Business
New Caledonia: An Uncertain Marriage
Merger To Change Face Of New Caledonia Mining
There are new uncertainties for New Caledonia's nickel industry, after the announcement of a merger between two major Canadian mining corporations.
New Caledonia has over a quarter of the world's nickel reserves, but the expansion of the nickel industry in the French Pacific territory is based on two projects being developed by Canadian companies. The nickel corporation Inco is building a nickel processing plant at Goro in the Southern Province, while Falconbridge has plans for another factory at Koniambo in the Northern Province.
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But on 11 October, Inco announced the friendly takeover of Falconbridge, its long time Canadian rival. At a time of booming demand from China, the deal pre-empts efforts by European companies to target Falconbridge for hostile takeover (the Anglo-Swiss corporation Xstrata already holds 19.9 per cent of shares in Falconbridge). If shareholders and regulators approve the US$10.6 billion deal, the newly merged corporation will be the largest nickel producer in the world.
The planned marriage of Inco and Falconbridge has crucial importance for New Caledonia and the announcement of the takeover has thrown up new uncertainties-will the merged corporation proceed with both the Goro and Koniambo projects?
In the aftermath of violent conflict of the 1980s, pro-independence politicians have been pushing for more investors to break the local monopoly of French corporation Société le Nickel (SLN). Since 1937 SLN's Doniambo factory in Noumea has been the sole processing plant in the territory. Inco and other Canadian corporations tried to break into the New Caledonia's nickel industry in the 1960s, but were rebuffed by the 1969 Bilotte laws.
Since the 1998 Noumea Accord, there have been new opportunities for restructuring the industry. Today, New Caledonia's provinces hold shares in SLN and its parent company Eramet and local politicians have been encouraging investment by the two Canadian nickel corporations.
Inco's local subsidiary Goro Nickel began construction at Goro in 2001, but the project has a troubled history and faces ongoing protests from unions and the Rheebu Nuu committee, which links chiefs and customary landowners near the construction site. There have been serious delays since construction commenced, with union protests over employment and local businesses seeking sub-contracting opportunities. Rheebu Nuu and local environment groups are also campaigning over potential environmental impacts from the plant, demanding further independent studies of the use of acid leach mining. They oppose plans for ocean dumping of manganese wastes, hoping to list New Caledonia's reef system as a World Heritage site.
In the north, Falconbridge's $2.2 billion Koniambo project is a central element of plans for "economic rebalancing" in New Caledonia under the 1998 Noumea Accord. With most major economic infrastructure located in the Southern Province, the proposed plant will be a pillar of economic development and employment in the rural north. Falconbridge has developed Koniambo in partnership with the local mining company SMSP, which holds 51 per cent of the project.
Under the February 1998 Bercy Accord, the final decision on the Koniambo project must be taken before 31 December this year. If Falconbridge does not proceed, Eramet and SLN can take over the project. The French government has offered tax incentives and loan guarantees for the project, but a failure to develop Koniambo would cast a dark shadow over the future of the Noumea Accord. In October, the Kanak Customary Senate stated that Inco's takeover of Falconbridge "leads us to question the capacity of the French State and New Caledonia's institutions to implement the Noumea Accord in a satisfactory manner."
Goro Nickel's Chief Executive Officer Ron Renton has told Radio Australia that Inco has "high expectations" that the northern project will proceed. But at print time the deadline for Koniambo may be affected by the legal and financial negotiations in Toronto and Paris.
The uncertainty is causing differences amongst local politicians. With its large Kanak population, the Northern Province is dominated by the pro-independence Party of Kanak Liberation (Palika) and Union Calédonienne (UC), which together hold 18 of 22 seats in the provincial Assembly. Palika leader Paul Neaoutyine is provincial president and a key supporter of the Koniambo project. Palika has criticised UC President Pascal Naouna, for his suggestion that Eramet and SLN might take over the project.
In November, New Caledonia's conservative Senator Simon Loueckhote called on the French government to "preserve French interests" against domination by a single Canadian corporation. In reply, Palika has argued that there is a need for appropriate environmental and employment controls whether a Canadian and French company manages the project: "Inco, Falconbridge and SLN-Eramet are all multinational corporations who invest because there will be profits, as in any capitalist society. It is up to any country which welcomes them to create a framework which meets both the needs of local citizens and of the indigenous community."
