Moody’s puts South32 on downgrade watch after $5bn aluminium sale

As the dust settled on South32’s $5bn aluminium clearance sale, ratings agency Moody’s cast doubt on the merits of its investment case by warning that it is now weighing a downgrade.

Shares in the miner fell as much as 4.3% in intraday trade on Friday, as Moody’s warned the sale will significantly shrink the scale of its operations and expose the mining giant to more concentration risk.

Since being spun off from BHP a decade ago, South32 has pitched itself to investors as a “globally diversified” metals and mining company, offering exposure to a range of countries, commodities and markets.

But the blowout deal announced on Wednesday will see the group disposing of one of the six commodity markets in its arsenal — one that accounted for about 60% of earnings in 2025.

South32 plans to sell almost all its aluminium smelters, alumina refineries and bauxite mines, including the huge Hillside Aluminium smelter in Richards Bay, to US firm Alcoa.

The only remaining aluminium, alumina or bauxite asset in its portfolio will be the power-starved Mozal Aluminium in Mozambique, a smelter that entered into care and maintenance in March after failing to secure affordable power.

On Friday, Moody’s announced that it has placed South32’s credit ratings on review for downgrade after the sale, for as much as $5.6bn, Reuters reported.

After losing nearly 4% on Thursday, South32 did recover by the close of trade on Friday, ending the day down just 0.63% at R47.33.

It gained more than 11% on Wednesday when the Alcoa deal was announced.

Moody’s said the sale will “materially reduce the company’s scale, commodity diversification and operating footprint”, removing assets that have contributed “around 37% of underlying earnings on average over the five fiscal years ended 2025″.

Some of this week’s jitters may also be attributed to shifts in the company’s senior ranks, with CEO Matt Daley replacing Graham Kerr after nearly 12 years at the helm on the same day the deal with Alcoa was announced.

Daley’s appointment signals a stronger focus on copper and zinc, the first of which has seen its price soaring on bets that data centres, electric vehicles and other low-emission technologies will lift demand over the coming decade.

Soon after the Alcoa deal was announced, Daley told Bloomberg the group had exciting organic growth opportunities in copper and zinc, with projects that are already nearing execution.

In the year to end-June 2025, alumina made up 51% of South32’s $2.1bn underlying earnings before interest, tax, depreciation and amortisation, while aluminium contributed 9% more.