AHTIUM 
By
Stock Exchange Release
25 August 2010
Talvivaara Mining Company Interim Report for January - June 2010
Second quarter highlights
* Payable nickel and zinc production 2,729 tonnes and 5,575 tonnes,
respectively; new production records set each month
* Net sales EUR 35.2 million, operating profit EUR 2.5 million
* EUR 100 million corporate revolving credit facility signed in June
* Second production line at the metals recovery plant successfully
commissioned in June
* Permit application to extract uranium as a by-product lodged in April;
Environmental Impact Assessment relating to uranium recovery ongoing
Half year highlights
* Payable nickel and zinc production 3,339 tonnes and 8,535 tonnes,
respectively
* Net sales EUR 46.9 million, operating profit EUR 0.2 million
* Zinc streaming agreement with Nyrstar NV for 1.25 million tonnes of zinc in
concentrate completed in February; pre-payment of USD 335 million received
from Nyrstar
* Project Term Loan Facility of USD 320 million fully repaid in February using
the proceeds of the zinc streaming agreement
* All nickel, zinc and foreign exchange risk hedging positions associated with
the Project Term Loan Facility closed in February for net proceeds of EUR
46 million
Production guidance
Nickel output at the Talvivaara mine increased from 610 t in the first quarter
to 2,729 t in the second quarter, demonstrating good progress in the production
ramp-up. An additional ca. 50% increase in quarterly production is anticipated
in the third quarter. With the commissioning of the second hydrogen plant in
October 2010, the fourth quarter production is expected to reach a level that
allows the Company to achieve total nickel production of ca. 15,000 t during the
current year. Talvivaara continues to expect the annualized production rate to
exceed 30,000 t before the year end and the full scale production target of
50,000 t per annum to be achievable in 2012.
Key figures
Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2010 2009 2010 2009 2009
-----------------------------------------------------------------
Net sales 35.2 1.7 46.9 1.8 7.6
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Operating profit (loss) 2.5 (10.1) 0.2 (7.9) (54.8)
-----------------------------------------------------------------
Profit (loss) for the period (16.8) (2.4) (33.7) (11.2) (55.0)
-----------------------------------------------------------------
Earnings per share, EUR (0.06) (0.01) (0.12) (0.04) (0.19)
-----------------------------------------------------------------
Equity-to-assets ratio 38.4% 44.5 % 38.4 % 44.5% 43.5 %
-----------------------------------------------------------------
Net interest-bearing debt 190.7 397.4 190.7 397.4 426.2
-----------------------------------------------------------------
Debt-to-equity ratio 51.6% 108.4% 51.6 % 108.4 % 111.4 %
-----------------------------------------------------------------
Capital expenditure 36.3 28.0 55.3 57.7 118.5
-----------------------------------------------------------------
Cash and cash equivalents
at the end of the period 35.4 24.3 35.4 24.3 11.9
-----------------------------------------------------------------
Number of employees
at the end of the period 382 276 382 276 308
-----------------------------------------------------------------
CEO Pekka Perä:
"I am pleased to report that we set new production records every month during
the second quarter. The positive development in ramp-up also helped us generate
an operating profit both for the second quarter and the half year.
The successful commissioning of the second production line at our metals
recovery plant was a major milestone and a pre-requisite for further increases
in production volumes going forward. I am also happy to note that since its
start-up in June, the new production line has demonstrated a clearly better
early track record than the first line in terms of availability and consistency
of operation.
Our main operational challenge during the period continued to be the mitigation
of hydrogen sulphide odour discharges. At present, the issue is under control in
normal operating conditions, but work continues to improve the gas scrubbing
capacity to also handle occasional fluctuations in hydrogen sulphide discharges
that may result from volume or other variations in the production process.
We regard the outlook for nickel as generally positive with industrial demand
anticipated to improve after the summer season and going into the final quarter
of the year. We anticipate this to support the recent price range, which has
varied from around USD 19,000/t in June to more than USD 22,000/t in August. The
upward trend over the summer appears to have been mainly financial investor
driven with the euro/dollar movements and rather erratic macroeconomic signals
also having played a role.
In the short term we expect to sustain our ramp-up in metal output and are
confident that our cash flow will turn positive before the end of this financial
year."
Webcast and conference call on 25 August 2010 at 12:00 pm UK / 2:00 pm Finland
A combined webcast and conference call on the interim report for January-June
2010 will be held at 12:00 pm UK / 2:00 pm Finland on 25 August 2010. The
webcast can be accessed through the following link:
http://qsb.webcast.fi/t/talvivaara/talvivaara_2010_0825_q2/
Details for the conference call:
Conference id: 873473
Participant - UK: +44 (0)20 7162 0025
Participant - North America Free phone: +1 877 491 0064
Participant - Finland: +358 (0)9 2313 9201
Further details on the event can be found on the Talvivaara website,
www.talvivaara.com. The webcast will also be available for viewing afterwards on
the Talvivaara website and through the above link.
Talvivaara Mining Co Plc Interim 2010 PDF:
https://inpublic.huginonline.com/hugin/files/attachment/136227/R/1439888/384260.
pdf>
Enquiries:
Talvivaara Mining Company Plc. Tel. +358 20 712 9800
Pekka Perä, CEO
Saila Miettinen-Lähde, CFO
Merlin Tel. +44 20 7726 8400
David Simonson
Anca Spiridon
Financial review
Second quarter 2010
Talvivaara's net sales for nickel and cobalt deliveries to Norilsk Nickel and
for zinc deliveries to Nyrstar during the three months ended 30 June 2010
amounted to EUR 35.2 million (Q2 2009: EUR 1.7 million).
The Group's other operating income mainly from fair value gains on biological
assets (trees) amounted to EUR 1.3 million (Q2 2009: EUR 6.3 million). Other
operating expenses amounted to EUR (7.8) million (Q2 2009: EUR (9.4) million)
and included realised losses of EUR (1.1) million on interest rate swaps.
