MAPUTO, Mar 16 – South32 Ltd. has placed its Mozal aluminum smelter in Mozambique on care and maintenance after failing to secure an affordable electricity supply beyond this month.
The mining company said it had been in discussions for six years with the Mozambican government and Eskom Holdings SOC Ltd., South Africa’s state owned power utility, over future electricity supply to the smelter. However, the negotiations did not produce an agreement that would allow the operation to continue under viable cost conditions.
The Mozal facility, located outside the capital city of Maputo, is one of the largest aluminum smelters in the southern hemisphere and a major industrial asset for Mozambique.
South32 Chief Executive Officer Graham Kerr said the outcome was not what the company had hoped for. The company confirmed that the plant was placed on care and maintenance and expects employee separation costs related to the decision to total about $60 million.
Mozal has long relied on electricity supplied by Eskom, which transmits power generated at Mozambique’s Cahora Bassa hydropower plant. However, energy intensive industries across the region are facing growing pressure as earlier preferential electricity pricing agreements expire and power costs rise.
In South Africa, similar pressures have led to a sharp reduction in smelting activity. Of the 66 smelting operations that previously operated in the country, only 11 are still active today.
South32 owns 63.7 percent of the Mozal smelter, while South Africa’s Industrial Development Corporation holds 32.4 percent. The remaining stake is owned by the Mozambican government.
The company also said alumina previously supplied from its Worsley refinery in Australia to Mozal will now be sold to third party customers under index linked pricing arrangements.
