South32 (ASX:S32) expects higher returns from a simplified business following its agreement to sell aluminum value chain assets to Alcoa (ASX:AAI), according to a late Tuesday filing with the Australian bourse.

The company expects its group operating margin to rise to at least 48% after the transaction from 31% in fiscal 2026, with potential for further margin expansion from overhead reduction and the commissioning of its Taylor project in the US, per the filing.

Under a streamlined focus, South32 will produce five commodities following the deal, down from seven as of fiscal 2026, while its count of operated sites will fall to four from seven.

The company said a structural supply deficit is emerging in the zinc market as mines deplete and grades decline, "which will require three Taylor-sized projects to be developed annually over the next decade to fill the gap."