Stock Exchange Release
Talvivaara Mining Company Plc
16 August 2012
Talvivaara Mining Company Interim Report for January-June 2012
Steady progress in production after re-start of metals plant in April
Financial result impacted by production stoppage and declining nickel price
Highlights
Q2 2012
* Nickel production of 3,194t and zinc production of 6,686t
* Production volumes impacted by dilution of leach solutions due to rapid
spring flooding and excessive rain as well as scheduled maintenance and
fatality-related stoppage in April
* Net sales of EUR 33.4m
* Operating loss of EUR (10.9)m
* New CEO Harri Natunen has conducted a comprehensive operational review and
is implementing a more sustainable production approach during ramp-up aimed
at improving efficiency and reliability of operations and minimising the
environmental impact
* Metals recovery plant in continuous and stable operation with close to 100%
availability since late April
H1 2012
* Nickel production of 6,568t and zinc production of 14,576t
* Net sales of EUR 72.5m
* Operating loss of EUR (22.3)m
* Significantly strengthened financial position; EUR 83m raised from equity
placing and EUR 110m from bond issue
Production guidance and operational outlook
As announced in Talvivaara's Operational Update of 3 July 2012, the combination
of the dilution effect of the excessive water in circulation and the proactive
decision taken to implement a more sustainable production approach during ramp-
up have impacted the Company's production target for the current year such that
the Company could no longer expect to achieve the previous guidance of
25,000-30,000t of nickel in 2012. Since the Operational Update, Talvivaara has
continued reviewing its operations and following completion of the assessment,
the Company's production guidance for 2012 is revised to approximately 17,000t
of nickel. The revised guidance accounts for the continued heavy rainfall in
July and early August, which has further prolonged the water balance issues and
dilution of leach solutions at the Sotkamo mine.
Talvivaara continues to anticipate the annualised production rate to sustainably
reach more than 25,000tpa of nickel during the fourth quarter of the year. The
step-up in the production rate is anticipated to be achievable following the
completion of the newly stacked heap section 3 during August and gradual
increase of the leach solution flow rate through the metals recovery plant from
around 1,500 m(3)/h to 1,800 m(3)/h over the coming weeks.
Due to the challenging water balance situation at mine, Talvivaara has since
late June been forced to mine lower-grade ore from a more distant location than
originally planned. As this is less economical and the Company already has a
significant nickel inventory in the heaps, the Company has decided to alter its
near-term production scheme such that over the next 3-4 months mining and
crushing operations will be restricted and the Company's own mining fleet will
be used to enhance reclaiming of the primary heaps. The planned alteration is
expected to accelerate nickel recovery due to reclaiming and also result in
substantial savings. Current year's metal production is not anticipated to be
impacted by the temporary shift in the production scheme.
Key figures
------------------------------------------+-------+------+-------+------+------
EUR million | Q2| Q2| Q1-Q2| Q1-Q2| FY
| 2012| 2011| 2012| 2011| 2011
------------------------------------------+-------+------+-------+------+------
Net sales | 33.4| 37.6| 72.5| 104.1| 231.2
------------------------------------------+-------+------+-------+------+------
Operating profit (loss) | (10.9)| (1.2)| (22.3)| 10.4| 30.9
------------------------------------------+-------+------+-------+------+------
% of net sales |(32.5%)|(3.1%)|(30.8%)| 10.0%| 13.4%
------------------------------------------+-------+------+-------+------+------
Profit (loss) for the period | (17.5)| (7.5)| (32.4)| (5.5)| (5.2)
------------------------------------------+-------+------+-------+------+------
Earnings per share, EUR | (0.06)|(0.03)| (0.12)|(0.03)|(0.04)
------------------------------------------+-------+------+-------+------+------
Equity-to-assets ratio | 28.9%| 29.0%| 28.9%| 29.0%| 27.9%
------------------------------------------+-------+------+-------+------+------
Net interest bearing debt | 475.6| 417.0| 475.6| 417.0| 455.7
------------------------------------------+-------+------+-------+------+------
Debt-to-equity ratio | 125.8%|128.2%| 125.8%|128.2%|141.3%
------------------------------------------+-------+------+-------+------+------
Capital expenditure | 20.7| 25.1| 35.3| 35.5| 79.1
------------------------------------------+-------+------+-------+------+------
Cash and cash equivalents at the end of | 128.7| 46.5| 128.7| 46.5| 40.0
the period | | | | |
------------------------------------------+-------+------+-------+------+------
Number of employees at the end of the | 505| 416| 505| 416| 461
period[1] | | | | |
------------------------------------------+-------+------+-------+------+------
All reported figures in this release are unaudited.
CEO Harri Natunen comments: "Reporting my first quarter as the CEO of
Talvivaara, I am pleased to note that the organisational and production changes
that we implemented during the spring have started to show good progress in
production stability, with the metals plant reaching a new monthly record of
solution flow rate into the plant in June and the stacking of new ore
continuously improving. Equally significant, we are also seeing important
improvements in personnel morale and our environmental performance. Drawing on
my past experience with similar operations as well as observations of
Talvivaara's people, operations and ore body, I am convinced that we can
overcome our remaining challenges and deliver a sustainable production ramp-up
path.
Whilst this good progress gives us confidence for the future, we must also
accept that we still continued to encounter a number of challenges during the
second quarter. After the very regrettable accident in March, in which one of
our employees lost his life, we stopped the metals recovery plant in order to
conduct safety-related modifications and improvements and subsequently brought
forward scheduled maintenance from May. As a result, the overall stoppage time
and prolonged start-up impacted second quarter production significantly.
Furthermore, our metals production was affected by rapid spring flooding and the
wettest spring in the Kainuu region since 1983, which resulted in excess water
in circulation and diluted the leach solutions by around 25-30% compared to the
long-term average water balance in the process. Over the summer we have focused
on moderating the water balance, but the continued unusually heavy rainfall in
July and early August have unfortunately further prolonged the issue. We have
taken this into account when calculating our revised production guidance.
Our financial result for the second quarter is disappointing, reflecting the
limited production levels, but also the weak nickel price development. The
nickel price has declined from around USD 21,000-22,000 per tonne in early 2012
to around USD 16,000 per tonne during the summer, primarily driven by
macroeconomic uncertainty and weak stainless steel fundamentals. Whilst nickel
and other base metals prices may remain under pressure in the short term,
development of the commodity utilisation rate of China and re-stocking following
the summer months may provide price support during the coming months.
As a result of the challenges we have faced during the first half of 2012, and
the more sustainable production approach we are implementing in order to ensure
operational stability and reliability, we have had to revise our production
guidance for the current year to around 17,000 tonnes of nickel. However,
encouraged by the steady performance of our metals recovery process since late
April, we continue to anticipate the annualised production rate to sustainably
reach more than 25,000tpa of nickel in during the fourth quarter.
Whilst excess water at the minesite has affected our production guidance, it has
also impacted our mining operations such that we have had to mine lower-grade
ore further away from primary crushing than originally planned. In order to
avoid this inefficiency and to accelerate utilisation of the nickel inventories
we already have in the heaps, we have decided to shift our focus from mining to
primary heap reclaiming over the next 3-4 months. During this time, we will also
move the excess water from the open pit to the gypsum pond, which is now being
enlarged. We expect this temporary shift in the production scheme to result in
substantial savings, but do not foresee it affecting our metals production
during the current year. "
(1) In addition, the Company employed 90 summer trainees as at 30 June 2012 and
65 summer trainees as at 30 June 2011.