Operating profit for Q2 2010 was EUR 2.5 million (Q2 2009: loss of EUR 10.1
million). The loss for the period amounted to EUR (16.8) million (Q2 2009: EUR
(2.4) million).
Capital expenditure during the quarter totalled EUR 36.3 million (Q2 2009: EUR
28.0 million). The expenditure related primarily to earth works at the secondary
heap foundations, installation of the second production line at the metals
recovery plant, and to the secondary heap stacker and conveyors.
First half 2010
Talvivaara's net sales during the six months ended 30 June 2010 amounted to EUR
46.9 million (Q1-Q2 2009: EUR 1.8 million). 3,024 tonnes of nickel, 8,640 tonnes
of zinc, and approximately 25 tonnes of cobalt were sold during the period.
The Group's other operating income mainly from fair value gains on biological
assets (trees) and realised gains on nickel and zinc forwards amounted to EUR
16.7 million (Q1-Q2 2009: EUR 25.6 million).
Employee benefit expenses including the value of employee expenses related to
the employee share option scheme of 2007 were EUR (9.9) million (Q1-Q2 2009: EUR
(8.1) million). The increase was attributable to the increased number of
personnel.
Other operating expenses amounted to EUR (19.3) million (Q1-Q2 2009: EUR (15.5)
million) and included realised losses of EUR (4.0) million on interest rate
swaps and USD forwards. Operating profit amounted to EUR 0.2 million (Q1-Q2
2009: loss of EUR 7.9 million).
Finance income for the six month period was EUR 4.9 million (Q1-Q2 2009: EUR
7.0 million) and consisted mainly of exchange rate gains of EUR 4.8 million on
bank accounts. Finance costs of EUR (50.3) million (Q1-Q2 2009: EUR (13.8)
million) were caused by exchange rate losses of EUR (41.5) million on the USD
320 million Project Term Loan Facility and on the USD 335 million Nyrstar
advance payment as well as interests of EUR (8.5) million on borrowings.
The Company's loss for the period amounted to EUR (33.7) million (Q1-Q2 2009:
EUR (11.2) million). The total comprehensive income for the first half of 2010
was EUR (39.6) million (Q1-Q2 2009: EUR (58.6) million), including a reduction
in hedge reserves resulting from the occurrence of the hedged sales.
Capital expenditure during the first half of 2010 totalled EUR 55.3 million
(Q1-Q2 2009: EUR 57.7 million). The expenditure related primarily to the
construction of heap foundations, installation of the second production line of
the metals recovery plant, and to the secondary heap stacker and conveyors. On
the consolidated statement of financial position as at 30 June 2010, property,
plant and equipment totalled EUR 663.2 million (31 December 2009: EUR 644.4
million).
During 2008-2009, Talvivaara Infrastructure Oy constructed a new railhead
connecting the mine site with the national railway grid. As of 30 June 2010, the
railway has been classified to assets held for sale. Property, plant and
equipment was reduced by EUR 39.4 million due to the reclassification.
In the Group's assets, inventories amounted to EUR 136.8 million on 30 June
2010 (31 December 2009: EUR 109.5 million). The nickel, zinc and USD forwards
were closed in Q1 2010 and as at 30 June 2010 the derivative financial
instruments consisted of interest rate swaps, which were valued at EUR (2.4)
million (derivative financial assets on 31 December 2009: EUR 33.1 million).
Cash and cash equivalents totalled EUR 35.4 million (31 December 2009: EUR 11.9
million).
In equity and liabilities, the total equity amounted to EUR 369.9 million on 30
June 2010 (31 December 2009: EUR 382.6 million), including approximately EUR 25
million from a perpetual capital loan. A total of 135,000 new shares were
subscribed and paid for during the first half of 2010 under the company's stock
option rights 2007A and the entire subscription price of 0.4 million was
recognized in equity.
Borrowings decreased from EUR 438.1 million on 31 December 2009 to EUR 226.2
million on 30 June 2010, reflecting the repayment of a USD 320 million Project
Term Loan Facility in February 2010. Talvivaara received a total of EUR 292
million in advance payments during the period, comprising USD 335 million for
the Zinc in Concentrate Streaming Agreement with Nyrstar NV, and EUR 20 million
paid by the Finnish State as an advance payment for the redemption of the
Talvivaara-Murtomäki railway. In short-term liabilities, accounts payable
amounted to EUR 31.6 million (31 December 2009: EUR 29.7 million) and other
payables amounted to EUR 39.8 million (31 December 2009: EUR 9.9 million). Other
payables included a factoring debt of EUR 27.5 million relating to nickel and
cobalt sales to Norilsk Nickel.
Total equity and liabilities as at 30 June 2010 amounted to EUR 963.8 million
(31 December 2009: EUR 879.0 million).
Currency and commodity hedges and hedge accounting
In connection with the repayment of the USD 320 million Project Term Loan
Facility in February 2010, the Group closed all of its commodity and foreign
exchange risk hedging positions realising net proceeds of EUR 46.0 million. Cash
flows from operating activities were positive due to the closing of the hedges.
Financing
On 30 June 2010, Talvivaara signed a EUR 100 million three-year revolving
multicurrency credit facility with Nordea Bank, Handelsbanken and Sampo Bank.
The facility has a margin of 300 bps until 31 December 2010 and thereafter a
varying margin of 175-300 bps depending on the Company's leverage ratio. The
facility is intended for general corporate purposes.
In June, Talvivaara also signed a EUR 10 million investment and working capital
facility with Finnvera Plc. with an eight-year maturity and a margin of 4.1%.
In June, the Finnish Government paid the first 50% installment towards the EUR
40 million (0% VAT) reimbursement granted for the Talvivaara-Murtomäki railroad.
