Building a mining policy for New-Caledonia

Mining in the Pacific conference – NouméaNovember 23, 2011

Analysis of the 2009 Mining development plan and 2011 Industrial plan

AurAuréélienlien Louis Louis -- Mining in the Pacific conferenceMining in the Pacific conference

Speaker

• Aurélien Louis

• Born 8th of july 1981

• Head of DIMENC, the administration in charge of mining, industrial environnement and energy policy in New Caledonia

• Chief executive of the Fonds Nickel, public fund devoted to providing financial support to the mining sector in times of crisis and mines rehabilitations

• High Commissioner advisor for industrial matters

• Ecole Polytechnique (2001), Télécom Paristech (2006), Ingénieur des Mines (2006)

• aurelien.louis@gouv.nc

The DIMENC

• Control of SEVESO and IPPC installation

• Pressure equipment control, explosive

• Dam safety

• Air pollution

Department for Department for IIndustry, ndustry, MMining and ining and EEnergy of New nergy of New CaledoniaCaledonia

IIndustryndustry10 agents10 agents

45 controls / year45 controls / year

• Mining permits

• Mining exploitation control• Mining export control

• Data collecting

MMiningining11 agents11 agents

110 controls / year110 controls / year

• Electricity and gas price setting and control

• Rural electrification funding

• Renewable energy and energy efficiency policy

EEnergynergy

9 agents9 agents

1000 MF / year for 1000 MF / year for energy efficiency energy efficiency and rural and rural elecelec

+ 1 laboratory and 1 geological survey+ 1 laboratory and 1 geological survey

Agenda

• The place of NC in the global mining and metal industry

• Building a mining policy for New Caledonia –the mining development plan and the mining code

The place of NC in the global mining and metal industry

New caledonia has highly valued, critical, mineralresources ; Nickel is the main one

Cobalt :Cobalt :

~500 T/~500 T/yearyear (Sandouville)(Sandouville)

5000 T/5000 T/yearyear (Vale NC)(Vale NC)

Nickel :Nickel :

180 000 T/180 000 T/yearyear (SLN, KNS, Vale)(SLN, KNS, Vale)

~60 000 T/~60 000 T/yearyear ((JapanJapan , , AustraliaAustralia ))

ChromiumChromium : : projectsprojects

Source : Critical raw materials for the EU, report of the WG, 20Source : Critical raw materials for the EU, report of the WG, 201010

Nickel : a metal with multiple uses

Stainless Steel; 65%

Nickel-based alloys; 12%

Electroplating; 10%

Alloy steel; 8%Other; 1%

Coins; 1%Battery; 3%

Source : Source : ErametEramet

Who buys nickel ? (1/2)

Who buys nickel ? (2/2)

NC : a mid scale player getting big

World Reserve : 71 000 kTWorld Reserve : 71 000 kTWorld Reserve : 71 000 kTSource : DIMENC, USGSSource : DIMENC, USGS

0%

5%

10%

15%

20%

25%

Russia

China

Austra

lia

Canada

Indo

nesia

CubaNew C

aledon

ia

Brazil

Philipi

nes

Metal production

Mine production

As of 2009 ; % of world total of Ni content ; metal production :As of 2009 ; % of world total of Ni content ; metal production : primary and intermediate Niprimary and intermediate Ni

20152015

Vale + 60 kT/anVale + 60 Vale + 60 kTkT/an/an

KNS + 60 kT/anKNS + 60 KNS + 60 kTkT/an/an

Various + 100 kT/anVarious + 100 Various + 100 kTkT/an/an

Ambatovy + 60 kT/anAmbatovyAmbatovy + 60 + 60 kTkT/an/an

Munali + 8,5 kT/anMunaliMunali + 8,5 + 8,5 kTkT/an/an

Various + 140 kT/anVarious + 140 Various + 140 kTkT/an/an

Talvivaara + 33 kT/anTalvivaaraTalvivaara + 33 + 33 kTkT/an/an

Caldag + 20 kT/anCaldagCaldag + 20 + 20 kTkT/an/an

Ramu + 30 kT/anRamuRamu + 30 + 30 kTkT/an/an

The major players in the nickel industry have variouskind of interests in New Caledonia