Enquiries:
Talvivaara Mining Company Plc. Tel. +358 20 712 9800
Harri Natunen, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO
Merlin PR Tel. +44 20 726 8400
David Simonson
Anca Spiridon
Webcast and conference call on 16 August 2012 at 12:00 BST/14:00 EET
A combined webcast and conference call on the January-June 2012 Interim Result
will be held on 16 August 2012 at 12:00 BST/14:00 EET. The call will be held in
English.
The webcast can be accessed through the following link:
http://qsb.webcast.fi/t/talvivaara/talvivaara_2012_0816_q2/
A conference call facility will be available for a Q&A with senior management
following the presentation.
Participant - Finland: +358 (0)9 2313 9201
Participant - UK: +44 (0)20 7162 0025
Participant - US: +1 334 323 6201
Conference ID: 914119
The webcast will also be available for viewing on the Talvivaara website shortly
after the event.
Financial review
Q2 2012 (April-June)
Net sales and financial result
Talvivaara's net sales for nickel and cobalt deliveries to Norilsk Nickel and
for zinc deliveries to Nyrstar during the quarter ended 30 June 2012 amounted to
EUR 33.4 million (Q2 2011: EUR 37.6 million). The net sales decreased by 14.3%
compared to Q1 2012 primarily due to a decline in the nickel price, but also as
a result of a slightly lower level of product deliveries. Product deliveries in
Q2 2012 amounted to 2,958 tonnes of nickel, 92 tonnes of cobalt and 7,107 tonnes
of zinc.
The operating loss for Q2 2012 was EUR (10.9) million (Q2 2011: EUR (1.2)
million). During the period, materials and services amounted to EUR (33.6)
million (Q2 2011: EUR (31.9) million) and other operating expenses to EUR (15.0)
million (Q2 2011: EUR (16.7) million). Compared to the first quarter of 2012,
materials and services and other operating expenses decreased by 9.7%, which is
in line with the change in product deliveries during the respective periods.
Loss for the period amounted to EUR (17.5) million (Q2 2011: EUR (7.5)
million).
Balance sheet and financing
Capital expenditure during the second quarter totalled EUR 20.7 million (Q2
2011: EUR 25.1 million). The expenditure primarily related to a reverse osmosis-
based water purification plant, secondary heap foundations, secondary leaching,
gypsum pond and the uranium extraction circuit. Talvivaara received advance
payments amounting to EUR 6.5 million from Cameco Corporation to cover the costs
of construction of the uranium extraction circuit.
Talvivaara issued a EUR 110 million senior unsecured bond in March 2012. The
bond was settled and the notes were listed on NASDAQ OMX Helsinki in April.
In April and May, Talvivaara conducted a buy-back for a portion of the Company's
senior unsecured convertible bonds due in May 2013 amounting to a nominal value
of EUR 8 million. The remaining nominal value of the convertible bonds is EUR
76.9 million.
Talvivaara's EUR 130 million revolving credit facility was amended in June,
changing its margin to 4.00% through June 2013. Thereafter, the margin will be
1.75-3.00% depending on the Company's leverage ratio. As at 30 June 2012, EUR
70 million of the facility was drawn.
H1 2012 (January-June)
Net sales and financial result
Talvivaara's net sales for nickel and cobalt deliveries to Norilsk Nickel and
for zinc deliveries to Nyrstar during H1 2012 amounted to EUR 72.5 million (H1
2011: EUR 104.1 million). Net sales decreased by 30.4% compared to H1 2011
mainly due to the lower price of nickel. Product deliveries amounted to 6,480
tonnes of nickel, 188 tonnes of cobalt and 15,440 tonnes of zinc (H1
2011: 6,551 tonnes of nickel, 15,418 tonnes of zinc and 140 tonnes of cobalt).
The Group's other operating income amounted to EUR 1.5 million (H1 2011: EUR
1.4 million) and came mainly from recovery of insurable losses.
Materials and services were EUR (68.5) million in H1 2012 (H1 2011: EUR (68.2)
million) and other operating expenses were EUR (33.9) million (H1 2011: EUR
(30.3) million). The largest cost items were production chemicals, external
services, electricity and maintenance.
Employee benefit expenses including the value of employee expenses related to
the employee share option scheme of 2007 were EUR (14.8) million (H1 2011: EUR
(13.4) million). The increase was attributable to the increased number of
personnel.
Operating loss for H1 2012 was EUR (22.3) million (H1 2011: profit of EUR 10.4
million), corresponding to an operating margin of (30.8%) (H1 2011: 10.0%).
Whilst the key determinant to the change in the operating margin was the
unfavourable development in the nickel price, also higher than normal
maintenance costs relating to the metals plant as well as the materials handling
equipment were a significant factor.
Finance income for the period was EUR 1.6 million (H1 2011: EUR 1.5 million) and
consisted mainly of exchange rate gains. Finance costs of EUR (21.7) million (H1
2011: EUR (18.5) million) resulted mainly from interest and related financing
expenses on borrowings.
Loss for H1 2012 amounted to EUR (32.4) million (H1 2011: EUR (5.5) million)
reflecting the abovementioned factors including unfavourable development in the
nickel price, high maintenance costs and lower than anticipated level of product
deliveries. Earnings per share was EUR (0.12) (H1 2011: EUR (0.03).
Total comprehensive income for H1 2012 was EUR (32.4) million (H1 2011: EUR
(10.4) million). The change in total comprehensive income compared to the
previous year was mainly attributable to the expiration of hedge reserves, the
reduction of which as a result of the occurrence of the hedged sales was still
included in the figure in 2011.
Balance sheet
Capital expenditure in H1 2012 totalled EUR 35.3 million (H1 2011: EUR 35.5
million). The expenditure related primarily to a reverse osmosis-based water
purification plant and metals plant modifications to increase recycling of
process waters, earthworks in secondary leaching, gypsum pond, and the uranium
extraction circuit. On the consolidated statement of financial position as at
30 June 2012, property, plant and equipment was EUR 773.6 million (31 December
2011: EUR 762.0 million).
In the Group's assets, inventories amounted to EUR 290.6 million on 30 June
2012 (31 December 2011: EUR 240.4 million). The increase in inventories reflects
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 51.1 million at 30 June 2012 (31 December
2011: EUR 64.0 million). Trade receivables remained roughly at the same level as
at the end of Q1 2012, but decreased from Q4 2011 due to a lower level of nickel
and zinc deliveries in H1 2012 and a decreased nickel price.
On 30 June 2012, cash and cash equivalents was EUR 128.7 million (31 December
2011: EUR 40.0 million).
In equity and liabilities, total equity amounted to EUR 378.2 million on 30 June
2012 (31 December 2011: EUR 322.6 million). Talvivaara raised EUR 81.5 million,
net of transaction costs, from an issue of 24,589,050 new shares in Q1 2012. In
addition, interest cost of EUR 2.8 million of a perpetual capital loan was
capitalized in equity. A total of 1,830,087 new shares were subscribed and paid
for in H1 2012 under the company's stock option rights 2007A and the entire
subscription price amounting to EUR 4.9 million was recognized in equity.
