Any city would be a bad place for a rocket (test) launch facility, 'collapsing' due to mining or not.

Luckily the city is some 44 km drive away from the launch site.

And there's still people living in Kiruna, it's not collapsing but affected still in some shape of form. Heard on some podcast that mining blasts are timed to reduce the disturbance and some buildings (or their inhabitants probably) relocated, IIRC.