ECONOMIC BENEFITS IN THE SHORT, MEDIUM & LONG TERM

Because of the island’s major reserves and proximity to Asian markets, the Vale Inco Nouvelle-Calédonie project is part of Inco’s growth strategy.  New Caledonia holds almost one quarter of the world's nickel reserves, and nickel exports, particularly to Asia, account for 90% of the country's total exports.  The project’s outcome for New Caledonia therefore affects the short (three years), medium (30 years) and long (100 years) term. 

Short term: the construction phase

Employment

The construction phase on its own will have created several hundred jobs locally. For the duration of construction works, between the end of 2004 and 2008, almost 2000 local employees, as well as hundreds of local companies and suppliers, will have worked on the site. Since the project commenced in 2004, the unemployment rate in New Caledonia has dropped substantially. Advantage has been taken of the construction phase to establish training programmes, in part to supply construction posts, but in particular, with a view to training workers for the mining phase.

Expenditure

During the 18 month period between October 2004, when construction began, and March 2006, more than 300 million US dollars (30 billion CFP) were spent or pledged to local contracts. Vale Inco Nouvelle-Calédonie alone awarded contracts to 660 local suppliers of goods and services.

Taxation

In 2005, the first full year of construction, Vale Inco Nouvelle-Calédonie paid taxes of more than 100 million CFP.

Medium term: the mining phase

Every year, more than 4 million tonnes of ore will be extracted from the Goro Plateau and transported to the hydro-metallurgical processing plant, which has been built on the same site. This plant will produce 60,000 tonnes of nickel and between 4600 and 5500 tonnes of cobalt every year. According to the economic feasibility study and for the purposes of calculating bankable profitability, the life of the project is estimated to be between 25 and 30 years.

Employment

According to the Nelson Taylor Soprès Institute (NTS) in New Caledonia (formerly the Louis Harris Institute), once fully operational, some 2,700 jobs will be created in addition to the 800 direct jobs at Vale Inco Nouvelle-Calédonie and a large majority of these will be taken up by local workers. Another estimate, from the Syndex consultancy, in partnership with the CFDT trade union in France, puts the number of indirect and secondary jobs created at between 5000 and 8000.

Expenditure

The factory’s annual expenditure will be around 50 to 100 million US dollars (5 to 10 billion CFP). This will have a significant multiplying effect on the local economy. In addition, direct and indirect jobs, and economic initiatives are already being and will continue to be generated by Vale Inco Nouvelle-Calédonie's activities. Many companies are working and will work, on-site or remotely, for and around the project, thus increasing their work volume.

Exports

The metals produced will be shipped principally to China. Studies undertaken by NTS (Nelson Taylor Soprès), envisage the project doubling the volume of exports and thus contributing to rebalancing the balance of payments. It will also increase GDP by 30%.

Taxation

Although, as an investor, Vale Inco Nouvelle-Calédonie benefits from a special tax position, the company is not exempt from a number of taxes.  These will generate millions of US dollars of tax revenue for New Caledonia which can be added to the social security contributions the company pays, the taxes paid by employees and sub-contracting companies and taxes coming from indirect and secondary activities which have been generated by the project. Therefore, even during the 15 year partial exemption period, studies suggest that Vale Inco Nouvelle-Calédonie will pay between 20 and 30 billion CFP in taxes and duty to the treasury in New Caledonia.  

A stake in the company

Finally, as the three provinces of New Caledonia are shareholders with a stake of 10% in the company, they are entitled to proportional dividend payments.

Long-term: exploration of other massifs

It is highly likely that mining at the plant will be prolonged beyond the 30 years envisaged for the massif at the Goro plateau to up to 100 years.

The hydrometallurgical process which is used by Vale Inco Nouvelle-Calédonie makes it possible to mine laterite with low nickel content - a mining resource which is very widespread in New Caledonia, especially in the south of the country. Inco’s expansion strategy therefore allows for the possibility of mining other massifs when the Goro site has been exhausted in order to extend the life of its equipment and, as a consequence of jobs and other benefits locally. This is why there is interest in the neighbouring massif at Prony where preparatory studies have already been undertaken.

Inco’s exploration permit was suspended in the middle of 2005 due to administrative reasons. There were no doubts about the validity or quality of the application. Vale Inco Nouvelle-Calédonie intends to take all necessary measures to regain the right to explore this massif. It has already made investments and is the only company equipped to mine it at the current time.

Reasons for tax breaks

The arrival of a major project in a given area always gives a major boost to economic activity and creates substantial income for the treasury. This is why the governments of different countries across the world vie with each other, through tax breaks, to attract investors from overseas to their particular country.  They know that their country will gain far more benefits than they have granted to the companies.  The partial tax exemption granted to Inco for the southern factory, just like that granted to Falconbridge for the northern factory, is in keeping with measures taken throughout the world to attract outside investors.