By Nic Maclellan
After months of political dispute, the Brazilian corporation Vale has finally sold its Goro nickel smelter and other assets in New Caledonia’s Southern Province.
The new owners Prony Resources and Trafigura have accepted a corporate structure that gives majority control to local New Caledonian interests. The deal is guaranteed by loans and tax breaks from the French government and is backed by the commercial and technical support of Tesla, the Californian automotive and renewable energy corporation.
Throughout 2020, there was widespread disagreement over which consortium could bid for the Goro nickel-cobalt smelter and the other assets of Vale Nouvelle-Calédonie (VNC). The company is the local subsidiary of the Brazilian corporation Vale, one of the largest mining companies in the world, with interests in logistics, transport, energy and steel making. After years of work on the project, VNC began nickel smelting in New Caledonia in 2010, late and over-budget, using high-pressure acid-leach technology.
The Goro smelter and Vale’s nickel ore reserves are located in the Kanak customary region of Djubea-Kapumë, which makes up the southernmost portion of Grande Terre. In the two decades since the project was conceived, Vale has engaged in tense struggles with local customary leaders, operating through the Rhéébù Nùù committee (“eye of the land” in the local Drubea language). As Vale collaborated with successive provincial administrations in the south, Rhéébù Nùù campaigned for environmental protection, jobs and opportunities for local subcontractors.
Since it began production, the Goro plant’s hydrometallurgical technology has generated major environmental problems. Vale’s failure to manage these impacts was a long-standing grievance from nearby Kanak villagers. From the beginning of operations, a series of acid spills from the smelter leaked effluent into local creeks and rivers, damaging the freshwater ecosystem that provides resources and livelihoods to local communities. A major leak of acidic effluent from Goro in May 2014 sparked violent clashes with trade unions, neighbouring Kanak tribes and subcontractors, amid calls for the smelter to be closed.
Faced with fluctuating nickel prices, technical challenges and local political opposition, Vale Canada announced in December 2019 that it would sell its local subsidiary VNC. In April 2020, the Northern Province’s development arm SOFINOR, in partnership with Korea Zinc, announced a preliminary bid for VNC’s assets. The Korean corporation is one of the world’s leading producers of zinc and other metals, and has extensive industrial experience in hydrometallurgy. Under this bid, New Caledonia’s three provinces would have jointly held a majority shareholding in a new venture.
SOFINOR/SMSP, in partnership with the transnational corporation Glencore, already runs the Koniambo smelter in the Northern Province. Locally owned, SMSP is a major exporter of nickel ore to two nickel smelters in Korea and China, with SMSP holding 51% control in partnership with Posco (Korea) and Yinchuan (China). SOFINOR/SMSP also holds 51% of the Koniambo Nickel SAS joint venture, a sharp contrast to the Southern Province 5% holding in the Goro project. However conservative anti-independence politicians in Noumea were opposed any expansion of SOFINOR into the Southern Province, with Provincial president Sonia Backes arguing: “This is unfeasible economically and unthinkable politically. Those who propose this have a desire to economically colonise the Southern Province.”
Following failed negotiations in mid-2020 between Vale and the Australian company New Century Resources, another bid for Vale’s assets was announced last October by Prony Resources, backed by commodity traders Trafigura. Independence leaders argued that this consortium did not have the technical expertise to manage the complex hydro-metallurgical process at Goro. Angered by the dismissal of SOFINOR’s bid without allowing Korea Zinc to conduct due diligence at the site, the FLNKS and customary leaders said that Prony’s proposed corporate structure would not guarantee long-term majority control by local interests.
Kanak mobilisation
To press the case for Vale to delay the sale, customary leaders in the South formed a negotiation structure, the Instance Coutumière Autochtone de Négociation (ICAN), which links eight high-chieftainships and the customary council of Djubea-Kapumë, together with the Rhéébù Nùù committee. ICAN’s support for SOFINOR’s bid was echoed by the “Usine du Sud, Usine Pays” (USUP) collective, which unites FLNKS members and local indigenous activists.
For months in late 2020, the proposed sale was delayed as New Caledonia was racked by protests, blockades and vandalism at the mine site. Rioting in Noumea in early December exacerbated growing tensions between supporters and opponents of independence in the government and Congress. After Korea Zinc withdrew its bid on 7 December, Vale formally accepted the bid from Prony Resources and Trafigura, but protests continued over the summer, delaying the finalisation of the sale.
To keep up the pressure, USUP held a mass meeting at the east coast town of Ponerihouen on 16 January, resolving that “our objectives have not changed and we reconfirm that the current Prony Resources bid does not provide an acceptable option, from either the environmental review or the proposed economic and industrial model.” The meeting called for “feedback on the stated demand in terms of independent environmental expertise, which is a precondition for any resumption and restart of the smelter.”
