In La Tribune 13/01/2021 (Update 17/01/2024)
3 years after the publication of this article, the facts confirm my observations of 2021: Prony Resources is in great difficulty and :
- some are calling for nationalization as a matter of national sovereignty…but New Caledonian nickel is exported …toward Asia and so little to mainland France or Europe;
- others denounce the financial set-up, but it’s a little late for that, as the arguments in this 2021 article indicate;
- still others claim without convincing that it will be saved… thanks to money… from the State… once again…, to be seen;
- others advocate mergers, but with whom? Ill-prepared mergers, i.e. in a depressed market because nobody had the courage to do them before, are always bloody, cruel or barbaric, because instead of rationalizing people and tools, it’s necessary to give up and close down.
The only thing that’s certain is that the initial set-up didn’t hold up, that another model was possible – more industrial and professional, as money probably flew away from New Caledonia (to do what?), to the great misfortune … of the jobs at the southern plant.
But back in January 2021, what was going on?
Caledonia has 4 refineries plants to process its nickel ore. The Northern Province owns two plants, one in Korea which it shares with the steelmaker Posco, the other, the one General de Gaulle wanted to rebalanced the economy, is shared with the miner Glencore. In both cases the North Province has 51% of the shares and the corporates 49%. Further south in Noumea, the SLN is 34% owned by the three provinces – South, North and Islands – and the balance by Eramet and a Japanese steelmaker. In the far south, the Goro’s refinery and mine are 5% owned by the local authorities and the balance by Vale of Brazil.
Two sales attempts
Since the end of 2019, Vale has put its 95% stake in Goro for sale at a price of a symbolic euro, but in the last 12 months two attempts to sell it have been fiascos.
The first failed because the chosen candidate, Australia’s New Century Resources, was neither industrially nor financially sound.
The second is currently being postponed, but has caused a stir. (Unfortunately, it was then chosen and, 3 years later, is the cause of the current difficulties). Goro was to be recapitalized to the tune of $100 million by a new shareholder, and the proposed solution seemed to be a package deal or a jumble of several opacities.
The clearest part of the new capital was that of Trafigura, an international trader. It would take 25% versus $25 million.
More tintinnabuling was that of a new company created for the operation, the Compagnie Financière Prony (CFP). Some people were surprised that its founder established in Polynesia, a territory free of income tax, combined the functions of director of the Goro site, negotiator for the sale of this same mining site for Vale and candidate for its takeover.
As Trafigura, CFP, a company not yet created and without sufficient financial resources to finance its contribution, took 25% of the capital. It was therefore announced that Trafigura would first advance $50 million to CFP, and then it was explained CFP would receive $25 million from Trafigura and $25 million from a shell company incorporated in the Grenadine Islands and headquartered in Liechtenstein.
The remaining 50% of the capital was to be divided among employees, local authorities, and private investors, with approximately $10 to $15 million to be contributed in total, although the amount and nature of the contributions by each was unknown.
More obscure, added together, these contributions did not add up to $100 million. In addition, while $1 million contributed by Trafigura gave 1% of the capital, the same contribution by another party appeared to offer a different percentage without any real explanation.
Financial and Tax help
For its part, Paris contributed financial and tax facilities of approximately €420 million in metropolitan money; the seller, Vale, gave $500 million to the buyer in order to modernize the mine’s dam; banks were announced to lend $242 million.
Finally, this solution was intended to supply nickel and cobalt to the Chinese battery industry.
A third proposal was that of the Sofinor Corp. associated with Korean-Zinc. (It was not selected in 2021). Industrially speaking it was clear, as it maintained all the activities of the site. Technically it was clean, because the Korean is the world leader in metal refining and was contributing with its metallurgical know-how and technologies. Financially it was pure, because the local authorities contributed 51% of the capital in the form of mining permits, while the Korean fully and directly financed the other 49% of the project from its own funds without tax cover-puppet. Strategically, it was cunning, because it wanted to supply not China, but the European “Airbus of batteries”. Politically it ensured a rebalancing of the Caledonian nickel, because if it was the Northern Province, already rich of two factories, which worked out the acquisition of the 51% and the Southern Province which inherited the presidency of the company.
However, as the employees of Sofinor-Korean Zinc had been forbidden access to the Goro mining site, their offer remained incomplete. Then on December 7, 2020, following diplomatic pressure, Korean Zinc withdrew from its joint offer with Sofinor.
Dated the following day, on December 8, 2020, an option to sell the plant and mine was proposed for signature to Trafigura-CFP and Vale. It stipulated CFP did not yet have any legal existence at that date.
Anti-colonial rhetoric revived
No needs to be a genius to foresee that a policy that did not anticipate its blunders would logically revive an anti-colonialist rhetoric that had been softened by 30 years of peace and that it would lead to a loss of control and disproportionate consequences. In the days that followed, the Goro factory was the site of degradation, fires, destruction, roadblocks, journalists were threatened, racist insults and death threats were repeated, social networks organized witch hunts. After 30 years of peace!
How to get out of this fiasco?
New Caledonia has demonstrated its expertise in networks that crush differences. Instead of presenting, including in the official Parisian media, the cession of Goro as a confrontation between North and South and between rural communities and Nouméa, to mimic it as an anti-Chinese bulwark without looking at what is happening in Indonesia, to oppose Glencore against Trafigura, these networks should get back to work as the departure of Vale must imperatively unify the territory and find harmony rather than division.
Secondly, the process of selling the Goro plant and mine must be redesigned to be less political, more neutral and impartial, but above all to increase its almost non-existent industrial expertise.
(The following conclusion of 2021 envisaged that the third industrial solution mentioned above would finally be adopted. But it was the second that was chosen, and it has led us to our current difficulties. CQFD)
In fact, the discussions of these last days are oriented towards 51% Caledonian interests and 49% non-Caledonian capital. The first bringing access to the mine and the second a real technical expertise for the refinery, while the capital and tax facilities are to be put in perspective for a third referendum. Contrary to the course of the last 12 months, in this future mecano the engineer and metallurgy must be the starting point and the competent and valid contenders are known. The whole is not very complicated, as long as the aim of the scheme is to save jobs and to continue a peace that has lasted for 30 years.