South32 has signed a binding agreement to sell its aluminium value chain assets to Alcoa Corporation for up to $5.6-billion, marking the diversified miner’s exit from the aluminium sector after three decades in South Africa.

The transaction, announced on July 1, includes full ownership of the Richards Bay-based Hillside Aluminium smelter – the largest aluminium smelter in the southern hemisphere – as well as the idled Bayside smelter property.

Alcoa will acquire South32’s 86% stake in Worsley Alumina in Western Australia, its 100% interest in Hillside Aluminium, a 33% stake in Brazil’s MRN bauxite mine, a 36% interest in the Brazil Alumina refinery and a 40% stake in the Brazil Aluminium smelter. The Mozal Aluminium smelter in Mozambique is excluded from the deal and remains on care and maintenance, with divestment under active consideration.

The $5.6-billion implied enterprise value comprises $3.1-billion in upfront cash, $1-billion in Alcoa shares – giving South32 roughly a 6% stake in the US company – approximately $750-million in net debt and lease liabilities assumed by Alcoa, and up to $750-million in contingent cash consideration linked to alumina and aluminium prices through 2030. Alcoa will also assume about $1.2-billion in related rehabilitation provisions.

“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 Graham Kerr, who stepped down as South32 CEO on June 30 as part of a managed transition.

Matthew Daley assumed the role of CEO and managing director on July 1. “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 added that the company expects about 55% production growth from its Taylor zinc-lead-silver project and the Sierra Gorda copper mine expansion in Chile.

For Alcoa, the acquisition strengthens its position as a pure-play upstream aluminium company and establishes its first presence in the South African market. “This is exactly the type of opportunity Alcoa is built to execute,” said Alcoa president and CEO William F Oplinger. “These high-quality, globally relevant assets are a strong fit within our portfolio and align directly with our strengths as a leading pure-play upstream aluminium company”.

South32 COO Africa Noel Pillay confirmed that Alcoa is well positioned to operate Hillside Aluminium, describing it as “a dedicated aluminium producer” that would bring the benefits of “deep aluminium value chain experience” to KwaZulu-Natal. He added that the company expects Hillside’s contribution to South Africa’s social and economic development to continue under Alcoa’s ownership.

The transaction is expected to generate approximately $900-million in net present value synergies for Alcoa through operational optimisation. South32, meanwhile, anticipates $125-million in annual overhead cost reductions from a leaner operating model. The deal is subject to shareholder and regulatory approvals and is expected to complete in the second half of 2027.