Blog Entry

Backgrounder: What's INCO doing in New Caledonia?

Catherine Coumans

Ph.D. Research Coordinator and Asia-Pacific Program Coordinator

by Catherine Coumans

New Caledonia is a French "Overseas Community" in the southwestern Pacific (21 degrees 30' S, 165 degrees 30' E). The archipelago is surrounded by a 2,000-km long reef system (44,000 square kilometres) that is the world's second largest coral massif after Australia's Great Barrier Reef. New Caledonia also boasts the world's largest lagoon, which contains all of the associated coral habitats. New Caledonia enjoys a global reputation for its rich bio-diversity and for the high percentage of species that are unique to these islands. On January 31, 2002, efforts by New Caledonian environmental activists and the leadership of the indigenous Kanak of New Caledonia paid off when the French government submitted a proposal seeking World Heritage status for the entire reef surrounding New Caledonia, but it will be at least another year before this status can be confirmed, if it is approved by UNESCO, and it is being contested by local politicians.

Indigenous Kanak make up 42.5% of New Caledonia's population of approximately 210,000; 37.1% of New Caledonians are European and the rest are primarily Pacific and Southeast Asian peoples. New Caledonia contains more than 20% the world's known nickel resources. Small-scale nickel mining on the archipelago dates back to 1875. More recently, however, there has been a boom of major multinational mining companies that are exploring for deposits in New Caledonia. Among the miners staking claims on the island are Canadian multinationals INCO and Falconbridge.

INCO, and at least five other multinationals, are focussing on the sparsely populated southern tip of the main island, which has not yet been subjected to large-scale mining. INCO's Goro project is the most advanced of the mining projects. INCO expects to receive a permit to build the mine in March of 2002. Conservationists say proposals to expand mining in New Caledonia by some 20 per cent will inevitably affect the reef and the unique terrestrial ecosystems. Local communities have also expressed alarm at the impact this huge mining project will have on their traditional way of life.

During a visit to Canada in October of 2001, Kanak officials of the Customary Senate and New Caledonian environmentalists told INCO executives and government officials of Natural Resources Canada and the Department of Foreign Affairs and International Trade that they want greater disclosure about INCO's plans, better public consultation, and a longer time frame for public review of INCO's forthcoming EIA so that they can commission an independent environmental assessment of the EIA and a thorough social impact assessment. [1] The New Caledonian delegation to Canada was made up of Georges Mandaoue (President of the Senat Coutumier), Regis Vandegou (Secretary General of the Senat Coutumier), Jacky Mermoud (Secretary General of Action Biosphere and member of Corail Vivant) and Rick Anex (Action Biosphere, Corail Vivant, and Secretary General of the Pacific Green Party). The Senat Coutumier (SC) is made up of clan chiefs who are chosen for the SC as representatives of the different tribal regions of New Caledonia. They choose a president from amongst themselves. The SC is considered the "voice" of the Kanak people; it has vested authority according to traditional Kanak law and presides over matters affecting the local population.

On November 21, 2001, nine Kanak leaders, representing the entire Kanak population from Djubea Kapune, the region of INCO's proposed mine, presented Christian Paul, French Secretary of State for Overseas Territories with a detailed petition outlining their concerns about the mine and their demands with respect to INCO's proposed project. Their concerns cover social, cultural, legal, technical, economic and environmental aspects of INCO's proposed mine. The Kanak leaders demanded a two year delay in the permitting of the mine so that a public inquiry into socio-cultural impacts could be conducted, and to allow enough time for an independent environmental review of INCO's proposal. (A reproduction of the Kanak petition is available.)

