Transcript
WALTER ZWEIFEL: The low nickel price has been like a dark cloud over the entire nickel sector for years now, with losses being run up by all the three main operators. What sent the alarm bells ringing is the announcement by Vale's new CEO Fabio Schvartsman in Brazil at the start of this month that it was reviewing its operation in New Caledonia. Vale runs a global network of mines and mining-related businesses which make it the world's top iron producer. However Vale has been bleeding money in New Caledonia where it is reported to have lost $US1.3 billion in the past three years.
JAMIE TAHANA: What are the options that are being discussed?
WZ: Publicly nothing is known. The Vale board is expected to make a decision in August on how to consolidate its operations. There has been no reaction from the New Caledonian government and no word from France either. However, there is speculation in the media by experts which have been weighing up the options.
JT: And what is the experts' view?
WZ: There appear to be four options being bandied around. The first is the plant's closure, a second to keep running it but with reduced output, a third option is its sale and a fourth option is a partial sale or partnership.
JT: What are the possible consequences?
WZ: It depends, of course, on what the Vale board decides, but all indications are that jobs are on the line at a time when employment issues are a worry in general in an economy which has come off the boil. The worst case scenario is that the plant is closed or mothballed and that most of its 1,200 employees are laid off. That would also immediately hit about 3000 people who are involved in subsidiary work related to the plant at Goro. And the impact would then reverberate throughout the economy.
JT: Has anything been done to avert this situation?
WZ: Everybody is aware of how important the nickel industry is for New Caledonia. That includes the French government which has stepped in to make loans available to tie over the nickel price slump. The Socialist government led by Manuel Valls extended loans to nickel producers in part for political reasons because so much of New Caledonia's economy is nickel-related. Yet in November when Vale was given a $US200 million loan from the French state, it only said it reduced the risk of closing the plant and wasn't a guarantee it would remain operational. It has to be kept in mind that a decade ago, the nickel price was about four times higher than today. It boosted projects at the time such as the one at Goro which went ahead despite massive cost overruns in the hope it would be highly profitable. The slump in the nickel price over the past three years has left the sector running at a loss and the question now is for how long this will continue.
