Higher energy costs at South32's Mozal Aluminium could slash value by $600m: RBC
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More news: South32 shares continued to slide in afternoon trading after the miner warned that it is struggling to secure a new electricity supply agreement at its Mozal Aluminium smelter in Mozambique.
Shares were down 5% to $2.96 at 3pm AEST.
RBC Capital Markets analyst Kaan Peker said the most likely outcome is that South32 will be forced to agree higher energy costs at Mozal. He believes this could wipe between $500 million and $600 million off the project's net asset value, which RBC estimates to be $1.6 billion.
In a worse case scenario, Peker said, South32 could curtail production at Mozal and potentially sell its excess alumina into the spot market, representing $200 million of residual value and a net reduction in asset value of $1.4 billion.
South32 shares slide on Mozal Aluminium uncertainty
More news: South32 shares slipped in morning trade after the miner flagged an unquantified impairment on its Mozal Aluminium smelter in Mozambique, and put the project's FY26 guidance under review.
Shares were down 4% to $2.99 at 11am AEST, paring gains of around 23% since early April.
South32 flags Mozal Aluminum impairment, puts guidance under review
The news: Diversified miner South32 has warned of "increased uncertainty" over the future of operations at its Mozal Aluminium smelter in Mozambique, as it assesses the size of its impairment expense on this year's earnings.
The numbers: South32, which owns a 63.7% holding in Mozal, said the project has been unable to agree on an affordable electricity price tariff beyond March 2026.
The context: Hidroeléctrica de Cahora Bassa (HCB) — a hydro-electric power generator majority owned by the Mozambique government — currently supplies most of the project's electricity. However, HCB has recently indicated that drought conditions may impact future supply.
South32 said it is continuing to engage with the government and HCB on securing affordable electricity supply to help Mozal operate beyond March.
The miner is assessing the carrying value on Mozal and expects to recognise an impairment expense in its FY25 results. It has also put FY26 production guidance for Mozal under review.
The source: ASX