Lack of Transparency and Opportunity for Public Oversight

During their visit to Canada in October 2001, local activists and representatives of the Kanak leadership of New Caledonia complained that they were not being given studies and documents that were commissioned by INCO pertaining to the project. A "Bankable Feasibility Study" was completed in March 2001. This included an Environmental Impact Assessment that was undertaken by Rescan Environmental Consultants. But neither of these documents was made available to local activists in spite of their constant requests for copies of these studies. During their meeting with INCO executives Alan Stubbs (V.P. Public and Government Affairs) and Bill Napier (VP Environment) in Toronto, the delegation from New Caledonia were told that the project was still undergoing changes and that they would have to wait until the final documents seeking a permit to mine (the Installation Classee) were released by the New Caledonian government before they could gain insight into the final plans for the project. [2]

Stubbs and Napier could not say when the Installation Classee would be released, nor how long the public review and comment period would be. New Caledonia does not have a set procedure or established environmental standards and criteria for the assessment of mining projects. INCO's multi-volume Installation Classee was finally officially released for public review on Monday, February 4, 2002. It was not actually available for the public, however, until the evening of Thursday the 7th, when it went up on INCO's web site where it can now be viewed. The public was informed that the public review period would only last one month, until March 7th. The Installation Classee that was put up on the web site was in French. Stubbs of INCO noted on February 7th that the document only exists in French. Scientists who have had a chance to look at the proposal have expressed concern and have indicated that more time is needed so that a proper independent assessment can be conducted.

Permitting Irregularities

Before and during the public commentary period, INCO was already moving heavy equipment into the area and building roads. Jacques Lafleur, the president of the southern province, who has the final word on the Goro project approval, appeared on television to state that the public commentary period would end on March 6 and he that he would sign the requisite permit approvals on March 7 so the mine could proceed on schedule.

INCO says it will adopt French standards for the project. [3] But the mine's waste water will be disposed of through a pipe into the sea and INCO has already admitted that the effluent will not be able to meet French environmental standards for all substances so the company will be asking for a "mixing-zone" in the sea of some 20 metres around the pipe outfall. [4]

A Global Treasure: seeking World Heritage Status

New Caledonia is recognized throughout the world as a region that significantly contributes to the world's biodiversity. New Caledonia is very rich in biodiversity with an especially large number of plant species. Due to its isolated location and its soil type (utramafic substrates), which is high in Chromium, Magnesium and Nickel and low in Calcium, over 76% of the plant species found in New Caledonia are unique and can only be found in this archipelago (Jaffre et al, 1998). [5] The International Union for the Conservation of Nature has focused on New Caledonia and found that 14.4% of New Caledonia plant species, some 480 species, fit in their Red List because they are extinct (5), threatened (160), vulnerable (214), rare (91) or have yet to have their status defined (World Conservation Monitoring Center. 1997. Red List of Threatened Plants). New Caledonian animal species, while smaller in number, are similarly unique in the world (Chazeau, 1995). [6] Some 65% of reptile species and 47% of bird species may only be found in New Caledonia. New Caledonia is one of the 25 biodiversity 'hotspots' on earth that contain 44% of the Earth's plant species and 35% of its vertebrate species in habitats that face a high risk of elimination.

Mining by INCO is expected to threaten terrestrial bio-diversity in a number of ways. Some non-native plant species can establish themselves more readily on mine waste than can native species leading to a reduction of endemic and unique species. There is also a threat to diversity of species as mining destroys distinct habitats and creates large areas with similar features. Studies of mining areas in New Caledonia that were abandoned more than 20 years ago show that re-vegetation has been sparse and mainly consisting of species that are already more widespread (Roche 2001:38). [7] Mining will also contribute significantly to air pollution through burning of bunker oil to run generators for the mine.

There is still an amazing lack of knowledge about freshwater flora and fauna in New Caledonia, but again high percentages of freshwater species, especially aquatic insects, are endemic to New Caledonia. Bottom dwelling organisms in water bodies are considered important as they are at the bottom of the food chain but according to Roche (2001) no detailed information is available on bottom dwelling fauna in New Caledonian rivers. According to local activist Rick Anex, the few living examples of the world's oldest freshwater fish, Galaxia, swim in neighboring streams that are downwind from INCO's proposed acid leaching operations, which will release airborne H2SO4.

