Sweden plans to uproot town for mine
UNDAUNTED by falling commodity prices, a Swedish company will start dismantling and moving the historic Arctic town of Kiruna this month to make way for the expansion of Europe’s biggest iron ore mine.
The northernmost town in Sweden, famed for its ice hotel and a red wooden church that was voted the country’s most beautiful building, is inhibiting the expansion of state-owned LKAB’s mine.
Moving the town just 3km away at an estimated cost of over $2 billion (R23.6bn) comes despite an iron ore price that has slumped by around two thirds in the past two years.
But LKAB’s plan, conceived in 2004, has at least two factors in its favour: it has the support of Kiruna’s 18 000 inhabitants and the ore from its mine is among the best in the world.
“We have to move past the grief because we’ve made a decision and 96 percent of the people supported it,” Kiruna deputy mayor Niklas Siren said. “The town and the mine live in symbiosis: there is no town without the mine and no mine without the town.”
LKAB is well placed to survive the price downturn, analysts say. Besides the premium category pellets it produces, it has no debt and has a patient owner in the Swedish government. It has also operated for 125 years, instilling a culture of long-term thinking.
Cyclical business
“This is not a fun time to be in the business,” LKAB chief executive Lars-Eric Aaro acknowledged, but added: “This is a cyclical business and you know, after the rain, the sun will shine again.”
Most of the town’s 1 100 buildings, apart from a few structures including the church, will be demolished and rebuilt in the new town.
“The church will be taken apart, piece by piece, then rebuilt in exactly the same way 3km to the east,” vicar Lars Jarlemyr said.
“A town is not just buildings but also people. So when you tear it down, you do the same with a community. People move, get new neighbours, new everything and because everything will be new, it will also be more expensive.”
LKAB will pay owners 125 percent of their property’s value or provide a new home.
“Cities have been moved before, even bigger ones, but not in a democratic way,” Mikael Stenqvist, the lead architect at White, the firm in charge of the redesign said.
Bulldozers will this month start tearing down the neigh- bourhood closest to the mine, where tremors from underground blasts can be felt in the early morning.
As waste rock fills the cavities left by extracted ore after each blast, the ground shifts, causing land deformities that inch ever closer to the town as mining extends under Kiruna.
Operating the deepest underground iron ore mine that includes 400km of roads inside the mountain, LKAB also has some of the industry’s highest costs as it lifts ore from over 1km below the surface.
High costs
Consuming almost 2 percent of Sweden’s power with 70 ton ore elevators that move at 60km an hour, underground rail lines and electric trucks, LKAB also has to pay Swedish wages, among the highest in the world, and could end up paying $2bn for moving Kiruna.
But the high costs made LKAB, which produces 90 percent of European iron ore, one of the most disciplined producers. It used profits from the boom years to pay for an expansion of production to 37 million tons a year by next year from 26 million tons in 2014, and has already set aside $1.5bn in cash for moving Kiruna.
Its ore has 70 percent concentration and it processes the rock into pellets, a premium product preferred by blast furnace operators, which pay $30-$40 per ton above ore prices.
The new Kiruna will be compact, keeping less mineral rich land occupied and hopefully avoiding another move in a 100 years. – Reuters