Preparing to restart Svea
'It's now or never,' says Store Norske Administrative Director Wenche Ravlo.
Store Norske is working on a proposal to submit to the Norwegian government, which owns the company, after this summer. The plan outlines the resumption of coal mining at Svea and Lunckefjell.
"If all conditions are met and the owners say yes the first coal will be coming out of the mountains in autumn of next year," said Administrative Director Wenche Ravlo.
Ravlo discussed the company's plans during a business meeting this week organized by the Longyearbyen Community and Svalbard Business Association. One of the reasons the cornerstone company is looking at the possibility of restarting coal production is the price trend during the past year. In 2016, the price of coal dropped as low as 40 dollars per ton, but soared as high as 90 dollars in December. Now the price is about 70 to 75 dollars per ton.
"At current rates, which we consider to be a more 'normal' level, we'd earned enough money to operate in Svea and Lunckefjell," Ravlo said.
Now or never
Operations at Svea and Lunckefjell are officially suspended and the government has agreed in concept to provide funding to maintain the mines through 2019, although approval of appropriations from the state budget are necessary. If Store Norske is to resume operations, it must for practical purposes begin planning now since the probability it will become easier as time goes by is small. Expertise may disappear from the company at the same time as infrastructure inside and outside the mines deteriorates. The cost of resuming operations will also increase over time.
"In theory, we could perhaps wait until next year to plan the start-up, but we believe it is best and easiest to make a case now," Ravlo said. "It is for that reason it's now or never."
The alternative to restarting is initiating a cleanup of Svea, possibly guided by clarification from the government, to develop the area for other activities such as education, research and tourism activities. If so, that will entail a scaled-down use of the infrastructure.
During the meeting, Ravlo noted the consequences of closing the mining operations at Svea and Lunckefjell. It means the claim areas will again become open, which may present a headache for the government.
"In principle, it will be open for companies from any treaty countries to take Store Norske's claims," she said.
15 years of operation.
There are an estimated 14 million tons of coal in the deposits remaining at Svea and Lunckefjell. The majority of the coal at Lunckefjell is considered suitable for the production of steel in the metallurgical industry, which brings higher prices than standard-grade coal used for energy. With a production rate of about one million tons a year, it will take Store Norwegian 12 to 15 years to extract the deposits.
Ravlo offered a brief overview of what that would mean for the Svalbard community.
"During the start-up period it will mean about 300 jobs directly linked to the business and 100 jobs in related industries," she said.
But there are many conditions that must be clear before a restart occurs. Store Norske is a Category 4 state-owned company, which means the company's objective is contributing to the implementation of the government's overall Svalbard policy. That means the state must consider whether the resumption of coal mining is desirable for that vision.
The commercial framework must be carefully considered by the owners and the restart must be weighed against environmental considerations. The project will involve a significant proportion of coal used for metal and other processing industries. Parliament has approved this type of coal in the government's pension fund, which speaks to the project's advantage.
"And then there must be a political decision about funding," said Ravlo, estimating it would cost up to 1.2 billion to restart operations at Svea.
"That is working capital which could be repaid," she said. "Profitability is essential to implementing a start-up."
Translated by Mark Sabbatini.