Borrowings increased from EUR 495.7 million on 31 December 2011 to EUR 604.4
million at the end of June 2012. The changes in borrowings during the first half
of 2012 included an issue of a senior unsecured bond of EUR 110 million, a draw-
down of EUR 20 million under the revolving credit facility, a repayment of
commercial paper notes amounting to EUR 8.5 million and a buy-back of senior
unsecured convertible bonds due 2013 with a nominal value of EUR 8 million.
Total advance payments as at 30 June 2012 amounted to EUR 252.6 million,
representing an increase of EUR 5.3 million from EUR 247.3 million on 31
December 2011. During the period, Talvivaara received a total of EUR 8.3 million
in advance payments from Cameco based on the uranium off-take agreement between
the companies, whilst the advance payment from Nyrstar base on the zinc
streaming agreement was amortised by EUR 3.0 million as a result of zinc
deliveries.
Total equity and liabilities as at 30 June 2012 amounted to EUR 1,307.2 million
(31 December 2011: EUR 1,156.7 million).
Financing
Talvivaara's EUR 130 million revolving credit facility was amended in June,
changing its margin to 4.00% through June 2013. Thereafter, the margin will be
1.75-3.00% depending on the Company's leverage ratio. As at 30 June 2012, EUR
70 million of the facility was drawn.
In April and May, Talvivaara conducted a buy-back for a portion of the Company's
senior unsecured convertible bonds due 2013 amounting to a nominal value of EUR
8 million. The remaining senior unsecured convertible bonds have a nominal value
of EUR 76.9 million and are due in May 2013.
In March, Talvivaara issued a EUR 110 million senior unsecured bond. The 5-year
bond has an issue price of 100%, pays a coupon of 9.75% and is callable after 3
years. The bond issue was sold to both Finnish and international institutional
and private investors. The bond was settled and the notes were listed on NASDAQ
OMX Helsinki in April.
In February, Talvivaara completed an issue of 24,589,050 new shares representing
approximately 10 per cent of the number of the existing shares of the company.
The proceeds of the share issue amounted to EUR 82.6 million before commissions
and expenses and to EUR 81.5 million net of costs. An Extraordinary General
Meeting of Talvivaara Mining Company Plc resolved to approve the share issue in
March, and the new shares were subsequently registered with the Finnish Trade
Register.
Currency option programme
Talvivaara has entered into a currency option programme comprising USD options
for two months from July 2012 through August 2012. The monthly obligation is USD
2.5 million and protection is USD 2.5 million. The collar ranges from 1.1460 to
1.4500.
Going concern
Talvivaara Group's forecasts and projections, taking account of the Group's
current liquidity position and reasonably possible changes in production, metal
prices and foreign exchange rates, indicate the Group to be able to continue in
operational existence with adequate financial resources for the foreseeable
future. The Group therefore continues to adopt the going concern basis in
preparing its consolidated financial statements.
Production review
During the second quarter, Talvivaara's production volumes were adversely
impacted by dilution of leach solutions due to spring flooding and excessive
rain, and a scheduled maintenance and a regrettable fatality related stoppage in
April. Second quarter production amounted to 3,194t of nickel (Q2 2011: 3,951t)
and 6,686t of zinc (Q2 2011: 7,662t). During the first half of 2012, Talvivaara
produced 6,568t of nickel (H1 2011: 8,166t) and 14,576t on zinc (H1
2011: 14,005t).
In metals recovery, production at the plant was restricted for most of April due
to the stoppage and subsequent changes to certain operating procedures, the
implementation of which slowed down early ramp-up after the re-start. The
production stoppage that followed the fatality at the plant in March continued
through the early part of April whilst the occupational safety-related
clarifications and improvements requested by the Finnish Safety and Chemicals
Agency were completed. Simultaneously the scheduled maintenance was brought
forward from May to April in order to minimise the overall stoppage time. As a
result, nickel production in April amounted to only 198t. After the re-start of
all production stages in late April, the metals plant has operated continuously
and steadily, producing 1,477t of nickel in May and 1,519t in June. The average
flow rate of metal containing leach solution to the plant reached a new monthly
record of 1,318 m(3)/h in June, and the availability of the plant was
effectively 100%.
Throughout the second quarter, metals production was also affected by flooding
that followed the rapid melting of snow and the unusually heavy rainfall that
has amounted to over 190mm during the spring in comparison to the long term
average of approximately 100mm. The excess water in circulation has diluted the
leach solutions such that the average nickel grade in solution pumped to the
metals plant was 1.8 g/l in the second quarter. The Company estimates the
dilutive effect of the recent rainfall having been around 25-30% compared to the
long-term average water balance in the process. Measures were taken to prevent
rainy seasons impacting production in the future. These include for instance
commitment to additional reverse osmosis capacity beyond the previously
announced level, which enables Talvivaara to further increase recycling of
purified process waters and to reduce raw water intake.
The mining department produced 3.0Mt of ore (Q2 2011: 2.8Mt) and 1.1Mt of waste
(Q2 2011: 5.3Mt). Primary focus continued to be on ore production, and mining
operations matched the ore demand by crushing. The excess water at the minesite
impacted mining operations towards the end of the quarter, forcing the mining
department to excavate slightly lower-grade ore from a more distant location
than originally planned.
Materials handling operations crushed and stacked 3.0Mt of new ore during the
second quarter, and ore under leaching at the end of the quarter amounted to
41.8Mt. Crushing has demonstrated its ability to deliver required production
levels and reclaiming of the primary heap has continuously improved thereby
eliminating a bottle-neck from materials handling. As the production of new ore
has progressed reasonably well during the first half of 2012 while metals
recovery has had lower availability, the nickel inventory under leaching in the
heaps has continued to grow, providing additional flexibility for increasing the
metals production rates in the coming months.
Production key figures
---------------------+------+-----+-----+------+------+------
| | Q2| Q2| Q1-Q2| Q1-Q2| FY
| | 2012| 2011| 2012| 2011| 2011
---------------------+------+-----+-----+------+------+------
Mining | | | | | |
---------------------+------+-----+-----+------+------+------
Ore production |Mt | 3.0| 2.8| 6.1| 4.9| 11.1
---------------------+------+-----+-----+------+------+------
Waste production |Mt | 1.1| 5.3| 2.6| 10.4| 17.0
---------------------+------+-----+-----+------+------+------
Materials handling | | | | | |
---------------------+------+-----+-----+------+------+------
Stacked ore |Mt | 3.0| 2.8| 6.1| 4.9| 11.1
---------------------+------+-----+-----+------+------+------
Bioheapleaching | | | | | |
---------------------+------+-----+-----+------+------+------
Ore under leaching |Mt | 41.8| 29.2| 41.8| 29.2| 35.6
---------------------+------+-----+-----+------+------+------
Metals recovery | | | | | |
---------------------+------+-----+-----+------+------+------
Nickel metal content|Tonnes|3,194|3,951| 6,568| 8,166|16,087
---------------------+------+-----+-----+------+------+------
Zinc metal content |Tonnes|6,686|7,662|14,576|14,005|31,815
---------------------+------+-----+-----+------+------+------
Operational review
CEO Harri Natunen has conducted a detailed operational review since joining
Talvivaara in mid-March. Going forward, the Company will adopt a more
sustainable production approach during ramp-up aimed at improving the efficiency
and reliability of operations. In practice this means implementing a relatively
moderate rate of production increase in order to keep all processes operating in
a stable manner such that good product quality can be maintained, environmental
discharges can be minimised, and occupational safety can be continuously
improved.
