South32 in talks with Eskom on a new pricing arrangement for Hillside Aluminium smelter

South32 is in talks with Eskom on a new pricing arrangement for Hillside Aluminium smelter. The company has entered into an interim arrangement with Eskom for power supply to the smelter for a 10 year period.

“The smelter sources alumina from our Worsley Alumina refinery with prices linked to the PAX on an M-1 basis, while its power is sourced from Eskom under separate contracts for its three potlines. We have been engaging with Eskom on a new pricing arrangement for the smelter, agreeing a new tariff to cover power supplied for a 10 year period,” the company said.

“The new tariff is South African rand based, with a rate of escalation linked to the South Africa Producer Price Index. While the new tariff is being considered for approval by the National Energy Regulator of South Africa, we have entered into an interim arrangement for power supply with Eskom.”

Hillside Aluminium saleable production increased by 3kt to a record 718kt in FY20 as the smelter continued to test its maximum technical capacity. The output is expected to increase to a record 720kt in FY21 and FY22, subject to load-shedding.

Operating unit costs decreased by 25% in FY20 to US$1,531/t as the smelter benefited from lower raw material input prices, lower aluminium price-linked power costs and a major workforce restructure that was concluded in June 2019.