Store Norske losses continue at record rate: 183.3M during first quarter of 2016

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They expected bad news and there will be more of it before – and if – it gets better.

Store Norske, hovering on the edge of bankruptcy, is reporting a 183.3-million kroner loss before taxes during the first quarter of 2015 due primarily to low coal production and prices. The company suffered a 45.5-million-kroner loss during the first quarter last year before the price crisis resulted in a record loss of 537 million kroner at the end of the year.

“The result is in accordance with the budget,” Store Norske Administrative Director Wenche Ravlo stated in an e-mail interview. “We had budgeted for lower prices and lower production in relation to 2014, and that is reflected in the results as expected.”

The first-quarter report states the mining company has an available liquidity 175 million kroner, compared to 269 million a year ago.

Store Norske is expected to receive a 500-million-kroner bailout package from the government to ensure operations can continue through 2016. But the company’s first-quarter report also repeats dire warnings from government and other analysts that its future beyond that is in peril if prices don’t rebound.

The company has laid off about 100 of its 340 employees this year and ceased operations at its Lunckefjell mine, which was envisioned as the primary production site during the next few years when it opened last year.

The mine is still seen as a potential savior because it contains industry-quality coal that sells for higher prices than energy-quality coal. But Store Norske’s report states a decision about resuming production – and therefore staying in business – needs to be made by the spring of 2016.

“After this it will require such a large inflow of additional liquidity that it will be difficult to implement, and coal activity will therefore cease during 2016,” the company’s report states.

Production is continuing at Svea, with 152,000 tons of coal produced during the first quarter compared to 285,000 tons last year, but deposits there are expected to be quickly depleted. Furthermore, prices for the coal there are about $60 a ton, abut $15 a ton below what the company needs to break even. The company earned 15.8 million kroner from coal sales, the same as last year.

The first-quarter report states costs for wages, production at Svea and other operations decreased 42.8 million in the first quarter compared with last year due to the layoffs and other cutbacks.

One good bit of news in the report is production at Mine 7 increased about by 1,000 tons, or eight percent, compared to a year ago, although that represents only a small percentage of the company’s overall production.

On the other hand, accidents were a trouble spot for the company during the first quarter as the injury rate was four times higher than projected. The calculation is based on the number of work hours lost due to three incidents resulting in injuries during the quarter. Store Norske’s “H-value” was 20, compared to its goal of five, an average of 8.3 for Norway’s mining industry and an average of 3.8 for all industries.