Mining strategy for New Caledonia or natural resource curse? Mining industry is usually characterized as a curse, also known as the « paradox of plenty ». New Caledonia, which is supposed to have 25% of the world’s deposits of nickel, attempted to overcome this curse. The mining industry was supposed to pay for a viable independence. This is a common belief in nationalism for natural resources. The country and its provinces tried to build a mining strategy based on added value and government majority equity in local companies.

Presentation

New Caledonia has been changing a lot since the Noumea Agreement in 1998. Three new nickel plants were launched which join the sole one New Caledonia already had, the Doniambo plant owned by Société Le Nickel: the first new one is located in the South of New Caledonia, which began operation in 2013; the second one is in the North unveiled by the French president in November 2014; the third is an off-shore plant in South-Korea whose two production lines started in 2008 and 2015. The construction of the two plants, at the same time in the island, created an economic and speculative boom, which speeded up the migratory flow from metropolitan France.
The country owns 34% of Société Le Nickel equity. What is at stake is to become a majority shareholder.
However, the country holds only 5% equity of the southern plant own by Vale. This equity issue has never been paid and therefore is remaining potential. Troubles never come singly, so there have been a lot of technical incidents during the starting phase of production.
A local mining company controlled by the Northern Province of New Caledonia owns, on paper, 51% of the northern plant equity, but the most of cash flows will pay off the debts towards Glencore, which amount to 97% of the construction costs. Indeed, the amount of equity is little compared to the cost of the project and therefore its finance, which means that the so-called 51% that symbolise the control of ownership by the country bringing the resource have not been paid by the local shareholder. Thanks to its financial capacity, Glencore will therefore greatly benefit from the contributions made on behalf of his partner.
Posco processing plants built off shore in Korea enhance lower content nickel ore deposits. However, the dividends that were supposed to return to New Caledonia and fund the construction of the Northern plant, are scarce in the economic downturn and only cover the losses of the local mining subsidiary.
For these projects, New Caledonia granted the multinational companies huge financial backing: the national and local government gave massive tax exemptions for people investing in French overseas territories; there is no local tax for 15 years after the commercial production begins. Moreover, access to the nickel ore deposits was free, without paying any duty. So far, there is no tax on the extracted metric ton of soil.
From North to South of New Caledonia, multinational companies fund the construction of all the plants and therefore fully operate the nickel industry. They secure the ore supplies and raw material contracts, hold the exclusive rights in the industrial process and patent. They control the distribution network, impose their decisions by blackmailing jobs and will take huge interests on the debt of local affiliate companies. The country and its provinces jointly bear some of the financial or industrial risk of a downturn while their financial partners that are the multinational companies will cash in most of the profits. This means that future generations will have to pay the full price for environmental damage and debt.
So, is the mining strategy of New Caledonia, despite its good will and so-called progressive discourse, a practice in favour of multinational companies and their local intermediaries bringing to them the resource? Does it confirm the mining resource curse?

Final documents

• Symposium on Pacific regional security
• Re-thinking regional security: Research and policy nexus
• 25-26 Novembre 2015 at the University of Canterbury, Christchurch, New Zealand

Mining strategy for New Caledonia or natural resource curse?