South32 operates Mozal Aluminum in Mozambique which is currently on care and maintenance. The smelter is not part of South32'a plans to sell its aluminium interests to US group Alcoa.
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South32 has announced the sale of its aluminium assets, including the Hillside Smelter in Richards Bay, to US-based Alcoa Corporation for up to $5.6bn, aiming to reposition itself as a leading base metals company.
The deal also marks Alcoa's first entry into the South Africa market. South32, the JSE and Australia listed global resources group which owns the Hillside smelter and the Mozal aluminium smelter in Mozambique, which is currently on care and maintenance, said Wednesday that Alcoa will also assume related rehabilitation provisions of $1.2bn.
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 deal, with divestment being considered, South32 said
."This transaction will unlock significant value for shareholders and repositions South32 as a leading upstream base metals focused company with high-margin assets and transformational growth,” said CEO and MD Graham Kerr, who also stepped down Wednesday in terms of a managed transition, while Matthew Daley took the reins as CEO and MD effective Wednesday.
William Oplinger, President and CEO of Alcoa said: “This is exactly the type of opportunity Alcoa is built to execute. These high-quality, globally relevant assets are a strong fit within our portfolio and align directly with our strengths as a leading pure-play upstream aluminium company. With our proven operating model and global capabilities, we are well positioned to enhance performance, unlock value, and support their long-term success.”
The transaction's implied enterprise value of up to $5.6bn includes $3.1bn in upfront cash consideration; $1.0bn in Alcoa shares priced at the 10-day volume weighted average price; $750 million in net debt and lease liabilities to be assumed by Alcoa; and up to $750m in contingent cash consideration, linked to alumina and aluminium prices to 2030.
Kerr said the sale should deliver significant upfront proceeds while retaining upside to commodity price strength through price-linked consideration.
Alcoa said the deal enhances its global aluminium supply at a time of accelerating demand for critical minerals and metals. It also reinforced Alcoa’s long-term commitment and investment in Australia and Brazil and establishes a new presence in South Africa.
“By strengthening industrial capacity in these regions, the transaction will support economic resilience and thousands of direct and indirect jobs across local communities,” the US group said in a statement.
"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 from base and precious metals,” said Daley.
He said on South32's immediate outook they expected to deliver about 55% production growth from the Taylor zinc, lead and silver project and Sierra Gorda's fourth copper mining grinding line expansion.
“Our deep pipeline of copper and zinc growth options in study and exploration phases provide additional upside,” said Daley.
Once the transaction completes, South32 shareholders would receive an initial return of about $500m as a special dividend. Additional shareholder returns would be considered following completion.
Alcoa said the deal was expected to generate synergies of about $90m through operational optimisation across complementary assets and application of best practices. Consolidating the life of asset planning across the Western Australia mining and refining operations provided a considerable portion of the anticipated synergies.
In addition, the transaction consolidated South32’s Brazilian joint venture interests in the Alumar alumina refinery and aluminium smelter, and provided Alcoa with new growth opportunities and an entry point into South Africa through a globally competitive aluminium smelter.
Daley said the transaction strengthened their balance sheet, enhanced their capacity to invest in high-returning growth projects and deliver shareholder returns.
Alcoa's Oplinger said this was a logical industry consolidation of like assets. The combined expertise and operating model were expected to enhance performance and increase cost competitiveness over time. Greater integration across bauxite, alumina, and aluminum improved security of supply and diversifies mine-to-metal routes, strengthening the group's ability to serve customers
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