Image source: © 2025 Krish Capital Pty. Ltd.

Highlights

  • South32 shares fell 5% to AUD 2.95 following a concerning update on its Mozal Aluminium operation.

  • The company has been unable to secure an affordable electricity supply agreement beyond March 2026.

  • South32 is reviewing FY26 production guidance and expects an impairment charge in FY25 results.

South32 Ltd (ASX:S32) shares declined by 5% in morning trade on Monday, falling to AUD 2.95, after the company released a market update concerning its Mozal Aluminium smelter in Mozambique. The update raised concerns about the long-term electricity supply to the facility, prompting a sell-off by investors.

Mozal Aluminium is located near Maputo, Mozambique, and produces high-quality primary aluminium for both domestic and export markets. The smelter is a key contributor to the national economy, accounting for approximately 3% of Mozambique’s gross domestic product and employing thousands of workers through direct and contracted roles.

South32 currently holds a 63.7% stake in the operation, with the Industrial Development Corporation of South Africa Limited owning 32.4% and the Government of Mozambique holding 3.9%.

In a statement released to the ASX, South32 provided an update on its efforts to secure a new electricity supply agreement for Mozal, with the current agreement set to expire in March 2026. Historically, power has been supplied predominantly by Hidroelectrica de Cahora Bassa (HCB), a hydro-electric generator majority-owned by the Mozambican government. When HCB has been unable to meet demand, additional electricity has been sourced from South Africa's Eskom.

Despite negotiations spanning six years with HCB, Eskom, and the Mozambique government, South32 reported it has not been able to reach an agreement on an affordable electricity tariff beyond March 2026. The miner also noted that HCB recently flagged the potential impact of drought conditions on its generation capacity, heightening uncertainty over future power supply.

This uncertainty has prompted South32 to assess the carrying value of the Mozal operation. The company said it expects to recognise an impairment expense related to Mozal in its full-year FY25 results, which are due to be released in August. Furthermore, due to the ongoing situation, South32 is reviewing its FY26 production guidance for the smelter.

Despite these challenges, the company reaffirmed its commitment to engaging with relevant stakeholders in Mozambique, including HCB and Eskom, in an effort to secure a viable power supply arrangement that could support continued operations beyond March 2026.

As of today, South32 shares are down nearly 20% compared to the same period last year.