Stock Exchange Release
Talvivaara Mining Company Plc
30 September 2014
Talvivaara Mining Company Interim Report for January-June 2014
Steady metals production and improved nickel price have allowed continuation of
operations and
corporate reorganisation while financing solutions remain pending
Highlights
Q2 2014
* Nickel production of 3,189t (Q2 2013:1,776t) and zinc production of 5,836t
(Q2 2013:4,465t)
* Metals production exceeded the amounts achieved in Q1 2014 and were the
highest since
Q3 2012 despite no new ore having been mined for leaching since November
2013
* Net sales EUR 39.2m (Q2 2013: EUR 13.0m)
* Operating loss EUR (4.2)m (Q2 2013: EUR (23.9)m)
* Loan and streaming holiday agreement with Nyrstar for an up to EUR 20m loan
facility and option to sell up to 80,000t of zinc to Nyrstar at market
prices for an additional financing impact of more than EUR 60m at current
zinc prices
* Talvivaara Sotkamo was granted an environmental permit decision on 30 April
2014 relating to its whole operation and uranium recovery; however,
operations continue under the old permit for the time being, as the new
permit is not yet final and binding due to appeals
H1 2014
* Nickel production of 6,257t (H1 2013: 4,508t) and zinc production of
11,562t (H1 2013: 7,593t)
* Net sales EUR 68.2m (H1 2013: EUR 40.6m)
* Operating loss EUR (11.2)m (H1 2013: EUR (43.8)m)
Events after the reporting period
* Metals production has continued steady in Q3 2014, however at slightly
declining quantities compared to the previous quarter due to the ageing of
the current heaps and continuing suspension of mining and materials handling
operations; production year-to-date through 28 September has amounted to
8,363t of nickel and 16,189t of zinc
* Water balance at the Talvivaara mine site improved over the summer and there
is now significant capacity available for possible emergency situations
* Investments are on-going into additional reverse osmosis water treatment
capacity and a further water storage area through the construction of the
Kulju dam
* The consideration of charges relating to the gypsum pond leakage and
discharges into water ways was completed on 22 September 2014; the
prosecutor has decided to bring charges against four members of Talvivaara's
management on aggravated impairment of the environment, as well as requested
a corporate fine imposed on Talvivaara Sotkamo and compensation for the
benefit obtained by the alleged crime;
the Company does not share the prosecutor's view of the threshold for
charges having been met
* The Company continues to draw down the up to EUR 20 million loan facility
from Nyrstar agreed in April 2014 for short term funding; to date, EUR 10.7
million of the facility has been drawn
Corporate reorganisation
* According to the estimate of the Administrator of the corporate
reorganisation proceedings of Talvivaara Mining Company Plc ("Talvivaara" or
the "Company") and its operating subsidiary Talvivaara Sotkamo Ltd
("Talvivaara Sotkamo"), the companies' business operations have during the
restructuring proceedings proved to be viable, and the Administrator has on
the date of this announcement submitted restructuring programme proposals
for both companies to the Espoo District Court
* For Talvivaara, an eight-year restructuring programme is proposed and based
on the cash flow from the services sold by it to its operating subsidiary
and on its role as the entity responsible for the Group's fundraising
* In the Administrator's view, the value of the Group's restructuring debt
secured by collateral is a maximum of EUR 56 million; the proposal suggests
a 97% haircut to the Company's unsecured restructuring debts
* For Talvivaara Sotkamo, the proposal is based on realisation restructuring,
in which the business operations and assets of Talvivaara Sotkamo are to be
sold to a newly formed entity owned mainly by Talvivaara and the funds
obtained from the sale are used to pay off or purchase restructuring debts;
unsecured debts are to be repaid at 1% of their nominal value
* For both companies, implementation of the restructuring programmes remains
subject to sufficient creditor support and an adequate long term financing
solution; the Company continues to explore all possible sources of finance
for Talvivaara and the new operating subsidiary to be formed, including e.g.