The installment was used in its entirety to partially repay the EUR 41.0 million
loan facility drawn down by Talvivaara Infrastructure Oy to finance the
construction of the railroad.
In February 2010, Talvivaara completed a Zinc in Concentrate Streaming Agreement
with Nyrstar NV. For the agreement, Nyrstar paid a USD 335 million advance
payment, the majority of which was used to completely pre-pay the USD 320
million Project Term Loan Facility.
In February 2010, Talvivaara also drew down a EUR 25 million perpetual capital
loan, which is recognized in equity according to IFRS, and a EUR 5 million
convertible loan from Outokumpu Mining Ltd.
Commercial arrangements
In addition to its financing component, Talvivaara's agreement with Nyrstar also
formed a significant commercial arrangement between the parties. The key
commercial terms of the Nyrstar agreement included Talvivaara's obligation to
deliver all of its zinc in concentrate production to Nyrstar until a total of
1,250,000 metric tonnes has been delivered (equivalent to approximately 2
million tonnes of zinc concentrate at a grade of 65%). Based on Talvivaara's
production plans, the deliveries are expected to occur over a period of 10-15
years. Deliveries commenced in March 2010.
In addition to the USD 335 million advance payment, Nyrstar pays Talvivaara an
extraction and processing fee of EUR 350 per tonne of zinc in concentrate
delivered (with escalators in relation to prices of elemental sulphur and
propane). The Parties have also agreed the following price participation:
* until the later of the seventh anniversary of the agreement or delivery of
600,000 tonnes of zinc in concentrate, Nyrstar will pay to Talvivaara 10% of
the LME zinc price exceeding USD 2,500 per tonne (up to USD 3,000 per
tonne), and 30% of the LME zinc price exceeding USD 3,000 per tonne; and
* thereafter, Nyrstar will pay to Talvivaara 30% of the excess of the LME zinc
price above the processing fee of EUR 350 per tonne of zinc in concentrate.
Nyrstar has also agreed to supply to Talvivaara up to 150,000 tonnes of
sulphuric acid per annum for use in Talvivaara's leaching process during the
period of supply of the zinc in concentrate.
Production review
Production ramp-up at the Talvivaara mine made significant progress during the
second quarter despite some continued production restrictions due to the
hydrogen sulphide odour. New production records were set by all departments in
April-June and payable metals production for the period amounted to 2,729 t (Q2
2009: 298 t) of nickel and 5,575 t (Q2 2009: 706 t) of zinc. The corresponding
figures for the half year were 3,339 t (Q1-Q2 2009: 460 t) for nickel and 8,535
t (Q1-Q2 2009: 706 t) for zinc.
The mining department increased its output both for ore and for waste rock
compared to the first quarter as well as all earlier periods. The ore mined in
the second quarter amounted to 3.5 Mt (Q2 2009: 2.4 Mt) and during the half year
to 6.6 Mt (Q1-Q2 2009: 6.3 Mt). The waste mining was primarily targeted at
providing material for levelling the ground for the secondary heap foundations,
while increased ore mining was budgeted as part of the ongoing production
ramp-up.
In materials handling, the amount of crushed and stacked ore in the second
quarter was 3.7 Mt, hence exceeding the previous quarter's output of 3.3 Mt. The
crushing output on a daily level already exceeded the volumes needed for the
targeted full scale production of 22-24 million tonnes per year, but the
availability of the circuit was not yet sufficient to maintain such levels for
extended periods of time. In order to overcome this limitation, two additional
crushers in the tertiary crushing stage were installed in June, with further
increase in crushing volumes expected in the third quarter.
Bioheapleaching progressed in line with expectations with primary heap section
2 providing most of the leach solution treated at the metals recovery plant
during the second quarter. Construction of heap section 3 was completed in early
June and stacking of heap section 4 commenced thereafter. Heap section 1, which
has suffered from back-precipitation of metals, is being turned over by
excavators in order to increase metal grades in solution obtained from this
section. This procedure is improving the solution grades and some solution from
heap section 1 is being used for metals recovery since June. Construction of the
secondary heap foundations continued throughout the second quarter with the
target of commissioning the reclaiming and secondary stacking systems in October
2010, as planned.
A major milestone was achieved in metals recovery with the commissioning of the
second production line in June. With experience gained from operating the first
line, many of the technical issues that had affected the start-up of the first
line had been fixed for the second one, making its commissioning relatively
uneventful.
Metals recovery rates continued to be affected by the hydrogen sulphide odour
that occasionally spreads to nearby communities. Measures were taken to improve
the gas scrubbing capacity, and the situation improved towards the end of the
second quarter to a level that allows normal operation of both production lines.
However, installation of additional gas scrubbing capacity continues during the
third quarter in order to build sufficient buffer into the system such that also
occasional higher discharge levels can be satisfactorily handled.
Operating expenses during the half year were materially in line with the budget.
Production key figures
Production Figures
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Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
2010 2009 2010 2009 2009
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Mining
Blasted ore million tonnes 3.5 2.4 6.6 6.3 10.8
Excavated waste million tonnes 4.1 0.9 6.5 1.8 4.3
Materials handling
Stacked ore million tonnes 3.7 2.1 7.0 4.0 8.5
Bioheapleaching
Ore in primary heap million tonnes 18.0 6.5 18.0 6.5 11.0
Metals recovery
Nickel sulphide production dry metric tonnes 5,266 402 6,485 460 1,525
Nickel metal content tonnes 2,729 198 3,339 224 735
Zinc sulphide production dry metric tonnes 8,616 794 13,542 1,254 5,271
Zinc metal content tonnes 5,575 538 8,535 706 3,133
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Permitting process ongoing for the extraction of uranium as a by-product
In February, Talvivaara announced its intention to initiate the recovery and
exploitation of uranium as a by-product. The Company plans to recover uranium in
the form of a uranium intermediate, yellow cake, from its main leaching process
by using a safe and technically simple solvent extraction process which is
widely applied to metals recovery.
