France seeks deal to salvage New Caledonia's nickel sector

France is seeking an agreement by the end of January to save New Caledonia's nickel industry, which has been hobbled by political tensions and high energy costs.

A nickel mine near Voh on the French island of New Caledonia. © Alain JOCARD / AFP

New Caledonia has some of the world's largest nickel reserves but its producers have suffered years of losses, leaving the Pacific territory eclipsed by a nickel mining boom in Indonesia.

Eramet and Glencore – respectively shareholders in nickel producers SLN and KNS in New Caledonia – have each said they will not provide more funding for the businesses, putting them at risk of financial collapse by early next year.

The French government has been holding talks on the nickel sector in parallel to widen political negotiations over the future of the troubled territory after independence from France was rejected in three referendums.

Presenting proposals to revive the nickel industry during a visit to New Caledonia, Economy Minister Bruno Le Maire has said he wants a preliminary deal to be reached by early January and a final accord signed by the end of that month.

"The financial situation of the three nickel processing sites in New Caledonia is critical," Le Maire told a press conference on Monday.

The territory's three main producers – SLN, KNS and Prony Resources – would need 1.5 billion euros in short-term financing, he said.

Postcard of the Pouembout nickel mining area, northern New Caledonia, 1910. © H. Guérin via Mindat.org

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Investment projects

An agreement would notably aim to free up more unused mining resources for exporting nickel ore to help the companies become profitable, Le Maire said.

The French government would contribute to investment projects, including an overhaul of New Caledonia's energy system that has made local processing costly, but would not bail out the industry.

The European Investment Bank could also play a role, Le Maire added.

The government would further support efforts to shift New Caledonia's nickel exports – currently focused on supplying the steel industry in Asia – towards an emerging electric-vehicle battery sector in Europe.

However, Prony Resources is the only one of New Caledonia's three processors that currently produces nickel suitable for making batteries.

(with newswires)