South32 to sell aluminium assets to Alcoa in deal worth up to US$5.6bn
Transaction reshapes South32 into a base metals-focused miner while giving Alcoa control of key alumina and aluminium operations
Mining and metals company South32 has entered into an agreement to sell its aluminium value chain assets to Alcoa Corporation in a transaction with an implied enterprise value of up to US$5.6 billion, marking a significant strategic shift for the diversified mining and metals company.
Announced on 1 July, the transaction includes upfront cash, Alcoa shares, assumed debt and lease liabilities, as well as contingent payments linked to future alumina and aluminium prices. Alcoa will also assume rehabilitation obligations of approximately US$1.2 billion.
Under the agreement, Alcoa will acquire South32’s interests in Worsley Alumina (86%), Hillside Aluminium (100%), the MRN bauxite mine (33%), subject to the exercise of pre-emptive rights by MRN’s partners, the Brazil Alumina refinery (36%), and the Brazil Aluminium smelter (40%).
Mozal Aluminium is excluded from the transaction and will remain on care and maintenance while South32 continues to actively consider divestment options.
The deal comprises:
- US$3.1 billion in upfront cash;
- US$1.0 billion in Alcoa shares, equivalent to approximately 17 million shares based on the 10-day volume weighted average price;
- Approximately US$750 million in net debt and lease liabilities to be assumed by Alcoa; and
- Up to US$750 million in contingent cash payments linked to alumina and aluminium prices through 2030.
South32 said the transaction will simplify its portfolio and strengthen its focus on upstream base and precious metals.
“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 inaugural South32 CEO Graham Kerr.
He added that the sale would generate significant upfront proceeds while allowing shareholders to retain exposure to stronger commodity prices through the contingent consideration. Kerr also said the combination of the companies’ alumina businesses in Western Australia would unlock material synergies.
South32 CEO Matt Daley said the company’s post-transaction portfolio would be centred on long-life, high-quality assets aligned with favourable market fundamentals.
“Following completion, our portfolio will be focused on high-quality, long-life assets leveraged to attractive market fundamentals, with approximately 85% of pro-forma EBITDA from base and precious metals,” Daley said.
He said South32’s funded growth pipeline is expected to deliver around 55% production growth through the Taylor project and the fourth grinding line expansion at Sierra Gorda, while a pipeline of copper and zinc projects provides further long-term growth opportunities.
Daley added that a simplified portfolio and leaner operating model are expected to reduce overhead costs by approximately US$125 million per year as new support structures are implemented.
The transaction remains subject to customary conditions and regulatory approvals.
