South32 warns of impairment as uncertainty grows over Mozal’s future operations
JSE-, ASX- and ADR-listed diversified miner South32 has informed shareholders that it expects to recognise an impairment expense in its 2025 financial year-end results, as a result of the reassessment of the carrying value of its Mozal aluminium smelter, in Mozambique, owing to increased uncertainty about future electricity supply.
Electricity is currently supplied to Mozal under an agreement that is due to expire in March next year. Historically, the majority of electricity for Mozal has been generated in Mozambique by majority State-owned hydro-electric power generator Hidroeléctrica de Cahora Bassa (HCB).
Under the current agreement, electricity is supplied to Mozal by South Africa’s State-owned power utility Eskom when HCB is unable to meet all of Mozal’s electricity requirements.
In a statement published on July 14, South32 said it had been working with the Mozambique government, HCB and Eskom for the past six years to secure electricity supply to Mozal beyond March 2026.
However, to date, Mozal has been unable to agree on an affordable electricity price tariff.
HCB has also recently indicated that drought conditions have the potential to impact its electricity generation and capacity to deliver sufficient hydro-electric power to Mozal. These factors have resulted in increased uncertainty regarding future electricity supply to the smelter.
Nonetheless, South32 said it would continue to engage with the Mozambique government, HCB and Eskom on securing affordable electricity supply to enable Mozal to operate beyond March 2026 and maintain its contribution to the Mozambique economy.
However, given the uncertainty of operating beyond March next year, South32 said the 2026 production guidance for Mozal was also under review.
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