Australia's South32 announced on July 1 that it has agreed to sell most of its aluminum assets to Alcoa for an implied enterprise value of up to $5.6 billion. This divestiture includes stakes in Australia's Worsley Alumina, South Africa's Hillside Aluminium, Brazil's MRN bauxite mine, and its Brazil alumina refinery and smelter. The transaction excludes South32's Mozal aluminum smelter in Mozambique, which is currently on care and maintenance. The deal is expected to close in the second half of 2027, with South32 planning to return approximately $500 million to shareholders as a special dividend afterward.
This strategic move allows South32's new CEO, Matthew Daley, to simplify the business and focus on higher-margin growth assets, particularly in copper mining in Chile and base metals in the U.S. Daley, who took over as CEO on Wednesday, stated that the company will have a "simpler business with a portfolio of higher-margin upstream operations, reduced complexity and greater resilience." He anticipates annual overhead cost savings of $125 million from the sale. Analysts noted that with $4.1 billion in cash and Alcoa shares expected, South32 will have significant capital for acquisitions.
For Alcoa, the deal expands its access to upstream assets, including bauxite, alumina, and aluminum assets across Brazil, South Africa, and Western Australia. Alcoa will also assume about $1.2 billion in cleanup and site-closure liabilities tied to the assets. The company expects the acquisition to allow it to cut costs by some $900 million in net present value through greater scale and integration, reducing complexity, lowering costs, and strengthening supply chain resilience.
South32 also announced that its Sierra Gorda joint venture in Chile approved a fourth grinding line expansion, expected to lift processing capacity by about 25% with a growth capital expenditure of around $725 million between 2027 and 2030. This expansion is projected to significantly increase copper production and lower operating unit costs, aligning with the company's new focus. Daley indicated openness to value-accretive mergers and acquisitions that are strategically aligned and maintain financial strength.
