Second mining company gets going.


New Caledonia appears to have won the second of two huge nickel mining and smelting projects that are expected to push its annual growth up to more than 6% of GDP.

Christmas and the New Year were a period pervaded by uncertainty about the future of the US$2.2 billion nickel mining and smelting town to be located at Koniambo in the Northern province.

By mid-February, statements by Falconbridge, the Canadian company behind the project, and its main local partner, SMSP, the Northern Province's investment arm, indicated the project was firm.

Falconbridge said preparations had started for opening the mine by late 2009/early 2010.

Falcolnbridge chairman, Aaron Regent said the main construction phase would begin in 2007.

A final formal decision, due to have been made by December 31, 2005, was deferred to February 27.

On December 6, Falconbridge said it would forgo a French government offer of a US$450 million tax holiday and a US$450 million loan guarantee because too many strings were attached to it.

The company will carry the entire cost of the project for now without turning to French financial aid.

Legal complications arose late last year when a friendly merger proposed by Falconbridge and INCO, the Canadian backer of the Goro nickel mine, came under scrutiny by regulatory authorities in Canada, the United States and Europe.

On December 29, a Paris court upheld Falconbridge's Koniambo's mining rights.

These were challenged by ERAMAT, controller of the long established SLN mining company and original holder of the Koniambo lease.

The French government agreed to transfer the lease to Falconbridge, compensating ERAMAT with about US$1 billion and a lower grade concession at Poum.

Falconbridge said its latest assessment of the nickel field classed it as being one of the world's largest and richest ones.

It has 142.1 million tonnes of ore at 2.13% nickel content and inferred reserves of 156 million tonnes at 2.2% nickel content.

Koniambo plans to produce 60,000 tonnes of nickel annually. In February, 2500 labourers recruited in the Philippines were due to arrive to accelerate work underway at Goro for the annual production of 60,000 tonnes of nickel.

In January, South Korea's Pohan Iron Steel Company (POSCO), the world's fifth largest by turnover, announced it would invest US$350 million for a share of SMSP's Koniambo holding.

The new mines will lift New Caledonia's annual economic growth from the current 4% to 6.45%, according to a study by the French Development Agency, the local statistical department ISEE and French overseas money supply institute, IEOM. Investment of about US$4 billion in the Goro and Koniambo projects will raise the total nickel output to about 200,000 tonnes from 2010.

GDP indicators put New Caledonia almost on par with New Zealand, measured by living standard.

But the study stressed that New Caledonia remained far too dependent on French aid of about US$1 billion a year and should diversify into other industries, like tourism.