SOUTH32 said on Monday it was considering its options with respect to its 63.7% stake in the Mozal aluminium smelter in Mozambique amid speculation South Africa’s Industrial Development Corporation was weighing a buy-out of the facility.
“With Mozal Aluminium currently on care and maintenance, we are evaluating various options regarding the smelter and our interest in it,” a South32 spokesperson said in an email to Miningmx.
Mozal was shut in March after South32 failed to agree a new power supply agreement with Hidroeléctrica de Cahora Bassa (HCB) and Eskom. Mozal’s closure resulted in the loss of up to 4,000 jobs including contractors to Mozal. The shuttering of the business is estimated to account for a 3% hit to the country’s GDP.
Last week, Business Day reported the IDC was seeking advisers about the possibilty of applying its pre-emptive rights, or of introducing new partners. The bank’s third option was selling its 31.4% stake in Mozal.
Citing IDC’s head of corporate affairs Tshepo Ramodibe, News24 said the corporation was indeed assessing a range of options. He declined to comment further, said News24.
Outgoing South32 CEO Graham Kerr has said in the past it would be very difficult to restart the aluminium smelter once it was finally closed. This was why the group placed it on care and maintenance. “We wouldn’t be looking to go into full closure mode until the HCB power contract and future was understood,” he told Miningmx in February.
“Once they do come back online, they’ve got a lot of power and not a lot of offtakers. So this could become viable going forward,” he said. “The challenge, I would say, is that restarting a smelter after a number of years is very difficult. It’s not like a mine. So that’ll be a challenge.”
South32 impaired its investment in Mozal by $372m last year.
Putting Mozal on care and maintenance cost $60m including employee separation and contract termination. In addition, about $5m in monthly care and maintenance costs are currently being incurred by the partners – an attributable $1.55m (R25m) for the IDC, or R300m on an annualised basis.
The aluminium price has been a beneficiary from the Middle East conflict with cash contracts charging to their highest premium since 2007 in early June, Bloomberg News said. The region accounts for a tenth of total world aluminium supply.
