SMSP - Group history

Group history

In achieving international corporate status through expert knowledge in the field and its export network, SMSP gained a solid reputation which gave it the clout to go looking for a partner amongst the world’s leading metallurgy companies, and in particular, to convince the Canadian company Falconbridge, then the world’s third largest nickel producer after Norilsk and Inco, to invest in building a process plant in the North Province with an annual production capacity of 60,000 tonnes of nickel in ferronickel.

Today

Gaining control of economic levers and negotiating interdependencies

The partnership with Falconbridge was made official in 1998 and its core concern remains the development of profitable, long-term and environmentally friendly mining operations to promote the interests of all stakeholders: shareholders, employees and local communities.

SMSP therefore acted as initiator and developer of the North Plant project, now its key priority. The company’s constant goal of creating jobs and promoting development in the North has led it to add a new perspective to low grade mineral ore exports in collaboration with its corporate metallurgy customers.

SMSP’s partnership with the South Korean company POSCO, one of the world leaders in stainless steel production, allows it to enhance the value of its mining assets by prolonging the life span of its ore deposits while guaranteeing its partner a long-term supply of mineral ore.

It gives SMSP access to a steady income from metallurgy while eliminating the intermediary traders. This plant, which complements the North Plant project, ensures long-term stability for SMSP’s core industrial activity, while constituting a financial lever for the construction of the North plant.

From 1990 to 1994

Jean-Marie Tjibaou

Jean-Marie TJIBAOU

SMSP FROM 1990 TO 1994:

Restructuring a business

SOFINOR takeover of SMSP

A vulnerable small mining company

When SOFINOR acquired the SMSP, it was operating as a « piecework company » with no mining estate of its own, paying royalties to Société Le Nickel (SLN) to mine deposits belonging to SLN. From the commercial point of view, this initial handicap was aggravated by the lack of direct sales channels, forcing the company to pay commission to intermediary traders and local export companies to deliver its ore to Japanese smelters. This meant an overall deduction of around 20% from turnover. The operation was profitable during the nickel boom but the first lasting slump in nickel prices on the London Metal Exchange (LME) spelt disaster for the company. In 1990, SMSP made a turnover of 1.2 billion XPF by exporting 309,000 tonnes of mineral ore. At that time, the company only had three years’ worth of reserves and employed a staff on 120 for deliveries to SLN and ore exports.

Economic climate: the recession years

The first years of the 1990s were marked by the slump in world nickel prices on the LME. There was a sharp fall from 4 US$ a pound in 1990 to 2.4 US$ a pound by 1994. In conjunction with a weak dollar and a slump in demand, the sales price per tonne of mineral ore was considerably lower than the cost of producing it. The combination of every possible factor of market stagnation created a highly unfavourable context for all mining industry professionals. Following its takeover, to ensure its survival in this hostile economic environment, SMSP immediately set about implementing a strategy of reconstruction, consolidation and development.

Restructuring and development strategy

Developing trade relations

The group’s strategy is to develop and source new clients while reducing commissions paid to intermediary traders. Since 1991, SMSP has been securing access to direct export channels to foreign smelters. Gradually, commissions paid to intermediaries (traders and local export companies) were eliminated. Concurrently, SMSP has worked to build a climate of confidence with smelters by supplying them with good quality mineral ore and signing long term contracts.

Building a mining estate

SMSP group strategy is to build its own mining capital and to ensure the durability of its trade relations and investment policy by uncovering new mineral reserves.
The company systematically acquires the mines it operates. Debt servicing is therefore offset by eliminating royalties in respect of leasing rights. An extensive prospecting program has succeeded in bringing to light 20 million tonnes of workable reserves. Updated annually, they ensure that production is guaranteed over a ten year period. In order to conserve its resources, SMSP has ceased highgrading its deposits and called a halt to sales of high grade mineral ore (2.8%) to SLN.