The planned investment in the solvent extraction plant is estimated at
approximately EUR 30 million. Annual production costs are estimated at
approximately EUR 2 million and the annual production volume at approximately
350 tonnes.
On 20 April 2010, Talvivaara Sotkamo Ltd lodged an application in accordance
with the Nuclear Energy Act to the Ministry of Employment and Economy for the
extraction of uranium as a by-product. The Environmental Impact Assessment
relating to the uranium extraction process also commenced at the mine site
during the period.
Talvivaara has initiated discussions with leading companies in the industry
regarding a potential cooperation for the uranium production and sales. The
financing and operating model for operation will be determined based on
agreement with the eventual partner.
Environment, health and safety
Safety among the Talvivaara personnel was good during the second quarter, as no
Lost Time Injuries (LTI's) were suffered. The number of LTI's during the half
year was five. The LTI frequency at the end of June was 17 accidents per million
hours worked year to date and 14 during the last 12 months.
Planning and implementation of the ISO 14001 Environmental Management System
continued during the first half of the year with the target of having the system
audited by the end of 2010.
Talvivaara commenced research work relating to the Global Reporting Initiative,
GRI, as part of its quest to improve its sustainability reporting. The Company
also participated the Carbon Disclosure Project.
Personnel
The number of personnel on 30 June 2010 was 382 (Q2 2009: 276), up by 46 from
336 on 31 March 2010 (Q1 2009: 272) and by 74 from 308 at the end of 2009. The
average number of employees during the first half of 2010 was 344 (Q1-Q2
2009: 268). In addition, Talvivaara employed over 30 trainees during the summer
of 2010.
Wages and salaries paid during the half year totalled EUR 8.4 million (Q1-Q2
2009: EUR 6.9 million).
Eeva Ruokonen, MSc(Mining), Lic.Tech.(Mineral Processing) was appointed Chief
Sustainability Officer and member of the Company's Executive Committee from the
beginning of February 2010.
Annual General Meeting
Talvivaara held its Annual General Meeting on 15 April 2010. The resolutions of
the AGM included:
* that the number of Board members be changed to eight and that Mr. Gordon
Edward Haslam, Mr. D. Graham Titcombe, Ms. Eileen Carr, Mr. Eero Niiva, Ms.
Saila Miettinen-Lähde, and Mr. Pekka Perä be re-appointed as directors of
the Company, and that Mr. Roland Junck and Mr. Tapani Järvinen be appointed
as new directors of the Company;
* that article 5 of the Company's articles of association be amended to
provide for a retirement of all the members of the Board of Directors at
each Annual General Meeting of Shareholders;
* that article 12 of the Company's articles of association be amended so that
the shareholders are convened to the Annual or Extraordinary Shareholders'
Meeting by a notice sent at the earliest three (3) months and at the latest
twenty-one (21) days before the meeting, however, at the minimum nine (9)
days before the record date of the Shareholder's' Meeting. Further, to be
allowed to take part in a Shareholders' Meeting a shareholder must register
with the Company at the latest by the date mentioned in the notice convening
the meeting and which date may not be earlier than ten (10) days before the
Shareholders' Meeting; and
* that the Board of Directors be authorised to decide on repurchasing a
maximum of 10,000,000 of the Company's own shares through public trading,
and to decide on conveying a maximum of 10,000,000 of the Company's own
shares, each in deviation of the pre-emptive rights of shareholders.
Risks and uncertainties
In line with current corporate governance guidelines on risk management,
Talvivaara carries out an ongoing process endorsed by the Board of Directors to
identify risks, measure their impact against certain assumptions and implement
the necessary proactive steps to manage these risks.
Talvivaara's operations are affected by various risks common to the mining
industry, such as risks relating to the development of Talvivaara's mineral
deposits, estimates of reserves and resources, infrastructure risks, and
volatility of commodity prices. There are also risks related to currency
exchange ratios, management and control systems, historical losses and
uncertainties about the future profitability of Talvivaara, dependence on key
personnel, effect of laws, governmental regulations and related costs,
environmental hazards, and risks related to Talvivaara's mining concessions and
permits.
In the short term, Talvivaara's key operational risks relate to the ongoing
ramp-up of operations. While the Company has demonstrated that all of its
production processes work and can be operated on an industrial scale, the rate
of ramp-up is still subject to risk factors, including various technical and
operational risks, that are currently unknown or beyond the Company's control.
The market price of nickel is, together with production volumes, the main
determinant of Talvivaara's revenues. The volatility of nickel price has
historically been high and it is in the Company's view likely that the
volatility will continue also in the future. Talvivaara is, since February
2010, unhedged against variations in metal prices, which means that nickel price
volatility will have a substantial effect on the Company's revenues and result.
Full or substantially full exposure to nickel prices is in line with
Talvivaara's strategy and supported by the Company's view that it can operate
the Talvivaara mine profitably also during the lows of commodity price cycles.
Talvivaara's revenues are determined mostly in US dollars, whilst the majority
of the Company's costs are incurred in Euro. Potential strengthening of the Euro
against the US dollar could thus have a material adverse effect on the business
and financial condition of the Company. Talvivaara is, since January 2010,
unhedged against the currency exchange risk relating to the US dollar. The
Company considers its unhedged position justified for the time being, but it may
hedge against currency exchange volatility at least on a case by case basis
going forward.
Shares and shareholders
The number of shares issued and outstanding and registered on the Euroclear
Shareholder Register as of 30 June 2010 was 245,180,718. Including the effect of
the convertible bond of 14 May 2008 and the Option Scheme of 2007, the
authorised full number of shares of the Company amounted to 263,669,291 at the
end of the period.