Sustainable development, safety and permitting
Safety
A safe working environment and safe working practices are top priorities for
Talvivaara, and following the regrettable fatality at the site, the Company
initiated an unscheduled stoppage in late March with a focus on preventative
safety-related improvements.
Operationally, safety instructions have been further refined and developed,
access practices in the vicinity of the metals recovery plant have been altered
and additional fixed gas detectors are being installed. Occupational safety-
related modifications in the metals recovery process include among others
increased scrubbing of hydrogen sulphide gases and improved control of hydrogen
sulphide feed into the process.
At the end of the second quarter, the injury frequency among the Talvivaara
personnel was 13.7 lost time injuries/million working hours on a rolling 12
month basis (30 June 2011: 13.1 lost time injuries/million working hours).
Environment
Talvivaara continues to focus on minimising the environmental impact of its
operations, and during the second quarter the Company announced investments in
environmental technology amounting to more than EUR 13 million. The new
technologies will improve the quality of effluent waters, reduce odour emissions
into the environment and limit dust emissions.
Hydrogen sulphide (odour) emissions have already declined significantly, and
odour complaints from nearby residents have reduced substantially with May the
first month since commencement of production with no odour complaints.
Furthermore, a catalytic burning unit to treat hydrogen sulphide gases is to be
installed in order to further reduce odour emissions. Dust emissions have been
addressed through a new dust removal system at the screening hall, which was
commissioned in July.
Talvivaara has continued to make significant progress in reducing its sulphate
and sodium discharges into nearby lakes as a result of process improvements and
increased water circulation. In order to further reduce discharges into water,
Talvivaara will invest in a reverse osmosis-based water treatment system, which
is expected to be commissioned by the end of 2012. Following the new water
treatment system, the new environmental permit limits proposed by the Company
for 2015 are anticipated to be achievable already in 2013.
In order to improve timely and transparent communication on environmental
matters with the neighbouring communities and other interested stakeholders,
Talvivaara launched a specific website for this purpose in January 2012. The
Finnish language website, www.paikanpaalla.fi, reviews environmental data and
events in blog format and aims to provide region-specific information in an
easily understandable and concise form.
Permitting
In January, Talvivaara received a positive opinion on its uranium recovery
process from the European Commission under the Euratom Treaty. In its opinion,
the European Commission considered that uranium recovery at the Talvivaara mine
complies with the goals set by the Euratom Treaty and may improve the supply
security of nuclear fuel in the European Union. In March, Talvivaara also
received a licence from the Finnish Government to extract uranium as a by-
product from its existing operations pursuant to the Nuclear Energy Act. The
permit is valid throughout the life of the mine, however, no longer than until
the end of 2054.
In April, Talvivaara was informed by the Northern Finland Regional State
Administrative Agency that the Company's environmental permit for uranium
extraction and the general update of Talvivaara mine's environmental permit are
to be processed together. Consequently, the Company expects a minor delay in the
uranium permitting process. The permitting authorities have informed Talvivaara
that a decision on the environmental permit for uranium extraction will be made
during 2012 in connection with the renewal of the mine's existing environmental
permit. Talvivaara aims to start uranium recovery as soon as all the necessary
permits have been obtained.
Following completion of the Environmental Impact Assessment ("EIA") programme,
the EIA process for the potential expansion of the Talvivaara mine was initiated
during the first quarter. The EIA covers options to expand production capacity
up to 100,000t of nickel per annum, and also the option to refine nickel
sulphide into LME-quality nickel metal. Talvivaara expects to submit the
environmental permit application to expand production production capacity in
early 2013.
Business development
Uranium production
Talvivaara is preparing for the recovery of uranium as a by-product of the
Company's existing operations. Uranium occurs naturally in small concentrations
in the Talvivaara area and leaches into the process solution along with
Talvivaara's main products. Annual uranium production is estimated at 350tU (ca.
770,000 pounds), corresponding to approximately 410t (900,000 pounds) of yellow
cake (UO(4)), and Talvivaara's entire uranium production will be sold under a
long-term agreement to Cameco Corporation.
Following receipt of the construction permit in August 2011, Talvivaara
commenced construction of the uranium recovery facility, which will be completed
during the current year. The permitting process for uranium production is
ongoing and the start of uranium production is further subject to, among others,
environmental permit approval and chemical authorisation. The decision on the
environmental permit is expected in 2012 in connection with the general update
of the mine's environmental permit.
Production expansion - Operation Overlord
Conceptual studies relating to production expansion beyond 50,000tpa of nickel
continued during the quarter, with a particular emphasis on permitting and the
ongoing Environmental Impact Assessment. The scoping studies are based on the
target of doubling 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, i.e. Talvivaara would integrate its
production one step further downstream.
No investment decisions relating to the production expansion have yet been
taken. Provided the investment is pursued, it is envisioned to be carried out in
a modular fashion to allow spreading out of the expenditure over an estimated
5-6 year period starting around 2014. 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.
Energy strategy
Talvivaara's energy strategy is focused on building an environmentally sound
portfolio of low-cost capacity allowing the Company to be energy self-sufficient
in the longer term. Talvivaara's electricity need is currently approximately
45MW, and is expected to increase significantly if the Company proceeds with the
planned capacity expansion and further refining of nickel into LME-quality
metal.
Talvivaara increased its capacity share in the Fennovoima nuclear project in
Finland from approximately 10MW to approximately 60MW during the first quarter
of 2012. The Company is also studying, amongst others, on-site windpower
production, bioenergy and utilization of energy generated in the production
process.
Annual General Meeting
Talvivaara's Annual General Meeting was held on 26 April 2012 in Sotkamo,
Finland. The resolutions of the AGM included:
* that no dividend be paid for the financial year 2011;
* that the annual fee payable to the members of the Board for the term until
the close of the Annual General Meeting in 2013 be as follows: Executive
Chairman of the Board EUR 280,000, Deputy Chairman (Senior Independent
Director) EUR 69,000, Chairmen of the Board Committees EUR 69,000 and other
Non-executive Directors EUR 48,000;
* that the number of Board members be eight and that Mr. Edward Haslam, Ms.
Eileen Carr, Mr. D. Graham Titcombe, Mr. Tapani Järvinen and Mr. Pekka Perä
be re-elected as Board members and Mr. Stuart Murray, Mr. Michael Rawlinson
and Ms. Kirsi Sormunen be appointed as new members of the Board;
* that the auditor be reimbursed according to the auditor's approved invoice
and authorised public accountants PricewaterhouseCoopers Oy be elected as
the company's auditor for the financial year 2012;
* that the Board be authorised to decide on the repurchase, in one or several
transactions, of a maximum of 10,000,000 of the Company's own shares. The
authorisation is valid until 25 October 2013 and replaces the authorisation
to repurchase 10,000,000 shares granted by the Annual General Meeting of 28
April 2011; and
* that the Board be authorised to decide on the conveyance, in one or several
transactions, of a maximum of 10,000,000 of the Company's own shares.The
shares may be conveyed to the Company's shareholders in proportion to their
present holding or by waiving the pre-emptive subscription rights of the
shareholders and the authorisation is valid until 25 April 2014.
