New Caledonia’s Mothballed Nickel Plant Starts Mass Sackings Process

Monday, 29 July 2024, 7:46 pm
Article: RNZ

Patrick Decloitre, Correspondent French Pacific Desk

New Caledonia's mothballed nickel plant in Koniambo (North of the main island) has announced it has engaged in the mass sackings of some 1200 staff, despite efforts to identify a potential buyer.

Koniambo (KNS - Koniambo Nickel SAS) operations had already been mothballed and put into sleep mode after the announcement, in February, from its major financier, Anglo-Swiss giant Glencore, that it wanted out.

KNS is jointly owned by Glencore (49 percent) and New Caledonia's Northern province (51 percent).

While making the announcement, Glencore has signalled a 6-month delay in the implementation of its decision, including payment of salaries.

The same timeframe was also supposed to be used to find potential buyers for the shares owned by Glencore.

Glencore said in February that keeping its stake in KNS was no longer sustainable.

It also recalled that the plant, in over ten years of existence and operation, had never made a profit.

Over the past ten years, KNS had accumulated a staggering €13.5 billion in debt.

As the 31 August deadline looms at the end of the six-month respite, what had been the symbol of New Caledonia's Northern province empowerment and wealth "re-balancing" of the French Pacific archipelago's provinces is now faced with a bleak reality.

Koniambo's wealth relies on the Tiébaghi nickel massif, believed to hold about one quarter of New Caledonia's nickel reserves.

Koniambo: a highly political symbol

KNS was born from a political and financial deal, including France, the "Bercy Accord" signed in December 1997, just months before the political Nouméa autonomy Accord was signed in 1998.

The deal was de facto enacting the transfer of the Tiébaghi massif to New Caledonia's Northern province and its financial arm, the Société Minière du Sud Pacifique (SMSP).

It was the financial translation of the will to restore some balance between the affluent Southern Province and the less favoured Northern Province of New Caledonia, mostly populated by the indigenous Kanak community.

Since the Koniambo project and its construction started, the new activity has had a stimulating effect on the whole region, especially in the small cities of Voh, Koné and Pouembout.

The number of local companies increased, as well as the population.

In announcing the official lay-offs on Friday, KNS still wanted to appear optimistic: "Even though we are pursuing the search process for a potential buyer, and that three groups continue to display an interest for our company, we do not have at this stage a finalised offer", the company admitted.

"We are therefore compelled to go ahead with the collective lay-off process on economic grounds".

Beyond 31 August, only a group of about fifty workers will remain employed in maintenance work on what will then be described as "cold" sleep process.

"But the fact that three world-class groups are still in discussions show that Koniambo Nickel still represents a strong interest for potential takeovers", an optimistic KNS Vice-President Alexandre Rousseau, told public broadcaster NC la 1ère on Saturday.

On top of the wave of sackings announced by KNS, some 600 contractors relying on the plant's activities have also lost their jobs since February.

Combined local unrest and world nickel crisis

The announcement comes as New Caledonia's economy is in a critical situation.

It has suffered a major blow, on top of an already grave financial situation.

Since 13 May, violent unrest has been ongoing in New Caledonia, with a backdrop of protests against French-proposed modifications of voters' eligibility for Provincial elections, which was perceived by pro-independence movements as a way of reducing the political voice of the indigenous Kanak community.

Since the riots, destruction, looting and arson began, over 700 businesses have been destroyed, ten persons (eight civilians and two French gendarmes) have been killed and the overall cost of the unrest is currently estimated at €2.2 billion.

During the riots and unrest, nickel mining sites have been specifically targeted several times.

The whole nickel sector in crisis

New Caledonia's nickel industry has also been in profound turmoil over the past years. Its other two plants, in the Southern province (Prony Resources and historic operator Société le Nickel (SLN) in Doniambo near Nouméa, owned by French mining giant Eramet), are also on the verge of collapse.

The situation came from a world nickel market now dominated by Indonesian units, who have started to produce nickel in mass quantities and at a much lower price.

The result was a collapse of world nickel price (-48 percent in 2023).

New Caledonia's production, in this context, was also perceived as much too expensive, prompting efforts for a deep reform, especially on the cost structure, mainly electricity.

A French assistance plan proposed in 2023 by French finance minister Bruno Le Maire, including a €200m buoy, was declined by local authorities, who said too much was being asked by France in terms of strings attached to the massive funding loan.

The French-proposed reform also intended to diversify New Caledonia's nickel buyers from an almost-entire reliance on Asian clients and instead turn to more European buyers, mostly car manufacturers for the purposes of production of batteries for electric cars.

Other plants on the verge of collapse

As a result of the combined effects of the current situation (the ongoing riots and the pre-existing nickel crisis), Prony Resources' operations are at a standstill.

Eramet, which in recent months had made no secret of its desire to disengage from SLN, earlier reported a net loss of some €72m for the first half of the financial year.

New Caledonia's nickel industry is believed to employ about 25 percent of the French Pacific archipelago's workforce.

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