South32 to Pause Mozal Smelter as Power Talks Fail

Australia-based mining group South32 has announced plans to place the Mozal aluminium smelter in Mozambique under care and maintenance by March, following the collapse of negotiations to secure a new long-term electricity supply agreement. The decision underscores the growing operational challenges faced by energy-intensive mining and smelting assets across Africa, where power costs, supply reliability, and climate-related disruptions are increasingly shaping investment decisions.

Mozal, which is 63.7 percent owned by South32, represents one of the most significant aluminium smelting operations in the region and accounts for more than 29 percent of the company’s aluminium output in the 2025 financial year. Despite its strategic importance, prolonged disputes over power pricing with government authorities and electricity suppliers have rendered continued operations commercially unviable. The current power supply agreement is set to expire in March, and efforts to negotiate revised terms have failed to deliver an acceptable outcome for all parties.

A key factor exacerbating the situation has been reduced hydroelectric generation from Hidroeléctrica de Cahora Bassa, Mozambique’s primary power producer. Persistent drought conditions have constrained water levels at the Cahora Bassa dam, limiting electricity output and increasing reliance on alternative power sources. In the interim, Mozal has been receiving backup electricity from South Africa’s Eskom, but this arrangement has not provided the cost certainty or long-term stability required for sustained smelter operations.

As a result of the shutdown decision, South32 expects to incur a one-off cost of approximately $60 million related to placing the smelter into care and maintenance. In addition, the company has already flagged an impairment charge of $372 million against the Mozal asset, reflecting the deteriorating economic outlook for the operation. Investor sentiment reacted negatively to the announcement, with South32 shares closing about 2 percent lower following the update.

From a broader perspective, the Mozal decision highlights a critical structural issue confronting Africa’s mining and metals sector. Aluminium smelting is highly energy-intensive, and the viability of such operations depends heavily on access to reliable, affordable electricity. As climate variability affects hydropower generation and utilities struggle with aging infrastructure and financial constraints, mining companies may increasingly reconsider their exposure to jurisdictions with unstable energy systems. For Mozambique and other African economies seeking to industrialize and move up the mineral value chain, the pause at Mozal serves as a cautionary signal that power sector reform, climate resilience, and competitive energy pricing will be essential to retaining large-scale processing and manufacturing investments.

Mini-Glossary

• Care and maintenance: A temporary shutdown state where operations stop but assets are preserved for potential restart.
• Impairment: An accounting adjustment that reduces the recorded value of an asset when its expected future earnings decline.
• Hydroelectric output: Electricity generated from water-powered turbines at dams or rivers.
• Energy-intensive: Industrial processes that require very large amounts of electricity to operate.
• Power supply agreement: A long-term contract defining electricity pricing, volumes, and reliability terms between a supplier and a customer.

Editor: Vural Burç ÇAKIR