New World Resources Plc (NWR), the largest coking-coal producer in the Czech Republic, rose to the highest in four months after announcing it will close its unprofitable Paskov mine.
The stock gained as much as 17 percent to 39.70 koruna, the highest since May 16, and closed up 5.9 percent today in Prague. The value of NWR shares has jumped 25 percent in the last four days of trading.
NWR will close Paskov, a coking-coal mine with 3,000 employees located in northeastern Czech Republic, by the end of next year unless the government agrees to provide financial support, in which case it could remain open until 2018, it said last night. NWR posted losses last year as demand for coal from steelmakers fell and the commodity price plunged almost 60 percent in the past two years.
“Operating the Paskov mine is economically unsustainable,” Jan Fabian, the chief executive officer of NWR’s main OKD unit, said yesterday in an interview on state television.
About 3,000 miners marched yesterday in the city of Ostrava to protest wage reductions and job cuts planned by NWR. Shutting down the mine, which produces about 1 million tons of coal a year, would result in a “social catastrophe” for the region, union leader Jaromir Pytlik told CTK news agency.
The mine is located in the district of Karvina, which has the fourth-highest jobless rate among 77 districts in the country, according to data from the Labor Ministry. The unemployment in the district was 12 percent in August.
NWR will offer most Paskov employees work at its three other active mines in the Czech Republic, Fabian said. He didn’t rule out extending mining at Paskov if the state agrees to subsidize operations. NWR will present its demands to the government “in several weeks” and negotiate potential state help, he said.
The interim government is unlikely to make any decision about potential help to save jobs as the country gears up for early elections on Oct. 25-26. The Social Democratic party, which has been leading in opinion polls since Prime Minister Petr Necas’s pro-austerity government collapsed in June, said it will not burden the state budget to save Paskov jobs.
“To demand another 4 to 6 billion koruna from the state to help phase out Paskov is absolutely outrageous,” said Lubomir Zaoralek, the Social Democrats’ deputy chairman. President Milos Zeman called on NWR’s biggest shareholder, billionaire Zdenek Bakala, to say whether he created cash reserves for difficult times, CTK reported, citing an interview with Zeman in Brussels.
The Paskov mine has a yearly loss of about 1.5 billion koruna ($78 million), according to Petr Bartek, an analyst at Erste Group Bank AG in Prague.
“This is NWR’s smallest mine with operating costs double the company’s average,” he said.
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