0%

5%

10%

15%

20%

25%

Norilsk Nickel Vale Jinchuan BHP Billiton Xstrata Sumito moMetal Mining

Eramet Pamco

Source : INSG, Source : INSG, ObsObs NicoNico 20102010

Nickel Nickel producersproducers

Nickel ore clientsNickel ore clients

Commercial Commercial interestsinterests

A key business in NC : a few facts and figures

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

In M

F C

FP

Agriculture

Banking and Insurance

Transport &CommunicationOther industry(including energy)Building sector

Trade

Nickel Industry

Public Service

Service industry (other)

ShareShare of nickel of nickel industryindustry in NC in NC AddedAdded ValueValue

12 %12 %

ContrbutionContrbution to to growthgrowth

25 %25 % of NC growth of NC growth between 98 and 06 was between 98 and 06 was due to the nickel sectordue to the nickel sector

JobsJobs ((privateprivate sectorsector))

More than More than 1 out of 61 out of 6private job in NC will be private job in NC will be

due to nickel in 2014due to nickel in 2014

Source : ISEE, DIMENCSource : ISEE, DIMENC

AddedAdded value in 2014value in 2014

Estimated Estimated 2 000 M$2 000 M$

As of 2006As of 20060

100 000

200 000

300 000

400 000

500 000

600 000

700 000

En

MF

CF

P

Nickel

Autres

ShareShare of nickel of nickel productsproducts in global export in global export (2000(2000--2010)2010)

92 %92 %

Geography and economics of Ni mining in NC

Source : DIMENC (2010)Source : DIMENC (2010)

Gwanyang, Korea : 1,4 Mth (17%)GwanyangGwanyang , Korea : 1,4 , Korea : 1,4 MthMth (17%)(17%)

Doniambo : ~ 3,8 Mth (46%)DoniamboDoniambo : ~ 3,8 : ~ 3,8 MthMth (46%)(46%)

Japan : 0,8 Mth (10%)Japan : 0,8 Japan : 0,8 MthMth (10%)(10%)

Yabulu, Australia: 2,3 Mth (28%)YabuluYabulu , Australia: 2,3 , Australia: 2,3 MthMth (28%)(28%)

Goro : 60 000 T Ni GoroGoro : 60 000 T Ni : 60 000 T Ni

KNS : 60 000 T Ni KNS : 60 000 T Ni KNS : 60 000 T Ni

Two world class mining projects

The Goro project :

– 69% Vale Inco, 21% Sumitomo/Mitsui, 10% SPMSC (NC and provinces)

– Hydrometalurgy– Capacity : 60 000 tons/year nickel and 5

000 tons/year cobalt– Project cost : 4 billion US$

Ni oxyde production by 2012

Stage :Tests on one production line by the end of the year

Two world class mining projects

The Koniambo project :

– 51% SMSP et 49% Xstrata Nickel– Pyrometallurgy– Capacity : 60 000 tons/year nickel– Project cost : 5 billions US$– Start of production by 2012

• Stage :– Factory modules being assembled

A century long history

1969 1969 -- 19731973 19901990

First environmental techniquesFirst environmental techniquesFirst environmental techniques

Mining “boom”Mining Mining ““boomboom””

Modern times Modern times

FromFrom 4% Ni to 2,5% Ni4% Ni to 2,5% Ni

200920092004 2004 -- 20082008The 21st The 21st centurycentury

FromFrom 2,5% Ni to ?% Ni2,5% Ni to ?% Ni

Mining development plan and codeMining development plan and codeMining development plan and code

Two major nickel projects launched + Posco deal

Two major nickel projects launched + Two major nickel projects launched + PoscoPosco dealdeal

Local ownership development policy : SLN - SMSP

Local ownership development policy : Local ownership development policy : SLN SLN -- SMSPSMSP

18641864 18731873 19111911 19501950

Discovery of nickel by Jules GarnierDiscovery of nickel by Jules Discovery of nickel by Jules GarnierGarnier

First mine opened in Mont Dore First mine opened in Mont Dore First mine opened in Mont Dore

Doniambo factory starts producingDoniamboDoniambo factory starts producingfactory starts producing

OldOld fashionfashion miningmining periodperiod

FromFrom 15% Ni to 4% Ni15% Ni to 4% Ni

The need for an explicit and coherent mining policy

• NC mining sector has developed at a swiftpace for the past 20 years :

– From the backyard of the Société Le Nickel to a center piece of the international nickel industry

– A massive local industrialization, with two major giant projects on their way to production

– Innovative partnerships put in place (Posco)

