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 With the SNNC's Gwangyang plant located in South Korea the SMSP Group has committed to a development process designed to:
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Enhance its mining estate by extending the life span of its reserves to 30 years via the reduction of the ore grade to 2,27%,
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Provide job security and create employments in the North Province, on both the East and West Coasts,
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Guarantee its partner POSCO, one of the world leader in stainless steel production and also the fourth largest steel manufacturer, steady long term nickel supplies, and finally
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Provide ore at the best cost via an industrial and commercial integration bringing together a mining company and a steel manufacturer. Such an unique, innovative and orignal partnership is therefore complementary of the SMSP's priority action since it secures jobs on the East and West Coasts of the Northen Province while constituting, at the same time, a financial lever for the implementation of the North plant. The SNNC joint venture, held by ther SMSP (51%) and POSCO (49%) à POSCO is in charge of the Gwangyang plant whose production capacity is 30,000 tonnes of nickel metal contained in ferronickels. The totality of that production is sold to POSCO.
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Mining resources valuation
Basing the SMSP Group’s future solely on mining would make the company’s position more precarious in relation both to its clients and its resources. As a mining company, it could not make long term plans and therefore could not envisage the extensive investments required to extend the life span of its orebodies and optimise their operation.
The company would therefore be at the mercy of international nickel market fluctuations and, as a mining company, would still be getting only 20 to 25% of the metal price. It would remain heavily dependent on client requirements both in terms of high grade quality and of price, which would be insufficient to guarantee satisfactory long term profitability.
For the last 50 years, exports have simply been an adjunct to the local metallurgy industry, providing an outlet for low grade ores economically unsuitable for local processing. This project will therefore ensure the stability of primary export activity over the long term by giving the mining company access to steady revenue from metallurgy, i.e. profits from metal sales.
It is a low grade ore export project, giving the mining company a controlling interest in the foreign pyrometallurgy plant. Using its resource of 90 million tonnes of wet ore, the extent and grading of which has been controlled by POSCO appointed specialists, distributed between the five mining centres of Ouaco, Poya, Nakety, Kouaoua and Boakaine, the SMSP Group will deliver 1.8 million tonnes of wet ore a year for an annual production of 30,000 tonnes of nickel metal in ferronickel. With an average of 30,000 tonnes of nickel metal content in exported ore, the Group can look forward to a solid industrial partnership.
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Industrial and commercial integration
The special feature of the legal structure is that the SMSP Group contributes 49% of its mining assets (excluding Koniambo) in return for a 51% interest in the capital of the South Korean company which owns the plant and sells its production to POSCO at LME nickel prices.
Two companies have been set up as part of the project: one in respect of the mine in New Caledonia (Nickel Mining Company) and one in respect of the pyrometallurgy plant in South Korea (Société du Nickel de Nouvelle-Calédonie et Corée) located in the centre of the Gwangyang industrial area with all its existing infrastructure.
The SMSP Group has a 51% interest in both companies.
NMC extracts and sells ore at market price to SNNC to produce ferronickel for POSCO, world leader in stainless steel production, which needs to procure steady supplies of ferronickel feed. The total investment value (mines and plant) is estimated at 70 billion XPF.
POSCO will finance the building of the ferronickel plant at an estimated cost of 35 billion XPF and the SMSP Group will reciprocate by contributing its entire mining export capability.
The global value of SMSP mining assets is also estimated at 35 billion XPF so SMSP and POSCO hold a 51% and a 49% interest respectively in the joint venture, accompanied by non-dilution clauses.
If the plant requires upgrading, POSCO will guarantee the loans. If the partnership is dissolved, SMSP recovers its mining titles.
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Economic and financial profitability
This project is a real master stroke, profitable for both parties. Thanks to an enterprising and innovative partnership with a world class steel manufacturer, the modest New Caledonian mining company has ensured its long term future activity and increased its potential reserves (by reducing the ore grading of exports) and also ensured revenues exceeding those brought by traditional mining extraction.
The SMSP Group has thereby guarded against the market uncertainties facing other mining companies.
With a steady annual export program of around 1.8 million tonnes over a 30 year period, the financial resources resulting from new mining activity based on an average grading of 2.27% (instead of 2.45%) will reach levels hitherto unknown in New Caledonia.
