South32, Alcoa deal ‘strategically coherent for both parties’, Wood Mackenzie analysis concludes
US giant Alcoa’s acquisition of South32’s aluminium assets, marking the Perth-based miner’s exit from WA operations, ‘is strategically coherent for both parties’, a global research and consultancy group says.
Alcoa’s acquisition of South32’s aluminium assets, marking the Perth-based miner’s exit from WA operations, “is strategically coherent for both parties”, a global research and consultancy group says.
Under the massive transaction unveiled this week, the US giant will pay up to $US5.6 billion ($8.1b) for South32’s 86 per cent-held Worsley Alumina refinery south of Perth, wholly-owned Hillside Aluminium in South Africa and 33 per cent stake in the MRN bauxite mine in Brazil.
South32’s stakes in a Brazilian alumina refinery (36 per cent) and aluminium smelter (40 per cent) are also part of the epic deal.
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By continuing you agree to our Terms and Privacy Policy.Wood Mackenzie metals and mining research head James Whiteside said it marked a decisive strategic shift for both companies.
“For Alcoa, it cements a dominant upstream position in bauxite and alumina,’ Mr Whiteside said.
“For South32, it accelerates a pivot toward copper and removes a significant decarbonisation burden at a moment of relative commodity price strength.”
Wood Mackenzie believes the transaction - one of the most significant deals in the global aluminium sector in years - is broadly in line with listed peers on near-term trading multiples, which suggests South32 is monetising at a perceived strong point in the cycle rather than leaving value on the table.
“This deal is a cycle-timed exit by South32 and a long-term strategic bet by Alcoa,” Mr Whiteside said.
“South32 is crystallising value in a supportive price environment while pivoting toward copper, where it sees stronger long-term fundamentals.
“Alcoa, meanwhile, is leaning into the cycle and underwriting long-term value through greater integration, cost optimisation and a dominant position in seaborne alumina markets.”
South32’s Worsley sale means the Perth-based business no longer has mining or refining operations in WA.
Its main growth project is the zinc-lead-silver-manganese-copper Hermosa project in the US state of Arizona, which originally had a $US2.2b budget but blow out to $US3.3b in April.
Alcoa, meanwhile, is at a crucial juncture in WA.
The Pittsburgh-headquartered giant shut its Kwinana alumina refinery last year and its mining permit is in jeopardy amid environmental concerns.
In February, Alcoa was slapped with an “unprecedented” $55 million penalty by the Federal Government to remediate Jarrah Forest it cleared without permission in the Perth Hills.
WA’s Environmental Protection Authority is currently assessing the long-term viability of Alcoa’s baxuite mining in the region.
Alcoa has come under close regulatory scrutiny following revelations Water Corporation has serious concerns that the company’s mining would contaminate Serpentine Dam — a vital source of Perth’s drinking water.
Alcoa provided the WA Government with a $100m guarantee in the event Perth’s water supply is contaminated but Water Corp has said a proper fix would cost billions of dollars.
The miner was also caught out lying by Australia’s advertising watchdog last year about much land in WA it had rehabilitated.
But Alcoa’s purchase of Worsley appears to have government support, with Federal Resources Minister Madeleine King saying she “welcomed” the deal.