a bond and/or share issue and the involvement of one or more cornerstone
investors
Key figures
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Q2 Q2 Q1-Q2 Q1-Q2 FY
EUR million 2014 2013 2014 2013 2013
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Net sales 39.2 13.0 68.2 40.6 77.6
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Operating loss (4.2) (23.9) (11.2) (43.8) (701.8)
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% of net sales (10.6)% (183.3)% (16.5)% (107.9)% (904.7)%
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Loss for the period (14.1) (27.6) (31.2) (51.5) (812.4)
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Earnings per share, EUR (0.00) (0.03) (0.01) (0.05) (0.48)
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Equity-to-assets ratio (53.3)% 37.0% (53.3)% 37.0% (46.1)%
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Net interest bearing debt 553.4 409.5 553.4 409.5 548.7
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Debt-to-equity ratio (173.7)% 81.2% (173.7)% 81.2% (190.9)%
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Capital expenditure 0.1 15.3 1.6 32.6 60.5
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Cash and cash equivalents at the 6.0 101.1 6.0 101.1 5.9
end of the period
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Number of employees at the end of 501 673 501 673 549
the period
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All reported figures in this release have been prepared on a going concern basis
and are unaudited.
CEO Pekka Perä comments: "Our second quarter 2014 was another period of steady
operational performance with production volumes exceeding those achieved in any
quarter since Q3 2012. Furthermore, our January-June production of 6,257t of
nickel was already 72% of the amount we produced in all of 2013, which further
confirms the good leaching performance of our primary heaps 1 and 4 as well the
coming of age of our metals recovery plant that has run at above 90%
availabilities throughout the year to date.
Our mining and materials handling operations have remained suspended since
November 2013 with the exception of a trial period of reclaiming old primary
heaps over some weeks during the spring. Because we have not produced new ore
under leaching for almost a year now, our production volumes have started to
decline during the third quarter, as anticipated. However, our year-to-date
nickel production through 28 September has amounted to 8,363t, which continues
to be well ahead of last year's production pace.
Whilst the performance of the two currently operating heaps has been good, the
overall production volumes compared to the planned full scale operations have,
due to the Company's financial restrictions, still remained limited. This is
reflected in our financial results, which for the second quarter showed an
operating loss of EUR 4.2 million and for the first six months of the year EUR
11.2 million. Although loss making periods can never be considered satisfactory,
we have nonetheless managed to narrow down the operating loss substantially over
the recent quarters as a result of our own operational improvements and cost
control measures and with the help of the improved nickel price, which was
around USD 18,000-19,000 per tonne during the spring and early summer.
Environmental performance and in particular water management remains in our
focus and I am pleased to note that water balance at the mine site has improved
through the second quarter and also thereafter such that, heading into the
autumn, there is now significant capacity available for possible emergency
situations. To improve the situation further, we are proceeding with investments
into additional reverse osmosis water treatment capacity and the construction of
the Kulju dam. Moreover, we are in the process of applying for an environmental
permit for a discharge pipe for purified waters to be led to Lake Nuasjärvi
which, if approved, provides a sustainable long term solution for the mine's
water management.
The Company and Talvivaara Sotkamo's corporate reorganisation proceedings have
now progressed to a stage where the Administrator has submitted restructuring
programme proposals for both companies to the Espoo District Court. The
implementation of the programmes remains subject to sufficient creditor support
as well as completion of adequate financing solutions for the Group. For the
short term, we continue generating revenues for our product sales and drawing
down the up to EUR 20 million loan agreed with Nyrstar in April. The longer term
solution still remains pending, and whilst we consider the completion of such
solution achievable, potentially through e.g. a bond and/or share issue and the
involvement of one or more cornerstone investors, we also have to acknowledge
that reaching a positive outcome is not certain and that the Company can give no
assurance that any reorganisation plan will be approved or that the
reorganisation process will ultimately be successful.
Operationally, our outlook for the short term is based on continuing metals
extraction from the existing heaps, mainly the primary heaps 1 and 4. Due to
the high rate or depletion from these heaps, the metal grades in solution and
therefore also our production volumes are anticipated to decline somewhat from
the previous months' levels going into the fourth quarter. In order to reduce
the rate of decline, we are evaluating the possibilities of re-starting the
reclamation of the old, inactive primary heaps to boost their leaching. Whilst
we anticipate being able to resume reclaiming in limited quantities in the near
future, our mining operations will remain suspended until the longer term
financing arrangements have been secured.
The short term market outlook appears slightly more cautious than in the
beginning of the summer. Whilst the Indonesian ban on nickel ore exports has
held well, the Chinese have been able to start sourcing part of their ore
requirement for nickel pig iron production from the Philippines. This, in turn,
has delayed the nickel market turning into deficit and contributed to the recent
softness in nickel prices. In longer term, the nickel market continues to look
more favourable with the stainless steel demand supporting the nickel market
better than in the recent times, and an ore export ban being proposed also in
the Philippines.
