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CANBERRA, Australia (February 1, 1998 - PACNEWS/Ioane)---The French government says it has not reached an agreement on nickel processing with New Caledonia's pro-independence movement, the FLNKS.

The FLNKS has demanded that France allow a nickel processing plant to be built in the pro-independence organization's northern stronghold.

The issue has become a major obstacle in negotiations over the political future of the French Pacific territory.

Rumors of an agreement swept the Paris Stock Exchange last week, driving the price of shares in the French government-owned nickel mining company, Eramet. But the French government says there are still issues to be resolved, and a deal has not yet been reached.

However, Reuters reports that a nickel agreement is possible soon between the French government and the FLNKS.

"We are in the final phase of drafting the text," an official in the office of the Prime Minister, Lionel Jospin, told Reuters.

Last month, the French nickel group, Eramet, approved a plan freeing up access to nickel reserves for a smelter which FLNKS wants built.

But Eramet said at the time that the plan, under which it would swap the reserves of its Koniambo mine for those of Societe Miniere’s Poum field, "would have a significant impact on activity, competitiveness and employment in the group’s nickel branch."

Reuters reports subsequent negotiations with the French government have to work out precise legal terms of the accord and to determine financial compensation to be paid to Eramet.

The French government supports the project primarily to appease local separatists ahead of a referendum on independence for New Caledonia.

Last October, activists led by the FLNKS, blocked access to Eramet’s mines in New Caledonia to press their demands for a new smelter.

The month-long protest ended after Eramet confirmed its willingness to provide the reserves to supply the new plant.

A Canadian mining company, Falconbridge, plans to start construction of the smelter in 2006. But the French government has said it would like work to begin earlier and has asked Falconbridge to propose a new date.

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