South32 operates Mozal Aluminum in Mozambique which is currently on care and maintenance. The smelter was not part of South32'a plans to sell its aluminium businesses to US group Alcoa.
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South32 plans to sell its aluminium value chain assets to US-based Alcoa Corporation for an implied enterprise value of up to $5,6 billion (R92,05 billion).
South32, the JSE and Australia-listed global resources group which owns the Hillside aluminium smelter in Richards Bay and the Mozal aluminium smelter in Mozambique (which is currently on care and maintenance), announced on Wednesday that Alcoa will also assume related rehabilitation provisions of $1,2 billion.
Alcoa will acquire South32's interests in Worsley Alumina (86%), Hillside Aluminium (100%), MRN bauxite (33%), Brazil Alumina refinery (36%), and Brazil Aluminium smelter (40%) under the transaction.
Mozal Aluminium is excluded from the transaction and remains on care and maintenance, with divestment under active consideration.
The implied enterprise value of up to $5,6bn includes $3,1bn in cash; $1bn in Alcoa shares priced at the 10-day average price; $750 million in net debt and lease liabilities to be assumed by Alcoa; and $750m in contingent cash consideration, linked to alumina and aluminium prices until 2030.
IN addition, effective today, Matthew Daley has commenced as CEO and MD of South32. This marks the completion of the previously announced CEO transition plan.
Graham Kerr stepped down as CEO and MD on June 30 and will continue as a strategic advisor to support engagements related to the transaction.
"This transaction will unlock significant value for shareholders and reposition South32 as a leading upstream base metals-focused company with high-margin assets and transformational growth,” said Kerr in a statement.
He stated that the sale of the aluminium value chain assets would deliver significant upfront proceeds while retaining upside to commodity price strength through price-linked consideration.
“This transaction sees us unlock and capture our share of material synergies from combining our respective alumina businesses in Western Australia," he added.
Daley said: "Following completion, our portfolio will be focused on high-quality, long-life assets leveraged to attractive market fundamentals, with about 85% of pro forma EBITDA (earnings before inrerest tax depreciation and amortisation) from base and precious metals.”
“From this strong platform, our peer-leading, funded growth profile is expected to deliver about 55% production growth from our Taylor project and Sierra Gorda's fourth grinding line expansion. Our deep pipeline of copper and zinc growth options in study and exploration phases provides additional upside,” said Daley.
Daley said the transaction strengthens their balance sheet, enhances their capacity to invest in high-returning growth projects, and delivers shareholder returns.
“Following completion, an initial return of about $500m will be delivered to South32 shareholders through an in-specie distribution of half the...consideration, as a special dividend.” Additional shareholder returns will be considered following completion.
"Under Alcoa's ownership, the assets will be part of a global aluminium value chain business. Together with Alcoa, we are committed to working closely with our people, communities, government, and other stakeholders to support a successful ownership transition."
"The sale of our aluminium value chain assets to Alcoa is a step change for South32 that accelerates the delivery of our strategy and supports sustainable growth over the long term. The board is confident this transaction will provide enduring value for shareholders,” the group said.
The deal creates an upstream base metals-focused company with transformational growth. It will be leveraged to structurally attractive commodities, with 85% of EBITDA from copper, zinc, silver, and lead.
Projects in construction or approved for development are expected to grow production volumes by 55%. Life extension projects, development options, and exploration offer further upside.
The deal would also create a simpler, focused portfolio, enabling a leaner support model. It would also reduce South32’s overheads by $125m a year, with full benefits to be realised in the 2029 financial year.
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