150 jobs lost at Store Norske

Store Norske must continue cutting. That became clear after a meeting by the coal company's board of directors.

Thursday where various options for future operations were considered.

The conclusion is that there is no economic basis for resuming work at the Lunckefjell mine last opened at the beginning of last year. This despite the fact the company has enacted money-saving measures and achieved production levels beyond those budgeted.

Therefore, 150 jobs will disappear.

A pause in operations

The board instead voted to keep the possibility of further coal mining open by putting operations at Lunckefjell and Svea on hold.

"With the amount invested in the Lunckefjell mine and the infrastructure at Svea we want to keep the possibility of further operations open," said Wenche Ravlo, the company's administrative director, in a prepared statement. "We will therefore enter into a dialogue with the owner about the operational pause, including the capital requirement related to this."

Pausing operations means the mines and infrastructure will be maintained, but there will be no activity beyond that. That has consequences for earnings and the company is therefore dependent on capital to take such a step.

Mine 7

Ravlo, in an interview with Svalbardposten, said the company will put operations at Lunckefjell and Svea on hold for up to three years, until 2019, and see if it becomes profitable to resume work in those mines.

Meanwhile, the board voted to double activity at Mine 7 by employing an extra shift.
What does that mean for the employees?

"It means that no matter what we are going ahead with the downsizing," Ravlo said. "We may yet have around 100 employees."

Today there are approximately 270 employees, including temporary workers. The goal is reducing the number to about 100 by the summer of 2016.

"That is, in a sense, the best case," she said.

Another option is also suspending production in Mine 7. There will be even fewer employees in that case, but it currently is not envisioned.

"I do not think this should come as no surprise to anyone," Ravlo said.

READ MORE: Coal mining future may be decided now

Starting immeditely

On Friday, the board of Norway's Ministry of Trade, Industry and Fisheries will meet to discuss Store Norske's decision.

"But we regardless need to deal with the downsizing," Ravlo said. "The process must begin immediately."

How does she expect that to be received?

"I do not think this should come as no surprise to anyone," Ravlo said. "We hope that if we can get to running idle that it may be a good alternative."

She says the downsizing will hit many hard and the company will implement processes as gently as possible.

"This is very special and a little ironic."

Worst crisis

Uncertainly persists among employees in Svalbard. Svein Jonny Albrigtsen has worked at Store Norske since 1985 and in October celebrated his 30th year at the coal company.

"We're happy in our workplace," he said. "This is the worst crisis I can remember. There have been crises before, but never like now. There is quite a different mood, everyone goes and waits."

Next year Store Norske is supposed to celebrate its 100-year anniversary. In addition, it has been 50 years since the debut of Mine 7, where Albrigtsen works.

"That is very special and slightly ironic," he said. "People hope that it becomes an anniversary with dignity. That there are miners again, that not everyone is gone."

'Significant risk'

Monica Mæland, a Conservative Party member, said the situation is serious, and the ministry is engaged in a close dialogue with the company's board and city officials.
"We shall, of course, make a thorough assessment of the request from the board and the issues further highlighted," she stated in a press release.

Mæland declined to state when a conclusion will be reached, but emphasized it is essential to maintain economic activity and a settlement in Svalbard.

"Mining at Store Major Norske has been a contribution to this," she said. "At the same time this is an industry with challenging market conditions and significant risk."

Hard landing

About 100 people have lost their jobs in this cornerstone company in Svalbard since the end of last year. Therefore, about 250 Store Norske employees have lost their jobs in a span of 18 months.

That affects Longyearbyen hard and the ripple effects are even more dramatic.A series of graphs created by Svalbardposten shows the consequences for the coal company and the entire community.

In addition, there are concerns that flights to the city may be reduced.

Furthermore, Parliament approved an assistance package for the company earlier this year that involves acquiring the company's property and infrastructure for 295 million kroner, plus a loan of 205 million kroner that has an interest rate of 15 percent.

The company has reduced its costs by 30 percent, but coal prices have plummeted and future prices are expected to be around $51 to $52 per ton. That is $13 to $14 below what Store Norske needs to break even at Lunckefjell.

Ravlo said the company is leaving open the possibility of hiring people again if it later becomes necessary due to the resumption of coal mining at Lunckefjell.

Translated by Mark Sabbatini