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It might not be the gift Store Norske wants, but it’s apparently the gift the company needs on its 100th birthday as the Norwegian government is proposing giving the company an additional 244 million kroner in funding and loans to allow the company to refinance existing debt.
“We have previously made it clear to Parliament that Store Norske might need more money this year to meet obligations at the mining company at the end of the year,” said Minister of Trade and Industry Monica Mæland in a prepared statement Friday. “We are now requesting this. The proposal will contribute to the ability of Mine 7 to continue operating, and the allow the operating pause at Svea and Lunckefjell to be continued in 2017.”
A total of 100 million kroner will be a loan secured by the company’s residential properties, according to the statement.
“We believe an agreement with the bank is preferable to an uncertain situation in the mining company,” Mæland said.
Store Norske, which celebrates its 100th birthday on Nov. 30 (official and unofficial events are planned the following day), has been the economic cornerstone for Longyearbyen for virtually the town’s entire history. Bu the company has undergone a massive downsizing during the past two years due to a crisis caused by a collapse in coal prices, laying off all but about 100 people from a workforce that was 400 only a few years ago and halting nearly all of its coal mining.
Parliament approved a 500-million-kroner bailout package in 2015 to stave off bankruptcy, but the company’s woes continued and it again found itself verging on the edge of insolvency. Mæland proposed this year giving the company up to 749 million kroner over a four-year period to suspend operations at Svea and Lunckefjell – but maintain the mines – for a few years in the hope coal prices recover.
Prices have almost doubled since April, rising from $45 a ton then to $85 a ton in early November, with a long-term forecast of $70 a ton. Store Norkse Administrative Director Wenche Ravlo stated earlier this fall the company needs prices of $65-$70 a ton to break even, but there are other factors – such as costs of restarting operations – that must be weighed when determining if the mines should reopen.
Store Norske’s future was also the subject of considerable debate in Parliament this week as lawmakers debated a revised “white paper” outlining policy goals for Svalbard. The propose revision, drafted three years ahead of schedule due to the coal crisis, was criticized for lacking specifics about the company’s future role in the archipelago and the government is being asked to provide such recommendations before Parliament votes on whether to approve the new white paper next spring.
Hi Mark! Thank’s for yet another good article. One point yet missing is that the major part of this money is not to cover “year-end expenses”, but to refinance existing loans from other banks.
Thanks for the clarification. I was trying to keep the wording simple – apparently too simple.