Export markets - New Caledonia

The market

Renowned for its impressive nickel resources, New Caledonia boasts the position of fifth largest nickel producer in the world (Source: Investing News Network). The islands contain about 7,100,000 tonnes of nickel which is about ten per cent of the world's nickel reserve and accounts for seven to ten per cent of the country's gross domestic product (GDP). With fluctuating prices of global commodities, there is a need to improve mining productivity, efficiency and output to ensure cost of production is lower than revenue. As a global leader in the resources and energy sector this is where Australian Mining Equipment, Technology and Services (METS) can add value.

New Caledonia has three nickel miner-metallurgists:

• Societé Le Nickel (SLN) is a partly owned by Eramet a French government-backed company
• Vale New Caledonia (Vale NC) is a partly owned by Vale, a Brazilian company
• Koniambo Nickel SAS (KNS) is a partly owned by Glencore, a Swiss company.

All three companies maintain a different approach to mining, extraction and refining of nickel. Australia’s proximity to New Caledonia makes it an excellent base from which to export services and technologies. Extensive supply chains allow Australian METS companies to provide support within short time frames. All three companies maintain a different approach to mining, extraction and refining of nickel. Australia’s proximity to New Caledonia makes it an excellent base from which to export services and technologies. Deep supply chains allows Australian companies to provide support within short time frames.

Koniambo

Based in the North Province of New Caledonia, Koniambo Nickel SAS (KNS) operates a world-class industrial complex. With a high-grade nickel deposit, Koniambo Nickel forecasts long-term, low-cost operations, governed by a very demanding sustainable development policy. KNS uses Nickel Smelting Technology to extract nickel from the Iron Ore. KNS is located in Koné, 310 kilometres north of Noumea.

Vale New Caledonia (VNC)

Vale New Caledonia is a subsidiary of Brazilian miner Vale. VNC currently mines Iimonite and saprolite and produces nickel and cobalt using a hydrometallurgy process. The site is located on the Goro Plateau in the Southern Province of New Caledonia approximately 75 kilometres south-east from the capital Noumea. Production of finished products from VNC reached a record level for a second quarter of 8,400 tonnes in 2016 with nickel oxide making 79.8 per cent of production. In a region where wet weather occurs 250-300 days of the year, solutions to operating in a wet environment are useful.

SLN

The French Government backed Societé Le Nickel is made up of four mining sites across the country - Thio, Kouaoua, Népoui-Kopéto and Tiébaghi- and one production facility, Doniambo, in the heart of Noumea. SLN use a pyrometallurgical process producing largely ferronickel. Notable issues include internalising some roles that are currently contracted out. Facilities are aging, with an updating and installation of a new power station and construction of a new refinery facility.

Challenges

• Reducing operating costs – each of the miner-metallurgists maintain large inventory stock. This is seen to be an area where better supply chains and inventory arrangement could lower costs.
• CE certification is often required for safety related products, pumps and electrical equipment.
• Technical expertise is needed for quality trainers and tradesmen to develop existing skill sets. Delivering Australian content in French is highly regarded.
• Integration of technical systems. There is scope to streamline existing technical systems using the internet of things (IoT).
• Operating in an environment with a high level of rainfall requires innovative solutions to maintain production outputs.

Opportunities

New Caledonia’s substantial nickel reserves offer a wealth of supply chain opportunities for maintenance and operations companies. There is high demand for technologies or innovative equipment and services.

Firms offering innovative technologies that are proven, increase productivity and efficiency, will find opportunities.

Australian companies wishing to take advantage of opportunities in New Caledonia must be able to offer:

• reliability, technical expertise, available ongoing supply of materials
• competitive pricing
• 'CE' product certification for all safety-related products
• innovative technologies that respond to company needs
• French language ability is vital to doing business in New Caledonia.

An alliance or partnership with the local New Caledonia companies is essential. As an island in the Pacific, the miner-metallurgists hold large inventories to address maintenance or unforeseen operational issues. There is a need to lower these inventory costs. The miners are open to innovation that will address this issue.

Additional opportunities for Australian companies exist in engineering expertise especially in wet mining environments such as Vale, technical/ or information systems to improve operational decision making. Leadership training to supervisors is commonly highlighted to support the operations.

Competitive environment

Supplying a product or service to the mining sector is contestable on a global basis. As the country is heavily reliant on imports, the cost of procurement is of high importance to mining companies. Australian exporters can expect competition of similar products being sourced directly from France and Europe and in some cases New Zealand. Australian products are well received with a significant advantage being shorter transport times compared to deliveries received from France and the European Union (EU).

Tariffs, regulations and customs

Social and Regulatory considerations

New Caledonia is a French overseas country (Collectivité d'Outre Mer), occupying a special position within the French Republic. The New Caledonian Government has the power to make laws in all areas that are not reserved to the French State. This includes taxation, mining law, employment law and health and safety, a brief update of which is provided below. A referendum regarding the independence of New Caledonia is expected to be held in late 2018.

