International giant buying South African assets as part of R92 billion deal
Alcoa Corp. has agreed to buy South32’s bauxite, alumina and aluminium assets in a deal worth as much as $5.6 billion, cementing its position as a top producer as long-term demand strengthens and the Iran war exposes supply concerns.
The US producer will pay $3.1 billion in cash and about $1 billion in Alcoa shares, while assuming $750 million of net debt and lease liabilities, according to statements from the companies.
South32 could receive an additional $750 million if alumina and aluminium prices exceed agreed thresholds over the next four years.
The acquisition significantly expands Alcoa’s integrated aluminium business, strengthening its position as one of the world’s largest producers by adding assets across the entire value chain, from bauxite mining to alumina refining and aluminium smelting.
South32’s massive Worsley alumina refinery will be integrated into Alcoa’s existing operations in Western Australia, with the nearby mines that supply it with bauxite now offering the company additional reserves of the key ore just as its own decline.
Falling ore grades led Alcoa to permanently shut its Kwinana alumina refinery last year.
Alcoa had also faced significant pushback from environmentalists over plans to mine a forest in Western Australia to tap bauxite ore.
“Our strategy is not simply to get bigger,” Alcoa Chief Executive Officer Bill Oplinger said on a call.
“In Australia, the Boddington mine and Worsley refinery sit alongside our existing mining and refining system, creating opportunities to further strengthen one of the world’s premier regions.”
The transaction also includes assets in Brazil and South Africa but excludes an idled smelter in Mozambique, which South32 said remains under strategic review.
The company said it would distribute at least half of the Alcoa stock it receives in the deal directly to shareholders; the remainder can be sold.
South32 shareholders will hold about 6% of Alcoa once the deal completes.
The agreement was announced after the end of US trading on Tuesday. Alcoa’s Sydney-listed stock fell as much as 7% on Wednesday, while South32 shares rose as much as 10%.
“This deal makes strategic and economic sense and is not a surprise to us, but could be a temporary overhang on Alcoa’s share price,” Jefferies LLC analyst Christopher LaFemina said in a note Wednesday.
Aluminum prices are up 3% this year after supply disruptions in the Middle East, a region accounting for nearly a 10th of global output, fueled a rally between March and May.
Those gains were later pared as prospects for an end to the Iran war eased supply concerns.
Producers like Alcoa are now positioning themselves for stronger long-term demand from electric vehicles, electricity transmission, renewable energy, packaging and aerospace.
The lightweight metal has also become increasingly important in power grids because of its lower cost and lighter weight than copper.
Alcoa said the acquisition would lift its annual production to 3.2 million tons of aluminium and 14.8 million tons of alumina.
South32 was created in 2015 from assets spun off from mining giant BHP Group. It will now hold copper, manganese and zinc-lead-silver assets.
The deal, expected to close in the first half of 2027, comes as South32’s long-serving CEO Graham Kerr steps down. He will be replaced by Matthew Daley, who begins in his new role on July 1.
UBS Group AG and Bank of America Corp. were advisers for South32. Goldman Sachs Group Inc. advised Alcoa.
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