STOCK EXCHANGE RELEASE 28 April 2011 Talvivaara Mining Company Interim Report for January-March 2011 New production record despite technical challenges at the metals recovery plant Highlights of the first quarter of 2011 · Nickel production 4,215t, up 10% from Q4 2010 and a new quarterly record · Net sales EUR 66.5m and operating profit EUR 11.6m * Uranium off-take agreement signed with Cameco Corporation in February Production guidance for 2011 * Production guidance for 2011 revised to 22,000-28,000t of nickel on 7 April 2011 * Zinc production expected to amount to 44,000-50,000t * Modification and maintenance programmes at the metals recovery plant commenced in order to improve plant availability and to remove bottlenecks Key figures ---------------------------------------------------+-----+------+-------+------ EUR million | Q1| Q4| Q1| FY | 2011| 2010| 2010| 2010 ---------------------------------------------------+-----+------+-------+------ Net sales | 66.5| 60.2| 11.6| 152.2 ---------------------------------------------------+-----+------+-------+------ Operating profit (loss) | 11.6| 14.3| (2.3)| 25.5 ---------------------------------------------------+-----+------+-------+------ % of net sales |17.5%| 23.8%|(20.2%)| 16.7% ---------------------------------------------------+-----+------+-------+------ Profit (loss) for the period | 12.8| (4.7)| (16.9)|(13.1) ---------------------------------------------------+-----+------+-------+------ Earnings per share, EUR | 0.03|(0.02)| (0.06)|(0.06) ---------------------------------------------------+-----+------+-------+------ Equity-to-assets ratio |33.0%| 31.3%| 42.8%| 31.3% ---------------------------------------------------+-----+------+-------+------ Net interest bearing debt |325.8| 315.0| 176.3| 315.0 ---------------------------------------------------+-----+------+-------+------ Debt-to-equity ratio |81.6%| 82.8%| 45.4%| 82.8% ---------------------------------------------------+-----+------+-------+------ Capital expenditure | 10.4| 23.5| 19.0| 115.7 ---------------------------------------------------+-----+------+-------+------ Cash and cash equivalents at the end of the period|144.7| 165.6| 55.9| 165.6 ---------------------------------------------------+-----+------+-------+------ Number of employees at the end of the period | 413| 389| 336| 389 ---------------------------------------------------+-----+------+-------+------ All reported figures in this release are unaudited. CEO Pekka Perä comments: "I am pleased to report yet another record quarterly nickel production, especially as it was achieved despite a series of technical issues resulting in low availability of the metals recovery plant. Going forward, we aim to secure successful continuation of our ramp-up through an upgrade and maintenance programme at the plant, which has now commenced and should boost production capacity and improve resilience during difficult weather conditions. We also posted record revenues in the first quarter, helped in part by the increased product deliveries, but also by nickel prices that held up strong at around USD 24,000-28,000 per tonne throughout the period." Enquiries: Talvivaara Mining Company Plc Tel. +358 20 712 9800 Pekka Perä, CEO Saila Miettinen-Lähde, CFO Merlin PR Tel. +44 20 726 8400 David Simonson Anca Spiridon Webcast and conference call on 28 April 2011 at 11:00 GMT/13:00 EET A combined webcast and conference call on the Q1 2011 result will be held on 28 April 2011 at 11:00 GMT/13:00 EET. The call will be held in English. The webcast can be accessed through the following link: http://qsb.webcast.fi/t/talvivaara/talvivaara_2011_0428_Q1/ A conference call facility will be available for a Q&A with senior management following the presentation. Finland: +358 (0)9 2313 9201 UK: +44 (0)20 7131 2799 US: +1 334 323 6201 Conference id: 891445 The webcast will also be available for viewing on the Talvivaara website from shortly after the event until the end of December 2011. Financial review Financial result Talvivaara's net sales for nickel and cobalt deliveries to Norilsk Nickel and for zinc deliveries to Nyrstar during the three months ended 31 March 2011 increased by 10% from the previous quarter and totalled EUR 66.5 million (Q1 2010: EUR 11.6 million). The product deliveries amounted to 3,846 tonnes of nickel, 76 tonnes of cobalt and 8,736 tonnes of zinc. The Group's other operating income of EUR 0.3 million (Q1 2010: EUR 15.4 million) consisted mainly of fair value gains on interest rate and currency exchange derivatives. Materials and services amounted to EUR (36.3) million (Q1 2010: EUR (19.9) million). The costs increased by 18% from EUR (30.7) million in the previous quarter, reflecting the growth in production volumes and related use of production chemicals, particularly propane. Use of maintenance services and spare parts was also higher during the period, and the price of many high volume process chemicals such as propane and caustic soda increased compared to Q4 2010. Personnel expenses including the value of employee expenses related to the employee share option scheme of 2007 were