The closure of the Grande Cache Coal mine is devastating news for the community, the town's mayor says.

"It's horrible news for us; we're shocked," Herb Castle said on Tuesday. "We had hoped that this wouldn't happen, but here it is again."

About 220 employees will receive termination notices this week.

In a letter to employees, Max Wang, Grande Cache Coal president and CEO, cited the need to reduce spending in light of "uncertainties of the continuously deteriorating global coal market."

The mine will end production on Dec. 24, Wang said.

The letter says employees who stay until the end will be paid two extra days of pay "to account for the statutory holidays of Christmas Day and Boxing Day."

Wang acknowledged the impact on employees.

"Regrettably, the operation suspension means job interruption for our hourly employees and many of our staff.

"We sincerely apologize for the difficulties this will cause you and your family."

A 30-member technical team will stay on to develop mining plans, and prepare applications for new mining permits and licences, Wang said.

'Hope to see you back'

"Simply speaking, we will prepare GCC for bigger future operations when the market returns, and hope to see you back then."

The union representing the miners, United Mine Workers of America Local 2009, said on its Facebook page the company is not obligated to pay out severance, but retains the right of recall.

"In compliance with our contract, employees will be given three months of recall rights per year of service up to a maximum of 24 months of recall," the message said.

"There's quite a bit of angst here," said local president Gary Taje. "Who wants to lose their job on Christmas Eve? At least they were given two months' notice so people can plan their Christmas accordingly."

Castle hopes the indefinite closure is not permanent.

"They have closed the mine down previously for short periods of time, so we don't know what the real outcome here is going to be."

Grande Cache Coal laid off 175 workers in February when it suspended surface-mining operations.

The closure will mean there'll be no mining in Grand Cache for a minimum of six months and possibly up to two years, Taje said.

That's how long it will take for the company to start up two projected underground mines and to expand the old strip mine, he said.

"The existing underground mine has been nearing the end of its life," Taje said. "The proposed mine ... experienced problems in getting a safe-work procedure put in place to deal with the hazard of falling rocks from high walls."

MLA Eric Rosendahl said the mine is a major employer in town.

"It's a really sad state of affairs for Grand Cache," he said. "We knew the mine wasn't doing well, but they were hanging in there. The whole operation was a total shock when I got news yesterday morning."

The company mines metallurgical coal used to make steel, most of which is exported to Asia.

Grande Cache, 435 kilometres west of Edmonton, has a population of about 4,500.