Taxation law

There are two tax incentive schemes for companies in New Caledonia. Under New Caledonian law, a tax rebate is available where companies finance investments in specific industries within New Caledonia, such as conversion plants, renewable energy, agriculture and tourism. The amount of tax rebate available (35 per cent to 60 per cent) depends on the project's location and duration. The rebate must remain in, or be used by the New Caledonian business making the investment. In addition, until the end of 2025, provisions in the French tax code, grant a similar cumulative tax rebate of 18 per cent to French taxpayers living in the metropole, and a tax rebate of 42 per cent for French Caledonian residents to be used for specific investments in New Caledonia. The taxpayers must pay at least 70 per cent of the tax rebate to the local business making the investment.

On 1 April 2017, New Caledonia introduced a General Consumption Tax (TGC) for a trial period. Once fully in force from 1 July 2018, it will replace seven direct and indirect taxes that are currently applicable on imports. The TGC will be applied in four tranches:

• a reduced rate, set at three per cent for food basics, services to the person, products of local industry and all basic necessities
• a rate of six per cent for real estate property transactions and additional services
• an intermediate rate of 11 per cent applicable to some foods, housing, clothing and fuel
• a standard rate of 22 per cent for the automobile, household equipment, sugar, alcoholic drinks and tobacco.

Certain sectors, such as health or education will be exempt from taxes, while other areas will be exempt from TGC and subject to other taxes such as mining activities and transport of goods.

Mining Law

The New Caledonian Mining Code was adopted by Parliament in March 2009. The Code aims to encourage the conversion of minerals within New Caledonia while also protecting the environment from mining activities. The Code prohibits the sale of non-converted ore to operators with head offices outside New Caledonia, where such a sale would affect the sustainable exploitation of minerals. It also grants the government power to declare geographical mining reserves. The regulations passed in February 2010 outline the test for the sustainable exploitation of minerals, and designated three geographical mining reserves.

The mining law and regulations also add conditions on the person applying for an exploration or exploitation permit. If the applicant is an individual, he or she must ordinarily reside in New Caledonia, without conditions as to his or her nationality. Where the applicant is a legal entity, the legal entity must be incorporated under French or European law and its directors must be nationals of one of these countries.

Employment law

The New Caledonian Labour Code was enacted in 2008, with the section concerning health and safety on building sites subsequently enacted in late 2009, and the corresponding regulations passed in 2011.

The Labour Code provides inspection and control mission to various departments, such as the Department of Mines and Quarries (Service des Mines et Carrières) regarding mining activities to ensure compliance with the provisions of the Code. These on-site interventions concern infrastructure including the yard sorting and loading facilities, mechanical workshops, analysis laboratories, offices, and work sites with employees. The checks also cover compliance with basic safety rules such as, wearing of personnel protective equipment, physical protection of hazardous areas, periodic regulatory checks, and working conditions and hours of work.

Industry standards

EU compliance needs to be a key consideration in export planning Compliance should also be checked with the mining company as some Australian standards are acceptable.

Market entry

When visiting a New Caledonian business, particularly for the first time, it is strongly recommended that you use an interpreter or have French speaking staff as a part of your travelling delegation. Regular visits to the market assist in developing and maintaining close working relationships. It is preferable to make appointments prior to visiting customers. Personal relationships tend to be a little more formal than in Australia and first names are generally not used until you have built up a good relationship.

Successful entry methods include:

• direct supplier
• joint venture with local companies
• local representation and/or third party distributor for the product or service.

All products require French labelling. Distributors tend to favour exporters who have made the effort to do so. Packaging material likely to carry disease is prohibited. Packing should be secure, guard against humidity, bear the consignee’s mark, including port mark, and should be numbered. IPSM15 is implemented for palettes, creates and wooden boxes. For industrial products, it is strongly recommended to have all user guides, instructions translated into French.

Distribution channels

With the market being such a small industry compared to other markets, Procurement activities are currently undertaken by each individual mining company. Mines with a multinational background use a combination of sourcing via their global networks and local products available. This will be combined with local companies that provide for the mining sector. In addition direct sourcing can be undertaken through their supply chain networks in Australia, New Zealand and Europe for specific solutions

Transport

Established sea and air freight services from Australia operate out of all major east coast sea ports and airports. All major miners have their own sea port. Most goods are transported via the road networks as the entry point for goods is in the Noumea. Road networks are well established and maintained in the metropolitan area of Noumea. Regional roads tend to be smaller than metro areas (consideration of travel times from Noumea to other areas of the country should be factored into transport planning). Given the language barriers and specific documentation required by New Caledonia Customs it is recommended that a freight forwarding agent is used to ensure compliance.

Links and industry contacts

Association Maintenance Durable (AMD) (in French)
AustMine
Australia Pacific Islands Business Council
Chambre de commerce et d’industrie de Nouvelle-Calédonie (Chamber of Commerce and Industry of New Caledonia)
The Direction de l'Industrie, des Mines et de l'Energie de la Nouvelle-Calédonie [Department of Industry, Mines and Energy of New Caledonia] (DIMENC)
Direction Régionale des Douanes de Nouvelle-Calédonie (New Caledonia Customs)