Mar 23, 2019 Last Updated 6:55 AM, Mar 23, 2019

Shipping nickel to China


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    2019
  • Published in February

At a time Western security analysts are fretting over Chinese strategic influence in the Pacific, some local businesses are looking at opportunities for trade and investment with China. In the French Pacific dependency of New Caledonia, the Northern Province administration led by Paul Neaoutyine is seeking expanded access for nickel sales to the Chinese market, as part of a broader development strategy for the Kanak-majority region.

The nickel strategy is managed through the provincial development arm Société de Financement et d’Investissement de la Province Nord (SOFINOR) and the mining company Société minière du sud Pacifique (SMSP).

Over the last three decades, since the 1988 Matignon-Oudinot Accords, SMSP has grown into a significant producer of nickel metal and a major global exporter of nickel ore. After the construction of the Koniambo nickel smelter in New Caledonia’s Northern Province, SMSP is expanding offshore through joint ventures. However the company has maintained 51 per cent controlling interest in its projects in New Caledonia, Korea and even China. This is an unprecedented achievement in the Pacific, where many governments and businesses take a minority stake in resource projects run by transnational corporations.

In an interview with Islands Business, SOFINOR’s chief financial officer Karl Therby said that SMSP was working both in New Caledonia and overseas to use the diverse range of nickel ores available from locally controlled mines.

“We’ve developed a strategy to add the maximum value to the resource by adding value right through the supply chain,” said Therby. “As is the case in many countries, mining alone cannot add the necessary value that can come from the minerals. So the crucial element is the transformation of the minerals within the country.

“For high grade ore, we’re doing this transformation onshore through our subsidiary KNS, while lower grade ore is transformed into metal offshore in our joint-venture plants in Korea with SNNC and NMC and our new partner in China.”

The driving force behind SMSP and its subsidiaries is New Caledonian entrepreneur Andre Dang Van Nha. Dang’s parents arrived in New Caledonia from French-controlled Indochina in 1935. They worked as indentured labourers in the mines on the Koniambo Massif owned by Société le Nickel (SLN), which has dominated New Caledonia’s nickel industry for more than 100 years. His father died in the mines when Dang was just 17
months old. Today, SMSP controls mining operations across the Koniambo Massif.

During New Caledonia’s armed conflict of the 1980s, Andre Dang was driven into exile in Australia, with the colonial Right perceiving him as too close to the FLNKS independence movement. However he returned to New Caledonia in 1990, to assist the Northern Province manage its mining operations after the tragic death of SMSP’s Raphael Pidjot in a helicopter crash.

Beginning in 1990 as a mining transport company with 120 employees, SMSP began exporting nickel ore in 2007. Over time, SMSP has worked to break the monopoly over nickel smelting held by the French corporation ERAMET and its local subsidiary SLN.

SMSP’s strategy has been to retain high value saprolite ore from the Koniambo Massif for domestic use. This ore, with 2.3 per cent nickel content, has been supplied to a new smelter in the Northern Province: the US$5.3 billion plant at Vavouto operated by Koniambo Nickel SAS (KNS), a joint venture between SMSP and the transnational conglomerate Glencore.

Andre Dang told Islands Business that he persuaded the Anglo-Swiss financial conglomerate to allow SMSP 51 per cent controlling interest in KNS. Dang said that despite debt burdens to get the project underway, this is carried by Glencore: “I bring the resource, and Glencore brings the money. Glencore takes all responsibility for the financial risk. I don’t have any debt – they’re the ones with debt!”

To generate funding for its share of Koniambo finances, SMSP developed a strategy to export lower grade nickel ore to Korea and China, once again using joint ventures controlled 51 per cent by SMSP.

SMSP has two joint ventures with the Korean corporation Posco: the Nickel Mining Company (NMC) and the nickel processing company Société du Nickel de Nouvelle-Calédonie et Corée (SNNC). In 2009, SNNC began smelting nickel at the company’s plant at Gwangyang, South Korea, with production of 261,469 tonnes of nickel metal between 2009 and 2017. In the same period, SMSP’s subsidiary NMC has exported nearly 20,000,000
tonnes of ore to the Gwangyang plant, which uses lower grade saprolite ore with an average of 1.98 per cent nickel content.

The next challenge is to export even lower grade ore, with average nickel content of 1.65 per cent, to a joint-venture smelter in China. On 18 October 2017, SMSP signed a memorandum of understanding (MOU) with Yangzhou Yichuan Nickel Industry Co Ltd to develop a joint project in China.

This MOU was expanded on 22 March 2018 when Andre Dang met Yichuan CEO Zhang Jianguo to finalise a memorandum of agreement (MOA).

These preliminary agreements were designed to test export systems to China before finalisation of a full contract, under which SMSP agrees to deliver 600,000 tonnes of nickel ore to Yichuan each year for the next
25 years, after the Chinese corporation agrees to sell 51 per cent of its share capital to SMSP.