Modernising equipment

With the creation of Nord Industrie Service (NIS) in 1991, the SMSP group acquired a subsidiary dedicated to the procurement, marketing and maintenance of industrial plant. This facility ensured that equipment resources were put to more efficient use and reduced subcontractor requirements. Equipment reserves were therefore extensively renewed at the same time as a rational method of procurement management was implemented.

From 1995 to 2005

Raphael PIDJOT

SMSP FROM 1995 TO 2005:

Company growth and expansion

Consolidation and growth

A modest mining concern come of age

At the end of 1994, LME nickel prices began to recover reflecting a rise in global demand. SMSP had forecast this upturn in the market and possessed enough reserves and technical capacity to meet the sharp increase in demand.
The company ramped up production to double its exports between 1994 and 1995. SMSP then exceeded the 2 million tonne mark, enabling New Caledonian nickel to recapture 50% of the Japanese market and 66% of the Australian market in laterites. At this time, the company was exporting the equivalent of 40,000 tonnes of nickel metal and 750 tonnes of cobalt a year.

An established mining company

By the end of 1995, the company had multiplied its 1990 level of exports by seven and the SMSP Group had become New Caledonia’s leading mineral ore exporter. The company’s export volume made it the second largest producer of oxidised ores. Company activity created around 1000 direct and indirect jobs and the company was operating mining centres on both the East and West Coasts of New Caledonia’s Main Island.

Satisfactory trade relations

On the sales and marketing front, SMSP had managed to establish clear rules rooted in the relationship of mutual confidence existing between the company and the smelters. The Japanese smelters guaranteed a purchase price corresponding to 25% of the LME cash nickel price per pound. The company’s Australian clients, with a monopoly on the purchase of laterite ore, only paid 10% of the LME official price.

Transformation and a new partnership

The SMSP Group has entered into a new era through its transformation from mining company to smelting company. To revitalise its mining capital, SMSP has acquired majority holdings in mining and metallurgy assets.

The limitations of mining

While SMSP is clearly a powerful economic force for the North Province and for New Caledonia as a whole, mining cannot by itself produce an economic miracle for the region and stop the population drift to Noumea. Given its scattered (and necessarily ephemeral) operating activities, the mining industry cannot, by itself, create the urban pole needed to provide the North Province with its own internal economic dynamics.

Launching economic activity

Generating 1,000 direct jobs and 2,500 indirect and induced jobs during its operational phase, the implementation of an ore processing plant ensures the launch of significant economic activity in the North Province and also ensures a local market outlet for existing manual activities (crop farming, fishing, stockbreeding, hotels and catering…). The implementation of such a major project also justifies the technical and social infrastructures required to ensure the region’s smooth and sustainable development. The SMSP Group’s economic success, its mining expertise and its assured place in the global economy helped to convince North Province leaders and elected representatives that it was time to set a new target: ore processing in New Caledonia.

Finding a new partner

In 1994, the SMSP Group started looking for a partner amongst the ranks of the world’s leading metallurgical companies. Although New Caledonia possesses mining expertise and resources in abundance, no New Caledonian mining company possessed the technology and financial resources to become a metallurgist unaided. The SMSP Group found in Falconbridge, at that time ranking third in the world, a metallurgy company with proven technological know-how. The Canadian corporation was open to the idea of joint venture partnerships with local operators and was interested in setting up a joint venture with the SMSP Group. And so began a partnership which was officially announced in April 1998 by André DANG VAN NHA and Oyvind HUSHOVD.

A worthy partner

Falconbridge was then one of the world’s foremost producers of nickel, copper, cobalt and platinum-group metals at a very competitive operating cost. It was also a major global recycling and scrap metal processing company. One of Falconbridge’s key commitments is to developing profitable, sustainable, safe and environmentally friendly mining operations to promote the interests of the communities where it operates, its employees and shareholders.

A balanced partnership agreement

The SMSP Group has a 51% stake in the joint venture. Its contribution consisted of the Koniambo ore deposit, its professional expertise and its local knowledge and reputation. With a 49% stake in the joint venture, its partner contributed the feasibility studies and guaranteed the financial investment taken on by the future joint company.

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