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South32 has exercised its pre-emptive
rights to acquire up to an additional 25% shareholding and related rights in
Mozal Aluminium, from Mitsubishi’s MCA Metals.
In doing so, the Sydney- and Johannesburg-listed
diversified mining company will match a headline purchase price of $250-million
to acquire the interest, taking South32’s ownership of the smelter up to 72.1%.
Increasing the shareholding lifts South32’s
group-wide annualised equity share of aluminium production by 15% – or 145 000
t – to 1 138 000 t.
The accretive transaction, with an
acquisition multiple of 3.6x on financial year 2021 earnings, will be funded
from cash on hand. The group’s net cash balance at the end of August 2021 was
$553-million.
“We have established a long operating track
record at the Mozal Aluminium smelter in Mozambique over the past 20 years.
During this time, we have formed strong relationships with our workforce, the
community, the Mozambican government and other key stakeholders,” said South32
CEO Graham Kerr in a release to Mining Weekly.
The smelter benefits from access to
hydroelectric power and key export markets into Europe and South32’s investment
in the AP3XLE energy efficiency technology is expected to further improve the
competitiveness of the smelter, which continues to operate at its technical
capacity.
The smelter is an important customer for
the alumina produced from South32’s Worsley Alumina refinery and the
transaction will further integrate that relationship in its supply chain.
“We are pleased to be able to increase our
shareholding on value accretive terms, with a transaction that we expect will
deliver a strong return for our shareholders. We are also working with our
partner at Alumar in Brazil to investigate a restart of the smelter using
renewable energy. Both investments are consistent with our strategy to increase
our exposure to the base metals required for the critical transition to a low
carbon future,” said Kerr.
Completion of the transaction is expected
following the satisfaction of customary conditions, with the transaction
consideration comprising:
a purchase price of $250-million based on
the acquisition of Mitsubishi’s 25% shareholding and related rights, which
would be adjusted downwards on a prorata basis should the Industrial
Development Corporation of South Africa trigger their pre-emptive rights;
joint profit sharing on South32's increased
shareholding with Mitsubishi for the period 1 July 2021 until completion of the
transaction; and
customary adjustments for working capital
and net debt.
South32’s Hillside aluminium smelter in
Richards Bay, KwaZulu-Natal, produces primary aluminium for export markets. To
support the development of the downstream aluminium industry in South Africa, a
portion of liquid metal is supplied to Isizinda Aluminium which, in turn,
supplies aluminium slab to Hulamin, a local company that produces products for
the domestic and export markets. Hillside’s capacity of 720 000 t a year makes
it the largest producer of primary aluminium in the southern hemisphere.
Aluminium is made by crushing and refining
bauxite - an aluminium ore - into a white alumina powder then smelting the
white alumina powder into aluminium metal.