OKD to decommission two mines

OKD will close its Darkov and CSA mines for good at end-February 2021 after the Czech government’s decision last week to start the gradual transfer of mines to state-owned Diamo for decommissioning.

The symbolic last truck will be dispatched from these two mines at the end of February next year, says OKD director operations David Hajek.

“It is no secret that the decline in coal prices to historic lows and the Covid-19 pandemic and related circumstances, such as reduced demand, long-term production cuts due to safety and anti-epidemic measures, as well as a complete interruption of mining, have had a significant negative impact on OKD,” says OKD chairperson Vanda Stankova.

“The combination of all these factors has essentially prevented OKD from any attempt to successfully cope with the decline in coal prices that OKD has faced since the beginning of the year,” she adds.

The miner has spent some CZK 25 million ($1.1m) as a direct result of Covid-19 measures, not including costs related to the mass testing of employees, it says. In mid-August the firm resumed all mining operations following a six-week stoppage due to the high number of workers that tested positive for Covid-19 (see Kallanish passim).

A social programme will be prepared for all employees who transfer to Diamo next year, with termination of employment and full severance pay assumed once the mines have completed decommissioning.

OKD will continue to operate its CSM-Jih and CSM-Sever mines, which were not included in the government’s decision.

“The length of operation of the CSM mines is conditioned by a number of factors,” Stankova observes. “Deep mining is very sensitive to price fluctuations; any further downward movement is extremely risky due to the high share of fixed costs of any company engaged in this method of coal mining. OKD is in a difficult financial situation for many reasons related to coal prices and the current Covid-19 pandemic, and it is currently not possible to responsibly make a longer forecast for the development of coal prices in the coming years or predict further developments in the epidemic situation.”

Moreover, OKD does not have the funds to finance long-term mining, which would require adequate investment. “From a purely economic and safety point of view, it is not possible today to decide on the long-term functioning of the CSM mines, without having a positive outlook for the future in terms of coal prices, economy and security of mining finance,” Stankova concludes.