With a new investment guide just published on New Caledonia, we find out what is happening in Papua New Guinea’s French-speaking Melanesian neighbour.

Loading nickel ore for export at Koniambo. Credit: ADECAL

This month, New Caledonia will reach a major milestone when its Koniambo nickel project produces its first refined nickel for export. The project, a joint venture between Xstrata Nickel and locally-owned Société Minière du Sud Pacifique (SMSP), has been under construction in the territory’s less-developed Northern Province since 2007.

Over the past decade, New Caledonia’s GDP growth has averaged 3.2%, mirroring Australia’s growth. Like Australia, and Papua New Guinea too, the main driver for this growth has been mining. In the French Pacific territory’s case, though, the main mineral of interest is nickel—New Caledonia is home to about 25% of the world’s reserves.

Big nickel producers

SMSP already has in place deals with Korean nickel refineries for its raw product, and is current negotiating similar agreements with Chinese refineries. Another long-standing nickel project, Vale’s Goro project in the prosperous Southern Province, has started to produce low levels of nickel in spite of technical challenges. Meanwhile, the nickel sector’s ‘Old Lady’, Société Le Nickel’s 110-year-old Doniambo plant, is being refurbished.

‘While the major construction work is done, there are ongoing opportunities to supply maintenance and other services to New Caledonia’s big nickel producers,’ notes Alain Chung, of New Caledonia’s investment and trade promotion agency, ADECAL.

New Caledonia in brief

Population: 252,000 (2011)

Capital: Noumea

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Area: 18,576 sq km

Official language: French

Currency: French Pacific franc (XPF)

Exports: Ferro-nickels, nickel ore, fish, prawns

Major export markets: France, Japan, Taiwan, Korea, Spain, Australia

Imports: Machinery and equipment, fuels, chemicals, foodstuffs

Major import markets: France, Singapore, Australia

Distances by air: Brisbane (2 hours), Sydney (2.5 hours), Auckland (2.5 hours)

Major infrastructure developments have occurred in New Caledonia alongside the development of its minerals sector, with the building and construction sector thriving up to 2012 in an over-heated economy. Construction activity is predicted to drop by about 20% in 2013.

Other exports

While nickel is the territory’s main export commodity, New Caledonia is attempting to diversify. Food is a key sector, with the islands’ distinctive Pacific blue prawn attracting high prices in Japanese sushi and sashimi restaurants, although local producers struggle to meet demand.

New Caledonia receives an average of three cruise ships a week

Le tourisme

Tourism is also a major contributor to the economy. Over the past two years, this sector has benefitted from a weakening of French Pacific Franc—pegged as it is to the euro—against the Australian dollar.  Some 300,000 cruise ship passengers visit New Caledonia annually, with an increasing number venturing ashore for longer periods of time to sample the territory’s unique combination of French and Pacific cuisine.

Investors are also catering for longer-term visitors. A 160-key Sheraton resort is expected to be completed by the end of 2013; the anchor tenant in a wider tourist development about 160 km north of the capital, Noumea.  Meanwhile, local investors are refurbishing La Promenade hotel in Noumea’s beachside suburb of Anse Vata so that it can re-opened as a Hilton hotel in July 2013.

Business opportunities

Alain Chung suggests there are immediate opportunities to develop luxury boutique cruise and jetboat services in Noumea to complement the expanding tourist sector. More broadly, there are opportunities to provide engineering, maintenance and operational services to New Caledonia’s industrial companies, and environmental services such as water treatment to local government.

Independence?

While New Caledonia is still officially part of France, residents there will vote in 2014 in the first of three scheduled referenda to determine if that remains the case. While the outcome is in the balance, Chung notes that proponents both for and against independence have committed themselves to a smooth long-term negotiation process, thus ensuring that the economy will continue its steady progress regardless of the outcome.

The New Caledonia Investment Guide is published this month by Baker & McKenzie and ADECAL.