The South32 Ltd (ASX: S32) share price is currently down by 5% after giving an update about Mozal Aluminium.

South32 is a diversified ASX mining share. Mozal Aluminium is located near Maputo, Mozambique. The smelter produces aluminium for domestic and export markets. South32 holds 63.7% of Mozal, another partner owns 32.4% and the Government of the Republic of Mozambique holds 3.9%.

Electricity update

The company provided an update about its work to secure a new electricity supply agreement for the Mozal Aluminium smelter and a related impairment expense for the FY25 period.

The electricity supplied to Mozal through an agreement is due to expire in March 2026, with the majority of the electricity generated in Mozambique coming from a hydro-electric power generator called Hidroelectrica de Cahora Bassa (HCB). HCB is majority-owned by the government of Mozambique.

Under the agreement, electricity from Eskon is supplied to Mozal when HCB is unable to meet all of Mozal’s electricity needs.

Despite working with the Mozambique government, HCB and Eskon for six years to secure electricity, Mozal hasn’t been able to agree an affordable electricity price tariff.

HCB has also recently indicated that drought conditions have the potential to impact its electricity generation and capacity to deliver sufficient hydropower to Mozal, so future electricity supply for Mozal is uncertain.

It’s still working on trying to secure affordable electricity supply so it can operate beyond March 2026 and maintain its “substantial contribution to the economy of Mozambique.”

What are the effects of this?

South32 said it’s assessing the value of Mozal on its balance sheet because of the increased uncertainty about the future electricity supply and it expects to recognise an impairment expense with its FY25 result. This is a painful update for the South32 share price.

The miner said it will tell the market about the size of the impairment when the assessment is completed.

Due to the uncertainty of operating beyond March 2026, the FY26 production guidance for Mozal is under review.

I think the company has an appealing mix of commodities, but there are risks operating in some countries more than others. There are other ASX dividend shares I’d rather buy.

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