A total of 135,000 Talvivaara Mining Company Plc's new shares were subscribed
and paid for during the period between 1 April 2010 and 30 June 2010 under the
Company's stock option rights 2007A. The entire subscription price of EUR
350,212.33 was entered into the invested unrestricted equity reserve and the
share issue reserve and a total of 2,198,100 stock option rights 2007A remain
unexercised.
The share subscription period for stock options 2007A commenced on 1 April 2010
and ends on 31 March 2012.
As at 30 June 2010, the shareholders who held more than 5% of the shares and
votes of Talvivaara were Pekka Perä (23.3 %), Varma Mutual Pension Insurance
Company (8.6%), and BlackRock Investment Management Ltd (6.2%).
Events after the review period
Draw downs from committed loan facilities
On 9 July 2010, Talvivaara drew down the EUR 10 million investment and working
capital facility signed with Finnvera Plc in June.
On 10 August 2010, Talvivaara drew down EUR 30 million of the EUR 100 million
revolving corporate facility signed in June.
Registration of shares subscribed under Talvivaara's stock option rights 2007A
131,000 of the 135,000 total shares subscribed during the period ending 30 June
2010 were entered into the Trade Register on 14 July 2010, as of which date the
new shares have established shareholder rights. As a result of the share
subscriptions, the number of Talvivaara Mining Company Plc shares increased to
245,311,718.
Short-term outlook
Talvivaara anticipates its production ramp-up to continue towards the ca.
15,000 t production target for nickel during the current year. While the newer
heap sections are contributing to metals recovery as expected, it appears likely
that the majority of the back-precipitated metal in the first heap section will
only be recovered in secondary leaching which will gradually start during Q4
2010. Therefore, the contribution of the first heap section to the current
year's metal production will remain relatively small, but is expected to play a
role in the later stages of ramp-up towards the full scale production of ca.
50,000 t of nickel in 2012.
The nickel fundamentals have improved during the early part of 2010 and this
development is expected to continue into the latter part of the year, driven in
part by recovery in the stainless steel markets. The 30% drop in LME nickel
inventories from the peak of 166,000 t in February to around 116,000 t in mid
August also speaks for a normalisation in the supply-demand ratio.
The improving underlying demand is anticipated to support the nickel price in
its recent range of around USD 19,000 - 22,000 per tonne, but a relatively high
degree of volatility driven by financial investors and mixed macroeconomic data
is likely to remain.
Espoo 25 August 2010
Talvivaara Mining Company Plc
Board of Directors
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Unaudited Unaudited Audited
three three six six twelve
(all amounts in EUR months to months to months to months to months to
'000) 30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
----------------------------------------------------------
Net sales 35,248 1,652 46,854 1,778 7,571
Other operating income 1,283 6,296 16,711 25,553 43,118
Changes in inventories
of
finished goods and
work in progress 13,084 17,795 32,159 32,077 75,587
Materials and services (21,439) (13,869) (41,369) (27,504) (65,156)
Personnel expenses (5,004) (4,282) (9,856) (8,065) (17,695)
Depreciation,
amortization,
depletion and
impairment charges (12,786) (8,351) (25,032) (16,219) (37,061)
Other operating
expenses (7,843) (9,369) (19,268) (15,525) (61,140)
----------------------------------------------------------
Operating profit
(loss) 2,543 (10,128) 199 (7,905) (54,776)
Finance income 3,713 14,462 4,864 7,013 11,526
Finance cost (28,988) (7,201) (50,316) (13,797) (31,835)
----------------------------------------------------------
Finance cost (net) (25,275) 7,261 (45,452) (6,784) (20,309)
Loss before income tax (22,732) (2,867) (45,253) (14,689) (75,085)
Income tax expense 5,968 507 11,553 3,491 20,127
----------------------------------------------------------
Profit (loss) for the
period (16,764) (2,360) (33,700) (11,198) (54,958)
Attributable to:
Equity holders of the
Company (15,025) (1,943) (28,886) (9,105) (45,267)
Minority interest (1,739) (417) (4,814) (2,093) (9,691)
----------------------------------------------------------
(16,764) (2,360) (33,700) (11,198) (54,958)
Earnings per share for profit (loss) attributable
to the equity
holders of the Company (expressed in EUR per share)
Basic and diluted (0.06) (0.01) (0.12) (0.04) (0.19)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Unaudited Unaudited Audited
three three six six twelve
months to months to months to months to months to
(all amounts in EUR '000) 30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
--------------------------------------------------
Profit (loss) for the period (16,764) (2,360) (33,700) (11,198) (54,958)
Other comprehensive income,
items net of tax
Cash flow hedges (2,857) (54,573) (5,876) (47,367) (69,705)
--------------------------------------------------
Other comprehensive income,
net of tax (2,857) (54,573) (5,876) (47,367) (69,705)
--------------------------------------------------
Total comprehensive income (19,621) (56,933) (39,576) (58,565) (124,663)
Attributable to:
Equity holders of the Company (17,311) (45,602) (33,587) (46,999) (101,031)
Minority interest (2,310) (11,331) (5,989) (11,566) (23,632)
--------------------------------------------------
(19,621) (56,933) (39,576) (58,565) (124,663)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
(all amounts in EUR '000) 30 Jun 10 31 Dec 09 30 Jun 09
ASSETS
Non-current assets
Property, plant and equipment 663,154 644,356 590,486
Biological assets 8,112 6,614 6,503
Intangible assets 7,734 7,846 7,586
Deferred tax assets 35,199 21,548 -
Derivative financial instruments - - 60,141
