FINAL CLOSURE: Government recommends permanent shutdown of mining at Svea, Lunckefjell

finalclosure

Hopes of resuming large-scale coal mining in Svalbard were dashed Thursday morning – probably permanently – as the Norwegian government is recommending Svea and Lunckefjell remain closed, and that maintenance of the mines cease and most of the infrastructure be removed. 

“After a collective assessment the government has come to the conclusion that the liquidation and eradication of coal mining in Svea and Lunckefjell is now the right solution,” said Trade and Industry Minister Monica Mæland in a prepared statement Thursday morning.

The decision, part of the proposed national budget for next year, means Store Norske will remain a shadow of its former presence as Longyearbyen’s economic cornerstone, with relatively small-scale production at Mine 7 and property management representing most of its remaining activity. The company laid off roughly 300 of its 400 workers workforce due to the crisis, but estimated those lost jobs could be regained for up to 15 years if extraction at the larger coal mines resumed.

“We are disappointed because we delivered the owner (the Norwegian government) a good and reasonable start-up plan,” Store Norske Mining Manager Per Nilsen told NRK. “We had faith that it would be realized because the market and demand for high quality cohorts have grown over the past year and a half.”

Store Norske officially suspended mining at Svea last fall after winding down operations for many months under a plan approved by Parliament that would maintain the two larger mines for up to three years in the hope market conditions would recover. But the company’s board of directors, declaring the suspension was costly and impractical, asked the government for a firm close-or-reopen option in the proposed budget.

Either option would have been costly since Store Norske estimates it would cost about 900 million kroner to restart production, about 60 to 70 percent of which the government would have to provide. The alternative was writing off the 1.2 billion kroner investment in Lunckefjell – which closed almost immediately after it opened in 2012 – plus several hundred million kroner in various assistance since the price crisis began in late 2014.

Next year’s budget is proposing 141 million kroner for cleanup activities at Svea and Lunckefjell, and 43 million kroner to cover pensions costs. The budget also authorizes spending up to 500 million kroner for implementing environmental measures at the two sites beyond the coming fiscal year.

 

Store Norske had proposed using infrastructure at Svea to develop full-scale tourism offerings including a lodge and various recreational options. But the budget recommends retaining minimal infrastructure at Svea, although the possibility of future tourism and research isn’t completely ruled out.

Store Norske Administrative Director Wenche Ravlo, who announced last week she is resigning as of March 1, told NRK the final cleanup will take about two to four years and she expects the company will retain its staff of about 100 people during that time.

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