• Mining as a component of NC emancipation process– Accord de Matignon – SMSP sold to North Province– Accord de Nouméa – The three Provinces in the capital of

SLN (STCPI)

• The growing need for sustainable development

OrganicOrganic Law, March 1999, Article 39 : A Law, March 1999, Article 39 : A miningmining developmentdevelopmentplan for a plan for a sustainablesustainable developmentdevelopment policypolicy of the of the miningmining sectorsector

The mining development plan and mining code of NC

The mining scheme : a diagnostic and an action plan

• 5 main topics– Streamlining mining regulation– Towards a better knowledge of the mineral resources – Protecting the environment and promoting better

practices to maintain biodiversity– Increasing local companies competitiveness and

climbing up the value chain– Ensuring that mining projects benefit to communities and

future generations

• A framework for all future mining developments : any individual decision taken within the framework of the mining law must be in agreement with the basic principles and guidelines of the Mining Development Plan

• A difficult validation process : first drafts issued in 2004 ; final version passed the congress only in 2009

http://www.dimenc.gouv.nc/portal/page/portal/dimenc/librairie/fihttp://www.dimenc.gouv.nc/portal/page/portal/dimenc/librairie/fichiers/schema_mise_en_vchiers/schema_mise_en_valeur_des%20richesses_minieresaleur_des%20richesses_minieres--mai_2009.pdfmai_2009.pdf

53%

16%

13%

8%

4%4% 2%

SLN

Ballande

NMC

Vale

SMGM

KNS

Autres

Getting a better knowledge of the mining potential of NC

• A low level knowledge of NC mineral resources

• Although extensive permiting has taken place in the past

• Resulting in a lack of new development opportunities and no global resources development plan

49 % of the surface of valid mining titles total surface has not been thoroughly drilled

49 % of the surface of valid mining titles total 49 % of the surface of valid mining titles total surface has not been thoroughly drilledsurface has not been thoroughly drilled

70 % of the peridodite surface is covered by a minin g permit

50 permit holders, for only 6 active companies

70 % of the 70 % of the peridoditeperidodite surface is covered by a mining permitsurface is covered by a mining permit

50 permit holders, for only 6 active companies50 permit holders, for only 6 active companiesRelative Relative shareshare of the total of the total permit surfacepermit surface

Gathering existing data to complete mineral resourc es estimationGathering existing data to complete mineral resourc es estimation

Setting a time limit to perform exploration on exis ting permits Setting a time limit to perform exploration on exis ting permits and and enforce individual resources exploitation planenforce individual resources exploitation plan

Facilitating exploration works licensing when done with competitFacilitating exploration works licensing when done with competitive ive environmental techniquesenvironmental techniques

Building a NC geological survey, to encourage increased investmeBuilding a NC geological survey, to encourage increased investments nts (hydrocarbon in the EEZ (hydrocarbon in the EEZ –– geology of limonite resources)geology of limonite resources)

DoneDone

DoneDone

DoneDone

DoneDone

Getting a better knowledge of the mining potential of NC

The nickel ressources assesment : first results (1/3)

6Supérieure à 140 m

18De 80 m à 140 m

34De 60 m centrée à 80 m

42Inférieure à 60 m centrée

% de sondagesLongueur de maille

The nickel ressources assesment : first results (2/3)

The nickel ressources assesment : first results (3/3)

Protecting the environment and promoting better practice s to maintain biodiversity

• Public awareness of the risks associated with environmental abestos fibers

• A renewed political engagement to preserve NC unique environement (environment code adopted in 2009 – coral reef included in world Heritage list)

Estimated 20 000 ha have been impacted by mining activities (~3,6% of peridotite surface)

Estimated 20 000 ha have been impacted by Estimated 20 000 ha have been impacted by mining activities (~3,6% of mining activities (~3,6% of peridotiteperidotite surface)surface)

• Since the 50’s, mechanization of mining operations and old fashion mining techniques has brought significant pollutions

• Lowering Ni grades lead to abandonnedmines without adequate closing work done

Protecting the environment and promoting better practices to maintain biodiversity

New authorization procedure for mining works, invol ving public New authorization procedure for mining works, invol ving public enquiry, environmental and socioenquiry, environmental and socio --econonomicecononomic studies, a special studies, a special administrative police, financial guarantees for env ironmental woadministrative police, financial guarantees for env ironmental wo rksrks

