The future of Mozambique’s Mozal Aluminium Smelter is under a cloud, with South32 set to write down the value of its majority stake due to unresolved power supply issues. After six years of unsuccessful negotiations for a new electricity agreement, the company now faces growing doubts over the smelter’s long-term viability.
Image credit: South32
The company said it will record an impairment charge in its 2025 financial results, citing rising uncertainty over the smelter’s operations beyond March 2026. Aluminium production is highly power-dependent, and without a new, affordable supply agreement in place, South32 is reassessing Mozal’s long-term value.
South32 stated, “We have been working with the government of Mozambique, HCB, and Eskom for the last six years to secure electricity supply to Mozal beyond March 2026. To date, Mozal has been unable to agree on an affordable electricity price tariff.”
Located near Maputo, Mozal Aluminium is a cornerstone of Mozambique’s industrial economy, contributing around 3 per cent of the country’s GDP and employing thousands. South32 holds a 63.7 per cent stake in the smelter, with the Industrial Development Corporation of South Africa owning 32.4 per cent, and the Mozambique government holding 3.9 per cent.
Mozal currently receives electricity primarily from Hidroeléctrica de Cahora Bassa (HCB), Mozambique’s state-owned hydroelectric provider. When HCB’s supply falls short, Eskom of South Africa steps in. The current agreement is set to expire in March 2026, and with no viable alternative secured, South32 has alerted investors to the potential risk of a major asset write-down.
The group said, “These factors have resulted in increased uncertainty regarding future electricity supply to Mozal. We are assessing the carrying value of Mozal given the increased uncertainty regarding future electricity supply and expect to recognise an impairment expense in our 2025 results. We will provide the quantum of the impairment expense when this assessment is completed.”
Compounding the concern, HCB recently warned that drought conditions could limit its ability to generate sufficient hydroelectric power, intensifying pressure on already strained negotiations.
Despite these challenges, South32 emphasised its ongoing efforts to find a solution:
The group said, “We will continue to engage with the Mozambique government, HCB, and Eskom to secure affordable electricity supply to operate Mozal beyond March 2026 and maintain its significant contribution to the economy of Mozambique.”
Production recovers, but risks remain
While the long-term outlook is uncertain, Mozal’s operational performance has recently improved. In the nine months ending March 2025, production rose 12 per cent year-on-year to 265,000 tonnes, aided by better plant conditions and recovery efforts following the October 2024 civil unrest.
According to South32, this rebound reflects actions taken to “mitigate the impacts of civil unrest” that had previously disrupted operations.
However, full-year FY2024 output fell 9 per cent to around 314,000 tonnes, highlighting ongoing pressure from power constraints and operational disruptions.
As the clock ticks toward the 2026 deadline, South32’s warning underscores the broader challenge of running energy-dependent assets in markets where long-term infrastructure certainty remains elusive.
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