TALVIVAARAN KAIVOSOSAKEYHTIO OYJ 
By 
HELSINKI/LONDON (Reuters) - Finnish miner Talvivaara
Friday's announcement, which sent Talvivaara shares down 43 percent to a record low, was made after the group failed to raise more cash from investors including Finnish state investment fund Solidium, which decided additional investment was not viable.
The government, long seen as a lifeline for the loss-making company, said it did not want to bear the main responsibility of financing a rescue package.
Talvivaara pioneered the use of bacteria to extract nickel in a process called bio heapleaching, an innovation initially hailed as environmentally friendly and cost-efficient.
Its founder and CEO Pekka Pera bought the rights to the group's Sotkamo mine in 2004 for a nominal one euro from his former employer Outokumpu (>> Outokumpu Oyj), which thought the nickel content at the mine's deposits too small to turn a profit.
Pera bet large-scale bio heapleaching would make it viable. But the company has faced repeated setbacks, from environmental troubles to operational hitches and a drop of more than a fifth in the price of nickel since the start of the year.
Talvivaara said it had sought an additional 40 million euros ($54 million) from a group of shareholders to restructure its debt, and that the shareholders first wanted the company to apply for corporate reorganisation.
It said that reorganisation could fail for various reasons, including a failure to obtain financing and operational or environmental issues.
"If the corporate reorganisation fails for these or any other reasons, Talvivaara would expect to file for bankruptcy proceedings unless other alternatives have materialised by that time," it said.
Talvivaara did not disclose with whom it was in talks, although Belgium's Nyrstar (>> NYRSTAR) said it was considering short-term financial help.
MAJOR EMPLOYER
Solidium said it was not involved in the latest process as the fund was an equity investor rather than a loan provider.
Some investors had believed it would step in to help the mine, a major employer in the rural Kainuu region of northeastern Finland, particularly at a time of a decline in traditional industries such as paper and machinery.
The fund had taken part in Talvivaara's 261 million euro ($351 million) rights issue of new stock in April, an investment that made it the company's top investor with a 17 percent stake.
"Additional equity investment in Talvivaara was not something we see as a viable option," said Solidium's investment director Hanna Masala, adding the fund had discussed options with Talvivvaara over the past few months.
Minister of Economic Affairs Jan Vapaavuori said the government would try to help, but its role was limited.
"These negotiations have been conducted on the principle that financing must be sought on market terms. The state cannot bear the main responsibility," he told reporters.
Many investors had expected the state to help Talvivaara because bankruptcy could saddle it with huge clean-up costs. Vapaavuori said the company should not be relieved of its environmental responsibilities, whatever the outcome of its reorganisation.
Talvivaara, which employs 570 people, said it was shutting its metals recovery plant for about a month and discontinuing ore production for around six months to cut costs.
As a result, it said it now expects nickel production in the second half of the year to be around 4,000 tonnes. It previously forecast output would exceed the 4,508 tonnes produced in the first half.
Talvivaara shares fell 43 percent to 3.51 pounds in London, while those in Helsinki fell by around the same rate to 0.0414 euros.
(Editing by David Holmes and Anthony Barker)
By Ritsuko Ando and Clara Ferreira-Marques
