Financial results of the 2009's semester

The presentation of the financial results of 2009's first semester, relies on the consolidation of data of the two integrated joint ventures, Société du Nickel de Nouvelle-Calédonie et Corée Co. Ltd, the SNNC's metallurgical branch in Korea, and Nickel Mining Company SAS, the NMC's mining branch in New Caledonian.

During the first six months of the year, the production of nickel metal contained in ferronickels is 10,175 tons of which 10,102 tons have been delivered to POSCO, which buys the entire production of nickel metal at the LME's price rate with 2% discount.

The first semester's turnover stands at 10.5 billion XPF. The plant generates a gross cash flow (EBITDA) of 3.1 billion XPF, which enables to smooth the mining operating losses amounting to 212 million XPF for the same period. 

These first financial results are particularly encouraging for the follow-up of operations since they have been made (1) in full period of world economic crisis which severely affects the nickel's industry, (2) with a production capacity still limited to two-thirds of the expected production capacity, and (3) despite the weathers disrupting the ores haulage to the sea edge and its loading on mineral tankers.

The rise in production will enable to increase the sales to POSCO and therefore the future financial results of SNNC-NMC's partnership.

Rise in production

As of 30th June 2009, eight months after the launching of its nickel's production plant, the SMSP-POSCO metallurgical branch has reached tow-thirds of its nominal production capacity of 30,000 tons of nickel metal contained in ferronickels. 

For its part, during this same 2009 first semester, the NMC's mining branch continued its rise in production to supply the ore, in quantity and in quality, to the SNNC's plant which is in advance, on both, the launching production calendar as well as on its rise in production. 

In the course of 2009's first semester, the New Caledonian subsidiary  NMC delivered 600,000 tons of wet nickel of an everage content of 2.23%  to our SNNC subsidiary.

The NMC proceeds on to recruit new staff to ensure the rise in production for the full capacity of its four mining centers, and has just signed 2 billion XPF of a development loan agreement with the BNP Paribas Bank for the development of its mining equipments and infrastructures.

The SMSP group would like to contratulate and thank its two subsidiaries and all the staff for the quality of the work and the supportive efforts that led to these promising results.

Following the court's decision which ended the Principal Agreement dated 12 November 1996 between Mr Bernard Gossoin,  the land owner and the SMSP company, operating the Pinpin mine, the company is able to sue the 2,3km portion of private road on the conditions that it pays 100 000 CFP penalty on each truck's passage. With an operational required 130 daily passages, the company finds itself in a difficult situation to haulage to the sea edge the Pinpin extracted ore intended for its processing plant in South Korea. 

The SMSP and Gossoin met several times on the purpose of discussing the terms and conditions of anew agreement to obtain a temporary authorization to use the private road and ensure the ore haulage operations. Two principal compromised agreements for the periods of 21st to 31st of May and 22nd June to 3rd of July, have been concluded accordingly. 

At the end of the last agreement, and failing to identify other areas of agreement, the SMSP was required to pay an important amount of money in order to extend the haulage period until the end of July.

The situation becoming economically unbearable for the company, the SMSP was forced to suspend its operations and release all its Poya center's members of staff, that is to say 93 workers (including staff, sub-contractors and daily workers). 

Koniambo Nickel SAS (KNS)  announced today the granting by the French authorities of a tax ruling  (décision d'agrément) pursutant to French tax legislation for the promotion of investments in French overseas territories (the so-called "Loi Girardin") that is expected to  result in a benefit of up to USD223 million to the Koniambo project. Pursuant to this tax ruling, French tax investors will be entitled to invest up to USD780 million in the 350 MW power plant of the project and deduct from their taxable income the value of their investments, subject to making available a portion of their tax savings for the construction of the power plant.   The financial exposition of tax investors will be totally garanteed by Xstrata Nickel in case of withdrawal of the tax ruling. The tax ruling for the Loi Girardin benefit is a particularly positive outcome for the Project showing a clear support form the French authorities and the common objective of KNS, SMSP, Xstrata Nickel, the North Province, New Caledonia and the French government to ensure the successful completion of the Koniambo project. 