Although our personnel have had to endure continued uncertainty relating to the
Company's future already for some time, they have tirelessly continued their
work and achieved remarkable results. Recent demonstrations of this dedication
have been for example the all-time monthly record in the average solution flow
rate through our metals plant at 1,548 m3/h in August and the over 93%
availability of the plant year-to-date. My sincere thanks and appreciation go to
all our employees for their efforts and persistence, and I continue looking
forward to a brighter future with them."
Enquiries:
Talvivaara Mining Company Plc. Tel. +358 20 712 9800
Pekka Perä, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO
Press conference and conference call on 30 September 2014 at 12:00 pm UK / 2:00
pm Finland
Talvivaara and the Administrator for Talvivaara's corporate reorganisation
proceedings, Mr. Pekka Jaatinen, will host a joint press conference and
conference call on 30 September 2014 at 12:00 pm UK / 2.00 pm Finland at Scandic
Hotel Marski (Mannerheimintie 10, 00100 Helsinki). Participants that are not
able to attend the event can listen to the press conference via conference call
as well as present questions to the Company's management and the Administrator
following the presentations. The press conference will be held in Finnish.
The conference call facility can be accessed at
Participant - Finland: +358 (0)9 2319 4455
Participant - UK: +44 (0)1452 541 003
Participant - US: +1 646 7412 120
Conference ID: 10943603
Financial review
Q2 2014 (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 2014 amounted to
EUR 39.2 million (Q2 2013: EUR 13.0 million). Net sales grew by 202% compared to
the year before and by 35.2% compared to Q1 2014 due to increased amounts or
product deliveries and the improved nickel price. Product deliveries in Q2 2014
amounted to 3,004t of nickel, 79t of cobalt and 16,400t of zinc (Q2 2013:1,756t
of nickel, 67t of cobalt and 2,081t of zinc). The large quantity of zinc
deliveries in Q2 2014 were the result of zinc being stored at the Kokkola port
from November 2013 through early April 2014 while delivery conditions under the
corporate reorganisation proceedings were being evaluated.
Changes in inventories of finished goods and work in progress amounted to EUR
(4.2) million (Q2 2013: EUR 16.0 million). The work in progress decreased during
the period, as ore production remained suspended and the inventories were
reduced as a result of continued metals production from the existing ore heaps.
Operating loss for Q2 2014 was EUR (4.2) million (Q2 2013: EUR (23.9) million),
corresponding to an operating margin of (10.6)% (Q2 2013: (183.3)%). During the
period, materials and services amounted to EUR (18.8) million (Q2 2013: EUR
(19.1) million) and other operating expenses to EUR (8.1) million (Q2 2013: EUR
(12.7) million). The improvement in the operating result reflected primarily
improved production volumes and a moderate increase in nickel price compared to
the year before. The comparatively small net movement in production costs
reflected on one hand the increase in variable costs resulting from higher
volumes of metals production, and on the other hand the continued suspension of
ore production and related savings.
Loss for the quarter amounted to EUR (14.1) million (Q2 2013: EUR (27.6)
million).
Balance sheet and financing
Capital expenditure during the second quarter of 2014 totalled EUR 0.1 million
(Q2 2013: EUR 15.3 million). Due to the tight liquidity situation, all capital
expenditure was minimised and focused only on necessary maintenance and
environmental investments.
H1 2014 (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 the six month period ended 30 June 2014
amounted to EUR 68.2 million (H1 2013: EUR 40.6 million). The increase in net
sales compared to the year before reflected primarily increased product
deliveries. On average, the movement in nickel prices year-on-year was
relatively minor with prices weakening from around USD 18,000/t to USD
13,000-14,000/t in H1 2013 and moving largely in the same range, but in opposite
direction in H1 2014. Product deliveries in H1 2014 amounted to 6,124t of
nickel, 142t of cobalt and 16,400t of zinc (H1 2013: 4,501t of nickel, 155t of
cobalt, 4,297t of zinc).
The Group's other operating income amounted to EUR 0.6 million (H1 2013: EUR
1.2 million) and mainly resulted from sales of timber.
Changes in inventories of finished goods and work in progress amounted to EUR
(5.4) million (H1 2013: EUR 23.3 million). Due to the suspension of mining and
materials handling operations since November 2013, no new ore was stacked during
H1 2014. Consequently, the work in progress decreased as metals were removed
from the ore heaps as a result of continued metals production.