Other receivables 7,600 7,582 11,449
721,799 687,946 676,165
Current assets
Inventories 136,824 109,512 66,514
Trade receivables 26,736 3,913 1,823
Other receivables 3,680 15,477 13,978
Derivative financial instruments - 50,244 41,875
Cash and cash equivalent 35,431 11,877 24,259
202,671 191,023 148,449
Assets held for sale 39,372 - -
Total assets 963,842 878,969 824,614
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Share capital 80 80 80
Share issue 340 - -
Share premium 8,086 8,086 8,086
Hedge reserve 11,866 16,567 34,438
Other reserves 439,020 417,448 335,273
Retained earnings (100,254) (71,368) (35,206)
359,138 370,813 342,671
Minority interest in equity 10,777 11,784 23,904
Total equity 369,915 382,597 366,575
Non-current liabilities
Borrowings 196,756 384,301 420,896
Advance payments 259,559 - -
Derivative financial instruments 1,557 3,110 2,801
Deferred tax liabilities - - 2,938
Provisions 2,453 1,594 959
460,325 389,005 427,594
Current liabilities
Borrowings 29,404 53,810 780
Advance payments 32,012 - -
Trade payables 31,580 29,669 20,646
Other payables 39,788 9,875 7,587
Derivative financial instruments 818 14,013 1,432
133,602 107,367 30,445
Total liabilities 593,927 496,372 458,039
Total equity and liabilities 963,842 878,969 824,614
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
A Share capital
B Share issue
C Share premium
D Invested unrestricted equity
E Hedge reserve
F Other reserves
G Retained earnings
H Total
I Minority interest
J Total equity
(all amounts in EUR '000)
A B C D E F G H I J
1 Jan 09
80 - 8,086 320,607 72,332 13,412 (26,101) 388,416 35,470 423,
886
Profit - - - - - - (9,105) (9,105) (2,093) (11,
(loss) 198)
for the
period
Cash flow - - - - (37,894) - - (37,894) (9,473) (47,
hedges 367)
Total - - - - (37 894) - (9,105) (46,999) (11,566) (58,
compre- 565)
hensive
income
for
the
period
Employee
share
option
scheme
- value - - - - - 1,254 - 1,254 - 1,
of 254
employee
services
30 Jun 09 80 - 8,086 320,607 34,438 14,666 (35,206) 342,671 23,904 366,
575
80 - 8,086 401,248 16,567 16,200 (71,368) 370,813 11,784 382,
31 Dec 09 597
1 Jan 10 80 - 8,086 401,248 16,567 16,200 (71,368) 370,813 11,784 382,
597
Profit - - - - - - (28,886) (28,886) (4,814) (33,
(loss) 700)
for the
period
Cash flow - - - - (4,701) - - (4,701) (1,175) (5,
hedges 876)
Total - - - - (4,701) - (28,886) (33,587) (5,989) (39,
compre- 576)
hensive
income
for
the
period
Realized - 340 - 11 - - - 351 - 351
stock
options
Perpetual - - - - - 19,925 - 19,925 4,982 24,
capita 907
loan
Employee
share
option
scheme
- value - - - - - 1,636 - 1,636 - 1,636
of
employee
services
30 Jun 10 80 340 8,086 401,259 11,866 37,761 (100,254) 359,138 10,777 369,
915
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Unaudited Unaudited Audited
three three six six twelve
months to months to months to months to months to
(all amounts in EUR '000) 30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
--------------------------------------------------
Cash flows from operating
activities
Profit (loss) for the period (16,764) (2,360) (33,700) (11,198) (54,958)
Adjustments for
Tax (5,968) (507) (11,553) (3,491) (20,127)
Depreciation and
amortization 12,786 8,351 25,032 16,219 37,061
Other non-cash income and
expenses (2,459) 1,187 (2,320) 2,724 845
Interest income (3,713) (14,462) (4,864) (7,013) (11,526)
Fair value gains on
financial assets at
fair value through profit or
loss (2,987) 10,266 (16,642) (8,190) 27,507
Interest expense 28,988 7,201 50,316 13,797 31,834
--------------------------------------------------
9,883 9,676 6,269 2,848 10,636
Change in working capital
Decrease(+)/increase(-) in
other receivables (14,063) (11,640) (9,744) 6,781 2,055
Decrease (+)/increase (-) in
inventories (12,517) (20,934) (27,312) (34,718) (77,820)
Decrease(-)/increase(+) in
trade and
other payables 39,181 3,926 34,293 (25,855) (16,421)
--------------------------------------------------
Change in working capital 8,201 (28,648) (2,763) (53,792) (92,186)
--------------------------------------------------
18,084 (18,972) (894) (50,944) (81,550)
Interest and other finance
cost paid (8,809) (7,571) (13,210) (11,554) (22,318)
Interest income 3,702 388 50,818 3,378 3,821
Net cash used in operating
activities 17,377 (26,155) 41,114 (59,120) (100,047)
Cash flows from investing
activities
Acquisition of subsidiary, net
of cash acquired - - - - (54)
Purchases of property, plant
and equipment (36,218) (27,985) (55,178) (57,660) (117,738)
Purchases of biological assets (7) - (7) (35) (35)
Purchases of intangible assets (110) (35) (124) (42) (741)
Proceeds from sale of
property,
plant and equipment - - - 9 9
Proceeds from sale of
biological assets 33 - 92 - 273
Proceeds from sale of
intangible assets - 49 - 49 49
Proceeds from government grant
related to tangible assets - 5,000 - 5,000 5,000
Proceeds from government grant
related to intangible assets - - - 13 228
--------------------------------------------------
Net cash used in investing
activities (36,302) (22,971) (55,217) (52,666) (113,009)
Cash flows from financing
activities
Proceeds from share issue net
of transaction costs - - - - 80,641
Realized stock options 351 - 351 - -
Proceeds from interest-bearing
liabilities 1,539 52,988 6,539 53,357 63,924
Proceeds from perpetual
capital loan - - 24,875 - -
Proceeds from other
liabilities 20,000 - 263,419 - -
Payment of interest-bearing
liabilities (23,448) (25) (257,527) (25) (2,345)
--------------------- --------------------
Net cash generated in
financing activities (1,558) 52,963 37,657 53,332 142,220
Net (decrease)/increase in
cash
and bank overdrafts (20,483) 3,837 23,554 (58,454) (70,836)
Cash and bank overdrafts at
beginning of the period 55,914 20,422 11,877 82,713 82,713
--------------------------------------------------
Cash and bank overdrafts at
end of the period 35,431 24,259 35,431 24,259 11,877
NOTES
1. Basis of preparation
This interim report has been prepared in compliance with IAS 34.
