South32 confirms Mozambique plant wind-down after profit beat

Australian diversified miner South32 reaffirmed it would put its Mozambique aluminum plant on care and maintenance next month after a drought hit power supply, as it posted a higher first-half profit that beat analysts’ estimates on Thursday.

The announcement came days after Mozambique’s Energy Minister Estevao Pale said “the government is doing everything that is required to make sure that the (Mozal) plant doesn’t go into maintenance.”

South32 last year took a $372 million impairment on the business because it had not been able to secure affordable power after March 2026, given the drought’s impact on Mozambique’s hydroelectric power utility. A reasonably priced deal with back-up provider Eskom, a South African utility, could not be reached.

“Unfortunately … the reality is we’re running out of things in the next week or so, of pitch and coke, and even if we found a power contract today, that could not be delivered to us in time to keep the plant running. So we’re definitely heading for care and maintenance,” South32’s outgoing CEO Graham Kerr said on an earnings call.

In Mozambique, the miner employs 2,000-plus people directly, another 2,000 contractors, and the plant accounts for a third of the country’s manufacturing jobs, he said.

Alumina that would have been used by the smelter will likely be routed to the Middle East, Kerr added.

Earnings rise, shares rally

Elsewhere, higher commodity prices overall helped to boost South32’s underlying earnings to $435 million for the half-year ended December 31, beating the Visible Alpha consensus estimate of $386.6 million and higher than the $375 million a year earlier. Shares rallied as much as 5%.

The first-half earnings gains were driven broadly by higher commodity prices, notably copper, silver and aluminum, lower controllable costs, and the restart of operations at its manganese division in Australia, the world’s biggest producer of manganese said.

Its manganese division in Australia swung to a profit with underlying earnings before interest and taxes of $66 million, up from a loss of $34 million from a year earlier, as the segment normalized production rates following the impacts of Tropical Cyclone Megan.

However, the miner trimmed production guidance for its Brazil aluminum segment to 135,000 metric tons from 160,000 tons this financial year and to 140,000 tons from 165,000 next year.

The smelter’s operator is implementing measures to improve stability and continue the ramp-up of all three potlines, South32 said.

South32, which was spun off from BHP Group in 2015, declared an interim dividend of 3.9 cents per share, compared with 3.4 cents in the previous year.

(By Melanie Burton and Sherin Sunny; Editing by Krishna Chandra Eluri and Jamie Freed)