Deal to keep last mine in Ostrava running until 2017 likely to expire soon

27-08-2015

The Czech government and owners New World Resources are likely to have to renegotiate state support aimed at extending the life of the Paskov mine, one of the biggest employers in the Moravian Silesian Region, the minister of industry and trade, Jan Mládek, told cabinet colleagues on Wednesday.

Photo: archive of OKDPhoto: archive of OKD Last year the state agreed despite some reluctance to provide CZK 600 to offset the social costs of NWR closing Paskov, if the company agreed to keep the loss-making mine open until the end of 2017.

Paskov, the only remaining active mine in the Ostrava region, employs a full-time staff of 1,800 and has hundreds of agency workers in part of the country with relatively high unemployment. Last year it lost CZK 1.2 billion.

One condition of the deal was that it would need to come up for renegotiation if coking coal benchmark prices dipped below the level of USD 110 a tonne for three quarters in succession.

Coal prices have been continuing to fall and Mr. Mládek said the benchmark had been beneath that level in the second and third quarters of this year and that OKD, NWR’s main mining unit, expected a similar situation when the figure is set for the final quarter next month.

If the two sides have not agreed a new deal by that point NWR will be able to shut the mine down whenever it wants. In a statement, Mr. Mládek said the government would discuss the matter again at the beginning of September.

In recent years coal prices have fallen sharply, with coking coal now going for less than half what it did in 2011. In the last year the price of coking coal has fallen to USD 90 a tonne.

BH Securities analyst Petr Hlinomaz told the Czech News Agency that fresh negotiations between the state and NWR were quite probable, with coal prices unlikely to increase any time soon.

OKD announced plans to close Paskov in 2013 after saying high costs meant it would continue to operate at a loss in the medium term. Miners unions argued that it should be kept running, saying millions of tonnes of coal could still be mined there.

After talks with the Czech government NWR agreed on the deal to keep Paskov going until the end of 2017. The move was later approved by the European Commission.

NWR is based in Amsterdam. Magnate Zdeněk Bakala stepped down from the company’s board of directors in April though he still has a half stake in CERCL Mining, (formerly BXR Mining), which is majority owner of NWR.

27-08-2015