On Monday of this week, the message everyone was waiting for came: Store Norske's board of directors voted to reduce the company's operations and get rid of at least 100 employees. Chairwoman Annette Malm Justad had just finished presiding over the meeting when Svalbardposten contacted her. As the board's executive chairperson, it is she who must perform the cuts.
'Not finished with this'
"It is important that we do it in a proper way," said Justad, who will take over leadership of the company on an acting basis when Administrative Director Per Andersson steps down Dec. 3. "All who are affected will be informed before Christmas and no later than week 51.
"But we are not finished with this," she added.
Svalbardposten reported Nov. 7 the company suffered a loss of 225 million kroner during the first nine months of this year and a loss of about 400 million is possible by the end of 2014. That would be the largest deficit in the company's history and its cash reserves will be empty by early next year. Store Norske therefore needs loans and guarantees backed by the government, which owns 99.9 percent of the company.
Items on the cuts list
The company will consider all aspects of its business and assess other possible savings measures. According to Svalbardposten sources, possible actions include, among other things:
• Sale of property and possessions
• Leasing of equipment
• Mortgaging assets
• Renegotiating contracts with subcontractors and suppliers
• Minimal operations, with coal production halved, for 18 months
• Delaying drilling of new extraction areas
• Rerouting of planned equipment
Moving the stope
Store Norske is planning to produce slightly less than one million tons of coal in 2015. A new longwall stope just delivered to Svalbard that should have been set up in Lunckefjellet will instead be mounted up to the D-10 panel at Svea Nord. Production will then be moved to the fringe areas inside the mine while the stope is moved to Lunckefjellet. Coal in the new mine will be extracted from only one panel and in October of next year the company will determine if drilling of new extraction areas should be resumed. That will depend on price developments in the coal market.
"We must improve the liquidity we have now," Justad said. "This is a serious situation that affects lots of people just before Christmas, but it is absolutely necessary to secure the business."
READ MORE: Not wanting to lose more colleagues
Efforts are underway already, and the goal is to get to the Minister of Trade, Industry and Fisheries and the bank in January a plan both parties can stand behind. Contracts with subcontractors are also being reviewed and several of them now preparing for layoffs of people in Svalbard. At Svea, AF Arctic and Sodexo are now awaiting official word from Store Norske (see separate article).
"In a situation like we are in now we must consider all aspects that can give us reduced costs and if there is anything we do not need anymore," the chairwoman said.
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Arild Olsen, a union steward for Store Norske's employees, said he supports the board's unanimous decision and believes there was no other solution.
"This model gives us a respite to get into position again," he said. "Anyone who understands mining knows that a business is in trouble when it must stop new operations. It is obviously difficult. It was therefore important to spend plenty of time at the board meeting and there was a unanimous board that gave its backing to the best solution. The alternative was to drift toward bankruptcy."
The company will base its operations on a coal price of 75 to 80 dollars a ton and, if coal prices increase in the future, Olsen said he believes that will be a bonus.
He said the task now is quickly getting clarification for those who are affected. At the same time, it is important to ensure labor rules are observed. A date for the company's planned meeting in January with the government officials acting as the owners is not set, but Olsen said he hopes at that point matters will be clarified.
Does he believe the government will be supportive?
"Yes. Certainly all of the employees at Store Norske have done their part and they're going to do even more to create a plan that will last. It would be a terrible shame if we did not get it."
How are employees reacting now that the decision to cut staff and operations is real?
"Now the hard truth is there and they are allowed to be angry," he said. "I understand. Everyone's reaction would be common in such a situation."
READ MORE: 'The employees at Store Norske do not deserve this'
New director first quarter?
Store Norske's board is now aiming to have a new administrative director in place during the first quarter of next year.
"It is not certain what is appropriate to do until we have delivered," said Justad, referring to changes at the coal company.