Employee benefit expenses were EUR (12.5) million in H1 2014 (H1 2013: EUR
(15.5) million), with the reduced expenses attributable to the on-going lay-offs
and decreased number of personnel.
The operating loss for H1 2014 was EUR (11.2) million (H1 2013: EUR (43.8)
million. Materials and services amounted to EUR (33.7) million in H1 2014 (H1
2013: EUR (41.7) million) and other operating expenses were EUR (16.5) million
(H1 2013: EUR (25.3) million). The largest cost items included chemicals used
for metals precipitation and water purification, and electricity. Due to the
ongoing suspension of ore production since November 2013, mining and materials
handling costs were limited to ongoing maintenance expenses and the costs
associated with the reclaiming trials during the spring.
Finance income for H1 2014 was EUR 0.3 million (H1 2013: EUR 0.4 million).
Finance costs were EUR (20.3) million (H1 2013: EUR (24.8) million) and
consisted mainly of interest accrued on borrowings. However, due to the ongoing
corporate reorganisation proceedings of the Company and Talvivaara Sotkamo, no
interest payments on borrowings were made. The eventual treatment of interests
and repayment of restructuring debt will be decided as part of the restructuring
programmes, the proposals for which were submitted to the Espoo District Court
on 30 September 2014, i.e. the day of this announcement.
Loss for the first half of 2014 and the total comprehensive income amounted to
EUR (31.2) million (H1 2013: EUR (51.5) million). Earnings per share were EUR
(0.01) in H1 2014 (H1 2013: EUR (0.05)).
Balance sheet
Capital expenditure in H1 2014 totalled EUR 1.6 million (H1 2013: EUR 32.6
million). The expenditure primarily related to water management. On the
consolidated statement of financial position as at 30 June 2014, property, plant
and equipment totalled EUR 294.9 million (31 December 2013: EUR 305.0 million),
which in comparison to periods prior to Q4 2013 reflects the EUR 499.3 million
impairment charge recognised at year-end 2013.
In the Group's assets, inventories amounted to EUR 256.7 million on 30 June
2014 (31 December 2013: EUR 261.5 million). At year-end 2013, an impairment
charge of EUR 93.7 million was recognised on the inventory. Subsequently, the
decrease in inventory in H1 2014 reflects metals production from the existing
heaps while no new ore has been added to the inventory due to the suspension of
ore production since November 2013.
Trade receivables amounted to EUR 3.6 million on 30 June 2014 (31 December
2013: EUR 10.4 million).
On 30 June 2014, cash and cash equivalents totalled EUR 6.0 million (31 December
2013: EUR 5.9 million).
In equity and liabilities, total equity amounted to EUR (318.7) million on 30
June 2014 (31 December 2013: EUR (287.5) million).
Talvivaara has continued to treat and discharge the excess waters retained at
the mine site after the gypsum pond leakage of November 2012. As a result of the
costs incurred in water treatment, primarily arising from the use of limestone
and milk of lime, EUR 2.3 million of environmental provisions have been de-
recognised during the first half of the year, from EUR 13.3 million on 31
December 2013 to EUR 11.0 million at the end of June 2014.
Borrowings increased from EUR 554.6 million on 31 December 2013 to EUR 559.4
million at the end of June 2014, with the net increase primarily due to the
draw-downs of the up to EUR 20 million loan facility agreed with Nyrstar on 1
April 2014. The draw-downs progressed during the second quarter in relation to
the amount of zinc delivered to Nyrstar and amounted to EUR 7.7 million at the
end of the period.
The Group's borrowings, with the exception of finance lease liabilities and new
debt incurred since the Company and Talvivaara Sotkamo's filing for corporate
reorganisation in November 2013, are restructuring debts, the payment terms of
which, including repayment amounts, interests and repayment schedules, will be
determined as part of the companies' restructuring programmes. Proposals for the
restructuring programmes have been submitted by the Administrator to Espoo
District Court on 30 September 2014, i.e. on the date of this announcement.
Total advance payments from Nyrstar and Cameco Corporation as at 30 June 2014
amounted to EUR 278.2 million (31 December 2013: 286.1 million).
Total equity and liabilities as at 30 June 2014 amounted to EUR 597.4 million
(31 December 2013: EUR 623.3 million).