The interim financial information set out herein has been prepared on the same
basis and using the same accounting policies as were applied in drawing up the
Group's statutory financial statements for the year ended 31 December 2009,
added with the following changes.
Revenue recognition
When Talvivaara enters into long-term supply contracts with customers and
receives advance payments for product to be delivered in future periods, the
advance payments are recognised in long-term liabilities. A portion of the
advance payments are recognized as short-term liabilities based on the expected
production during the following 12 months. The advance payments are gradually
recognized as revenues over the term of the contracts as shipments are made and
title and risk of loss pass to the customer according to the terms of the
relevant supply agreement.
2. Property, plant and
equipment
Machinery Construction Land Other
and in and tangible
(all amounts in EUR '000) equipment progress buildings assets Total
---------------------------------------------------
Gross carrying amount at 1
Jan 10 209,907 51,671 223,036 202,791 687,405
Additions 28,115 54,841 151 10 83,117
Transfer to assets held for
sale - - - (40,610) (40,610)
Disposals - - (149) - (149)
Transfers 56,161 (86,228) (15,211) 14,856 -
---------------------------------------------------
Gross carrying amount at 30
Jun 10 294,183 20,284 238,249 177,047 729,763
---------------------------------------------------
Accumulated depreciation and
impairment losses at 1 Jan 10 16,949 - 10,230 15,870 43,049
Transfer to assets held for
sale - - - (1,238) (1,238)
Depreciation for the year 10,824 - 5,026 8,948 24,798
--------------------------------------------------------------------------------
Accumulated depreciation and
impairment losses
---------------------------------------------------
at 30 Jun 10 27,773 - 15,256 23,580 66,609
---------------------------------------------------
Carrying amount at 1 Jan 10 192,958 51,671 212,806 186,921 644,356
---------------------------------------------------
Carrying amount at 30 Jun 10 266,410 20,284 222,993 153,467 663,154
3. Trade receivables
30 Jun 10 31 Dec 09
--------------------
Nickel-Cobalt sulphide 25,880 3,096
Zinc sulphide 856 817
--------------------
26,736 3,913
4. Inventories
30 Jun 10 31 Dec 09
--------------------
Raw materials and consumables 5,072 9,919
Ore on leach pads 73,362 57,726
Work in progress 54,841 39,403
Finished products 3,549 2,464
--------------------
Inventories total 136,824 109,512
5. Assets held for sale
During 2008-2009, Talvivaara Infrastructure Oy constructed a new railhead
connecting the mine site with the national railway grid. The Finnish State has
committed to reimburse the construction expenses to Talvivaara Infrastructure Oy
up to an amount of EUR 40.0 million (VAT 0%) in two instalments in 2010-2011,
provided that agreed criteria for minimum transportation volumes on the railroad
have been fulfilled. The first agreed transportation milestone was reached in
May 2010 and subsequently the Finnish State paid the first EUR 20 million
instalment in June 2010. The remaining minimum transportation volumes are
anticipated to be achieved within the next 12 months. The railway has been
classified to assets held for sale from 30 June 2010.
Assets held for sale 30 Jun 10 31 Dec 09
--------------------
Railway 39,372 -
6. Borrowings
(all amounts in EUR '000)
Non-current 30 Jun 10 31 Dec 09
--------------------
Capital loans 1,405 1,405
Investment and Working Capital loan 46,395 45,417
Project Term Loan Facility 1 - 189,505
Senior Unsecured Convertible Bonds 76,804 75,477
Convertible bond 5,070 -
Railway Term Loan Facility - 19,861
Finance lease liabilities 36,312 15,306
Interest Subsidy Loans - 4,187
Other 30,770 33,143
--------------------
196,756 384,301
--------------------
Current
Project Term Loan Facility1 - 32,625
Railway Term Loan Facility 18,444 19,898
Finance lease liabilities 6,770 1,287
Interest Subsidy Loans 4,190 -
--------------------
29,404 53,810
--------------------
--------------------
Total borrowings 226,160 438,111
1) The Project Term Loan has been reclassified to long-term borrowings in
comparative information for 2009, because the decision to repay the Project Term
Loan was made after the financial year ended.
7. Advance payments
(all amounts in EUR '000)
Non-current 30 Jun 10 31 Dec 09
--------------------
Deferred zinc sales revenue 259,559 -
--------------------
259,559 -
--------------------
Current
Deferred zinc sales revenue 12,012 -
Advance payment on railway 20,000 -
--------------------
32,012 -
--------------------
--------------------
Total 291,571 -
During the first quarter of 2010, Talvivaara received an advance payment of USD
335 million from Nyrstar NV relating to a long-term zinc supply agreement
between the companies. During the term of the agreement, Talvivaara is to
deliver 1.25 million tonnes of zinc in concentrate to Nyrstar NV. The
deliveries commenced in March 2010 and by 30 June 2010 Talvivaara had delivered
6,549 tonnes of zinc to Nyrstar. Accordingly, the advance payment had decreased
by approximately USD 1.8 million based on the delivered zinc.