FLNKS spokesperson Daniel Goa, president of the largest independence party Union Calédonienne, told the meeting that USUP was calling for “an economic and industrial project that is viable and sustainable and truly directed towards the construction of our nation and not short-term financial interests. Today, we are ready to put such a project on the table for negotiation. This is a proposal which respects our political vision, that the wealth of our country must serve its development and not its plunder.”
The debate was transformed in February by the collapse of New Caledonia’s government, after the resignation of five independence representatives from the multi-party executive led by President Thierry Santa. The incoming government elected by New Caledonia’s Congress now has a majority of pro-independence members, for the first time since new political institutions were created by the Noumea Accord in 1998. Even though the pro-independence majority (six of 11 executive members) were unable to decide immediately on a new President, the shift in political leadership made it clear to all that a negotiated compromise was necessary to finalise the future of the southern smelter.
The deal came together in early March, brokered between the Southern Province, ICAN and USUP. Provincial president Sonia Backes, a leading anti-independence politician from Les Républicains calédoniennes, negotiated directly with customary leaders and Roch Wamytan, speaker of New Caledonia’s Congress and himself a high chief from Saint Louis, the Kanak tribe on the outskirts of the capital Noumea.
Announcing the new deal on 4 March, Wamytan said: “After several months of tension followed by discussions around the restarting of the southern smelter, all parties have been aware of the need to find a compromise. Political parties, our governing institutions and customary leaders are all aware of the risks for investors, employees and more generally the economic and environmental interests of New Caledonia.”
New corporate structure
The new corporate structure of Prony Resources New Caledonia provides a complex mechanism to engage local and overseas interests, as well as New Caledonia’s three provinces and customary leaders.
Along with foreign investors, the company will be built around the Société de participation minière du Sud calédonien (SPMSC), a holding company that operates on behalf of New Caledonia’s three provincial administrations in the North, South and Loyalty Islands. Shareholdings in the new company will be capped at: 30% for SPMSC; 21% for local investors, customary landowners and employees; 19% for Trafigura; and 30% for Prony management and international investment firm Agio Global. In contrast to the original bid issued in 2020 by Trafigura and Prony Resources, the 51% controlling interest for New Caledonians cannot be watered down by future share releases.
Under the new deal, a central part of the revised operation will be implementation of the “Lucy” project, establishing dry storage of industrial waste at the site rather than storage of effluent in a tailings dam. SPMSC will bring in independent experts to monitor the existing tailings dam, revegetate the site and establish an independent monitoring committee, including representatives of local environmental groups that have long campaigned against Vale’s pollution.
Antonin Beurrier, Chief Executive of Prony Resources said: “Today’s announcement comes after several months of negotiations that have led to the successful transfer of ownership of the Usine du Sud operation to become 51% owned by local New Caledonian interests. It ensures a successful and sustainable future for the operation that will preserve 3,000 direct and indirect jobs and ensure the successful completion of Project Lucy for dry storage of tailings, the largest private investment on the island for the next three years, creating 600 new jobs.”
As part of the negotiated solution, Vale wrote off a debt of 27 billion CFP (US$200 million) owed by SPMSC to its subsidiary VNC. The French state has offered tax breaks to the new company, a €200 million loan and loan guarantees of a further €180 million. Under the deal, the Southern provincial administration will reclaim mining titles held by Vale, which can then be reallocated to a future buyer. Vale and Trafigura will continue to market part of the nickel metal produced by the new operation.
The other central element of the new deal is the involvement of Tesla, the US energy and automotive corporation headed by Elon Musk. In a statement last July, Musk called on the global mining industry to produce more nickel, a key ingredient in the batteries that power Tesla’s electric cars. The US billionaire offered a “giant contract for a long period of time” to companies that could supply nickel in an efficient, environmentally sustainable manner, noting that “the real limitation on Tesla growth is [battery] cell production at an affordable price.”
To support the new company in New Caledonia, Tesla will now join the project as a technical and commercial partner, advising on environmental management and assisting with the generation and storage of electricity using renewable energy. In the medium term, this partnership could greatly benefit Tesla’s vehicle manufacturing, given the crucial demand for nickel in car batteries for new generation electric vehicles.
New Caledonia holds an estimated 25 per cent of global nickel reserves, so the looming boom of electric vehicle manufacture in the next decade makes these mineral resources a crucial strategic asset. The battle to ensure that New Caledonians benefit from the exploitation of their natural resources will continue in coming months, as the French dependency moves towards another referendum on self-determination in 2022.
