South32 has placed Mozal aluminium under care and maintenance on March 15 after failing to secure affordable power supply for the Mozambique-based smelter.
The smelter was placed under maintenance after six years of negotiations with the government of Mozambique to secure sufficient, affordable-priced electricity beyond March.
South32 CEO Graham Kerr said: “While this is not the outcome we wanted, we are proud of the history and significant contribution Mozal has made to the local community and the Mozambican economy in its 25 years of operation.”
The move ends 25 years of aluminium production and triggers one-off costs of approximately US$60 million (AU$85.5 million), including employee separation costs and termination of contracting arrangements. Ongoing annual care and maintenance costs are approximately US$5 million (AU$7.1 million).
The alumina supplied from the Worsley alumina refinery to Mozal will be sold to third-party customers at index-linked prices.
South32 explained that Mozal consistently consumes 950 megawatts of power, accounting for a significant proportion of production costs.
Aluminium smelters rely on low-cost power to remain a viable business, and Mozal’s ability to operate is dependent on its ability to secure sufficient and competitively priced electricity supply.
However, the recent drought in the Zambesi Basin has impacted the amount of electricity available from Mozambique’s hydro-electric power generator, Hidroeléctrica de Cahora Bassa (HCB), from which Mozal has previously sourced most of its electricity.
Obtaining Eskom power was a condition of any new deal, yet South32 could not agree to an electricity price that would keep the smelter competitive on the global market.
