Pacific nickel plan angers Green groups

No environmental regulations restrict nickel mining on New Caledonia

In this story: World Heritage listing sought Environmental "disaster" Tax holiday for Inco Cleaning up its image RELATED STORIES

By CNN's Grant Holloway
and Reuters

TORONTO, Canada -- In a move which has angered environmentalists, Scott Hand, the new chief executive of nickel giant Inco, has decided to develop the $1.4 billion Goro nickel deposit in New Caledonia.

Hand succeeded Mike Sopko, who had headed Inco for the past 10 years, at a shareholders meeting in Toronto Wednesday.

QUOTE "It will be an absolute environmental disaster." - Drew Hutton, Greens spokesman

Hand, a lawyer who joined Inco in 1973, said he would lead a new aggressive growth program to enhance Inco's position as the Western world's biggest nickel producer.

It will begin with the construction of the Goro mine later this year in the French Pacific territory of New Caledonia.

Goro production is expected to start in 2004 with annual capacity of 54,000 tonnes of nickel and 5,400 tonnes of cobalt. Cash operating costs would be less than $1 a pound.

Hand also pledged to clean up the company's poor environmental record.

But the development of the Goro mine has angered environmentalists around the globe who are opposed to nickel mining on the Pacific territory.

World Heritage listing sought

Green groups just last week began a campaign to have New Caledonia's coral reefs -- the second largest reef system in the world -- nominated for World Heritage listing.

Green groups say that run-off from nickel mining in New Caledonia is threatening the pristine reefs, a problem exacerbated by the lack of any environmental controls in the French territory.

But Hand said that in new projects like Goro the company would ensure operations are environmentally sound from the start.

Inco had rejected marine tailings disposal for Goro and instead expects to implement a more expensive, environmentally sensitive, land disposal system for tailings.

But Australian Greens Party spokesman Drew Hutton told CNN that while the land disposal made a small difference, the project would still be an environmental disaster.

Hutton said the key problem was the mine would use an acid leaching process creating tailings that would then have to be neutralized.

Environmental "disaster"

Pristine coral reefs are under threat say Green groups

"To do this the company will mine about 1.2 million tonnes of coral from outlying islands to mix with the tailings to neutralize them," Hutton said.

"It will be an absolute environmental disaster."

Hutton said Green groups had sighted Inco's Environmental Impact Assessment for Goro and said it was a "very flawed document".

"Such a document would not even get past first base in Canada or Australia, but in New Caledonia there are no environmental protection laws," he said.

Hutton said Green groups internationally, but particularly in France and Canada, would be putting pressure on the company over the Goro project.

Tax holiday for Inco

Hand told Inco shareholders the company was proceeding with regulatory approval and financing for Goro, which will include a program sponsored by the French government that supports investments in French overseas territories.

The government of New Caledonia has granted Inco a 15-year, 100 percent tax holiday followed by a five-year 50 percent tax holiday to develop Goro, which should be passed by its Congress in June this year, Hand said.

The project is expected to create 800 permanent jobs and another 1,500 indirect jobs in the territory.

Hand said Inco was in discussions with several companies, including other major nickel producers, to find a minority partner for the project.

Inco has an 85 percent interest in Goro with the remaining 15 percent held by France's Bureau de Recherches Geologiques et Minieres (BRGM).

Goro will supply stainless steel manufacturers in South Korea, Taiwan and eventually in China, the fastest growing market for nickel products.

Hand also said Inco would begin formal talks with Canada's provincial government of Newfoundland within the next month on developing the potentially lucrative Voisey's Bay nickel deposit, which it bought in 1996.

The project has been on hold because of differences between the company and the province over the site of a smelter to process Voisey's Bay ore.

Cleaning up its image

"There are some indications that there is an interest to make a deal, which is a good sign, but we won't really know until we get into discussions," he said.

Hand said Inco would have to be proactive to clean up its image as a big polluter and would continue to correct environmental problems where it has operations.

He announced Inco had accepted responsibility for nickel concentrations found in Port Colborne, Ontario, as a result of historical emissions from its 85-year-old refinery there.

Residents of the town on Lake Erie launched a C$750 million class action lawsuit against Inco in March, blaming it for cancer-causing poisons from the refinery, which since 1995 has processed only cobalt.

"Where Inco has operations, it has legacies, and we are going to have to face up to them in a proper and responsible way," Hand told reporters.

He said while the company did not believe it was responsible for contaminating landfills on 16 properties in the town, the company would voluntarily clean them.

"We believe that's the responsible thing to do in a community in which we operate," he said.

Reuters contributed to this report.

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