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 counterparties,
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 continue to 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 industrial scale, the rate
of ramp-up is still subject to risk factors including the reliability and
sustainable capacity of production equipment, and eventual speed of leaching and
the extent of metals recovery in bioheapleaching. In addition, there may be
production and ramp-up related risks that are currently unknown or beyond the
Company's control.
The market price of nickel has historically been volatile and in the Company's
view this is likely to persist, driven by shifts in the supply-demand balance,
macroeconomic indicators and variations in currency exchange ratios. Nickel
sales currently represent close to 90% of the Company's revenues and variations
in the nickel price therefore have a direct and significant effect on
Talvivaara's financial result and economic viability. Talvivaara is, since
February 2010, unhedged against variations in metal prices. 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, once it has been fully ramped up, profitably also during the lows of
commodity price cycles.
Talvivaara's revenues are almost entirely 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 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.
Liquidity and refinancing risks may arise as a result of the Company's inability
to produce sufficient volumes of its saleable products, particularly nickel,
unexpected increase in production costs, and sudden or substantial changes in
the prices of commodities or currency exchange rates. Talvivaara seeks to reduce
liquidity risk by close monitoring of liquidity in order to detect any threat of
adverse changes in advance so as to allow for sufficient time to secure access
to adequate credit or other funding on reasonable terms. Talvivaara also seeks
to maintain a balanced maturity profile of its long-term debt in order to
mitigate refinancing risks.
Personnel and management
The number of personnel employed by the Group on 30 June 2012 was 595 (Q2
2011: 481), including 90 temporary summer trainees.
Wages and salaries paid during the three months to 30 June 2012 totalled EUR
5.7 million (Q2 2011: EUR 5.4 million). Wages and salaries paid during the six
months to 30 June 2012 totalled EUR 12.3 million (H1 2011: EUR 11.3 million).
As part of the Group's long term incentive plan, the employees of Talvivaara
have established a Group personnel fund to manage the earnings bonuses paid by
Talvivaara. In accordance with its bylaws, the fund will invest a substantial
proportion of its assets in Talvivaara Mining Company shares. The fund is
managed by personnel representatives elected by the employees.
Harri Natunen, 56, was appointed Talvivaara's CEO effective as of 26 April
2012. Mr. Natunen has had an over thirty-year successful career in mining and
metallurgical operations internationally. His latest position prior to joining
Talvivaara was as Director, Zinc Production and Business Development at Boliden
AB in Sweden 2008-2012, where he held responsibility over the Kokkola, Finland,
and Odda, Norway, zinc operations.
Maija Kaski, 44, was appointed as Chief Human Resources Officer and Mikko
Korteniemi, 53, as Chief Production Officer (Bioheapleaching and Metals
Recovery) and Jari Voutilainen, 46, as Chief Mining Officer (Mining and
Materials Handling) as of 1 June 2012. Previously Mr. Voutilainen worked for the
Company as General Manager of Business Development.
Talvivaara's former Chief Operations Officer, Lassi Lammassaari, was appointed
Vice President - Strategic Projects, also as of 1 June 2012. Mr. Lammassaari
will focus on strategically important projects in the development and expansion
of the Company operations.
Following his appointment, CEO Natunen consolidated the Executive Committee,
which now continues in the following composition:
Harri Natunen, Chief Executive Officer
Saila Miettinen-Lähde, Deputy CEO / Chief Financial Officer
Pekka Erkinheimo, Chief Commercial Officer
Kari Vyhtinen, Chief Investment Officer
Eeva Ruokonen, Chief Sustainability Officer
Maija Kaski, Chief Human Resources Officer
Mikko Korteniemi, Chief Production Officer (Bioheapleaching and Metals Recovery)
Jari Voutilainen Chief Mining Officer (Mining and Materials Handling).
Shares and shareholders
The number of shares issued and outstanding and registered on the Euroclear
Shareholder Register as of 30 June 2012 was 272,309,640. Including the effect of
the EUR 85 million convertible bond of 14 May 2008, the EUR 225 million
convertible bond of 16 December 2010, the Option Scheme of 2007 and share
subscriptions registered on 23 April 2012, the authorised full number of shares
of the Company amounted to 315,785,376.
The share subscription period for stock options 2007A was between 1 April 2010
and 31 March 2012. By the end of the subscription period a total of 2,279,373
Talvivaara Mining Company's new shares were subscribed for under the stock
option rights 2007A. A total of 53,727 stock option rights 2007A remained
unexercised following the end of the subscription period.
The share subscription period for stock options 2007B is between 1 April 2011
and 31 March 2013. No new shares of Talvivaara were subscribed for under the
stock option rights 2007B in H1 2012 and a total of 2,284,337 stock option
rights 2007B remain unexercised. A total of 2,333,000 option rights 2007C have
been issued to 250 key employees and the subscription period for stock options
2007C is between 1 April 2012 and 31 March 2014. A total of 2,333,000 stock
options 2007C remain unexercised.
In February 2012, Talvivaara completed an issue of 24,589,050 new shares
representing approximately 10 per cent of the number of the existing shares of
the Company. An Extraordinary General Meeting of Talvivaara Mining Company Plc.
resolved on 12 March 2012 to approve the proposal by the Board of Directors on
the share issue in deviation from the shareholders' pre-emptive subscription
rights. The new shares were registered with the Finnish Trade Register on 13
March 2012.
In addition, the Board of Directors has resolved, on the basis of the
authorisation granted by the Extraordinary General Meeting held on 12 March
2012, to issue special rights entitling to subscribe up to 184,428 new shares,
in order to carry out an adjustment to the conversion price, as a result of the
equity placing, in accordance with the terms and conditions of the convertible
bonds due 2013. Accordingly the maximum number of ordinary shares that may be
issued upon conversion is 11,677,591 shares. Due to an adjustment to the
conversion price of the convertible bonds due 2015, as a result of the placing,
the maximum number of ordinary shares that may be issued upon conversion is
27,180,708 shares.
As at 30 June 2012, the shareholders who held more than 5% of the shares and
votes of Talvivaara were Pekka Perä (20.8%), Solidium Oy (8.9%), Varma Mutual
Pension Insurance Company (8.7%) and Ilmarinen Mutual Pension Insurance Company
(6.2%).
Short-term outlook
Operational outlook
The currently challenging water balance situation at the Sotkamo mine is forcing
Talvivaara to temporarily mine lower-grade ore from a more distant location than
originally planned. Because this is less economical than the original plan and
as there is already a substantial nickel inventory in the heaps, the Company has
decided to alter its near-term production scheme such that heap reclaiming will
be favoured over mining during the coming 3-4 months. In practice this means
that mining and crushing of new ore will be restricted and the Company's own
mining fleet will be used to enhance reclaiming of the primary heaps.
The Company is now constructing an enlargement to its gypsum pond. Upon
completion of this expansion in mid-September, the excess water in the open pit
will be pumped to the gypsum pond thereby allowing return to the original mining
plan once the production scheme is also brought back to normal.
The planned alteration to the production scheme is expected to accelerate nickel
recovery from the heaps as a result of reclaiming and to achieve substantial
one-off near-term savings as a result of the temporary restriction of mining and
crushing operations. Because of the already existing nickel inventory under
leaching, the planned scheme is not anticipated to impact expected metals
production output.