New Caledonia's coral reef system is considered to be in good health compared to other reefs in the Pacific (Wilkinson 2000). [8] The reef system is home to 15,000 species of marine animals, including 800 species found nowhere else on the planet. New Caledonians are concerned that these highly complex and fragile reef ecosystems will not be preserved in the face of large-scale modern mining and cannot be restored after mining. Already there is some evidence of damage to reefs near watersheds with past or present mining activity. Scientists believe the protection of the reef is important because it is at the southern edge of the tropical zone, and is therefore more likely to survive the "bleaching" associated with warmer temperatures, which is destroying much of the world's coral. Janice M. Lough, Ph.D., Principal Research Scientist, Australian Institute of Marine Science, and Thomas J. Goreau, Ph.D., an American marine biologist who is a specialist on coral bleaching, presented papers on the significance of New Caledonia's reef system at an international conference on coral reefs in Bali in 2000. The United Nations Environment Program's latest estimates show that living coral, containing as many as 2 million species of plants and animals, has been reduced to less than a tenth of a percent of the world's ocean area (Globe and Mail, September 11, 2001).

The reef is also essential for native Kanaks, with villagers harvesting 4,000 tonnes of fish a year from its lagoon. On January 31st 2002, the French government submitted a proposal seeking World Heritage status for the entire reef surrounding New Caledonia. It will be at least another year before UNESCO will rule on the proposal. The Senat Coutumier of Kanak chiefs has endorsed the World Heritage proposal. The World Heritage proposal has also been endorsed by Mr. Rock Wamytan, the head of the opposition Kanak political party, the Front de Libération Nationale Kanak et Socialiste, a broad coalition set up in 1984, made up of Kanak leaders, a trade union confederation and a feminist group.

Jaques Lafleur, long-time president and strongman of the southern province where the mine is to be located, has responded furiously to the proposal for World Heritage status. He railed against "interference from Paris" in local affairs and warned that the proposal may "provoke violence in New Caledonia." [9]

Violence and Human Rights Abuses

On February 13, just some ten days after the INCO permit proposal was made public, two men beat up the publisher of the weekly satirical newspaper Le Chien Bleu, Etienne Dutailly, at his Noumea office. "Le Chien Bleu" features satire about the sometimes turbulent New Caledonian political scene. On February 20, New Caledonian radio station Radio Djiido reported that its editor-in-chief, Lucienne Moréo-See, was assaulted at her home near the capital of Nouméa. The radio station said two men attacked Moréo-See in the morning hours several days earlier. They assaulted the journalist and then left. The attack, it turns out, occurred within hours of the assault on Dutailly. New Caledonian environmental activists opposing IINCO's Goro project say their lives have been threatened unless they stop criticizing the development. Nevertheless, they have publicly condemned the above attacks and vowed to continue to exercise their right of free speech. [10]

Mining in a Tax Haven with no Environmental Laws but with Significant Risk to Investors

INCO executives claim that the company's Goro nickel property in New Caledonia is among the richest undeveloped laterite orebodies in the world. [11] INCO's new CEO, Scott Hand, has given the green light to a $1.4-billion US commercial nickel-cobalt project on the site. The Goro project is expected to produce a nickel oxide product containing 78 per cent nickel and a cobalt carbonate product. The operation is expected to supply stainless steel customers in South Korea, Taiwan and eventually China, and the specialty cobalt markets in those countries.

