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Monday, July 15, 2024

Mine on verge of bankruptcy

The Sydvaranger mining company in Kirkenes is teetering on the verge of bankruptcy, its lawyer claims, after a key supplier stopped delivering important reserve parts for mine equipment. The mine, which also faces financial problems, is a major employer in the area and a bankruptcy would seriously hurt the local economy in eastern Finnmark.

The Sydvaranger mine east of Kirkenes has been a major employer in the area but now claims its on the verge of bankruptcy. PHOTO:
The Sydvaranger mine east of Kirkenes has been a major employer in the area but now claims it’s on the verge of bankruptcy. PHOTO: Berglund

Newspaper Dagens Næringsliv (DN) reported on Wednesday that the halt in deliveries from the mine’s supplier Pon Equipment has already forced shutdown of important machinery. That’s disrupting production of the mine’s iron ore, at a time when even a few days of such disruption is critical.

The mining company, which has around 400 employees in the Kirkenes area, has been battered by a 60 percent decline in iron ore prices since 2011. DN reported the company has lost around half-a-billion kroner in the past 18 months, has heavy debt and only has financing through the end of October.

It was only a few years ago that the future looked bright for Sydvaranger, which is owned by Northern Iron Limited of Australia. It was established in 2007 to rehabilitate the mine located east of Kirkenes, near the Russian border, its rail line and production plant. The company also launched production of high-value iron ore concentrate. Norwegian businessman and shipowner Felix Tschudi owns nearly a 14 percent stake in Northern Iron Limited and has been a major player in the mine’s rehabilitation, through his company Tschudi Mining Company AS.

The problems began after iron ore prices took a dive, and Sydvaranger had debt of nearly NOK 700 million at the end of June. Norway’s largest bank, DNB, is among the company’s largest lenders. The conflict with its equipment supplier is the latest threat facing the company.

“Sydvaranger is in an extremely pressured economic situation,” its lawyer Ørjan S Haukaas wrote in a new assessment of the company. The consequences of the refusal for a key supplier to deliver needed parts “can thus be fatal for Sydvaranger. If productions stops for just a few days, Sydvaranger will probably have to file for bankruptcy.”

Pon officials contend they had an agreement with Sydvaranger regarding service and reserve parts for machinery for several years, but that Sydvaranger itself cancelled it. Pon now wants a court to evaluate whether it should be forced to deliver reserve parts  even though the agreement was cancelled.

A judge has ordered Pon to deliver parts until the matter can be heard in October. Sydvaranger claims it was unhappy with the agreement it had with Pon but that Pon has a monopoly on the parts and they can’t be bought elsewhere. Berglund



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