SYDNEY – As a long-running struggle between indigenous Kanaks seeking independence and well-off mostly white settlers wanting to stay with France nears its end-game in the South Pacific colony of New Caledonia, the ownership of its nickel industry has become a violent contest between the two camps.

This week, its capital Noumea – in pre-Covid times a languid tropical resort center where locals of all races played pétanque in its squares – was shrouded in black smoke from burning tires and cars as Kanak protestors set up barricades and police fired tear gas.

Dozens of protesters were arrested, and several police officers injured, Radio New Zealand reported.

The protest was part of a fight over New Caledonia’s rich nickel mining and processing industry. With 33 mines, the island is the world’s fourth-biggest nickel ore producer, and its three refineries make it the seventh biggest nickel metal producer.

The owner of the largest ore and metal producer, Brazilian mining giant Vale, wants out after racking up billions of dollars in losses from buying in at the wrong time in market cycles and poor technical choices. After a sale to a medium-sized Australian mining firm, New Century Resources, fell through in September, two contestants emerged.

One, favored by the French government, is a consortium called Prony Resources, in which a Swiss trader of petroleum and mineral products, Trafigura, would hold 25%, local stakeholders including Vale staff 50%, and other undisclosed investors the remaining 25%.

The bid is said to be worth US$1.2 billion. The government was ready to put $400 million in debt and guarantees behind the New Century proposal, and presumably something similar is part of the Prony bid.

The second bid came from the Kanak collective Sofinor running several mines in the northern part of the island, where the indigenous people are concentrated. It has teamed up with Korea Zinc, but no figures have been produced and its proponents say they have struggled to get access to the area for due diligence purposes.

Intriguingly, Korea Zinc has a large subsidiary, Sun Metals Corp, operating a zinc refinery in the Queensland port of Townsville, where a nickel plant that used to process ore from New Caledonia shut down in 2016 owing to the insolvency of its owner, part of controversial businessman-politician Clive Palmer’s operations.

Having made a big investment in a photovoltaic power station and a planned hydrogen plant in Townsville, could Korea Zinc have seen a possible role in reviving the city’s nickel industry?

The question became academic on December 8 when Radio New Zealand reported Korea Zinc had withdrawn from the bidding because it had failed to get access to the Vale site to carry out due diligence.

Mounting anger among Kanaks at the government’s perceived preferred treatment of the Prony Resources bid has been vented in road-blocks and protests over recent months, while pro-French loyalist leaders have come in behind the bid as the best prospect for sustaining the nickel industry, the territory’s economic mainstay alongside tourism.

A Prony takeover would certainly consolidate the imbalance of economic power between Kanaks and settlers.

So the ownership has become a proxy for New Caledonia’s independence battle, just after a referendum in October saw a narrowing divide on the question. In the vote, 53.3% of voters said “non” (no) to independence, down from 56.7% in a first referendum in 2018.

The trend suggests that a third referendum expected in 2022 would see the “oui” (yes) vote rise from October’s 46.7% to 50% or even a narrow majority.

October’s vote saw opinion still largely split along the indigenous-settler divide. The “oui” vote dominated in the northern part of the main island and the Loyalty Islands to the east, where Kanaks are concentrated. The “non” vote prevailed in the main island’s south around Nouméa and a smaller settler enclave.

Their different aspirations previously broke into violence in the 1980s when Kanaks sought to follow nearby Vanuatu, a former British-French “condominion”, into independence. The violence culminated in 1988 when Kanak militants took French police as hostages on the small island of Ouvéa; French special forces went in, with large loss of life.

The horror led to a first 10-year peacemaking effort, known as the Matignon accords, signed by French loyalists and Kanak leaders. They were extended by the 1998 Nouméa accords which set out 20 years of political and social development to be followed by three referendums on whether to stay with France held at two-year intervals.

The second has now been held, and the final one is foreshadowed in 2022. Under the accords, a third referendum must be held if requested by at least a third of the New Caledonia congress, its legislature. The earliest request can be made in April.

Pro-independence Kanak parties have the required numbers in the congress and say they will demand it. Loyalists, seeing where the numbers are trending, are starting to balk at another vote.

Sonia Backès, a conservative loyalist who is president of the southern region, has said it even bears the risk of a “civil war.”

Some loyalist elements are now urging new negotiations on some kind of middle way to avoid holding the third referendum. A more hard-line element wants a vote on just scrapping the accord in 2022, bringing the 40,000 more recent settlers onto the local electoral roll and thus outvoting the Kanaks for good.

Some compromise is stirring on the Kanak side. Roch Wamytan, a Kanak who was a signatory to the 1998 accords and is now president of the territory’s congress, floated the idea of independence in association with France.

This would perhaps be like the ties of the northern Pacific states of Palau, Micronesia and the Marshall Islands with the United States, which extends defense, funding and social services, while still holding their own United Nations membership.

France itself looks ready to adjust. In 2018, President Emmanuel Macron visited New Caledonia before the vote and expressed pride in the decision to remain with France. In October, he stayed away, and afterward just referred to the “success” of the “second democratic rendezvous” as a sign of “confidence in the Republic.”

He promised to organize a third referendum if that was requested and urged the territory’s people to think hard about all scenarios after 2022.

Macron dispatched his territories minister, Sebastien Lecornu, to New Caledonia after the referendum to encourage more flexible thinking. “This binary question of a yes or no to independence is not the answer to all the questions raised in society today,” he said on reaching Nouméa.

Since his visit in October, Lecornu has been sidetracked into trying to manage the dispute over the Vale sale, and get it resolved before the Brazilian company carries out its plan to shut down production early next year if no firm deal emerges by then.

New Caledonia’s South Pacific region is also stepping into the debate. Vanuatu’s opposition leader and recent foreign minister, Ralph Regenvanu, has urged more contact with loyalists to convince them New Caledonia can be a viable state.

He noted that this camp often cites Vanuatu as a dire example of independence. “For us, it is quite amusing because we think we have got a very good development model happening here,” Regenvanu told Radio New Zealand.

In previous times, Australia would have been more encouraging about the emergence of an independent New Caledonia. Now, however, it seems worried about a shaky independent state without French support being an open door for China to step in, says Pacific specialist Alexandre Dayant at Sydney’s Lowy Institute, a think tank.

Australian leaders have warmed to French plans to keep the tricolour flying through the Pacific by naval visits as part of a recently proposed France-India-Australia “axis” and to the appointment of a French ambassador for the “Indo-Pacific.” Both India and Australia, of course, are big customers for the French arms industry.

In a statement on October’s vote, Australian Foreign Minister Marise Payne said “We recognize the choice made by New Caledonians to remain a part of France” and went on to declare that “Australia values its close relationship with France as a like minded partner in the Indo-Pacific region. We welcome France’s ongoing commitment to the Pacific, and its significant contribution to regional security and prosperity.”

Not a word was uttered about the Kanaks and their aspirations. This week’s street violence about a corporate buyout is an ominous flashback to the 1980s and a signal that the warning of civil war might have to be taken more seriously.