Vale's move to exit New Caledonia nickel mine heightens unrest

AUCKLAND -- Authorities on the Pacific island of New Caledonia suspended international flight services on Thursday amid unrest over plans by Brazilian mining company Vale to exit its operations there.

The French colony of New Caledonia, 1,200 km east of Australia, is home to around a quarter of the world's known reserves of nickel, a key ingredient for making steel and batteries.

Residents, divided between indigenous Kanaks and colonial descendants, voted narrowly in October against independence and instead to remain part of France. The festering social cleavage, however, has complicated Vale's move to cut years of losses on the Goro nickel and cobalt mine.

Vale announced on Wednesday evening that it had reached a formal agreement to sell Goro, in New Caledonia's Southern Province, to Prony Resources, a consortium led by local management and quarter-owned by Singapore-based commodities trading house Trafigura Group with backing from both the colonial and French governments. Vale said it aimed to close the deal by March but did not disclose terms.

"All parties to this negotiation have invested a significant amount of time and effort to reach a solution for the sustainable future of [Vale New Caledonia]," Mark Travers, Vale's executive director for base metals, said in the announcement.

Kanak groups have been backing a rival bid for the mine, one of the country's largest employers, from Sofinor, a company controlled by the government of the Northern Province that was working in partnership with South Korea's Korea Zinc. Vale, however, disqualified the offer in late October.

Opponents began taking to the streets earlier this week to press Sofinor's case, bringing the capital of Noumea largely to a standstill, with roadblocks and demonstrations that also reached the island's main port.

The unrest, including clashes with armed French settlers, accelerated further on Thursday after Vale's announcement.

"The shareholding from New Caledonia has yet to be finalized," a consortium of Kanak groups, including the pro-independence party Kanak Socialist National Liberation Front, said in a joint statement on Thursday. "We have not heard anything on the maintaining of jobs."

The Liberation Front, which governs the Northern Province, has objected to Trafigura's involvement in Prony Resources, saying it amounts to "plundering of the country's resources by multinationals" and raises concerns about risks to the local environment.

Pro-independence supporters took to the streets of the capital, Noumea, after the October independence referendum.    © AP

Late Thursday, intruders penetrated Goro itself, with Vale saying five pieces of equipment were stolen and that all staff would be evacuated from the mine. The government cited the need to mobilize police to deal with the unrest in suspending international flights.

"The evacuation decision was made by Vale NC management to ensure the safety of employees," the company said.

French and colonial officials are holding urgent discussions about how to handle the unrest. Sofinor, meanwhile, says it is working on a new bid for Goro with an unnamed international partner after Korea Zinc withdrew on Monday, two days before Vale's deal announcement.

Vale took over rights to Goro in 2007 as part of its $19 billion buyout of Canada's Inco and commenced production three years later. But it has never been able to reach its original annual output targets of 60,000 tons of nickel and 5,000 tons of cobalt, in part due to technological complications with processing of the ore.

Output of nickel reached a peak of 37,400 tons in 2017 and Vale has since written down its investment by more than $2 billion, including a $400 million charge in the April-June quarter.

Goro had been on track for output of 31,000 tons this year, with Vale blaming slow production on the impact of rains and storms. In its Wednesday announcement, Vale said it would reserve a further $500 million on its books in relation to the mine's sale.

Vale said in September that it would simply close Goro after a planned sale to Australian zinc producer New Century Resources collapsed due to financing difficulties. The company, however, took no obvious steps to prepare for closure.

In the view of Sebastien Goulard, founder of Paris-based public affairs consultancy Cooperans, the struggle over Goro reflects competing visions for New Caledonia's future as well as a battle for control of the patronage coming from the mine. Some groups have been hoping to develop downstream industries based on the mine's output.

"It is not only about economics, and that is why it is so difficult to conduct business in New Caledonia," he said. "The pro-independence supporters prefer to keep control over the island's main economic sectors. [But] the current crisis gives a terrible image of New Caledonia to possible foreign investors."