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The Industrial Development Corporation (IDC) is weighing options to buy South32’s majority stake in Mozambique-based Mozal Aluminium and revive the smelter, which was placed in care and maintenance in March after it failed to strike a tariff relief deal with Eskom.Business Day can exclusively reveal that the IDC is engaging the services of transaction advisers to do due diligence on a possible deal, with the state-owned outfit keeping all options open as it looks to salvage the smelter, which accounts for about 3% of Mozambique’s GDP. The IDC has a 31.4% stake in Mozal, while Australia-headquartered South32 holds a controlling 63.7% stake and the government holds a 3.9% stake through preference shares.The facility, about 20km west of Maputo, was mothballed after South32 said energy costs were strangling the business.The decision came after failed negotiations in 2025 with Eskom, the Mozambican government, and Mozambique’s leading hydropower group, Hidroeléctrica de Cahora Bassa, over a new power purchase agreement for 2026.The IDC has asked the advisers to look into three options on what to do with its big exposure to Mozal.The first option the advisers will delve into is the possibility of the IDC acquiring South32’s shares either by exercising its pre-emptive rights or by making an offer to purchase the shares. The advisers will also consider the possibility of facilitating an alternative shareholding structure, which might involve partnering with other interested parties to take ownership of the smelter.The last option on the table is the IDC selling down its stake or exiting the investment — an option that will see it take a knock from the investment it has already made in the business. The advisers will assess commercial merits, risks and transaction terms of acquiring Mozal and resuscitating operations and identify probable strategic equity partners for potential collaboration in the acquisition and long-term operation of Mozal.The advisers will also be expected to put a price tag on the asset at the conclusion of the due diligence exercise.The prerequisite for the IDC to proceed with any transaction, Business Day understands, is for a commercially viable and financially sustainable business plan for the resuscitation of Mozal operations to be put on the table for its consideration.Smelters, unlike mines, require much money to resume operations. Mozal, backed by a $2bn investment, has been an integral part of Mozambique’s economy for the past 25 years, supporting more than 20,000 jobs.Aluminium manufacturing requires much electricity, with Mozal consuming a constant 950MW of power, accounting for a big proportion of production costs.At the time of putting the facility in care and maintenance, South32’s leadership said the electricity tariff Mozal was being asked to pay would have made it one of the world’s most expensive aluminium smelters to operate.South32 was spun off from BHP Billiton in 2015. The company has a secondary listing on the JSE, where it is valued at R230bn, with the stock up nearly 50% over the past year.The freeze on operations is also expected to leave a huge dent in Eskom’s finances, with the facility said to gobble up about R5bn of electricity annually, money that goes into Eskom’s coffers.Eskom, in its SO₂ emission dispatch strategy released earlier this year, acknowledged the impact on sales if Mozal ceases operations.“The energy forecast indicates the decline in energy sales over time, which follows the previous year’s trend. The sharp decline in FY2031 is based on the projected Mozal contract being extended until March 2030. However, if Mozal’s contract is not extended, the decline may be realised earlier in FY2027,” the document reads.IDC is alive to the electricity costs and their impact on the business, having asked the transaction advisers to look into this aspect as well before presenting final recommendations on which course the entity must take.“This development [care and maintenance] reflects the structural unviability of the smelter under prevailing electricity pricing and contracting conditions, rather than technical or market failure. Accordingly, any decision to resume operations will have to be accompanied by a long-term affordable and sustainable electricity supply solution,” reads the terms of engagement issued to transaction advisers.“It is against this background that IDC requires independent, comprehensive assessment and investment-grade advice to determine whether Mozal can be returned to sustainable operations and an affordable and sustainable electricity supply solution can be secured.”The consultants will also be expected to review existing power-supply arrangements and termination risks. The review will include interim supply arrangements, self-generation, wheeling, renewables and hybrid solutions, and a proposed gas-to-power solution adjacent to Mozal.The advisers will then have to evaluate the capital requirements, timelines, regulatory approvals, and pricing implications of each power supply option.The IDC and South32 did not respond to requests for comment.