Société Minière du Sud Pacifique (SMSP) and Xstrata Nickel are pleased to announce the nomination of  Denis Lachance to the position of Koniambo Nickel SAS (KNS) President. "we are happy that Denis has accepted this nomination" said Ian Pearce, Président and Chief Director of Xstrata NIckel. "Denis has gained more than 26 years experience in the mining sector, including more than 10 years at Noranda, Falconbridge and Xstrata Nickel  in the production facilities as well as in the projects themselves. The last position which Denis occupied in the company was that of Vice-president of the Raglan mining operations. He was also a member of KNS Advisory Management Committee and a member of Xstrata Nickel board of directors.  As KNS Chief Leader, Denis will raise from the KNS board of management and will be responsible for the implementation of the operational structures and business management thus contributing to the accuracy of mining operations of Northern plant and installation of support facilities. necessary to successfully finalize the construction and the launching of the Koniambo project, planned for 2011. The new President of KNS will be introduced to the New Caledonian press on February 27 by both SMSP and Xstrata Nickel's managements.

SMSP and Xstrata Nickel would also like to cordially thank Michel Rioux for his devotion and his engagement in the Koniambo project simiar to his fruitfull contribution within Koniambo Nickel SAS. Andre Dang, SMSP Group's chairman, says that “during these nine years that he would have devoted to the Koniam project, Michel knew to show of an exemplary engagement and a contagious determination leading to make the Northern Plant, a source of pride for the employees and all the New Caledonian communities. An authentic man, orchestor of this determining stage of the project, he would have built the foundations of this plant which the country calls of its desires. We wish him good luck in his new functions and welcome the new President of KNS, Denis Lachange ". Ian Piearce “warmly thanks Michel for his work and his acceptance to remain in position longer than predicted in order to assure that the Koniambo project reaches successfully the stage of starting of construction. The vital relations that he knew so well to establish and maintain with all our partners and friends in New Caledonia are the basis of our future success. Michel showed of an exeptional devotion and an unrelaxing engagement regarding this extraordinary project which is Koniambo ".

SMSP and POSCO have signed simultaneously the resolutions permitting to proceed to the transfer of mining titles from SMSP to NIckel Mining Company (NMC), approved the subsequent capital increase and have proceeded to the transfer of 49% shares from NMC to POSCO.

NMC is the joint venture between SMSP and POSCO based in New Caledonia that is in charge of the mining branch gathering the centres of Ouaco, Poya, Nakety, Kouaoua and Boakaine. SNNC (Société du Nickel de Nouvelle-Calédonie et Corée) is the other joint venture created by SMSP and POSCO that is in charge of the construction and exploitation of the processing plant located on the Gwangyang industrial site in South Korea. SMSP holds a majority participation of 51% in each of the two companies.

The special feature of the legal structure is that SMSP contributes 49% of its mining assets (excluding Koniambo) in return for 51% interest in the capital of the South Korean company which operates the plant and sells its production to POSCO.

SMSP Board of Directors met in Noumea on September 7. Amongst a certain number of points that have been reviewed, two important resolutions regarding the construction of the North plant have been endorsed by all its members.

The Board members reviewed details of project execution planning, execution preparedness, schedule and cost optimisation and were able to confirm that all core elements of the renewal phase had been completed in time. The Board endorsed the cost inrease and the continuity of preliminary works.

The Board members were equally able to confim that both the recent evolution of the market and the partnership signed by SMSP with the world leader of stainless steel, South Korean POSCO, had radically changed the context in which the construction of the North plant takes place. By lowering down its low grade ore exports from 2.45% to 2.27%, SMSP not only secures its mines and related jobs, but also creates a financial capability allowing the company to fully play its partnership role in the construction of the North plant. The processing plant in South Korea, whose start-up is scheduled in 12 months time, will generate an immediate profit that will provide SMSP with a financial capability for the construction of the North plant. The Board members have therefore endorsed SMSP's financial participation to up to 51% of the construction cost. 

Koniambo Nickel Sas Board of Directors met on August 23 in Toronto, at Xstrata Nickel headquarters, and reviewed the renewal plan of the Koniambo projet.

The Board members have reviewed details of project execution planning, cost and schedule optimization and execution preparedness.

In a timely manner, but separately, the individual Boards of Directors of each Partner will meet in September according to plan to endorse the conclusions of the final report. SMSP Board of Directors will meet first on September 7.

Entirely bilingual, SMSP's website proposes a general presentation of the Group, its results, its commitment to sustainable development, its mining activities and industrial projects.

As a New Caledonian company and an indisputable player in economic rebalancing, SMSP is committed to a strategy of increasing the value of mining resources which is oriented towards metal production.

Thanks to its majority holdings in mining and metallurgy assets, the modest New Caledonian mining subcontractor, which became world leader in mineral ore exports in 1995, is now poised to become a major player in the world marketplace.

The North plant is its priority action and the Gwangyang plant, in South Korea, constitutes an original, innovative and complementary partnership allowing SMSP to stabilise its main activity over the long term. It constitutes also a financial lever for the North plant.