EUR (6.8) million (Q1 2010: EUR (4.9) million). The increase was attributable to the increased number of personnel. Other operating expenses amounted to EUR (13.7) million (Q1 2010: EUR (11.4) million) and remained at the same level as in the previous quarter. The other operating expenses were mainly due to accruals in maintenance costs, higher cost and consumption of electricity during the colder winter season, and freight. The operating profit for Q1 2011 was EUR 11.6 million (Q1 2010: loss of EUR (2.3) million). The operating margin of 17.5% decreased from that reported for the fourth quarter partly due to technical issues and related maintenance expenses in materials handling and in metals recovery. The operating margin was also negatively affected by the fact that some March production was delivered just after the end of the reporting period and hence not included in the first quarter revenues. Finance income amounted to EUR 15.7 million (Q1 2010: EUR (1.2) million). It consisted primarily of non-cash exchange rate gains of approximately EUR 14.6 million on the USD 335 million Nyrstar advance payment. Finance cost amounted to EUR (9.4) million (Q1 2010: EUR (21.3) million). It consisted primarily of interests on borrowings of approximately EUR (8.1) million. Profit for the period amounted to EUR 12.8 million (Q1 2010: loss of EUR (16.9) million). The total comprehensive income for the first quarter of 2011 was EUR 10.2 million (Q1 2010: EUR (20.0) million), including a reduction in hedge reserves resulting from the occurrence of the hedged sales. Balance sheet Capital expenditure during the first quarter totalled EUR 10.4 million (Q1 2010: EUR 19.0 million). The expenditure related primarily to dust removal systems for crushing and screening, the secondary heap stacker and the secondary heap foundations. On the consolidated statement of financial position as at 31 March 2011, property, plant and equipment totalled EUR 727.5 million (31 December 2010: EUR 728.2 million). In the Group's assets, inventories amounted to EUR 190.9 million on 31 March 2011 (31 December 2010: EUR 175.4 million). The increase in inventories reflected the ramp-up of production and the consequent increase in the amount of ore stacked on heaps, valued at cost. Trade receivables amounted to EUR 61.3 million on 31 March 2011 (31 December 2010: EUR 52.4 million). The increase in trade receivables reflected the ramp-up of production and increase in nickel price compared to the previous quarter. On 31 March 2011, cash and cash equivalents totalled EUR 144.7 million (31 December 2010: EUR 165.6 million). In equity and liabilities, the total equity amounted to EUR 399.2 million on 31 March 2011 (31 December 2010: EUR 380.3 million), including approximately EUR 25 million from a perpetual capital loan. An equity component of EUR 9.0 million for the senior unsecured convertible bonds issued in December 2010 and due 2015 was recognised in equity during the first quarter. At year-end 2010, the equity component was not recognised, as the shareholder resolution allowing the conversion of the bonds had not yet been obtained. A total of 13,000 new shares were subscribed and paid for during the first quarter of 2011 under the company's stock option rights 2007A and the entire subscription price was recognised in equity. Borrowings decreased from EUR 480.6 million on 31 December 2010 to EUR 470.5 million at the end of March 2011. The changes in borrowings during the period included determination of the equity component for senior unsecured convertible bonds due 2015 after an Extraordinary General Meeting of Talvivaara resolved to approve the issue of special rights in January 2011. Total advance payments as at 31 March 2011 amounted to EUR 257.7 million (31 December 2010: EUR 267.1 million). The changes in advance payments during the period included non-cash exchange rate gains of approximately EUR 14.6 million for the Nyrstar advance payment. In addition, Talvivaara received EUR 7.0 million in advance payments during the first quarter based on a uranium off-take agreement with Cameco Corporation. Total equity and liabilities as at 31 March 2011 amounted to EUR 1,208.0 million (31 December 2010: EUR 1,216.3 million). Financing In January, a Talvivaara Extraordinary General Meeting resolved to approve the proposal of the Board of Directors for the issue of special rights in relation to EUR 225 million senior unsecured convertible bonds which were issued in December 2010 and are due 2015. The bonds are convertible into 27.0 million fully paid ordinary shares of the Company. The interest rate applied to the convertible bond is 4.00% and the yield to maturity 6.50%, reflecting a redemption price of 114.5% at maturity. Uranium off-take agreement with Cameco In February, Talvivaara signed a uranium off-take agreement with Cameco Corporation. Under the terms of the agreement, Cameco will provide an up-front investment, up to a maximum of USD 60 million, to cover the construction cost of the uranium extraction circuit. Cameco's capital contribution will be repaid through deliveries of uranium