SOFINOR’s Karl Therby explained that Yichuan’s pyro-metallurgical smelter at Yangzhou began production in 2012 using Indonesian minerals, but soon turned to New Caledonia.

“The Chinese had been purchasing nickel ore from Indonesia, but they had a range of concerns about the quality, the humidity of the ore and of the reliability of delivery,” Therby said. “So SMSP was able to say to them that, through our Korean operation, we have shown our capacity and reliability to export ore of higher quality than can be found in the Indonesian market. By signing the contract with us, they’ve guaranteed supply but we retain 51 per cent of the operation.”

The decision to operate offshore in Korea, and especially in China, was driven by domestic politics as well as market realities. Conservative anti-independence parties in Noumea are fiercely opposed to Chinese investment in New Caledonian enterprises, so SOFINOR and SMSP have developed new ways of working without Chinese companies operating in New Caledonia (a contrast to the troubled Chinese investment in PNG’s Ramu nickel project).

SOFINOR’s Karl Therby explained: “In our political context, with referendums on independence and public concern about Chinese influence, we don’t want them to operate here. We’ve seen what has happened in Papua New Guinea, we’ve seen what has happened in Vanuatu and we want to protect the territory from all that. So they have no actual investment in our mines; instead, we just have a contract to supply them.”

Andre Dang said that this strategy is based on an unprecedented corporate structure giving majority control to SMSP rather than the Chinese partner.

“The corporate structure is a real innovation and it’s the first time in the world that it’s been used, above all in China. The structure of 51 per cent / 49 per cent - the Chinese have never before accepted this. The Chinese government was obliged to change a law and it took seven years to allow SMSP to start operations there. We’ve just taken one small step into the Chinese market.”

He added: “After that we’ll see, because the Chinese are very intelligent. We have to be very careful, because they can be terrible! The Chinese aren’t here, they’ve stayed at home! Instead, we’ve gone over there and have taken possession of a small piece of their country, through our 51 per cent control of the smelter. The cost of operations will be paid for by the profits from the smelting.”

In 2018, after striking an agreement with SMSP, Yangzhou Yichuan Nickel added a second production line to its Yangzhou smelter, increasing potential annual production capacity from 5,000 tonnes to 25,000 tonnes of ferronickel. The metal is then sold to stainless steel producers in China. In July 2018, Northern provincial president Paul Néaoutyine paid an official visit to China, to meet with officials from Yangzhou City and major
shareholders from the Yangzhou Yichuan Nickel.

The first shipment to China under the MOA, departing Noumea in late July 2018, caused initial problems. The Yangzhou port only has capacity for vessels weighing 45,000 tonnes in a shallow river channel, but the first shipment of ore from New Caledonia

aboard MV Kiran Caribbean amounted to 62,500 tonnes. Without informing SMSP or the New Caledonian mining directorate, Yinchuan unloaded 16,006 tonnes at Lianyungang port rather than deliver the full load to the Yangzhou smelter.

To assert their rights as controlling partner, Andre Dang halted further shipments until the Chinese company apologised and agreed to bear the costs of transhipment to smaller vessels. When shipments resume, this will allow all the ore to be used at the Yangzhou smelter, thereby generating maximum returns to SMSP as controlling partner of the operation.

For Andre Dang, this strategy of maintaining majority control over operations avoids many of the problems that independent Pacific countries have faced with Chinese investments, including the over-use of Chinese labour, poor environmental standards and pressure on local politicians.

“As long as I’m at the company, I will never allow it to sell nickel ore directly to China,” Dang said. “I only want our resource to be used in New Caledonian plants or those that will be owned by New Caledonia in the future and that will supply benefits to our country. I’ll be travelling soon to China to make our policy clear to them. We’re going to shoot ourselves in the foot if we simply provide raw minerals to our competitors. That’s been going on for 140 years, ever since colonisation. We want to ensure the continued existence of our mines, because nickel is not a renewable resource. Once you’ve exhausted it, bit by bit, that’s the end.

“We don’t want New Caledonia to end up like Nauru,” he said.

“They were a world leader in phosphate mining, but they abused it and used it all up. They are a sad country. So our strategy is to add value to the resource which can generate funds for use in sectors beyond the nickel industry, which will benefit the country and future generations.”

PNG breaks away from Pacifical


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    2019
  • Published in 2018 October

ONE of the pioneers behind the establishment of a commercial partnership between the Parties to the Nauru Agreement (PNA) and the Dutch tuna marketing company Pacifical is suggesting that PNA divorce itself from the marriage.

This comes in light of the recent breakaway by one of PNA’s bigger members Papua New Guinea, who has cut ties with Pacifical to pursue the coveted Marine Stewardship Council (MSC) eco-certification on its own.

Dr Transform Aqorau, former CEO of PNA and now CEO of iTuna Intel, said times have changed and now might be the time for PNA to rethink this partnership, which he had helped forge on behalf of PNA in 2011 with the Dutch tuna distribution company, Sustunable.

