In cool market, burning ground for Barents miners

Harald Martinsen is CEO of Syd-Varanger Gruve, a company owned by the Australian-registered Northern Iron.

One of the smaller mining companies in Scandinavia, the Northern Iron, is struggling to make ends meet as raw material prices plummet. After several golden years, a string of regional mining companies is threatened by closure.

 “We believe we can make it”, company representative Harald Martinsen said in a presentation in Kirkenes this week. The Northern Iron has not made net profits since it started up mining in Arctic Norway in 2009, and deficits are steadily growing. However, the company still appears confident that it will make it through the industry downturn.

“We have some advantages”, Martinsen underlined, referring to his company’s strategic location by the Barents Sea, its efficient logistical operations and its high ore quality. 

The situation is worst for companies being in a project development phase and consequently without cash flows, the company director argued.

As previously reported, the Northland Resources this week informed that it is halting all developments at its grand project site in northern Sweden and that practically all staff is being dismissed. Northland has invested major sums in the development of the Kaunusvaara and Hannukainen iron ore resources located in Swedish Lapland. The halt in operations will strongly affect local economy and labor markets, and possibly also infrastructure developments in the whole region. Northland intends to ship out its ore from the Norwegian port of Narvik.

The Syd-Varanger mines is increasingly struggling to make profits.

While Northland is still in a project development phase, the Northern Iron production is in full swing. The company invested about 50 million Norwegian kroner in the re-opening of the Syd-Varanger mines outside Kirkenes and today has 420 people working to bring ore to the markets. The ore is brought by railway to a processing facility and from there further taken by ships to buyers. In 2014, the entire company production was sold to European buyers.

According to the company, an increase in output is of crucial importance for sustainable future operations. Over the last years, production has gradually grown and is expected to reach 2,8 million tons of iron ore concentrate in the near future, CEO Martinsen said at a seminar organized by the Barents Institute, a unit under the University of Tromsø.

However, the production increase is not without controversy. The company dumps significant volumes of tailings in the local fjord and the local community is increasingly questions the level of payback to the society.

The Barents Region is highly rich in minerals and metals and iron ore production is conducted in northern Sweden, Norway and Russia. The by far biggest producer is the LKAB company in northern Sweden. On the Russian side of the border, the Severstal operates plants in both Murmansk Oblast and the Republic of Karelia. As figures from Patchwork Barents illustrate, there are a total of seven iron mine and processing plants in the region.