The Norwegian mining company Store Norske Spitsbergen Kullkompani is set under pressure by the permanently low world market price for coal. Since 2012 the Norwegian coal mining in Spitsbergen is a loss-making business. Falling prices encountered inferior qualities and rising costs in the main mine Svea Nord near Sveagruva. Here mining is coming towards an end and is now run in the marginal parts of the coal seam (see also Spitsbergen-Svalbard.com news Store Norske: black gold yields red numbers from May 2013).
The new mine at Lunckefjellet, opened officially in February 2014, was supposed to produce relief. But at a current average coal price of 75$ per ton Lunckefjellet is not profitable either. The price is at least 10$ per ton less than Store Norske needs to avoid operating at a loss. When the new mine was planned, the company even calculated with a price 40% above the current level. As the total amount of coal expected at Lunckefjellet is relatively low, compared to Svea Nord, the new mine will only be driven until 2018 and it is not expected that the coal price will rise in the next few years.
Recently Store Norske´s management described the situation as serious for the first time. In the long run the company will react with cost reductions which also means a reduction of staff. In the short run it was necessary to hire 30 additional miners to extract coal from marginal parts of the old mine Svea Nord, meaning an interim increase of operating costs. Facing the current conditions it is getting questionable if coal mining in Spitsbergen will have a future at all. New projects like Ispallen and Operafjellet are challenged.
Both Store Norske, which is 99.9% owned by the Norwegian state, and the local government in Longyearbyen are aware of the economic and social relevance of the company for the small community of only 2000 inhabitants. If coal mining in Spitsbergen will be reduced or even suspended it will affect not only those who work for the mining company. A large number of other jobs in Longyearbyen are directly or partly connected to the mining business.
Currently, Store Norske is in a dialogue with their employees, the Norwegian state and the bankers to ensure further operation in 2015.
Sveagruva in Van Mijenfjord: the current centre of coal mining in Spitsbergen.