The bankable feasibility study confirmed the capital cost of US$1.4 billion for a fully integrated mining and processing facility with an annual capacity of 54,000 tonnes of nickel and 5,400 tonnes of cobalt. Operating costs (after cobalt by-product credits) are expected to be below US$1.00 per pound. INCO expects returns of 15% at 3-dollar nickel and 7-dollar cobalt, before any partner buy-in premium. [12]

Tax Holidays: INCO currently holds 85 per cent of Goro with the remaining 15 per cent held by France's Bureau de Recherches Géologiques et Minières (BRGM). INCO is currently in discussions with a number of companies interested in acquiring a minority interest in the project. INCO anticipates a partner will hold 30% of the project. The New Caledonian authorities have agreed to grant a 15-year 100 per cent tax holiday followed by a 5-year 50 per cent tax holiday. INCO also has an agreement-in-principle with the French government for some $350 million of "very favourable tax assisted financing" for the project. [13]

INCO says this mine will eventually be bigger than its 100 year old mine in Sudbury, Ontario, and last as long.

INCO expects to mine in New Caledonia for a long time. According to Hand, "Goro's reserve and resource position offers an excellent base for the Goro operation and we intend to increase our position to allow a major and growing presence in New Caledonia for the long-term. We will be celebrating our 100th year in Sudbury next year and intend to be there for many years to come. We see the same long-term future for New Caledonia."

Risky Technology: INCO has been operating a $50 million pilot plant program to test its planned, hydrometallurgical and solvent extraction process known as Pressure Acid Leach or PAL. This is an experimental process of extracting Nickel by using sulphuric acid and high pressure in an autoclave to leach out the metal from the ore. INCO's version of this technology is still secret and proprietary, but other versions that have been used at three Australian mines have not been commercially successful. Each of the projects was worth $l billion-plus, and each was supposed to produce a pound of nickel as cheaply as 70 cents (U.S.) but the Australian PAL operations are having serious technological and production difficulties and have yet to produce nickel at a profit, much less at 70 cents a pound. [14] INCO says its pilot plant has shown some success, but it will need to be scaled up some 5000%. INCO's Alan Stubbs admits that no one can be sure how the process will work at that much larger scale. [15]

Local Opposition

There are a number of environmental NGO groups that are heading up the opposition to expanded mining in New Caledonia, the main players being Action Biosphere and Corail Vivant. The other major players in the opposition to mining are the traditional Kanak chiefs in the Senat Coutumier, the local Chiefs in the Goro area and the New Caledonian Green party.

The local chiefs in the Goro area have come out against permitting the project for two years while independent assessments can be prepared. (See below for a reproduction of the Kanak petition, in French.) They are supported by the indigenous Innu of Canada, who went through a very lengthy environmental review of INCO's proposed Voisey's Bay nickel project. The Innu have been in intensive negotiations with INCO over the Voisey's Bay project for years (not yet concluded) and will have a critical say in whether the project goes ahead, under what conditions, and what the benefits to the Innu community will be. The local Kanak chiefs, on the other hand, complain that they have received almost no information from INCO over the years that the mine was being planned and now only have one month in which to review the voluminous permit proposal.

[1] Notes from a meeting with INCO executives Bill Napier and Alan Stubbs: October 22, 2001
[2] Ibid.
[3] Personal Communication with Bill Napier: November 10, 2001.
[4] Ibid.
[5] Jaffre, – ., P. Bouchet, J.M. Veillon, 1998. Threatened Plants of New Caledonia: Is the system of protected areas adequate? In Biodiversity and Conservation, 7:109-135.
[6] Chazeau, J. 1995. Actes de la Deuxieme Conference Internationale sur l'Ecologie des Milieux Serpentinigues. Noumea, 31 juillet-5 aut 1995. pp.95-105.
[7] Roche. October 2001. Koniambo Project: Environmental Baseline Study – Summary.
[8] Wilkinson, – .R., 2000. Status of Coral Reefs of the World: 2000. Australian Institute of Marine Science, 363 pages.
[9] Article in Le Monde of February 27, 2002.
[10] Lowe, M. March 1, 2002. Inco's Risky South Seas Venture in
[11] Scott Hand, February 5, 2002. Investment Community Meeting. Florida
[12] Ibid.
[13] Ibid.
[14] Lowe, op cit.
[15] Personal Communication: October 29, 2001.