Coal’s last gasp? Store Norske may decide next week to end mining in Svalbard as coal price crisis persists

sveafog

Judgement Day for Longyearbyen may occur as soon as next week.

Deciding if Store Norske should cease its coal mining operations is among the items on the agenda when the company’s board of directors meets Sept. 3, according to Svalbardposten. The company originally stated such a decision would be finalized next spring, but a collapse in coal prices that’s largely responsible for the crisis now appears to have no end in sight.

“Every effort had been made,” Wench Ravlo, the company’s administrative director, told Svalbardposten. “We have delivered, but the market is not with us.”

Coal prices are currently about $54 a ton and Ravlo told the newspaper an average price of $52 a ton is forecast for the next six months. She said a price of $65 a ton is needed to break even, even though the company has slashed its staff and expenses by about a third.

Ending all of the company’s mining  would result in a loss of 316 full-time employees at Store Norske and related local entities, and leave the company with only 33 employees, according to a report prepared for the board. The company had about 400 employees before an initial round of downsizing two years ago and laying off about 100 more workers this year.

One option, according to Svalbardposten, is the company’s board may ask the Norwegian government to make a decision about whether mining should continue. The government, as a condition of providing a 500-million-kroner emergency assistance package earlier this year, acquired all of Store Norske’s property and outstanding shares.

Store Norske’s problems are being experienced on a global scale due to the price collapse resulting largely from a supply glut as China, the biggest consumer of the commodity, is burning less of the fuel at its power stations.

At least six major coal companies in the United States – including the second- and fourth-largest – have filed for bankruptcy this year, and the largest coal company in New Zealand and a major coal producer in South Africa are among the those filing for bankruptcy this month.

It is also uncertain whether it is possible to operate the Mine 7 profitably. A liquidation of that mine is therefore also evaluated as an option. Longyearbyen would then lose a total of 316 employees and Store Norske would have only 33 employees by 2017.

At least six major coal companies in the United States – including the second- and fourth-largest – have filed for bankruptcy this year, and the largest coal company in New Zealand and a major coal producer in South Africa are among the those filing for bankruptcy this month.

Leave a Reply