Nickel Prony Ressources mining site in New Caledonia. Photo: Supplied
The French government has agreed to dig into its coffers and help rescue New Caledonia's beleaguered nickel industry. But the aid is tied to a stringent reform "pact".
The latest financial assistance came early this week with an agreement between France and mining giant Eramet, whereby a sum of €320 million (which is the amount of previous loans granted by the French government) will be converted to "neutralise" an existing debt in Eramet's New Caledonia subsidiary Société Le Nickel (SLN) so as the huge figure can be transferred from the liabilities section to "quasi-equities".
The main objective was to off-load SLN's consolidated accounts and make it easier for Eramet's SLN to appear more attractive to potential future companies willing to takeover.
Eramet stressed in a release this week that it would not grant any more financing to SLN "in order to preserve the group's balance sheet".
SLN has accumulated a debt of €493m at the end of 2023.
The French State holds 27.13 percent in Eramet's stock.
The France-Eramet agreement is also part of a more general approach from Paris to try and save New Caledonia's nickel industry's major players: SLN, as well as two other nickel mining plants (Koniambo -KNS-, North of New Caledonia's main island and Prony Resources, South).
All three are faced with life-and-death difficulties, with a backdrop of a nickel supply world market now dominated by Indonesia and China, where the production of the precious metal is much cheaper and competitive.
French finance Minister Bruno Le Maire, who visited New Caledonia in November 2023, pledged to assist the ailing industry in its Pacific territory, but that the assistance would be tied to what he called a "nickel pact".
Nickel ore from New Caledonia. Photo: Supplied
"Nickel pact" to be signed
The pact is currently scheduled to be signed on 25 March and it would involve necessary far-reaching reforms for New Caledonia, including help to lower production costs (mainly electricity) and diversification of the clientele.
Koniambo's main financier Anglo-Swiss Glencore last month decided to put its New Caledonian unit in "care and maintenance" mode, effectively putting it to sleep until a potential investor was found to takeover its shareholding of 49 percent.
This means production from Koniambo smelters has now stopped and core staff (about 1300) now have a 6-month window of visibility in terms of employment. Another estimated 2000 employees working for Koniambo subcontractors have already lost their jobs.
Over the past ten years, Koniambo has accumulated a staggering €14 billion in losses.
In another development, it was announced last week that Prony Resources, also facing short-term risk of bankruptcy, is going to be granted a loan of some €140m from the French government.
This is drawn from a so-called French "Economic and Social development fund".
The fresh lifebuoy is believed to provide sufficient funds to help Prony (which has accumulated a debt of some €109m just for 2023) operate until 2026.
Over the past few weeks, Prony has been working on a restructuring of its stock, so as to allow future potential foreign investors to acquire larger bulks (up you 74 percent) of the capital.
Switzerland's Trafigura currently owns 19 percent of Prony's stock.
"Emergency plan" unveiled
On Wednesday, New Caledonia's government introduced a much-needed "emergency plan" which President Louis Mapou said was designed to help companies directly affected by the nickel crisis.
"The situation is extremely difficult, we're talking about companies and life projects that are now being put into question", Mapou told local media during a press conference.
The plan was designed to provide "special unemployment allocations" to help employees facing short-term job losses.
New Caledonia's nickel sector is estimated to employ up to 25 percent of the French Pacific archipelago's 270,000 inhabitants.