Talvivaara Mining Company Plc
Key financial figures of the
Group
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
--------------------------------------------------
Net sales EUR '000 35,248 1,652 46,854 1,778 7,571
Operating profit
(loss) EUR '000 2,543 (10,128) 199 (7,905) (54,776)
Operating profit
(loss)percentage 7.2 % -613.1 % 0.4 % -444.6 % -723.5 %
Profit (loss) before
tax EUR '000 (22,732) (2,867) (45,253) (14,689) (75,085)
Profit (loss) for the
period EUR '000 (16,764) (2,360) (33,700) (11,198) (54,958)
Return on equity -4.4 % -0.6 % -9.0 % -2.8 % -13.6 %
Equity-to-assets
ratio 38.4% 44.5 % 38.4 % 44.5 % 43.5 %
Net interest-bearing
debt EUR '000 190,729 397,417 190,729 397,417 426,234
Debt-to-equity ratio 51.6% 108.4 % 51.6 % 108.4 % 111.4 %
Capital expenditure EUR '000 36,335 28,020 55,308 57,737 118,514
Research &
development
expenditure EUR '000 63 - 63 - 261
Property, plant and
equipment EUR '000 663,154 590,486 663,154 590,486 644,356
Derivative financial
instruments EUR '000 (2,375) 97,783 (2,375) 97,783 33,121
Borrowings EUR '000 226,160 421,676 226,160 421,676 438,111
Cash and cash
equivalents at the
end of the period EUR '000 35,431 24,259 35,431 24,259 11,877
Share-related key figures
--------------------------------------------------
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
--------------------------------------------------
Earnings
per share EUR (0.06) (0.01) (0.12) (0.04) (0.19)
Equity
per share EUR 1.46 1.54 1.46 1.54 1.51
Development of share
price
at London Stock
Exchange
Average
trading price1 EUR 4.60 3.36 4.48 3.01 3.57
GBP 4.00 2.95 3.90 2.69 3.18
Lowest
trading price1 EUR 3.94 2.26 3.94 1.44 1.45
GBP 3.42 1.99 3.42 1.29 1.29
Highest
trading price1 EUR 5.63 4.69 5.63 4.61 4.68
GBP 4.90 4.12 4.90 4.12 4.17
Trading price at the
end of the period2 EUR 4.47 3.99 4.47 3.99 4.35
GBP 3.65 3.40 3.65 3.40 3.86
Change during
the period -17.8% 56.5% -5.5% 185.7% 224.6%
Market capitalization
at the end of the EUR
period3 '000 1,094,758 889,390 1,094,758 889,390 1,066,454
GBP
'000 894,910 757,849 894,910 757,849 947,118
Development in
trading volume
1000
Trading volume shares 26,722 65,151 65,827 83,504 153,421
In relation to weighted
average number of
shares 10.9% 29.2% 26.8% 37.5% 65.6%
Development of share
price at OMX Helsinki
Average trading price1 EUR 4.71 3.97 4.55 3.97 4.21
Lowest trading price1 EUR 4.04 3.05 3.99 3.05 3.05
Highest trading price1 EUR 5.62 4.85 5.62 4.85 4.86
Trading price at the
end
of the period2 EUR 4.45 4.05 4.45 4.05 4.33
Change during the
period -10.4% 29.4% 2.8% 29.4% 38.3%
Market capitalization
at EUR
the end of the period3 '000 1,091,545 902,732 1,091,545 902,732 1,061,615
Development in trading
volume
1000
Trading volume shares 36,300 41,398 76,392 41,398 113,077
In relation to weighted
average number of
shares 14.8% 18.6% 31.2% 18.6% 48.4%
Adjusted average 245,177, 222,896, 245,177, 222,896, 233,762,
number of shares 646 718 646 718 033
Number of shares at 245,180, 222,896, 245,180, 222,896, 245,176,
the end of the period 718 718 718 718 718
1) Trading price is calculated on the average of EUR/GBP exchange rates
published by the European Central Bank during the period
2) Trading price is calculated on the EUR/GBP exchange rate published by the
European Central Bank at the end of the period
3) Market capitalization is calculated on the EUR/GBP exchange rate published by
the European Central Bank at the end of the period
1) Trading price is calculated on the average of EUR/GBP exchange rates
published by the European Central Bank during the period
2) Trading price is calculated on the EUR/GBP exchange rate published by the
European Central Bank at the end of the period
3) Market capitalization is calculated on the EUR/GBP exchange rate published by
the European Central Bank at the end of the period
Employee-related key figures
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
-----------------------------------------------------------
Wages and salaries EUR '000 4,145 3,581 8,381 6,850 14,876
Average number of
employees 365 272 344 268 272
Number of employees
at the end of the
period 382 276 382 276 308
Other figures
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 31 Dec 09
--------------------------------------------------
Share options outstanding
at the end of the period 5,333,100 4,442,500 5,333,100 4,442,500 5,352,500
Number of shares to be issued
against the outstanding share
options 5,333,100 4,442,500 5,333,100 4,442,500 5,352,500
Rights to vote of shares to be
issued against the outstanding
share options 2.1 % 2.0 % 2.1 % 2.0 % 2.1 %
Talvivaara Mining Company Plc
Key financial figures of the Group
Return on equity Profit (loss) for the period /
----------------------------------------------
(Total equity at the beginning of period +
Total equity at the end of period)/2
Equity-to-assets ratio Total equity/
----------------------------------------------
Total assets
Interest-bearing debt - Cash and cash
Net interest-bearing debt equivalent
Debt-to-equity ratio Net interest-bearing debt
----------------------------------------------
Total equity
Share-related key figures
Profit (loss) attributable to equity holders
Earnings per share of the Company/
----------------------------------------------
Adjusted average number of shares
Equity attributable to equity holders of the
Equity per share Company/
----------------------------------------------
Adjusted average number of shares
Market capitalization at the Number of shares at the end of the period *
end of the period trading price at the end of the period
[HUG#1439888]
Talvivaara Mining Co Plc Interim 2010:
http://hugin.info/136227/R/1439888/384260.pdf
This announcement is distributed by Thomson Reuters on behalf of
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
All reproduction for further distribution is prohibited.
Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
Talvivaara Mining : Company Plc Interim Report for January - June 2010
August 25, 2010 at 02:05 am EDT
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