Talvivaara's revised production guidance for 2012 is approximately 17,000 tonnes
of nickel. The guidance takes into account the dilution effect of the excessive
water in circulation, further impacted by the continued heavy rainfall in July
and early August, and the decision taken to implement a more sustainable
production approach during ramp-up. As noted, the current year's metal
production is however not expected to be impacted by the planned near-term
production scheme alteration.
Market outlook
Nickel and base metals prices more broadly remained under pressure during the
second quarter as concerns over the global growth outlook and European sovereign
debt crisis re-accelerated. The nickel price has declined from USD
21,000-22,000/t in early 2012 to around USD 16,000/t during the summer. Whilst
general macroeconomic uncertainty and weakness in the stainless steel industry
may limit recovery of the nickel price in the short term, development of the
commodity utilisation rate of China and re-stocking following the summer months
may provide price support during the coming months.
Talvivaara foresees the nickel industry fundamentals to support favourable
nickel price development in the longer term, driven by increasing marginal cost
of production across the nickel industry and lack of new committed nickel
projects to replace depleting supply after the next few years. Talvivaara
continues to see the longer term nickel price support level at around USD
20,000/t.
16 August 2012
Talvivaara Mining Company Plc.
Board of Directors
CONSOLIDATED INCOME STATEMENT
Unaudited three Unaudited three Unaudited six Unaudited six
(all amounts in EUR months to months to months to months to
'000) 30 Jun 12 30 Jun 11 30 Jun 12 30 Jun 11
-------------------------------------------------------------
Net sales 33,440 37,647 72,467 104,114
Other operating
income 142 1,085 1,499 1,421
Changes in
inventories of
finished goods and
work in
progress 23,844 26,893 46,322 39,674
Materials and
services (33,553) (31,894) (68,474) (68,204)
Personnel expenses (6,980) (6,626) (14,799) (13,421)
Depreciation,
amortization,
depletion and
impairment
charges (12,747) (11,618) (25,411) (22,816)
Other operating
expenses (15,016) (16,671) (33,905) (30,335)
-------------------------------------------------------------
Operating profit
(loss) (10,870) (1,184) (22,301) 10,433
Finance income 125 455 1,568 1,547
Finance cost (12,373) (9,125) (21,745) (18,512)
-------------------------------------------------------------
Finance income
(cost) (net) (12,248) (8,670) (20,177) (16,965)
Profit (loss)
before income tax (23,118) (9,854) (42,478) (6,532)
Income tax expense 5,642 2,360 10,093 988
-------------------------------------------------------------
Profit (loss) for
the period (17,476) (7,494) (32,385) (5,544)
-------------------------------------------------------------
Attributable to:
Owners of the
parent (15,999) (6,772) (29,560) (6,601)
Non-controlling
interest (1,477) (722) (2,825) 1,057
-------------------------------------------------------------
(17,476) (7,494) (32,385) (5,544)
-------------------------------------------------------------
Earnings per share for profit (loss) attributable to the owners of
the parent
(expressed in EUR per share)
Basic and diluted (0.06) (0.03) (0.12) (0.03)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited three Unaudited three Unaudited six Unaudited six
(all amounts in EUR months to months to months to months to
'000) 30 Jun 12 30 Jun 11 30 Jun 12 30 Jun 11
------------------------------------------------------------
Profit (loss) for
the period (17,476) (7,494) (32,385) (5,544)
Other comprehensive
income, items net of
tax
Cash flow hedges - (2,335) - (4,879)
Other comprehensive
income, net of tax - (2,335) - (4,879)
------------------------------------------------------------
Total comprehensive
income (17,476) (9,829) (32,385) (10,423)
------------------------------------------------------------
Attributable to:
Owners of the parent (15,999) (8,835) (29,560) (10,699)
Non-controlling
interest (1,477) (994) (2,825) 276
------------------------------------------------------------
(17,476) (9,829) (32,385) (10,423)
------------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
as at as at as at
(all amounts in EUR '000) 30 Jun 12 31 Dec 11 30 Jun 11
------------------------------
ASSETS
Non-current assets
Property, plant and equipment 773,623 761,985 741,006
Biological assets 7,691 7,688 8,317
Intangible assets 7,245 7,371 7,559
Deferred tax assets 37,292 26,398 24,047
Other receivables 2,919 2,902 2,970
Available-for-sale financial assets 4,578 630 590
833,348 806,974 784,489
Current assets
Inventories 290,567 240,436 219,105
Trade receivables 51,114 64,027 25,352
Other receivables 3,409 5,249 6,094
Financial assets at fair value through
profit or loss 11,898
Derivative financial instruments - 10 703
Cash and cash equivalent 128,735 40,019 34,628
473,825 349,741 297,780
Assets held for sale - - 39,395
Total assets 1,307,173 1,156,715 1,121,664
EQUITY AND LIABILITIES
Equity attributable to owners of
the parent
Share capital 80 80 80
Share issue - 278 -
Share premium 8,086 8,086 8,086
Hedge reserve - - 3,770
Other reserves 539,489 449,532 447,928
Retained earnings (182,466) (151,129) (149,068)
365,189 306,847 310,796
Non-controlling interest in equity 13,017 15,733 14,462
Total equity 378,206 322,580 325,258
Non-current liabilities
Borrowings 513,788 467,161 423,903
Advance payments 240,895 235,568 229,067
Provisions 5,438 6,036 5,278
760,121 708,765 658,248
Current liabilities
Borrowings 90,577 28,515 39,622
Advance payments 11,684 11,684 34,800
Trade payables 31,154 33,678 40,035
Other payables 35,430 51,478 22,644
Derivative financial instruments 1 15 1,057
168,846 125,370 138,158
Total liabilities 928,967 834,135 796,406
Total equity and liabilities 1,307,173 1,156,715 1,121,664
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
A Share capital
B. Share issue
C. Share premium
D. Hedge reserve
E. Invested unrestricted equity
F. Other reserves
G. Retained earnings
H. Total
I. Non-controlling interest
J. Total equity
(all amounts in EUR
'000)
A B C D E F G H I J
--------------------------------------------------------------------------------
1 Jan 11 80 91 8,086 7,494 401,612 31,399 (80,067) 368, 16, 385,
695 895 590
Profit (loss) (6, 1, (5,
for - - - - - - (6,601) 601) 057 544)
the period
Other
comprehensive
income
- Cash flow - - - (4,098) - - - (4, (4,
hedges 098) (781) 879)
-------------------------------------------------------------------
Total
comprehensive - - - (4,098) - - (6,601) (10, (10,
income for 699) 276 423)
the period
Transactions
with owners
Stock options - (91) - - 502 - -
411 - 411
Senior
unsecured 1, 1,
convertible - - - - 1,800 - - 800 - 800
bonds
due 2015
Acquisition (59, (2, (61,
of - - - 374 - 996 (60,509) 139) 349) 488)
subsidiary
Perpetual - - - - - - (1,891) (1, (360) (2,
capital loan 891) 251)
Incentive
arrangement - - - - - 47 - 47
for Executive 47 -
Management
Senior
unsecured
convertible 9, 9,
bonds - - - - - 9,018 - 018 - 018
due 2015,
equity
component
Employee
share
option scheme
- value of 2, 2,
employee - - - - - 2,554 - 554 - 554
services
-------------------------------------------------------------------
Total
contribution
by (47, (2, (49,
and - (91) - 374 2,302 12,615 (62,400) 200) 709) 909)
distribution
to
owners
Total (47, (2, (49,
transactions - (91) - 374 2,302 12,615 (62,400) 200) 709) 909)
with owners
-------------------------------------------------------------------
30 Jun 11 80 - 8,086 3,770 403,914 44,014 (149,068) 310, 14, 325,
796 462 258
-------------------------------------------------------------------
31 Dec 11 80 278 8,086 - 404,070 45,462 (151,129) 306, 15, 322,
847 733 580
1 Jan 12 80 278 8,086 - 404,070 45,462 (151,129) 306, 15, 322,
847 733 580
Profit (loss) (29, (2, (32,
for - - - - - - (29,560) 560) 825) 385)
the period
Other
comprehensive
income
- Cash flow - - - - - - - - - -