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Delivery of the first stocks intended to gauge the furnace, June 2008
At its meeting of June 20, the Northern Province Assembly has authorized the Nickel Mining Company (NMC) to export the ore to the Société de Nickel de Nouvelle-Calédonie et Corée (SNNC). The first ore stock of 160,000 tons intended to gauge the furnace left Téoudié Port, at the end of June 2008. On the field, the efforts were concentrated on the exportation of this first stock of ore, essential for the adjustment and calibration of the plant’s furnace, whose lighting later took place in August 2008. This is a valuable operation, as the pyrometallurgical plant is conceived and designed to accommodate a nickel content of 2.27%, an iron content of 13% and a granulometrics below 100 millimeters.
The lighting of the furnace, August 2008
On August 25, 2008, the SMSP Group, through its subsidiary company SNNC (Nickel Company of New Caledonia and Korea), along with its industrial and commercial partner POSCO, proceeded to the lighting of the largest electric furnace of 94 MW, ever carried out in a pyrometallurgical unit.
Importance of the electric furnace and its process with the rotary kilns
The nickel ore is charged into the rotary kiln together with coal, and is thermally dehydrated by coal combustion and made into calcined ore. The calcined ore is charged into the 94 MW electric furnace while maintaining a high temperature. The crude ferronickel which contains about 20% of nickel and 80% of iron is produced in this process. The metal produced in the electric furnace contains sulphur as an impurity. This sulphur is isolated by a de-solidification installation. De-Sox and De-Nox equipment is integrated to prevent eventual fugitive dust emission of sulphur and nitrogen oxides in the air. Ferronickel is finally produced in the form of granulate in the shot or injection making process. At the taping of the ferronickel, released slag produced in this process are recycled into materials for roadbed and aggregate for the earth works.
The plant’s starting of production, October 2008
The Nickel Company of New Caledonia and Korea (SNNC), in which SMSP holds 51% of the capital, started production on October 20, 2008 thus marking the SMSP’s entry into the protected field of the metallurgy.
With more than 350 million dollars devoted to the plant’s construction (2005 rates), the SMSP thus consolidated the France’s status as a major investor in South Korea. The SNNC pyrometallurgical plant is among the 10 top French direct investments ever carried out in South Korea. The SMSP is thus placed in the rank the great French groups between BNP Paribas, Total, Renault, Lafarge, Rodia and Saint Gobain.
The plant was built on an industrial complex which has already all the required infrastructures such as an international port, a power station, roads and land conveyors. This made it possible to reduce significantly the capital costs.
The plant which would have been built in less than 30 months should produce at the end of 2009, a few 24,000 tons of nickel metal contained in ferronickels, before reaching its full capacity.
Full capacity production reached at the end of 2009
Eleven months only after the first nickel taping on October 20, 2008, the SNNC joint venture carried out successfully the full production capacity This operation reflects the stability of the electric production of 94MW and the capacity to produce annually 30,000 tons of nickel metal contained in the ferronickels intended for the industrial complex of Pohang. In this period of economic crisis the common concern is to find best possible competitiveness for a production of ferronickels which should reach the 30,000 tons of nickel metal in 2010. The plant makes it possible to ensure ore exports on the long term and to safeguard employment on the mines of Ouaco, Poya, Nakéty and Kouaoua where the main goal is to guarantee the plant’s saprolite ore’s supply.
Timetable of construction and ramp up
The plant was built on an industrial site which already comprises required infrastrutures, an international port, a power station, roads, land conveyors, which allows significant reduction of capital costs. Our partnership was extremely effective since the plant construction would have been carried out in less than two and half years. It is at the price of a committed work that the building works were completed three months in advance of the predicted initial calendar. Eleven months after entering into production, the plant reached its full capacity.
SNNC's Executives
The joint venture company SNNC jointly owned by SMSP and POSCO is governed by an Executive Board of Directors comprising three members representing each of the two shareholders, represented respectively at General Meetings by André DANG VAN NHA on behalf of the SMSP and Young-Ik JANG on behalf of POSCO.
| André DANG VAN NHA |
SMSP member
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| Dominique NACCI |
SMSP member |
| Marcel THOMAS |
SMSP member |
| Sang-Hong LEE |
POSCO member
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| Ki-Bong KIM |
POSCO member |
| Keun-Young LIM |
POSCO member |
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SNNC 
