Store Norske just finished shutting nearly everything down four months ago and most of the relatively few remaining workers were talking about going on strike. But the labor dispute was resolved quickly last week and a sustained rebound in coal prices is allowing the company putting together a proposal to resume operations at one or both of its two main mines next year.
It’s a turnaround many said would never happen as the mining company spent the past two years massively downsizing its workforce and operations, and relying on government loans and acquisitions to avoid bankruptcy due to a collapse in coal prices. Numerous industry experts said the price slump would likely be long-term due to the proliferation of cheaper and cleaner energy sources, but a decision by China to limit its output helped cause prices to nearly double from their low point by the end of 2016.
Store Norske has stated in recent reports it needs an average price of $65 to $70 a ton to break even. The Sydney Morning Herald, quoting industry analysts, reported Saturday prices are likely to average $70 to $80 a ton in 2017. However, that estimate is uncertain since, among other things, China could lift its production limits.
There are also numerous uncertainties at Store Norske about resuming operations, including a restart cost that could be roughly one billion kroner, according to official estimates. Furthermore, both the company’s board of directors and the Norwegian government – which took over full ownership of the company as part of a bailout package – will have to approve a reopening plan.
But Wenche Ravlo, the company’s administrative director, told High North News the situation is optimistic enough for officials to present a proposal to the board by May or June, with the goal of resuming operations in the fall of the 2018.
“There are significantly better prospects now than a year ago, but it is also obvious that we need to see a stability in prices before it can come to talking about starting again with coal mining at Svea and Lunckefjell,” she said.
The company downsized from about 400 employees in 2012 to less than 100 as of last October. The only active mining is occurring at the relatively small Mine 7, which fuels Longyearbyen’s power plant in addition to providing some income from sales. The company – through subsidiaries – is also trying to diversity into industries such as tourism using its current and former mining facilities, as well as consulting about Arctic industry and architecture.
But the possibility work ceasing at Mine 7 as well, at least temporarily, was raised when the roughly 60 employees still working in Store Norske’s mining division threatened to go on strike. Anita Johansen, head negotiator for the union representing the miners, told Fri Fagbevegelse they wanted to ensure the company didn’t alter its wages and working conditions if it expanded into new mining operations.
“For example, Store Norske starts a new mine as a separate company,” she said. “Then it is not a collective agreement, and wages and working conditions are not regulated by the agreement. It will not be easy to get Norwegians to work for low wages, but not difficult to get such Russians or Ukrainians to work. They have mining expertise. But what about the working conditions?”
Johansen said there has been “an increasing degree of social dumping” in Svalbard, and foreigners need to be aware of facts such as not receiving social benefits from the state if they work in the archipelago.
The dispute was scheduled to go before a mediator next month, But Ravlo said in an interview late last week the matter has been resolved, noting the existing agreement already covers mining activity in Svalbard and discussions beyond that are purely hypothetical.
“What they’re speculating about is something that may happen in 20 years,” she said.