concentrate in the initial years of the agreement. Once the capital is repaid, Cameco will purchase the uranium concentrate produced at Sotkamo through a supply agreement that will be in effect until 31 December 2027. Cameco will provide Talvivaara with payment for the uranium based on a formula that references market prices at the time of delivery. Annual uranium production is estimated at 350tU (ca. 770,000 pounds), corresponding to approximately 410t (900,000 pounds) of yellow cake (UO(4)). Cameco provides technical assistance to Talvivaara in the design, construction, commissioning and operation of the uranium extraction circuit to be constructed at the Sotkamo mine. Subject to receiving the necessary permits and authorizations, Talvivaara plans to start construction in the coming months and complete it in 2012. The agreements between Talvivaara and Cameco are subject to ratification by the Euratom Supply Agency and the approval of the European Commission pursuant to the Euratom Treaty. These approvals are expected within the next few months. In April 2010, Talvivaara applied to the Ministry of Employment and Economy for a permit to extract uranium as a by-product, in accordance with the Nuclear Energy Act. Talvivaara expects this permit in late 2011. Production review Continuation of production ramp-up at the Sotkamo mine was again confirmed by a new quarterly production record for nickel amounting to 4,215t (Q1 2010:610t) and representing an increase of 10% from previous quarter production. The zinc output of 6,363t (Q1 2010: 2,960t) was however lower than in Q4 2010 due to nickel contamination caused by a defective valve at the metals recovery plant. As a result, non-saleable product containing more than 3,000t of zinc had to be recycled back to bioheapleaching. The defective valve was fixed after the incident and the problem is not expected to be a recurrent one. The mining department produced 2.2Mt of ore (Q1 2010: 3.0Mt) and 5.2Mt of waste (Q1 2010: 2.4Mt). The emphasis was again on waste mining to provide material for levelling the ground for the secondary heap foundations. Ore mining had to be restricted due to bottle-necks in materials handling. In materials handling, the amount of crushed and stacked ore in the first quarter was 2.2Mt (Q1 2010: 3.3Mt). Production output was negatively affected by continued commissioning issues with the primary heap reclaiming system. Firstly, excavation capacity was insufficient due to a contractor change and delays in getting the planned capacity excavators in place. Secondly, the purpose-built reclaiming equipment was not yet operational at full speed and optimization of the system continued throughout the period. Whilst materials handling failed to reach the budgeted production levels in the first quarter, it should be noted that at the end of the period there was already more than 50,000t of nickel in stacked ore under leaching. Materials handling was thus not a critical issue in view of the current year's metals production targets. Bioheapleaching progressed according to expectations during the first quarter. The average nickel grades in solution pumped to metals recovery continued to increase and averaged 2.3 g/l in March. The main sources of leach solution were heap sections 3 and 4, from which around 30% of the circulating solution was continuously pumped to the metals plant. As this depletion rate is well above the long term planned rate of 10-15%, the sustained increase in metal grades in solution was especially encouraging and indicated good leaching in the newer heap sections. Leaching in the secondary heap continued well, but solution quantities were not sufficient for metals recovery due to the start-up problems faced in primary heap reclaiming. In metals recovery, the first quarter ended in a promising fashion with a period of ten days at an average annualised production rate of over 32,000t of nickel. However, for most of the period the plant availability was lower than expected, primarily because of blockages in pipelines due to disruptions in materials flows or freezing, and insufficient hydrogen sulphide capacity stemming from dust contamination in the hydrogen sulphide generators. In addition, production capacity was at times restricted because of insufficient sulphur melting capacity. Whilst none of the experienced difficulties were fundamental or long-term in nature, they led to the conclusion, as announced soon after the quarter end on 7 April 2011 (see section Events after the review period), that certain upgrades and modifications at the plant were necessary in order to sustain the achieved throughput rates and to ramp up production further. The maintenance and upgrading works were largely planned during the quarter and involve increasing of sulphur melting and certain pumping capacities, cleaning and upgrading of hydrogen sulphide generators, inspection and maintenance of reactors and thickeners, and numerous small modification items, e.g. doubling up of selected process pipelines, that help improve production reliability and sustainable capacity. Production key figures --------------------------+------+-----+-----+-----+------ | | Q1| Q4| Q1| FY | | 2011| 2010| 2010| 2010 --------------------------+------+-----+-----+-----+------ Mining | | | | | --------------------------+------+-----+-----+-----+------ Ore production |Mt | 2.2| 3.3| 3.0| 13.3 --------------------------+------+-----+-----+-----+------ Waste production |Mt | 5.2| 4.3| 2.4| 16.7 --------------------------+------+-----+-----+-----+------ Materials handling | | | | | --------------------------+------+-----+-----+-----+------ Stacked ore |Mt | 2.2| 2.9| 3.3| 13.3 --------------------------+------+-----+-----+-----+------ Bioheapleaching | | | | | --------------------------+------+-----+-----+-----+------ Ore under leaching |Mt | 26.5| 24.3| 14.3| 24.3 --------------------------+------+-----+-----+-----+------ Metals recovery | | | | | --------------------------+------+-----+-----+-----+------ Nickel metal content|Tonnes|4,215|3,831| 610|10,382 --------------------------+------+-----+-----+-----+------ Zinc metal content |Tonnes|6,363|9,369|2,960|25,462 --------------------------+------+-----+-----+-----+------ Fulfilment of minimum transportation requirement on Talvivaara-Murtomäki railroad In 2008-2009, Talvivaara constructed a 25 km railway connecting the Talvivaara mine with the national railway grid. Subject to agreed minimum transportation volumes on the railroad being achieved, the Finnish State agreed to reimburse the construction expenses to Talvivaara Infrastructure Oy up to an amount of EUR 40 million (0% VAT) in two instalments and to redeem the railroad as part of the national rail grid. The first agreed transportation milestone was reached in 2010 and the Finnish State subsequently paid EUR 20 million as a partial reimbursement. The remaining minimum transportation volumes were reached in January 2011 and Talvivaara expects the final redemption to take place during the first half of 2011. Production expansion - Operation Overlord Conceptual studies relating to production expansion beyond 50,000tpa of nickel continued. A dedicated project team was established and strengthened to seven members with metallurgical, infrastructure, bioheapleaching and materials handling expertise. Recruiting to the project team continues targeting added expertise on project coordination, environmental and water management issues, and automation. As permitting is one of the most critical parts of the project in view of the overall timetable, particular emphasis was put on getting the necessary permitting processes started as soon as possible. As a result, baseline studies of the environment were already commenced at the end of the first quarter and preparations were made for the Environmental Impact Assessment (EIA) to start during the second half of 2011. The EIA will cover certain parallel process options, as the final production processes and end products have not yet been chosen. Following the EIA, Talvivaara expects to submit the environmental permit application for the expansion in 2012. Scoping studies are currently based on the target of doubling up the presently planned production to approximately 100,000tpa of nickel. Whilst studies relating to various processing options continue, it appears relatively likely that a substantial part of the expanded production would be LME quality nickel metal. Production of cobalt metal is also an option, but refining of zinc to zinc metal is currently not within the planning scope. For certain products and raw materials, e.g. manganese and sulphuric acid, joint ventures or other partnering arrangements will be investigated. Investment into the expansion project is planned to be carried out in a modular fashion to allow stretching of the expenditure over an estimated 5-6 year period starting in 2013. The modular approach also allows commissioning of the equipment and processes sequentially in the order of the process stages, which is expected to reduce the risk of serious start-up issues. For the project to proceed to expanded production from 2016, the first investment decisions would need to be made in 2012. The first critical items to be ordered include a primary crusher, to be located at the Kolmisoppi pit, and additional fine crushers. The new crushing circuit could be targeted for commissioning in late 2014, along with mining from the Kolmisoppi deposit. Earth works on additional heap foundations, initially within the scope of the current environmental permit, are estimated to commence in 2013. If the expansion project is realized to its full planned extent, it is estimated that the Talvivaara mine will directly provide work for 1,100-1,200 employees. Indirectly, around 2,000 new jobs are anticipated to be created. The project phase is estimated at approximately 6,000 man years. Sustainable development and permitting The main achievements of the first quarter included the completion of the Environmental Impact Assessment relating to the extraction of uranium as a by- product. A statement to this effect was obtained from the local environmental authority declaring the EIA sufficient. The environmental permit application