French Government Supports New Caledonia’s Nickel Industry with Financial Assistance and Reform Pact
The French government has stepped in to provide critical financial support to the struggling nickel industry in New Caledonia, a move that underscores the significant challenges facing this key economic sector. In a recent agreement with mining giant Eramet, France has decided to convert €320 million of previous loans into "quasi-equities" to alleviate the debt burden of Eramet's New Caledonia subsidiary, Société Le Nickel (SLN).
This financial maneuver is intended to improve SLN's balance sheet and enhance its attractiveness to potential investors. Eramet has stated that it will not extend further financing to SLN, highlighting the precarious financial situation of the subsidiary, which reported a debt of €493 million at the end of 2023.
The French State, holding a 27.13% stake in Eramet, is also extending its support to other key players in New Caledonia's nickel industry, including Koniambo (KNS) in the north and Prony Resources in the south. Both companies are grappling with severe financial difficulties amid stiff competition from nickel producers in Indonesia and China, where costs are significantly lower.
French Finance Minister Bruno Le Maire, who visited New Caledonia in November 2023, has committed to supporting the nickel industry, tying this assistance to a comprehensive "nickel pact." Scheduled to be signed on 25 March, the pact aims to implement broad reforms in New Caledonia, focusing on reducing production costs, primarily for electricity, and diversifying client bases.
The pact comes at a critical time, especially after Koniambo's main financier, Anglo-Swiss Glencore, decided to place its New Caledonian unit into "care and maintenance" mode due to unsustainable financial losses, halting production and putting the jobs of approximately 1,300 core staff and 2,000 subcontractors at risk. Over the past decade, Koniambo has incurred losses amounting to €14 billion.
Furthermore, Prony Resources is set to receive a €140 million loan from the French government's "Economic and Social development fund" to prevent imminent bankruptcy. This assistance is expected to sustain the company's operations until 2026, amidst efforts to restructure its stock for attracting potential foreign investors. Currently, Switzerland's Trafigura owns a 19% stake in Prony's stock.
Amid these developments, New Caledonia's government has announced an "emergency plan" to support companies and employees directly impacted by the nickel industry's downturn. The plan includes providing special unemployment allocations to those facing job losses, highlighting the government's commitment to mitigating the crisis's impact on the local economy and its workforce, which significantly depends on the nickel sector.
