Mozambican Smelter Must De-eskom Itself - Mining Executive

Future expansion of the Mozal aluminium smelter at Beluluane in Mozambique hinges on procuring a new contract for the supply of electricity to the smelter, Graham Kerr of South 32 has said.

In discussions with journalists following a meeting in Maputo with Prime Minister Adriano Maleiane, the CEO of the international mining and metals company holding the primary stake in the smelter, remarked that the existing contract governing Mozal's electricity procurement was set to expire in 2026.

Consequently, he expressed hope for an extension of the contract until at least 2030.

Mozal currently sources its electricity from the South African utility Eskom.

However, Kerr contends that the power is essentially Mozambican, as Eskom purchases 1 150 megawatts from the Mozambican company, Hidroelctrica de Cahora Bassa (HCB), which operates the Cahora Bassa dam on the Zambezi River.

Subsequently, Eskom supplies 950 megawatts to Mozal. Given the absence of a direct electricity transmission line from the Zambezi Valley to Maputo, HCB's power must traverse via Eskom to reach Mozal.

Eskom confronts substantial challenges within South Africa, mainly because of load-shedding.

The diversion of 950 megawatts to support a Mozambican industry might encounter objections from South African consumers, despite the argument that this power originated in Mozambique.

Kerr emphasised that Mozal's strategic planning was contingent on securing a long-term agreement for procuring the requisite power for the smelter.

Presently, Mozal's two production lines yield 580 000 tonnes of aluminium annually, consuming 950 megawatts of electricity, rendering Mozal the largest power consumer in the country by a significant margin.

Proposals have been made to introduce a third production line, yet Kerr underscored that progress on such plans depended on the resolution of the power supply issue.

Kerr dismissed the notion of constructing new production facilities elsewhere in the country. He argued that establishing a third production line would leverage existing infrastructure, whereas establishing an entirely new smelter, such as in northern Mozambique, would present formidable challenges.

Addressing the recurring allegation that Mozal evaded taxes, Kerr clarified that the government collected a one per cent royalty on Mozal's revenue in addition to dividends as a shareholder. However, he acknowledged that Mozal was presently exempt from corporate income tax.

Mozal's employees, both direct and indirect, are subject to personal income tax.

Kerr asserted that 6.9% of direct taxes in Mozambique stemmed from Mozal.