Financing
On 1 April 2014, the Company and Talvivaara Sotkamo entered into a loan and
streaming holiday agreement ('the Agreement') with Nyrstar Sales and Marketing
AG ("Nyrstar"). Under the Agreement, Nyrstar makes available to Talvivaara a
loan facility of up to EUR 20 million. Nyrstar makes the facility available in
several tranches with the amount of each advance calculated with reference to a
corresponding delivery by Talvivaara Sotkamo of zinc in concentrate under the
original zinc streaming agreement of February 2010.
Subject to Talvivaara securing an adequate overall financial solution, the
Company also has an option to enter into a streaming holiday for delivery
volumes of up to 80,000 tonnes of zinc in concentrate. During the streaming
holiday, Nyrstar commits, outside the framework of the original contract, to
purchase zinc concentrate from Talvivaara at market terms. The streaming
holiday, if used in full, has an over EUR 60 million additional financing impact
for the Company at current zinc prices.
In return for the holiday, the value sharing mechanism of the original zinc
streaming agreement will be amended to reduce on a pro rata basis such that, if
the full holiday period is elected, the value sharing mechanism thereafter
becomes nil. When applied, the value sharing mechanism allows Talvivaara to
receive a cash consideration for its deliveries that is higher than the
extraction and processing fee determined in the zinc streaming agreement.
Nyrstar's obligation to extend financing under the loan facility will cease at
the earlier of the aggregate amount outstanding including accrued interest
exceeding EUR 20 million or the commencement of a streaming holiday. As at 30
June 2014, Talvivaara had drawn EUR 7.7 million of the Nyrstar loan facility.
Going concern
Talvivaara's interim results for January - June 2014 have been prepared on a
going concern basis, which assumes that the Company will be able to realise its
assets and discharge its liabilities in the normal course of business for the
foreseeable future.
The Company is working together with the Administrator towards finding
appropriate financing solutions for the Group going forward. On 1 April 2014,
Talvivaara entered into a loan and streaming holiday agreement with Nyrstar for
a loan facility of up to EUR 20 million. Continuing draw-downs of this facility
together with stable production performance and the positive development in
nickel price over the recent months have provided Talvivaara with sufficient
liquidity to continue the corporate reorganisation and its operations for the
time being. To secure the Group's long term viability, Talvivaara is in
discussions with potential cornerstone investor(s) relating to their
participation in an overall financial solution for the Group through new
financial instrument(s), which may include e.g. a bond and/or a share issue. The
Company considers such overall financial solution to be achievable, however
acknowledging that reaching a positive outcome is not certain and that the
Company can give no assurance that the submitted restructuring programmes are
approved or that the reorganisation process will ultimately be successful.
As of the date of the announcement of the Company's H1 2014 interim results, the
Directors, Management and the Administrator do not contemplate the liquidation
of Talvivaara, and the reorganisation of the Company is proposed to be carried
out through a typical eight-year restructuring programme. Reorganisation of
Talvivaara Sotkamo is proposed to be based on realisation restructuring, in
which the business operations and assets of Talvivaara Sotkamo are to be sold to
a newly formed entity in which Talvivaara is the main owner. The funds obtained
from the sale are to be used to pay off or purchase Talvivaara Sotkamo's
restructuring debts. Although the realisation restructuring is effectively a
liquidation, the proposed procedure does not have an impact on the presentation
of the Group's financial results as such, as the receiving entity is also a
Group company and consolidated as part of the Group accounts.
With consideration to the proposed restructuring programmes, the Group's
financial situation and plans for achieving an overall financial solution, the
Directors and Management believe that the going concern basis of presentation is
appropriate despite the uncertainties associated with the contemplated financing
transactions as well as the reorganisation proceedings. However, the Directors
and Management acknowledge that the Company's liquidity situation continues to
cause material uncertainty that casts significant doubt upon the Group's ability
to continue as a going concern and that, therefore, the Group may be unable to
realise its assets and discharge its liabilities in the normal course of
business. Should the going concern basis prove inappropriate in the foreseeable
future, adjustments to the carrying amounts and/or classifications of
Talvivaara's assets and liabilities would be necessary.
The Group's ability to continue as a going concern is dependent not only on the
successful completion of the contemplated financing transactions and
authorisation and implementation of the proposed restructuring programmes, but
also on Talvivaara's ability to successfully implement its business plan at the
Talvivaara mine and on the prevailing market conditions. At the time of the
Company's H1 2014 interim results on 30 September 2014, it is not possible to
foresee whether Talvivaara will be able to execute its financing, reorganisation
and operational plans or whether the execution of these will improve the Group's
financial condition sufficiently to allow it to continue as a going concern.
