Australian mining company South32 has announced a $372 million (23.9 billion meticais) impairment on the Mozal aluminium smelter in Mozambique, even admitting something once unthinkable: shutting down operations if it cannot secure competitively priced energy when the current supply contract ends in March 2026, Reuters reported on Thursday, August 14.
According to Reuters, South32’s CEO, Graham Kerr, stated that the proposal currently under discussion “would make cash flow negative every month, every day,” stressing that the company needs “a deal that is profitable over the cycle and capable of delivering returns to shareholders.”
Given this scenario, the company indicated it may place Mozal into care and maintenance mode, scaling back activities such as pot relining and limiting new investments. South32 shares fell more than 5% following the announcement.
Negotiations are ongoing between South32, the Government, Hidroeléctrica de Cahora Bassa (HCB) — the smelter’s main energy supplier — and South African provider Eskom, which currently steps in when HCB cannot meet demand.
Despite the closure threat, Graham Kerr said he expects “a viable solution that will allow Mozal to operate beyond March 2026 and maintain its substantial contribution to Mozambique.” The miner projects its share of Mozal’s output to drop to around 240,000 tonnes in fiscal year 2026, down from an expected 355,000 tonnes in 2025. In December last year, nationwide protests had already disrupted operations and affected production.
Mozal’s Huge Weight in the National Economy
Mozal, Mozambique’s largest aluminium smelter, remains one of the main pillars of the national economy, playing a central role in the industrial sector and in the country’s exports. In 2024, its share of GDP remained around 3%, cementing its strategic relevance. The company’s annual financial output exceeds 43 billion meticais, and its operations account for about 40% of national manufacturing output, reinforcing Mozal’s status as a flagship of Mozambican industry.
On the production side, the company maintained strong aluminium output, estimated at over 310,000 tonnes in 2024, with expectations to exceed 350,000 tonnes in 2025. This capacity places Mozal among the country’s largest industrial exporters, generating thousands of direct and indirect jobs and contributing significantly to the trade balance.
However, 2024 brought significant challenges. The company paid no dividends to the State due to negative results (losses), in contrast with the 839.8 million meticais paid in 2022 and 274 million in 2023. Nevertheless, according to the Government, Mozal still pays around one billion meticais annually in taxes.
Energy supply was another critical point in the company’s performance, marked by instability and negotiations over new contracts. Since energy is the main input for the smelter, these issues have affected both Mozal’s production performance and its fiscal contribution. This is currently at the heart of the dispute with the Government.
The project’s location and initial viability in the early 2000s were influenced by strategic incentives and international agreements, including subsidies on energy costs and tax breaks on VAT and import duties.
Mozal remains one of the main drivers of Mozambique’s industry and exports, making a significant contribution to GDP and employment. However, 2024 highlighted the limits of its direct fiscal impact and reignited debate over the country’s dependence on megaprojects with low local productive integration and limited social benefits.
Source: Diário Económico
