"This is very positive news, and an important clarification for the company and for Longyearbyen," said Wenche Ravlo, Store Norske's administrative director.
The government is endorsing a recommendation by the company's board of directors to put operations at Lunckefjell on hold for up to three years, employ a second shift at Mine 7 just outside Longyearbyen and to preserve early retirement.
"It was about time," said Ravlo, who requested a response from the government Nov. 23.
Downsizing efforts will continue during the coming months, with a gradual transition to the suspension period beginning next summer. The clarification also means the company can select which personnel will perform maintenance work at the mine and infrastructure at Svea and Lunckefjell.
"We have listed a rather extensive array of the expertise that is needed," Ravlo said.
The government plans to provide 110 million kroner in 2016 for the maintenance work, more than the 95 million kroner per year Store Norske requested. An assessment of capital is planned at the end of 2016 and 2017, but it is estimated subsequent allocations will be about 145 million kroner annually.
Considerations regarding settlements and commercial activity in Svalbard were the basis for the decision, according to Norwegian Minister of Trade and Industry Monica Mæland, a Conservative Party member.
"The mining company contributes to a thriving community in Longyearbyen," she said in a press release issued by the ministry. "The money will give the local community better conditions to be able to adapt."
Store Norske received 500 million kroner in the spring of 2015 in the form of loans and a state takeover of the company's property and infrastructure. A new financing agreement with DNB implies an acceptance by the bank that operations will be put on hold and production will approximately double at Mine 7, as well as a hedge of agreements regarding early retirement, according to Store Norske Chairwoman Annette Malm Justad in an interview with Svalbardposten.
"The purpose of the operational pause is to give the community a little longer time to build up new industries," Mæland said. "At the same time we maintain the ability to start up again if the market picks up. We have no guarantee that the situation will worsen. As the owner of Store Norske we are following developments closely. We are assessing the situation continuously."
Parliament will have the last word on the matter, taking up legislation drafted by the government in the spring of 2016.
Store Norske's administrative director said she is comfortable with that.
"We assume the government has during this time been in communication with parliamentary leaders before they came forth with the proposal," Ravlo said.
Translated by Mark Sabbatini