for uranium extraction was submitted to the regional environmental permitting agency in March. Application for the renewal of the existing environmental permit was also submitted in March. At the end of the quarter, the injury frequency among the Talvivaara personnel was 13.7 lost time injuries/million working hours on a rolling 12 month basis (31 December 2010: 10.7 lost time injuries/million working hours). In line with its sustainable development policies, Talvivaara continued its efforts aimed at reducing the environmental effects of its operations. Concrete measures included, among others, the installation of additional dust removal systems in crushing and screening, and further work aimed at removing any odour discharges from the metals recovery plant. Risk management and principal risks 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 counter parties, 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 may currently be unknown or are beyond the Company's control. In order to better mitigate operational risks going forward, Talvivaara has in place an ongoing production reliability programme, which targets at reducing downtime and risk of accidents through detailed evaluation of all equipment and processes and subsequent improvement of operating procedures and maintenance. The Company has also commenced additional maintenance and upgrading programmes at the metals recovery plant in order to improve plant availability and capacity in the future. 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 to persist also in the future. Talvivaara is unhedged against variations in nickel 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 hedges its exposure to the currency exchange risk relating to the US dollar on a case by case basis with the aim of limiting the adverse effects of US dollar weakness as considered justified from time to time. Personnel The number of personnel on 31 March 2011 was 413 (Q1 2010: 336), up by 24 from the end of 2010. Wages and salaries paid during the first three months of the year totalled EUR 5.9 million (Q1 2010: EUR 4.2 million). Shares and shareholders The number of shares issued and outstanding and registered on the Euroclear Shareholder Register as of 31 March 2011 was 245,364,096. Including the effect of the EUR 85 million convertible bond of 14 May 2008, the EUR 225 million convertible bond of 16 December 2010 and the Option Scheme of 2007, the authorised full number of shares of the Company amounted to 290,636,391. The share subscription period for stock options 2007A is between 1 April 2010 and 31 March 2012. By 31 March 2011 a total of 187,378 Talvivaara Mining Company Plc's new shares were subscribed for under the stock option rights 2007A and a total of 2,145,722 stock option rights 2007A remain unexercised. As at 31 March 2011, the shareholders who held more than 5% of the shares and votes of Talvivaara were Pekka Perä (23.06 %), Varma Mutual Pension Insurance Company (8.60%), and BlackRock Investment Management Ltd (5.80%). Events after the review period Revision of production guidance for 2011 Talvivaara revised its production target for the current year to 22,000-28,000t of nickel on 7 April 2011. Zinc production is anticipated to amount to 44,000-50,000t. The Company decided to lower its production target due to unsatisfactory availability of the metals recovery plant in the first quarter and certain capacity limiting bottle-necks identified at the plant. In order to improve production reliability and to remove the bottle-necks, Talvivaara decided to bring the annual maintenance break forward to April-May 2011 and to extend this scheduled break to allow for all of the identified issues to be addressed and for the plant to be thoroughly inspected as part of the Company's preventive maintenance plan. The Company anticipates scheduling a second maintenance stoppage for September or October in order to install long lead-time equipment which is not available during the first stoppage, and to further enhance parts of process equipment in order to avoid potential problems caused by exceptional winter conditions. The total duration of the maintenance and upgrading stoppages is estimated at approximately three weeks. The impact on production output of the programmes depends on the timing and eventual length of the production stoppages and the resulting improvement in production reliability and capacity. Delays in reclaiming the primary heap may also have an impact on production due to corresponding delays in obtaining leach solution from the secondary heap to metals recovery. The maintenance and modification works are not anticipated to require any major equipment additions or replacements; hence the programmes are not expected to materially affect the Company's capital expenditure during the year. Short-term outlook Talvivaara expects production at the Sotkamo mine to continue ramping up in line with the revised target and the production reliability to improve as a result of the ongoing maintenance and upgrading programmes. The maintenance and upgrading stoppage of April-May is likely have an