Australian diversified miner South32 has confirmed that its Mozal aluminium smelter, in Mozambique, will be put into care and maintenance in March.

“As announced in December 2025, Mozal aluminium will transition to care and maintenance in March 2026 due to the inability to secure sufficient and affordable electricity supply. We are working closely with our people and stakeholders through this change,” CEO Graham Kerr said in a presentation for the six months ended December 31, 2025.

The group was unable to secure the about 940 MW of continuous power required for Mozal, with the current power contract ending in March. In December, the group ceased purchases of raw materials, being long lead items that are costly.

The drought has hindered Mozambique’s hydropower generation company Hidroeléctrica de Cahora Bassa’s (HCB’s) ability to provide future supply, despite several engagements with government, Kerr explained, speaking to Engineering News on February 12.

Just this week, newswire Reuters reported that Mozambique Mineral Resources and Energy Minister Estevao Pale said that the government was doing everything required to ensure that the smelter stayed open.

In terms of the current contract, South African utility Eskom would fill the gap when HCB was unable to supply power.

However, South32 was unable to come to an agreement with Eskom on a new contract, despite years of engagements, with Kerr indicating that what South32 considered an affordable contract, would be lossmaking to Eskom.

“We talked to them for a while. The price they could sell us the power at, which is effectively megaflex, would make Mozal totally unviable.”  

Kerr estimated that, over the past six months, HCB provided only about 10% of Mozal’s required power, leaving Eskom to supply about 90%. Therefore, Eskom would now have to find another buyer for this, he said, warning that this may have a negative impact on the utility’s earnings.

Kerr said South32 had been liaising with employees about the future, redundancy payments, incentives and other matters. About 4 000 direct jobs were expected to be impacted, comprised of people in the business and contractors, while about 20 000 indirect jobs would take a hit.

“It’s about 3.9% of the GDP of Mozambique. And for many of those people, unfortunately, there’s not a lot of jobs that sit close by where they can get re-employed,” he warned.

Kerr also pointed out the difficulties and cost implications of bringing the smelter back online.

“An aluminium smelter, once closed, is not like a mine where you can turn it on and off. All those pots would probably have to be refurbished and worked on, and the cost of relining a pot, is expensive.

“For anyone to do that, it’s going to cost a lot of money. They will probably lose all the technical capability from the workforce . . . Plus, every day you’re in care and maintenance, no matter what you do, the plant degrades more.”

South32 was cognisant of the long-term implications of this decision and informed shareholders about this likely outcome in about August last year, Kerr said.

“We impaired the majority of the asset value already, so we effectively wrote the plant and equipment down to zero. We have a little bit of working capital still in the business. We’ve already looked to place the aluminium products somewhere else, in terms of contingency of having no business," he explained.

The group expects to incur care and maintenance costs of $5-million a year to maintain basic security around Mozal.

Redundancy, separation and related costs are estimated at about $60-million.

Kerr said that undertaking a closure and rehab would run at about $119-million; however, it would have to liaise with the government regarding the timing of this.

“For us, it’s incredibly disappointing. We've got some amazing people there. They work really hard. And the reality is, the smelter, if you had an affordable power contract, could have been operating for another 20-plus years.”

INTERIM PERFORMANCE

South32 delivered underlying earnings before interest, taxes, depreciation and amortisation of $1.1-billion for the six months ended December 31.                   

It announced a fully-franked interim ordinary dividend of $0.39 apiece ($175-million) for the period.

“Reflecting our strong financial position and positive outlook for the business, we have also increased our capital management programme by $100-million to $2.6-billion, with $209-million remaining to be returned to shareholders,” Kerr averred.

Full-year 2026 production and operating unit cost guidance was unchanged across the operated businesses, with the group maintaining disciplined focus on delivering safe and reliable operating performance, he explained.

“We’re continuing work to grow our base metals production and unlock value across multiple development horizons,” Kerr pointed out.

At the Hermosa project in Arizona, South32 advanced construction of its large-scale, long-life Taylor zinc/lead/silver project.

“We’re also continuing work to unlock value from Hermosa’s broader land package, today releasing further positive exploration drilling results from the Peake copper deposit,” Kerr highlighted.

At the Cannington project in Australia, South32 announced a 28% increase in the underground ore reserve, while also targeting further potential growth through both underground and openpit development options.

The Sierra Gorda project, in Chile, progressed options to grow future copper production, advancing studies for the fourth grinding line project, and defining an exploration target at Catabela Northeast which highlights the potential for future mine life extension.