JOHANNESBURG (miningweekly.com) – As a global producer of materials across the aluminium value chain, Alcoa Corporation is well positioned to operate South Africa’s Hillside Aluminium business into the future, South32 COO Africa Noel Pillay stated categorically on Wednesday, July 1, when the diversified Johannesburg Stock Exchange-listed mining company South32 announced the signing of a binding conditional agreement to sell Hillside Aluminium to New York-listed Alcoa for up to $5.6-billion.

In addition to the Hillside aluminium smelter and the idled Bayside smelter property in South Africa, Alcoa will also acquire South32’s interests in Australia's Boddington bauxite mine and the Worsley alumina refinery, as well as the Mineração Rio do Norte bauxite mine and the Alumar alumina refinery and aluminium smelter in Brazil.

South Africa's Hillside, Pillay stated, would be operated by “a dedicated aluminium producer”, who would bring the benefits of “deep aluminium value chain experience” to the province of KwaZulu-Natal, where it would support local jobs, host communities, and the South African economy as a whole.

“We expect this contribution to continue under Alcoa’s ownership,” added Pillay, who, during Hillside’s thirtieth anniversary celebration earlier this year, highlighted Hillside’s meaningful contribution to South Africa’s social and economic development, as well as the smelter's important role in underpinning South Africa’s important value-adding downstream aluminium activity.

Interestingly, the transaction strengthens Alcoa’s position as a pure-play upstream aluminium company while repositioning South32 as an upstream-focused base metals company that will maintain a South African presence through manganese mining in South Africa's Northern Cape.

At the same time, the transaction establishes a far-reaching South African presence for Pittsburgh-headquartered Alcoa, which will benefit from the unlocking of synergistic value.

Importantly, in a release to Mining Weekly, Alcoa described itself as an organisation with a deep understanding of the central role it plays within the communities where it operates.

Meanwhile, what is crucial at Hillside is the discovery of a viable, low-carbon energy solution from 2031, when the aluminium-price-based electricity contract with South Africa’s State-owned electricity utility Eskom expires.

What is encouraging is the value that Eskom places on its longstanding partnership with what is the southern hemisphere’s largest aluminium business.

Moreover, Alcoa president and CEO William F Oplinger highlighted the investment opportunity as one which underscored Alcoa’s commitment to supply security and the responsible delivery of a product that was essential to the global economy.

Hillside’s “high-quality, globally relevant assets”, Oplinger added, had a strong strategic fit within Alcoa’s portfolio and was directly aligned with Alcoa’s pure-play upstream aluminium status.

It can be pointed out that part of the Bayside smelter has been recommissioned to take some of the liquid aluminium metal to businesses that have established themselves on Bayside's footprint, entrepreneurship that South32 endorsed, and this forms part of the transaction with Alcoa.

The overall transaction is expected to come with immediate cash flow benefits for Alcoa as it absorbs attractive long-term assets at an asking price perceived as reasonable.