hedges
-------------------------------------------------------------------
Total
comprehensive - - - - - - (29,560) (29, (2, (32,
income for 560) 825) 385)
the period
Transactions
with owners
Stock options - (278) - - 5,198 - - 4, - 4,
920 920
Senior
unsecured
convertible - - - - - (251) - (251) - (251)
bonds
due 2013
Perpetual - - - - - 2,353 (1,777) 685
capital loan 576 109
- - - - 81,504 - - 81, 81,
Share issue 504 - 504
Incentive
arrangement - - - - - 47 - 47
for Executive 47 -
Management
Employee
share
option scheme
- value of 1, 1,
employee - - - - - 1,106 - 106 - 106
services
-------------------------------------------------------------------
Total
contribution
by - (278) - - 86,702 3,255 (1,777) 87, 88,
and 902 109 011
distribution
to owners
Total 87, 88,
transactions - (278) - - 86,702 3,255 (1,777) 902 109 011
with owners
-------------------------------------------------------------------
30 Jun 12 80 - 8,086 - 490,772 48,717 (182,466) 365, 13, 378,
189 017 206
-------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Unaudited Unaudited
three three six six
months to months to months to months to
(all amounts in EUR '000) 30 Jun 12 30 Jun 11 30 Jun 12 30 Jun 11
------------------------------------------------------
Cash flows from operating
activities
Profit (loss) for the
period (17,476) (7,494) (32,385) (5,544)
Adjustments for
Tax (5,642) (2,360) (10,093) (988)
Depreciation and
amortization 2,747 11,618 25,411 22,816
Other non-cash income and
expenses (6,252) (12,012) (12,037) (17,992)
Interest income (125) (455) (1,568) (1,547)
Fair value gains on
financial assets at fair
value through profit or
loss - (240) (5) (385)
Interest expense 12,373 9,124 21,745 18,511
------------------------------------------------------
(4,375) (1,819) (8,932) 14,871
Change in working capital
Decrease(+)/increase(-) in
other
receivables 1,242 36,364 15,949 37,707
Decrease (+)/increase (-)
in inventories (22,305) (28,221) (50,130) (43,743)
Decrease(-)/increase(+) in
trade and
other payables (8,738) (8,254) (21,296) (22,647)
------------------------------------------------------
Change in working capital (29,801) (111) (55,477) (28,683)
------------------------------------------------------
(34,176) (1,930) (64,409) (13,812)
Interest and other finance
cost paid (11,690) (9,704) (12,531) (11,514)
Interest and other finance
income 132 70 357 339
------------------------------------------------------
Net cash generated (used)
in operating
activities (45,734) (11,564) (76,583) (24,987)
Cash flows from investing
activities
Acquisition of subsidiary,
net of cash
acquired - (61,487) - (61,487)
Purchases of property,
plant and equipment (20,556) (25,013) (35,127) (35,384)
Purchases of biological
assets - (35) - (35)
Purchases of intangible
assets (101) (81) (194) (104)
Proceeds from sale of
property, plant and
equipment - - 18 -
Proceeds from sale of
biological assets 91 48 91 232
Purchases of financial
assets at fair value
through profit or loss - (12,010) - (12,010)
Purchases of available-
for-sale financial
assets (8,545) (90) (12,116) (128)
------------------------------------------------------
Net cash generated (used)
in investing
activities (29,111) (98,668) (47,328) (108,916)
Cash flows from financing
activities
Proceeds from share issue
net of transactions costs (39) - 81,138 -
Realised stock options 4,619 377 4,920 411
Proceeds from interest-
bearing liabilities 110,000 1,067 130,000 1,067
Perpetual capital loan - - - (3,042)
Proceeds from advance
payments 6,546 - 8,333 7,000
Payment of interest-
bearing liabilities (3,495) (1,234) (11,764) (2,460)
------------------------------------------------------
Net cash generated (used)
in financing
activities 117,631 210 212,627 2,976
Net increase (decrease) in
cash and
cash equivalents 42,786 (110,022) 88,716 (130,927)
Cash and cash equivalents
at beginning
of the period 85,949 144,650 40,019 165,555
------------------------------------------------------
Cash and cash equivalents
at end of
the period 128,735 34,628 128,735 34,628
------------------------------------------------------
NOTES
1. Basis of preparation
This year-end 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 2011.
2. Property, plant and equipment
Machinery Other
and Construction Land and tangible
(all amounts in EUR '000) equipment in progress buildings assets Total
--------------------------------------------------
Gross carrying amount at 1 Jan
12 361,245 41,344 273,921 224,796 901,306
Additions 1,863 34,883 - - 36,746
Disposals (34) - - - (34)
Transfers 1,729 (6,200) 2,602 1,869 -
--------------------------------------------------------------------------------
Gross carrying amount at 30
Jun 12 364,803 70,027 276,523 226,665 938,018
--------------------------------------------------
Accumulated depreciation and
impairment losses at 1 Jan 12 66,791 - 32,644 39,886 139,321
Disposals (17) - - - (17)
Depreciation for the period 14,855 - 6,096 4,140 25,091
--------------------------------------------------------------------------------
Accumulated depreciation and
impairment losses at 30 Jun 12 81,629 - 38,740 44,026 164,395
--------------------------------------------------
Carrying amount at 1 Jan 12 294,454 41,344 241,277 184,910 761,985
--------------------------------------------------
Carrying amount at 30 Jun 12 283,174 70,027 237,783 182,639 773,623
--------------------------------------------------
3. Trade receivables
(all amounts in EUR '000)
30 Jun 12 31 Dec 11
--------------------
Nickel-Cobalt sulphide 44,974 55,258
Zinc sulphide 6,140 8,769
--------------------
Total trade receivables 51,114 64,027
--------------------
4. Inventories
(all amounts in EUR '000)
30 Jun 12 31 Dec 11
--------------------
Raw materials and consumables 17,824 14,016
Work in progress 258,213 213,629
Finished products 14,530 12,791
--------------------
Total inventories 290,567 240,436
--------------------
5. Borrowings
(all amounts in EUR '000)
Non-current 30 Jun 12 31 Dec 11
--------------------
Capital loans 1,405 1,405
Investment and Working Capital loan 57,230 57,863
Bond due 2017 108,484
Revolving Credit Facility 69,278 49,110
Senior Unsecured Convertible Bonds due 2015 221,587 217,138
Senior Unsecured Convertible Bonds due 2013 - 80,796
Finance lease liabilities 34,946 37,444
Other 20,858 23,405
--------------------
513,788 467,161
--------------------
Current
Investment and Working Capital loan 1,430 1,430
Senior Unsecured Convertible Bonds due 2013 74,482 -
Commercial papers - 8,481
Finance lease liabilities 14,665 18,604
--------------------
90,577 28,515
--------------------
Total borrowings 604,365 495,676
--------------------
6. Advance payments
(all amounts in EUR '000)
Non-current 30 Jun 12 31 Dec 11
--------------------
Deferred zinc sales revenue 218,181 221,187
Deferred uranium sales revenue 22,714 14,381
--------------------
240,895 235,568
--------------------
Current
Deferred zinc sales revenue 11,684 11,684
--------------------
11,684 11,684
--------------------
Total advance payments 252,579 247,252
--------------------
7. Changes in the number of shares issued
Number of shares
-----------------------
31 Dec 11 245,781,803
Stock options 2007A 1,938,787
Share issue 24,589,050
-----------------------
30 Jun 12 272,309,640
-----------------------
8. Contingencies and commitments
(all amounts in EUR '000)
The future aggregate minimum lease payments
under non-cancellable operating leases
30 Jun 12 31 Dec 11
--------------------
Not later than 1 year 1,388 1,919
Later than 1 year and not later than 5 years 967 929
Later than 5 years 38 37
--------------------
2,393 2,885
Capital commitments
At 30 June 2012, the Group had capital commitments amounting to EUR 27.0 million
(31 December 2011: EUR 14.5 million) principally relating to the completion of
the Talvivaara mine, improving the reliability and expansion of production
capacity. These commitments are for the acquisition of new property, plant and
equipment.
