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Thursday, July 18, 2024

Mining company declares bankruptcy

As many as 400 people lost their jobs in Norway’s northernmost county of Finnmark on Wednesday, after Sydvaranger Gruve AS announced that it was filing for bankruptcy. The mining company based in Kirkenes has been one of the biggest employers in the area, which also is currently struggling to accommodate thousands of asylum seekers coming over the border from Russia.

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 was filing for bankruptcy on Wednesday. PHOTO: Berglund

Kirkenes Mayor Rune Rafaelsen informed the town council for the local municipality of Sør-Varanger of the decision at mid-day and announced that efforts would be made to tackle the effects of so many people losing their jobs in an area where few other jobs exist.

“This is a large and serious crisis for the municipality,” Rafaelsen said, “and not least for the people it affects.”

Rafaelsen told Norwegian Broadcasting (NRK) that Sydvaranger’s employees wouldn’t be receiving any pay for December, which was supposed to be sent to their bank accounts on Friday. He said the municipality would try to find measures to help employees and their families who needed it.

Rafaelsen feared the bankruptcy of the mining company, which was doing well just a few years ago at a time when Northern Norway and particularly Kirkenes were riding a wave of prosperity, would affect as many as 1,500 people “directly or indirectly.” He vowed that the local government would “do all we can to help in this difficult situation.”

Sydvaranger Gruve AS is owned by mining conglomerate Northern Iron of Australia, which blamed the bankruptcy on low prices for the iron ore mined at the sprawling pits east of Kirkenes. Even though potential investors had shown “strong interest” in the company, Northern Iron’s lenders reportedly had determined that an “acceptable solution” wouldn’t be found.

‘Dirty deal’
Northern Iron’s board thus decided that it had run out of options, without making the situation worse for Sydvaranger’s creditors. Since Sydvaranger, according to Northern Iron, won’t be able to cover its debt to either Norway’s biggest bank, DNB, or Innovation Norway, a state business development agency, and neither wanted to take part in further discussions with potential investors, Northern Iron’s board felt it had “had no choice” but to file for bankruptcy.

Employees expressed anger and feelings of betrayal. “This was a dirty deal by DNB,” Henning Bråten, leader of the employees’ local union Nordens Klippe, told Dagens Næringsliv (DN). “DNB is securing its own values while letting the employees fend for themselves until Christmas. DNB is cynical.” He added that the bankruptcy and looming lack of paychecks for workers comes “at the worst possible time of the year.”

DNB defended its position, claiming it had tried hard to “find a solution for Sydvaranger.” DNB spokesman Even Westerveld said the bank had foregone both principal and interest rates payments on loans to the mining firm since last Christmas and worked on several alternatives. “But there’s a limit to how far a bank can stretch itself,” Westerveld said. “We understand this is a tough day for the residents of Kirkenes and the employees, because Sydvaranger was an important cornerstone company.”

The company was being put under the control of a bankruptcy administrator, who will take over management of Sydvaranger’s assets and creditors’ claims. The company logged a loss of around NOK 1.14 billion last year after the price of iron ore fell by half. Its debt was set at around USD 100 million (NOK 870 million). Its third-largest creditor is Tschudi Shipping Company, owned by investor Felix H Tschudi who had invested in the mine himself and once was called the “king of Kirkenes.”

“This is a dark day for all the employees of Sydvaranger Gruve, all its suppliers and for the whole community,” Bjørn Johansen, secretary of trade union federation LO in Finnmark told NRK. “It’s actually a dark day for all of Finnmark.” Berglund



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