South32 (ASX:S32) has announced it is reviewing its FY26 production guidance due to uncertainty surrounding the electricity supply to its Mozal aluminium smelter in Mozambique. The company anticipates recognising an unquantified impairment expense related to Mozal in its FY25 financial results. South32 is a diversified mining and metals company, producing commodities like aluminium, nickel, and silver. It operates in multiple countries across the globe.
The electricity supply agreement for Mozal is set to expire in March 2026. Historically, the smelter has primarily relied on electricity generated by Hidroelectrica de Cahora Bassa (HCB), a hydroelectric power generator majority-owned by the Mozambican government. Eskom provides supplemental electricity when HCB cannot meet Mozal’s full requirements.
South32 stated that it has been in discussions with the Mozambican government, HCB, and Eskom for six years to secure electricity supply beyond March 2026. However, Mozal has been unable to agree upon an affordable electricity price tariff. HCB has also indicated that drought conditions may impact its electricity generation capacity, potentially affecting its ability to supply sufficient power to Mozal.
Given the increasing uncertainty regarding future electricity supply, South32 is currently assessing the carrying value of Mozal. The company will provide further details on the quantum of the impairment expense once the assessment is complete. Due to the uncertainty of operating beyond March 2026, the FY26 production guidance for Mozal is under review.