Key financial figures of the
Group
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 12 30 Jun 11 30 Jun 12 30 Jun11 31 Dec 11
--------------------------------------------------
Net sales EUR '000 33,440 37,647 72,467 104,114 231,226
Operating profit
(loss) EUR '000 (10,870) (1,184) (22,301) 10,433 30,899
Operating profit
(loss) percentage -32.5 % -3.1 % -30.8 % 10.0 % 13.4 %
Profit (loss) before
tax EUR '000 (23,118) (9,854) (42,478) (6,532) (6,964)
Profit (loss) for the
period EUR '000 (17,476) (7,494) (32,385) (5,544) (5,216)
Return on equity -4.5 % -2.1 % -9.2 % -1.6 % -1.5 %
Equity-to-assets
ratio 28.9 % 29.0 % 28.9 % 29.0 % 27.9 %
Net interest-bearing
debt EUR '000 475,630 416,999 475,630 416,999 455,657
Debt-to-equity ratio 125.8 % 128.2 % 125.8 % 128.2 % 141.3 %
Return on investment -0.5 % 0.2 % -1.2 % 1.6 % 4.0 %
Capital expenditure EUR '000 20,657 25,129 35,321 35,523 79,144
Property, plant and
equipment EUR '000 773,623 741,006 773,623 741,006 761,985
Derivative financial
instruments EUR '000 (1) (354) (1) (354) (5)
Borrowings EUR '000 604,365 463,525 604,365 463,525 495,676
Cash and cash
equivalents at
the end of the period EUR '000 128,735 46,526 128,735 46,526 40,019
Share-related key figures
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 12 30 Jun 11 30 Jun 12 30 Jun 11 31 Dec 11
----------------------------------------------------------
Earnings per
share EUR (0.06) (0.03) (0.12) (0.03) (0.04)
Equity per
share EUR 1.40 1.27 1.40 1.27 1.25
Development of share
price
at London Stock
Exchange
Average trading
price(1) EUR 2.21 5.50 2.99 6.12 4.22
GBP 1.82 4.86 2.46 5.31 3.66
Lowest trading
price(1) EUR 1.57 4.56 1.57 4.64 2.25
GBP 1.29 4.03 1.29 4.03 1.95
Highest trading
price(1) EUR 2.95 6.59 4.37 7.16 7.17
GBP 2.43 5.82 3.59 6.22 6.22
Trading price
at the
end of the
period(2) EUR 2.13 5.15 2.13 5.15 2.39
GBP 1.72 4.65 1.72 4.65 2.00
Change during
the period -28.8 % -20.0 % -14.3 % -21.9 % -66.4 %
Price-earnings
ratio neg. neg. neg. neg. neg.
Market
capitalization
at
the end of the EUR 588,
period(3) '000 578,844 1,265,975 578,844 1,265,975 487
GBP 491,
'000 467,011 1,142,605 467,011 1,142,605 564
Development in
trading volume
1000 67,
Trading volume shares 29,445 14,927 66,716 26,347 799
In relation to
weighted
average number
of shares 11.3 % 6.1 % 25.6 % 10.8 % 27.6 %
Development of
share price
at OMX Helsinki
Average trading
price EUR 2.13 5.55 2.99 6.16 4.33
Lowest trading
price EUR 1.57 4.53 1.57 4.53 2.27
Highest trading
price EUR 2.92 6.63 4.35 7.34 7.34
Trading price
at the
end of the
period EUR 2.12 5.16 2.12 5.16 2.49
Change during
the period -27.1 % -21.8 % -14.9 % -27.0 % -64.8 %
Price-earnings
ratio neg. neg. neg. neg. neg.
Market
capitalization
at
the end of the EUR 612,
period '000 577,296 1,267,923 577,296 1,267,923 488
Development in
trading volume
1000 190,
Trading volume shares 46,221 44,708 114,894 82,728 901
In relation to
weighted
average number
of shares 17.8 % 18.3 % 44.2 % 33.9 % 77.7 %
Adjusted
average
number of 245,601,
shares 260,218,489 244,339,128 260,218,489 244,339,128 204
Fully diluted
average
number of 244,497,
shares 260,218,489 244,339,128 260,218,489 244,339,128 204
Number of
shares at the
end of the 245,781,
period 272,309,640 245,721,603 272,309,640 245,721,603 803
(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 12 30 Jun 11 30 Jun 12 30 Jun 11 31 Dec 11
--------------------------------------------------
Wages and salaries EUR '000 5,693 5,405 12,274 11,262 21,574
Average number of
employees 548 451 548 429 445
Number of employees
at the end
of the period 595 481 595 481 461
Other figures
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 12 30 Jun 11 30 Jun 12 30 Jun 11 31 Dec 11
--------------------------------------------------
Share options outstanding at
the
end of the period 4,611,337 5,796,111 4,611,337 5,796,111 6,501,151
Number of shares to be issued
against the outstanding share
options 4,611,337 5,796,111 4,611,337 5,796,111 6,501,151
Rights to vote of shares to be
issued
against the outstanding share
options 1.7 % 2.4 % 1.7 % 2.4 % 2.6 %
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
Return on investment Profit (loss) for the period + Finance cost
-------------------------------------------------------
(Total equity at the beginning of period + Total
equity at the end of period)/2 + (Borrowings at the
beginning of period + Borrowings at the end of
period)/2
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
--------------------------------------------------------------------------------
[HUG#1633525]
Talvivaara Mining Company Interim Report for January-June 2012
| Source: Talvivaaran Kaivososakeyhtiö Oyj
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