A Code of best practice, to be signed by the entire professionA Code of best practice, to be signed by the entire profession

Increasing NC knowledge of mining activities impact on the Increasing NC knowledge of mining activities impact on the environementenvironementthrough the CNRT through the CNRT ““ Nickel et son Nickel et son environnementenvironnement ””

Workers protection regulation against Workers protection regulation against abestosabestos fibers fibers –– Best practices sharing Best practices sharing encouraged within the mining sectorencouraged within the mining sector

Creation of a fund devoted to financing mines rehab ilitation (Creation of a fund devoted to financing mines rehab ilitation ( FondsFondsNickel)Nickel)

DoneDone

DoneDone

DoneDone

DoneDone

DoneDone

YATE

THIO

VOH

POYA

PAITA

BOURAIL

HOUAILOU

HIENGHENE

LA FOA

KONE

POINDIMIE

KOUMAC

BOULOUPARIS

CANALA

POUEMBOUTPONERIHOUEN

OUEGOA

POUM

MONT DORE

KAALA GOMEN

TOUHO

KOUAOUA

MOINDOU

DUMBEA

POUEBO

LIFOU

OUVEA

LIFOU

SARRAMEAFARINO

NOUMEA

POUM

MONT DORE

OUVEA

NOUMEA

The Fonds Nickel : a public fund devoted to mines rehabilitation

Top priority sitesTop priority sites

• A GIS covering around 454 old mines

• A ranking system, according to environmental impact or rehabilitation economic interest

• 66 will be financed by mining operators (sites abandonned after 1975)

• 166 with a 20% private participation (sites located on a mining concession)

• 62 with only public funds

• When possible, sites re-exploitation will be preferred

First hands-on experience

12/200912/2009 30/07/201030/07/2010

Towards a sustainable industrial development

• NC is a long time exporter of Nickel ore (2,3 MT Ni since the 19th c.)

• Two world class mining projects and new forms of partnerships with potential clients => a new awareness of the necessity to increase local added-value of the mining & metal business

• But an old fashion regulation of exports and no tools to preserve resource for future local met development

A new regulatory framework for ore exportA new regulatory framework for ore export

A legislative framework to secure resources, for fu ture metallurA legislative framework to secure resources, for fu ture metallur gic gic development (development ( rrééservesserves ggééographiquesographiques mméétallurgiquestallurgiques et et rrééservesservestechniques techniques provincialesprovinciales ))

Creation of the Creation of the «« ObservatoireObservatoire du nickel et du cobaltdu nickel et du cobalt »»

DoneDone

DoneDone

DoneDone

Towards a sustainable industrial development

Ensuring that mining projects benefit to communities and future generations

• The construction phase of Goro and KNS project has shown the impact of big projects on local communities

– The need for public information and discussion– The question of the employment

• The local economy too much dependent on the mining sector and the mining sector dependent on global mineral resources economic situation

SocioSocio --economic impact studies as part of the authorizatio n processeconomic impact studies as part of the authorizatio n process

Creation of local information commissions (CLI)Creation of local information commissions (CLI)

Using a public fund, the Using a public fund, the FondsFonds Nickel, to preserve mining jobs in times of Nickel, to preserve mining jobs in times of crisiscrisis

Creation of a sovereign fund, le Creation of a sovereign fund, le FondsFonds Nickel pour les Nickel pour les ggéénnéérationsrations futuresfutures

DoneDone

DoneDone

PendingPending

DoneDone

The mining development plan and beyond

• The main tools have been put in place :– A mining code, including a new regulation for ore export– The creation of the Fonds Nickel et the preparation of a rehabilitation program– The first call for projects of the CNRT “Nickel et son environnement”– The observatoire du nickel et du cobalt– The mineral resources assesment

• The quality of the mining plan should be reviewed on the long term– The period between 2012 and 2015 will be critical

• But some questions have been left open or need to be further explored

The industrial development plan

• The preparation of an industrial development plan has been decided by the comitédes signataires, with the goal to complement the mining development plan

• A industrial strategic committee has been put in place, with the contribution of the French state

• The main questions :– The contribution of the mining business to the fiscal resources of NC ; the creation of a

sovereign fund– The exploitation pace and the export policy : how to maximise value from the nickel

resources ?– The need or not for new metallurgical projects and the synergy to be found between existing

units to ensure their long term existence– The public participation in mining projects : their adequate level and their management

• Conclusions by end 2011