On June 19, the company announced it will need to halt development of the first stope panel in the ecotone zone and the panel will therefore be 216 meters shorter than planned. This amounts to a production loss of 128,000 tons of coal, equivalent to 6.5 percent of the normal annual production for Store Norse. The value of this coal depends on market prices, but at 80 dollars per ton would amount to about 61 million kroner.
Along with geologists and rock engineers, Managing Director Per Andersson had a full examination before the decision. Now the company is considering drilling extra holes to avoid more surprises.
"It's not a pleasant surprise that we have to deviate from the plan and must leave the coal, that none of us likes," he said. "At the same time, this is a panel in the outer part of the field and there will always be some uncertainty as to the actual conditions in the mountain compared to what core drilling has told us."
What will be done to determine if there will be extra drilling?
"I have asked the geologists to assess whether additional core drilling now can help improve the data we already have for the area," he said. "It means in the fall we must adjust our drilling plans and that we need a change in the permit from the government, which should not be a problem."
The new Lunckefjell mine has presented many challenges since the first coal was extracted from the mountain in November of last year. Problems with equipment also meant that work has been slower. Furthermore, before the start of extraction there was far more core drilling into Lunckefjell than, for example, in Svea Nord. Andersson confirmed this.
"The big difference is that there was no opportunity for trial operations at Lunckefjell, as was the case at Svea Nord," Andersson said.
According to Exploration Manager Morten Often, they were not prepared for the stone in the coal seam, which first increased from zero to one meter at 50 to 60 meters, before it increased it to four meters the next few meters up.
"We have not experienced that any time before," he said.
Nevertheless, the company have previously found that coal occurrences in the peripheral zones were not like geologists expected.
"In Lunckefjell we need to have enough geological data.," Often said. "Nonetheless, no drilling can provide all the answers. It happened also in Svea Nord, so this is not an unknown situation. But it is more troublesome in Lunckefjell than in Svea Nord and it is a little bit of problem. Finding a way and making sure we do not end up in the same situation on the next panels is important."
Little snow coolant means that it will not be possible to do vertical drilling down in the mountain before next year. However, it may in the meantime be appropriate to conduct horizontal drilling inside the mine to try to get better knowledge of faults and blocking stones.
"Especially faults that run the length of the panel, but we have not seen any sign of that," Often said. "The seam in places is visible on the mountainside on the east and careful examination generally, yet it is virtually impossible to detect faults on one to two meters of drilling from the surface. Remember that it is 250 meters between the boreholes."
Is there a danger of more surprises?
"You always fear such negative surprises, but we are hoping for positive, at the same time as we do everything we can for the survey," Often said. "To put it this way: you don't have full control at the mine before it is driven out."
Store Norske is now in contact with a company about the horizontal drilling and then will consider action.
However, it is clear 2014 will be a tough year for Store Norske, since the last coal in Svea Nord contains more than 30 percent stone and it all must be cleaned in concentration plants. With a planned capacity of 1.7 million tons of coal a year, it must now extract 2.6 million tons gross. And on top of that comes the ongoing difficulties in Lunkefjell and low coal prices. Per Andersson said he isn't making any specific predictions, but he knows the numbers will be in the red in 2014. And maybe the year after.
"The plan was that in the course of 2015, the numbers would turn from red to black, but that assumed a more positive trend in coal prices than we have seen so far," he said. "And that we would not have such problems as we have just had,"
Store Norske's total coal production in 2013 sold for roughly 1.26 billion kroner. There was more than 400 million kroner more than the year before, but it was not nearly enough. The company ended 2013 with a before-tax deficit of 75.2 million kroner. It is an improvement of 201 kroner million compared to the previous year, with a major cause being fewer disruptions in concentration plant in Svea and thus higher production.
Nevertheless, coal prices now are well below what Store Norske budgeted for and approaching the level in 2006-2007. At that time, prices were between 72 and 83 dollar per ton.