries, bringing the approved total to $503m. Analysts at Jefferies noted the additional cost exceeded their estimates but highlighted the overall strong performance across core assets.
The company reported a 135% rise in quarterly manganese production to 1.4 million wet metric tons, beating Visible Alpha’s consensus estimate of 1.23Mt. The domestic manganese division produced 854,000t during the quarter, compared with nil output last year.
South African manganese operations produced 551,000t in the first quarter, below the prior year’s production.
For fiscal 2026, the company maintained its production forecasts across all operations. “Looking ahead, we remain focused on maintaining our operating momentum and capitalising on strengthening market conditions in base metals,” said Kerr.