impact on the second quarter production such that the growth in production volumes will be more pronounced in the third and fourth quarters. The near term market outlook for nickel is relatively positive with demand continuing strong especially from China. Overall, the market has been in a deficit in the early part of 2011 on the back of strong stainless steel production growth, but the supply-demand balance may be moving into surplus towards the end of the year with increasing production projected especially in ferronickel. This may drive nickel prices lower in the coming months from their recent level of USD 25,000-28,000 per tonne. However, the price is not expected to suffer a dramatic decrease but rather to potentially settle slightly lower during the summer months. The EUR/USD exchange rate may also have an effect on nickel price with sustained USD weakness likely to support commodity prices. April 28, 2011 Talvivaara Mining Company Plc Board of Directors CONSOLIDATED INCOME STATEMENT Unaudited Unaudited three three months to months to (all amounts in EUR '000) 31 Mar 2011 31 Mar 2010 -------------------------------- Net sales 66,467 11,606 Other operating income 336 15,428 Changes in inventories of finished goods and work in progress 12,781 19,075 Materials and services (36,310) (19,930) Personnel expenses (6,795) (4,852) Depreciation, amortization, depletion and impairment charges (11,198) (12,246) Other operating expenses (13,664) (11,425) -------------------------------- Operating profit (loss) 11,617 (2,344) Finance income 15,733 1,151 Finance cost (9,387) (21,328) -------------------------------- Finance income (cost) (net) 6,346 (20,177) Profit (loss) before income tax 17,963 (22,521) Income tax expense (5,179) 5,585 -------------------------------- Profit (loss) for the period 12,784 (16,936) Attributable to: Owners of the parent 8,839 (13,861) Non-controlling interest 3,945 (3,075) -------------------------------- 12,784 (16,936) Earnings per share for profit (loss) attributable to the owners of the parent expressed in EUR per share) Basic and diluted 0.03 (0.06) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited Unaudited three three months to months to (all amounts in EUR '000) 31 Mar 2011 31 Mar 2010 ------------------------ Profit (loss) for the period 12,784 (16,936) Other comprehensive income, items net of tax Cash flow hedges (2,544) (3,019) Other comprehensive income, net of tax (2,544) (3,019) ------------------------ Total comprehensive income 10,240 (19,955) Attributable to: Owners of the parent 6,804 (16,276) Non-controlling interest 3,436 (3,679) ------------------------ 10,240 (19,955) CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited Audited Unaudited three twelve three months to months to months to (all amounts in EUR '000) 31 Mar 2011 31 Dec 2010 31 Mar 2010 ASSETS Non-current assets Property, plant and equipment 727,539 728,226 663,491 Biological assets 7,983 8,464 6,894 Intangible assets 7,620 7,737 7,745 Deferred tax assets 18,927 22,421 28,222 Other receivables 2,882 7,626 7,591 Available-for-sale financial assets 502 464 - 765,453 774,938 713,943 Current assets Inventories 190,883 175,361 124,307 Trade receivables 61,311 52,354 9,142 Other receivables 6,274 8,702 5,578 Derivative financial instruments 1 40 - Cash and cash equivalent 144,650 165,555 55,914 403,119 402,012 194,941 Assets held for sale 39,391 39,391 - Total assets 1,207,963 1,216,341 908,884 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital 80 80 80 Share issue - 91 - Share premium 8,086 8,086 8,086 Hedge reserve 5,459 7,494 14,152 Other reserves 444,046 433,012 438,603 Retained earnings (77,284) (84,322) (85,229) 380,387 364,441 375,692 Non-controlling interest in equity 18,817 15,831 13,087 Total equity 399,204 380,272 388,779 Non-current liabilities Borrowings 427,328 437,623 208,559 Advance payments 223,376 231,812 248,535 Trade payables 4 17 - Derivative financial instruments - - 3,288 Provisions 4,893 3,935 1,804 655,601 673,387 462,186 Current liabilities Borrowings 43,144 42,934 23,682 Advance payments 34,337 35,243 - Trade payables 31,082 39,408 25,389 Other payables 43,502 43,820 8,848 Derivative financial instruments 1,093 1,277 - 153,158 162,682 57,919 Total liabilities 808,759 836,069 520,105 Total equity and liabilities 1,207,963 1,216,341 908,884 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 earning H. Total I. Non-controlling interest J. Total equity (all amounts in EUR '000) A B C D E F G H I J 01 Jan 10 80 - 8,086 401,248 16,567 16,200 (71,368) 370, 11,784 382 813 ,597 Profit - - - - - - (13,861) (13, (3,075) (16 (loss) 861) ,936) for the period Other compre- hensive income - Cash flow (2, (3 hedges - - - - (2,415) - - 415) (604) ,019) Total compre- hensive income for the (16, (19 period - - - - (2,415) - (13,861) 276) (3,679) ,955) Transactions with owners Perpetual capital 19, 24 loan - - - - - 19,925 - 925 4,982 ,907 Employee share option scheme - value of employee 1, 1 services - - - - - 1,230 - 230 - ,230 Total contribution by and distribution 21, 26 to owners - - - - - 21,155 - 155 4,982 ,137 