It’s a partnership that has helped propel PNA-fished and processed skipjack and yellow fin tuna into the international markets – Europe especially.

“Pacifical was an idea ahead of its time. It was and still is a brilliant idea, telling the narrative of a fish with a story from the pristine waters of the Pacific islands and the cultures of the Pacific islanders,” Aqorau told IB. “I don’t think at the time, we envisaged that other companies with whom PNA member countries do business with would be interested in having their own MSC. PNA led the way and Pacifical was a narrow tunnel through which PNA MSC tuna was marketed. There are now more companies who have their own MSC so there is competition for Pacifical, and indeed these companies are based in the PNA countries or have license to fish in the PNA countries so that might mean the supplies to Pacifical will decline. Competition is good for business but PNA is now in competition with businesses and companies that are based in the PNA, so all I’m saying is perhaps PNA might think about getting out of the business,” Aqorau said. In August, PNG’s tuna industry, represented by the Fishing Industry Association of Papua New Guinea (FIA) signed a Memorandum of Understanding with PNG’s National Fisheries Authority to pursue its own MSC certification. The aim, according to FIA, is to get its licensed purse seine fleet – fishing skipjack and yellow fin tuna on anchored fish aggregation devices (FADs), drifting FADs and free schools in both its EEZ and archipelagic waters – certified to the MSC standards.

The decision however turned into a public war of words between two major industry online media outlets Undercurrent News (UCN) and Atuna with Pacifical in the thick of it. Last month, UCN reported that the underlying reason PNG was breaking away was because of Pacifical’s lack of transparency with its accounts and financial operations and reporting.

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Tour operator goes hybrid


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    2019
  • Published in 2017 September

Green fleet

WITH the growing number of tour operators and tourism logistics companies, every passenger moved makes a difference. And sometimes the business edge comes not only in volume of traffic but by the ability to move more passengers at a fraction of the cost of the competitor.

More travelers are becoming aware of the carbon footprint they create by flying from one end of the globe to another. In this age of climate responsibility, anything a traveler can do to mitigate against climate change and global warming is a plus. Fiji-based tour company. Pacific Destinations, recently added two brand new Toyota RAV 4 Hybrid to its fleet as part of the company’s strategy to minimise its carbon footprint.

The company is looking at adding at least two more vehicles before the end of the 2017 and more during 2018. “Two vehicles may be a small number but it is a start towards their work, keeping Fiji clean and they will be adding more RAV 4 Hybrids in the coming months,” Managing Director, James Sowane explained to Island Business.

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$40m biscuit factory


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    2019
  • Published in 2017 July

From humble beginnings, FMF Foods expands

WHAT started as a flour mill in 1973, which imported premium Australian wheat and milled flour, has now become a household brand across the Pacific, venturing into other businesses, biscuits in particular. Well-known for its quality products, the company changed its name from Flour Mills of Fiji, which the FMF originated from.

With a vast range of food products, it was only appropriate to reflect this in the company name which changed to FMF Foods Limited in 2011. While the name of the company and its profile may have changed over the years, its original commitment towards customers remains unchanged, if only stronger.

This is evident in the construction of the $40million FMF Foods Ltd biscuit factory, along the Queens highway in Veisari. This investment is set to inject thousands of dollars into the economy, employ 120 directly and an equally number indirectly engaged, benefiting around 250 families when the factory is in full operation. According to the FMF Group of Companies managing director Ram Bajekal, the new biscuit factory had been constructed to manufacture biscuits largely meant for the Melanesian market.

“The need for a new factory was felt when the company realised that the existing factory at Walu Bay was not sufficient to meet the entire needs of their market,” Mr Bajekal said. Biscuit brand Raun Raun will be manufactured in the newly constructed factory alongside other brands.

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Push to extend Fiji tax-free zones


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    2019
  • Published in 2017 July

IN the aftermath of the military coups of 1987, the then interim government created a tax free zone in Kalabu, Nasinu, which helped Nasinu to grow and bridge the development between Nausori to Suva City. Suva-Nausori continues to grow tremendously.

 The same, however, cannot be said between Wainadoi and Pacific Harbour. The region has land and labour. There is a need to develop the necessary infrastructure to attract investors to create jobs and add value to the local economy specifically and national economy generally.

With the Suva to Nausori corridor now almost full, the only other way the development from the capital city can move is towards the West. Ratu Suliano Matanitobua, a member of the Opposition, pleaded in Parliament, to declare this region a ‘tax free zone’, in the hope to improve infrastructure and connectivity, an ambitious project reflecting the desires of the people of this region.

A paramount chief in this area, Matanitobua said he had witnessed every opportunity and plans to develop Serua and Namosi. Located 17km to 60 km west of Suva City on the Southern Coast of Viti Levu, the total region covers the provinces of Serua and Namosi and a part of Rewa province known as Beqa, with a total population close to 35,000 people, 66 per cent iTaukei, four per cent minority communities and 30 per cent Fijians of Indian descent.

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