Cover Story
Pushing Ahead with Nickel Projects Despite Recession
Industry expects strong growth in a few years
Investors in the nickel and metallurgy sector are taking advantage of New Caledonia's law granting tax holidays of up to 15 years on investments of over 50 billion CFP (US$370 million).
A major nickel processing plant project is moving towards its commercial phase with another not far behind. Despite the recent drop in nickel prices, there is a general feeling that there will be strong growth and demand in the next few years. Demand from the Asian market, especially China, is considerable, although Europe and North America also remain significant markets. The bulk of the nickel is destined for the production of stainless steel.
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Goro Nickel, a subsidiary of Canadian mining company, Inco, is about to begin constructing its commercial nickel and cobalt processing plant at the southern tip of New Caledonia. The economic benefits for the country will be tremendous. New Cale-donia will have a five percent share in the capital and, once it moves into the commercial phase, the plant will create 800 direct jobs and 1700 indirect and induced jobs. The impact on the country's economy will be around US$100 million a year.
The hydrometallurgic plant will use a technique known as pressure acid leaching (PAL) to extract nickel and cobalt. This method uses pressure and sulphuric acid to extract nickel in an economically feasible way from laterites. At the end of the processing, the acid will be neutralised using limestone and chalk. The more common pyrometallurgic processing technique by smelting is used to extract nickel from richer ore known as garnierites.
A pilot project, at a cost of US$50 million, began operating in 1999 to test the PAL technique and train a pool of technical staff. Last April, the company announced it would take the project into the commercial phase. The cost of developing both the mining site and commercial plant is estimated at US$1.4 billion, of which Inco will finance 70 percent.
Although a financial backer has not yet been found, earthworks have already started at the site of the commercial plant in preparation for construction. The construction period, expected to take three years, will mainly provide short-term employment. Construction will be undertaken by a joint venture uniting three engineering companies; the United States firm Bechtel, the French firm Technip and the Canadian firm Hatch (BTH). If all goes according to plan, the plant will be operational at the end of 2004 using ore from the Goro mine nearby. There is sufficient ore in the Goro area to last at least 40 years. The plant will produce 54,000 tonnes of nickel and 5400 tonnes of cobalt a year and is banking on the Asian market. It will export mainly to Japan, South Korea, Taiwan and China.
In preparation for the commercial phase, the company is investing in training programmes through the University of New Caledonia, technical schools and other institutions. It has also set up recruitment centres to inform prospective employees and gauge the available resources on the local employment market. Once the commercial plant is operational, the pilot plant will be used as a training centre.
Environmental concerns
As with any industrial activity there are concerns about its environmental
impact. The dumping of industrial waste is a major concern for
environmentalists. After hydrometallurgic processing there are two main
waste matters; the residue soil, which is currently undergoing revegetation
trials, and effluents which will be dumped into the lagoon via a pipeline.
Despite reassurances that independent inspection bodies will verify
procedures, there has been widespread concern about flushing the waste
liquid into the sea.
Environmentalists are worried about the possible long-term effects on the fragile lagoon ecosystem. A current bid to have New Caledonia¹s lagoon added to the UNESCO World Heritage listing has added fuel to the debate. The controversy stirred up by the bid has raised an interesting question on whether it is possible to reconcile the economic stakes of an industrial operation with environmental conservation.
Another recent controversial issue was the possible destruction of an extremely endangered palm tree to make way for a road. While such an action merits an individual analysis, it¹s important to keep things in perspective and remember that agriculture and fire have caused more environmental damage to flora in New Caledonia than mining. These days mining companies are being more cautious but farmers have yet to reach the same level of awareness and adopt measures to preserve the endemic flora.
Development heads North
Hot on the heels of the hydrometallurgic plant in the south, is a
pyrometallurgic plant near Kone, the Northern Provincial capital, which is
entering the final phase of feasibility studies before construction gets the
green light. The project is a joint venture between the Northern
Province-owned Société Minière du Sud Pacifique (SMSP) and Canadian mining
company, Falconbridge. An initial plan to build a hydrometallurgic plant has
been shelved.
The SMSP currently has 650 employees and accounts for 600 induced jobs. Despite current financial problems due to the recession in the Japanese and United States economies, and low nickel prices, the SMSP is pushing ahead with its big plans for the future. At the beginning of the year it introduced measures to minimise its financial losses, including reducing its employees' working hours.
"Mining companies everywhere have taken tough stances," says Stephane Camerlynck, communications manager. "We did likewise to show the banks and our financial partners that we're taking the matter seriously."
When one trade union disagreed with these measures and went on strike, preventing access to mining sites and company offices, and even destroying equipment, other trade unions and pro-independence political parties came rushing to the rescue and stood by the SMSP¹s decision. This show of solidarity is an indication of how strongly the public in the Northern Province feels about the project.
The pyrometallurgic plant will have a phenomenal impact on the north. All going to plan, construction is expected to start next year and be completed by 2006. The plant will process 60,000 tonnes of nickel a year and create 800 direct jobs and 2800 indirect and induced jobs. The development generated by the plant will help curb the migration south to look for work in the capital.
Increasing production
To add to this development, the SLN, another mining company, is to
significantly increase production at its Tiébaghi mine in the north. The
project is part of a major investment over the next four to five years. The
SLN which currently operates the country's only processing plant, also plans
to entirely renovate one of its electric furnaces. The company¹s current
output is 60,000 tonnes of nickel metal (processed from 3.3 million tonnes
of nickel ore) which it aims to boost by 15,000 tonnes. The export of
processed ore as nickel metal has higher economic benefits than the export
of nickel ore.
The Tiébaghi mine currently produces 250,000 tonnes of nickel ore. The expansion project, expected to create 210 to 230 direct and indirect jobs, will enable an annual production of 1 million tonnes. The project will be completed at the end of 2004 but the increase in production will happen gradually, reaching its full capacity by 2006.
The renovation of the electric furnace at the Doniambo pyrometallurgic plant in Noumea's industrial zone will help process the extra ore. The renovation will increase the furnace's power capacity from 42MW to 75MW.
The overall investment is US$200 million, of which US$125 million will be spent on Tiébaghi, and the rest on the Doniambo renovation. The project will also enable an improvement in the environmental impact of the plant. A study is being undertaken to try and reduce dust in the ore before it is sent to the furnace, and to improve the filtration system after processing, prior to releasing the dust into the atmosphere. In addition to the jobs created, the project will benefit the entire country as the provinces of New Caledonia have a 30 percent share in the SLN's capital, says SLN communications manager, Olivier Beaunay.