Total transactions with 21, 26 owners - - - - - 21,155 - 155 4,982 ,137 31 Mar 10 375, 388 80 - 8,086 401,248 14,152 37,355 (85,229) 692 13,087 ,779 364, 380 31 Dec 10 80 91 8,086 401,612 7,494 31,400 (84,322) 441 15,831 ,272 01 Jan 11 364, 380 80 91 8,086 401,612 7,494 31,400 (84,322) 441 15,831 ,272 Profit (loss) for the 8, 12 period - - - - - - 8,839 839 3,945 ,784 Other compre- hensive income - Cash flow (2, (2 hedges - - - - (2,035) - - 035) (509) ,544) Total compre- hensive income for the 6, 10 period - - - - (2,035) - 8,839 804 3,436 ,240 Transactions with owners Stock options - (91) - 125 - - - 34 - 34 Perpetual capital (1, (2 loan - - - - - - (1,801) 801) (450) ,251) Incentive arrangement for Executive Management - - - - - 23 - 23 - 23 Convertible bond, equity 9, 9 component - - - - - 9,018 - 018 - ,018 Employee share option scheme - value of employee 1, 1 services - - - - - 1,868 - 868 - ,868 Total contribution by and distribution 9, 8 to owners - (91) - 125 - 10,909 (1,801) 142 (450) ,692 Total transactions 9, 8 with owners - (91) - 125 - 10,909 (1,801) 142 (450) ,692 31 Mar 2011 380, 399 80 - 8,086 401,737 5,459 42,309 (77,284) 387 18,817 ,204 CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited Unaudited three three months to months to (all amounts in EUR '000) 31 Mar 2011 31 Mar 2010 ------------------------ Cash flows from operating activities Profit (loss) for the period 12,784 (16,936) Adjustments for Tax 5,179 (5,585) Depreciation and amortization 11,198 12,246 Other non-cash income and expenses (5,980) 139 Interest income (15,733) (1,151) Fair value gains (losses) on financial assets at fair value through profit or loss (145) (13,655) Interest expense 9,387 21,328 ------------------------ 16,690 (3,614) Change in working capital Decrease(+)/increase(-) in other receivables 1,343 4,319 Decrease (+)/increase (-) in inventories (15,522) (14,795) Decrease(-)/increase(+) in trade and other payables (14,393) (4,888) ------------------------ Change in working capital (28,572) (15,364) ------------------------ (11,882) (18,978) Interest and other finance cost paid (1,810) (4,401) Interest and other finance income 269 47,116 Net cash generated (used) in operating activities (13,423) 23,737 Cash flows from investing activities Purchases of property, plant and equipment (10,371) (18,960) Purchases of intangible assets (23) (14) Proceeds from sale of biological assets 184 59 Purchases of available-for-sale financial assets (38) - ------------------------ Net cash generated (used) in investing activities (10,248) (18,915) Cash flows from financing activities Realised stock options 34 - Proceeds from interest-bearing liabilities - 5,000 Perpetual capital loan (3,042) 24,875 Proceeds from advance payments 7,000 243,419 Payment of interest-bearing liabilities (1,226) (234,079) ------------------------ Net cash generated (used) in financing activities 2,766 39,215 Net increase (decrease) in cash and cash equivalents (20,905) 44,037 Cash and cash equivalents at beginning of the period 165,555 11,877 ------------------------ Cash and cash equivalents at end of the period 144,650 55,914 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 2010. 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 2011 | 336,598| 21,035| 257,613| 206,227|821,473 ----------------------------+---------+------------+---------+--------+------- Additions | 135| 10,235| 1| -| 10,371 ----------------------------+---------+------------+---------+--------+------- Transfers | 7,637| (10,888)| 2,495| 756| - ----------------------------+---------+------------+---------+--------+------- Gross carrying amount | | | | | at 31 Mar 2011 | 344,370| 20,382| 260,109| 206,983|831,844 ----------------------------+---------+------------+---------+--------+------- Accumulated depreciation | | | | | and impairment losses at | | | | | 1 Jan 2011 | 39,793| -| 21,150| 32,304| 93,247 ----------------------------+---------+------------+---------+--------+------- Depreciation for the period| 5,908| -| 2,844| 2,306| 11,058 ----------------------------+---------+------------+---------+--------+------- | | | | | ----------------------------+---------+------------+---------+--------+------- Accumulated depreciation | | | | | and impairment losses at | | | | | 31 Mar 2011 | 45,701| -| 23,994| 34,610|104,305 ----------------------------+---------+------------+---------+--------+------- | | | | | ----------------------------+---------+------------+---------+--------+------- Carrying amount | | | | | at 1 Jan 2011 | 296,805| 21,035| 236,463| 173,923|728,226 ----------------------------+---------+------------+---------+--------+------- Carrying amount | | | | | at 31 Mar 2011 | 298,669| 20,382| 236,115| 172,373|727,539 ----------------------------+---------+------------+---------+--------+------- 3. Trade receivables (all amounts in EUR '000) 31 Mar 2011 31 Dec 2010 ------------------------ Nickel-Cobalt sulphide 58,416 50,437 Zinc sulphide 2,895 1,917 ------------------------ Total trade receivables 61,311 52,354 4. Inventories (all amounts in EUR '000) 31 Mar 2011 31 Dec 2010 ------------------------ Raw materials and consumables 11,408 8,668 Ore on leach pads 61,872 79,593 Work in progress 102,352 75,039 Finished products 15,251 12,061 ------------------------ Total inventories 190,883 175,361 5. Borrowings (all amounts in EUR '000) Non-current 31 Mar 2011 31 Dec 2010 ------------------------ Capital loans 1,405 1,405 Investment and Working Capital loan 57,362 57,324 Senior Unsecured Convertible Bonds due 2013 78,776 78,086 Senior Unsecured Convertible Bonds due 2015 212,707 219,426 Finance lease liabilities 49,941 53,018 Other 27,137 28,364 ------------------------ 427,328 437,623 ------------------------ Current Railway Term Loan Facility 18,613 18,527 Finance lease liabilities 20,333 20,211 Interest Subsidy Loans 4,198 4,196 ------------------------ 43,144 42,934 ------------------------ Total borrowings 470,472 480,557 Talvivaara Mining Company Plc Key financial figures of the Group Three Three Twelve months to months to months to 31 Mar 11 31 Mar 10 31 Dec 10 ------------------------------ Net sales EUR '000 66 467 11 606 152,163 Operating profit (loss) EUR '000 11 617 (2 344) 25,456 Operating profit (loss) percentage 17.5 % -20,2 % 16.7 % Profit (loss) before tax EUR '000 17,963 (22 521) (9,908) Profit (loss) for the period EUR '000 12,784 (16,936) (13,052) Return on equity 3.3 % (4.4 %) (3,4 %) Equity-to-assets ratio 33.0 % 42.8 % 31,3 % Net interest-bearing debt EUR '000 325,822 176,328 315 002 Debt-to-equity ratio 81.6 % 45.4 % 82,8 % Return on investment 2.6 % 0.6 % 3,1 % Capital expenditure EUR '000 10,394 18,974 115 658 Research & development expenditure EUR '000 - - 365 Property, plant and equipment EUR '000 727,539 663,491 728 226 Derivative financial instruments EUR '000 (1,092) (3,287) (1 237) Borrowings EUR '000 470,472 232,241 480 557 Cash and cash equivalents at the end of the period EUR '000 144,650 55,914 165 555 Share-related key figures Three Three Twelve months to months to months to 31 Mar 11 31 Mar 10 31 Dec 10 ------------------------------------ Earnings per share EUR 0.03 (0.06) (0.06) Equity per share EUR 1.55 1.53 1.55 Development of share price at London Stock Exchange Average trading price(1) EUR 6.69 4.32 4.89 GBP 5.71 3.83 4.20 Lowest trading price(1) EUR 5.99 3.94 3.99 GBP 5.12 3.50 3.42 Highest trading price(1) EUR 7.28 5.02 7.11 GBP 6.22 4.45 6.10 Trading price at the end of the period(2) EUR 6.58 5.00 6.92 GBP 5.82 4.44 5.96 Change during the period -2.4 % 15.0 % 54.2 % Price-earnings ratio 194 neg. neg. Market capitalization at the end of the period(3) EUR '000 1,614,566 1,226,991 1,697,196 GBP '000 1,426,792 1,089,075 1,460,861 Development in trading volume Trading volume 1000 shares 11,420 39.105 93,802 In relation to weighted average number of shares 4.7 % 15.9 % 38.2 % Development of share price at OMX Helsinki Average trading price EUR 6.77 4.40 5.18 Lowest trading price EUR 5.91 3.99 3.99 Highest trading price EUR 7.34 5.00 7,18 Trading price at the end of the period EUR 6.60 4.97 7.07 Change during the period -6.6 % 14.8 % 63.3 % Price-earnings ratio 195 neg. neg. Market capitalization at the end of the period EUR '000 1,619,403 1,218,528 1,734,389 Development in trading volume Trading volume 1000 shares 38,020 40,093 140,115 In relation to weighted average number of shares 15.5 % 16.4 % 57.1 % Adjusted average number of shares 245,344,901 245,176,718 245,241,660 Fully diluted average number of shares 245,344,901 245,176,718 245,241,660 Number of shares at the end of the period 245,364,096 245,176,718 245,316,718 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. Employee-related key figures Three Three Twelve months to months to months to 31 Mar 2011 31 Mar 2010 31 Dec 2010 ------------------------------------ Wages and salaries EUR '000 5,857 4,236 16,652 Average number of employees 407 325 362 Number of employees at the end of the period 413 336 389 Other figures Three Three Twelve months to months to months to 31 Mar 2011 31 Mar 2010 31 Dec 2010 ------------------------------------ Share options outstanding at the end of the period 5,937,822 5,421,100 5,950,822 Number of shares to be issued against the outstanding share options 5,937,822 5,421,100 5,950,822 Rights to vote of shares to be issued against the outstanding share options 2.4 % 2.2 % 2.4 % 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 Net interest-bearing debt Interest-bearing debt - Cash and cash equivalent Debt-to-equity ratio Net interest-bearing debt ------------------------------------------------------- Total equity Share-related key figures Profit (loss) attributable to equity holders of the Earnings per share Company ------------------------------------------------------- Adjusted average number of shares Equity per share Equity attributable to equity holders of the Company ------------------------------------------------------- Adjusted average number of shares Number of shares at the end of the period x trading Market capitalization at price at the the end of the period end of the period [HUG#1509920]
Talvivaara Mining Company Interim Report for January-March 2011
| Source: Talvivaaran Kaivososakeyhtiö Oyj