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Store Norske plans to shut down virtually all mining operations and downsize all but 100 employees by next summer following a meeting of the company’s board of directors Thursday.
“The downsizing will hit many hard,” said Wenche Ravlo, the company’s administrative director, in a prepared statement. “We must ensure that this happens as gently as possible.”
The decision comes after a year-long crisis caused primarily by a collapse in coal prices, forcing the company to obtain a 500-million-kroner bailout package from the Norwegian government this year to avoid bankruptcy. The assistance was supposed to ensure Store Norske could continue operating through 2016, but Ravlo said a continuing decline in prices is forcing the board to take quicker action.
“The market is simply not with us and that is something we cannot control,” she told NRK.
The company currently has about 270 employees following two rounds of downsizing from an original staff of about 400 during the past two years.
The company’s board decided it is not economically viable to resume operation at the Lunckefjell, which was shut down due to the crisis, and plans to suspend operations there and at Svea for three years. The only production planned it at Mine 7, which represents a tiny fraction of the company’s usual output, although production at the mine will be doubled initially. If operations at the mine return to normal levels, an additional 50 employees will lose their jobs.
“With the amount invested in the Lunckefjell mine and the infrastructure at Svea we want to keep the possibility of further operations open” Wenche said in the company’s statement. “We will therefore enter into a dialogue with the owner about the operational pause, including the capital requirement related to this.”
The Norwegian government, as a condition of its assistance package, assumed full ownership of Store Norske by acquiring all the company’s property and infrastructure, plus the small percentage of shares held by private investors. The Ministry of Trade, Industry and Fisheries’ board is scheduled to meet Friday to discuss Store Norkse’s decision.
The drastic cuts in staff and operations will have major repercussions for Longyearbyen, with the company estimating about 280 full-time jobs will be lost when associated industries are factored in. Those who are still working in Longyearbyen are also likely to pay the price in the form of higher fees for basic services and a possible reduction of some services such as flights.
“Things are going to be much more expensive for everybody,” said Ronny Brunvoll, director of Visit Svalbard.
He said it will also change the makeup of the community because the workforce will be less diverse.
“If you’re a couple coming up here, you’re lucky if both of you want to work in research or tourism,” he said.
Very to sorry to hear the news regarding the mining operations at Store Norske, during my career with a machinery supplier I visited Svea on many occassions over a period of 15 years.
It was a pleasure to work with the miners and support staff and I have very fond memories of my time in the Arctic.
My best wishes go to all involved and good luck for the future.
Regards
Malcolm Goodinson.
What is the purpose of continuing to mine at Mine7, is this coal primarily to be used for the town of Longyearbyen only, or sold as well?
I’ve posted a story about Store Norske’s second-quarter earnings where I note the coal from Mine 7 not used at the power plant can be sold for industrial uses, which may fetch around $90 or so a ton, compared to the $50 energy-grade coal sells for. Since Store Norske says it needs a price of $65 to break even with its scaled-back operations, obviously it makes sense to focus efforts there. Furthermore, there’s enough coal there to continue mining for at least a decade…if coal prices recover during that time, than the hope of resuming work elsewhere becomes a reality.