Dangerous Liaisons

province_sudFollowing its special session held on 14 October, the Congress of New Caledonia stated that applications for the export of limonite ore to China were not inconsistent with the provisions of the Mining Scheme passed in 2009. By way of consequence, the majority of elected members voted for these applications to be included in the agenda of the Government meeting. However, despite the decisions of the Congress, on the four applications which have actually been included in the agenda, only one was accepted, one rejected and the two other deferred. The Government has once again sent a message of incomprehension and hostility to a mining sector which, this year, is expected to generate a historical loss ranging from XPF 80 to 100 billion and perhaps more. Given the magnitude of investments and the relentless decline of the LME nickel price, it is yet absolutely necessary that mining and metallurgical players are treated fairly, on the basis of objective reference criteria, which is far from being the case.
Inability to think outside the scope of politics. Defending the principle of freedom of enterprise and trade, three Government representatives of the pro-French Les Republicains and Union pour la Calédonie dans la France supported export applications. Defending a nationalist vision, the five Government representatives of PALIKA and Calédonie Ensemble formally opposed them all – and this despite having allowed the previous week export to Korea for much greater nickel ore grade (2% instead of 1.65%), for a much longer period (more than two decades instead of 18 months) and so for much more substantial additional exported volumes (1.9 million tons of wet ore per year until 2037). Despite its position in Congress and the resulting clarification of the Mining Scheme guiding principles, the three Government representatives of Union Calédonienne made a complete u-turn. Detaining the balance of power, they actually voted for the MKM application because it is a financial supporter of the party, but against the one lodged by State-controlled SLN which they would like to take control of, and abstained for locally-owned companies SMT and SMGM by imposing prior consultations and proof of effective community support. These choices are utterly political and divergent views show once again the inability for New Caledonia to reason outside the political field – and thus to discuss economic and financial issues, and possibly agree on a nickel strategy.
Inability to respect and develop a regulatory framework. The selection criteria set out by the Mining Scheme, since incorporated into the Mining Code, relate to (1) the exported tonnage, (2) the chemical quality of the ore including the content of nickel metal, (3) the provenance of mining products, (4) the type of contract and its duration, (5) the conditions and economic principles of valuation, as well as (6) interests and benefits for the petitioner and the community of such an operation. During the Government meeting, SLN request was denied because « the application deserves a clarification”. Which one? Aren’t we entitled to know and to ask ourselves why a  formal request for clarification can justify an explicit refusal? Requests by SMT and SMGM could not give rise to a favorable decision either because these two local mining companies would deal with limonite « tailings and therefore work on ancient sites currently stabilized”. One can wonder about the relevance of such an argument, especially with regard to the selection criteria set out by the Mining Scheme and Code. Limonite which is the issue here would come, either from ore having been stockpiled because of its low nickel content, or nickel particules carried by runoff water which would be recovered by the cleaning of tailings. In both cases, these operations constitute a recovery adding value of sub economic resources (criterion 5) as well as a measure of environmental protection in the interest of the community (criterion 6). Regarding precisely the interests and benefits of the latter, and taking particularly into account “the populations living near these sites”, this also raises the question of why the prerequisite for prior consultation did not apply to MKM and SMSP ? Why the Government did not subordinate MKM and NMC requests to prior statements of support by the local communities living nearby the mining sites?
Double standard! The only two mining companies newly allowed by the Government to export nickel ore outside limited traditional channels are those supported by pro-independent political parties. The décisions are not made on objective ground in accordance with well-established selection criteria, but are purely political, which adds further tensions.  By agreeing not to comment on the poor financial situation of SMSP and ensuring instead the provision of new mining resources as well as the increase in export volumes to boost its assets, Calédonie Ensemble desperately wants to become the preferred partner of the separatists for the discussions that are part of the output of the Noumea Agreement. Yet, despite its best efforts, nothing is less certain because the presidential and legislative elections scheduled in May 2017 may well reshuffle the balance of power. In order to remain in tune with the pro-independence voters in the Northern Province, Union Calédonienne advocates stop exports in its national committee, then agreed to export ore in Congress, while voting later on the basis of short term interests in Government. Officially, permission to export to China 300 000 tons of wet ore over 18 months was attributed to the MKM company because the latter would be in a difficult economic situation, which under current circumstances is a pleonasm as all mining companies  bear important losses. But nothing indicates however that on the political scale such a winding strategy will eventually pay off. Yet, through the granting of new mining resources and authorization of exports, SMSP can continue to capitalize on the convenient fiction that is its 51% equity shares. Dang-erous liaisons in a Banana Republic or legitimate hope in a heavily subsidised economy? Whatever the case may be, as in The Crow and The Fox, the company will try to continue to make pro-independence supporters believe that it is theirs and at the same time, say to its multinational partners running the businesses that, thanks to Government support, it is now able to obtain unrestricted access to mining resources as well as the exclusivity of laterites export to the region. Bigger is the cheese, harder will be the fall!

 

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