Alcoa to acquire South32's alumina and bauxite assets in deal worth over $5.6b

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Alcoa has agreed to acquire South32’s aluminium value-chain assets in Australia, Brazil and South Africa in a transaction with an implied enterprise value of up to USD 5.6 billion.

The binding conditional agreement will significantly expand Alcoa’s upstream aluminium business, adding bauxite mining, alumina refining and aluminium-smelting capacity across three continents. The deal remains subject to South32 shareholder and regulatory approvals and is targeted to close by June 29, 2027. 

Deal includes cash, shares and assumed liabilities

The USD 5.6 billion implied enterprise value comprises USD 3.1 billion in cash, about USD 1 billion in newly issued Alcoa shares, around USD 750 million in net debt and lease liabilities to be assumed by Alcoa, and up to USD 750 million in contingent cash payments.

The potential contingent payment will depend on agreed alumina and aluminium price targets through 2030. Alcoa will also assume rehabilitation provisions of about USD 1.2 billion associated with the assets. 

South32 plans to distribute about half of the Alcoa shares it receives, worth approximately USD 500 million at announcement, to eligible shareholders through an in-specie, fully franked special dividend after completion.

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Assets span Australia, Brazil and South Africa

Alcoa will acquire South32’s 86 per cent interest in Worsley Alumina in Western Australia, full ownership of the Hillside Aluminium smelter in South Africa, a 33 per cent interest in Brazil’s Mineração Rio do Norte bauxite mine, a 36 per cent interest in the Brazil Alumina refinery and a 40 per cent interest in the Brazil Aluminium smelter.

The Mineração Rio do Norte acquisition remains subject to pre-emptive rights held by the mine’s partners.

Mozal Aluminium in Mozambique is excluded from the Alcoa-South32 transaction. The smelter remains on care and maintenance, while South32 considers a possible divestment. 

Alcoa targets larger mine-to-metal platform

Alcoa said the acquisition would strengthen its position as a pure-play upstream aluminium producer by bringing additional bauxite, alumina and aluminium operations into its global portfolio.

Once completed, the combined business is expected to produce about 14.8 million tonnes of alumina and 3.2 million tonnes of aluminium a year. Alcoa expects about USD 900 million in net present value from operational synergies, including better integration of mining and refining operations in Western Australia. 

Alcoa chief executive William Oplinger said the assets were a strategic fit that would strengthen the company’s mine-to-metal operations and global supply chain.

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Hillside’s future in focus

The Hillside Aluminium smelter in Richards Bay is a major part of the transaction’s South African significance. It is the country’s only primary aluminium smelter and supplies liquid metal to domestic downstream producers.

Alcoa has said it intends to keep Hillside operating despite the operation’s energy challenges. Its long-term competitiveness will depend on a new electricity arrangement before the current Eskom supply agreement expires in 2031. South32 and Eskom have said they are in advanced discussions on a long-term power solution aimed at supporting a lower-carbon operating pathway. 

For South32, the sale is designed to simplify its portfolio and increase its focus on higher-margin base and precious metals assets. The company expects the reshaped business to generate about 85 per cent of pro-forma EBITDA from those commodities.

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