The restructuring programmes to be authorised by the District Court of Espoo
will, if approved as proposed, materially change the carrying amounts and
classifications reported in the Group's financial statements. The assets and
liabilities in the Company's H1 2014 interim results do not reflect any
adjustments proposed or authorised as part of such restructuring programmes.
Furthermore, the interim results do not aim to reflect or provide for the
consequences of the corporate reorganisation proceedings, such as: (i) the
realisable value of the Group's assets on a liquidation basis or their
availability to satisfy liabilities, (ii) the amounts of loans and debts subject
to restructuring and priority thereof, (iii) or the effect on the Group's
consolidated income statement of any changes potentially made to its business as
a result of the final restructuring programme. However, in view of the inherent
uncertainty brought about by the corporate reorganization proceedings,
operational challenges caused by and partly continuing as a result of water
balance issues, and the weak nickel price environment that prevailed for most of
2013 and into early 2014, the Group has made substantial impairment charges in
its FY 2013 financial statements related to its tangible assets, inventories and
deferred tax assets. Further, the challenging liquidity position and the
commencement of the corporate reorganisation proceedings for the Company and
Talvivaara Sotkamo have resulted in breach of covenants and default events in
accordance with the respective terms and conditions of the companies' loan
agreements resulting in adjustments to the carrying values and classifications
of such loans.
Production review
During the second quarter, Talvivaara produced 3,189t of nickel (Q2
2013: 1,776t) and 5,836t of zinc (Q2 2013: 4,465t). During the first half of
2014, Talvivaara produced 6,257t of nickel (H1 2013: 4,508t) and 11,562t of zinc
(H1 2013: 7,593t).
Talvivaara's metals production was mainly supported by the good performance of
primary heaps 1 and 4, which were taken to production during the second half of
2013. However, as no new ore has been mined for leaching since November 2013,
the production has been sustained by bleeding solution from the currently
operating heaps at higher than designed rates. As a result, the nickel grade in
solution pumped to the metals plant decreased during the quarter and was at the
level of 1.0 g/l at the end of June.
The average feed flow to the metals recovery plant during the second quarter was
1,349 m3/h including all stoppages, but reached the running rate of 1,600 m3/h
regularly. The cost efficiency of production at the metals plant remained
satisfactory despite the declining metal grades in solution.
Talvivaara's ore production has been suspended since November 2013. Reclamation
of the old primary heaps was commenced on trial basis in May, but suspended
again in mid-June due to the Company's tight liquidity situation. In addition,
the use of a surface miner for reclaiming was tested in June, yielding promising
results. The Company has since continued evaluating relevant equipment
requirements for capacity increase and cost savings for the reclaiming function
in the future, and also utilized the surface miners for the maintenance of heap
surfaces to improve heap permeability and quality of irrigation.
Production key figures
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Q2 Q2 Q1-Q2 Q1-Q2 FY
2014 2013 2014 2013 2013
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Mining
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Ore production Mt - 1.8 - 1.8 7.4
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Waste production Mt - 0.9 - 0.9 3.1
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Materials handling
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Stacked ore Mt - 1.8 - 1.8 7.7
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Bioheapleaching
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Ore under leaching Mt 51.8 46.1 51.8 46.1 51.8
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Metals recovery
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Nickel metal content Tonnes 3,189 1,776 6,257 4,508 8,662
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Zinc metal content Tonnes 5,836 4,465 11,562 7,593 17,418
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Sustainable development, safety and permitting
Safety
At the end of the second quarter, the injury frequency among the Talvivaara
personnel was 34.1 lost time injuries/million working hours on a rolling 12
month basis (30 June 2013: 19.5 lost time injuries/million working hours).
Recent focus has been particularly on improved work hygiene with the target of
mitigating any risk of unnecessary exposure by the employees to harmful
substances present in the work place.
Environment
Talvivaara continues to focus on minimising the environmental impact of its
operations. Current primary focus is on water balance management.
Treatment and discharge of excess waters from the mine area continued throughout
the second quarter, but discharge was minimized in June to avoid exceeding the
permitted discharge quotas for sulphate and zinc. Treatment of contaminated
waters within the mining area has, however, continued despite the limited
discharge rate, which has improved the quality of water that continues to be
stored at the mine site.
Emergency volumes in the water storage areas around the mine site increased
through the second quarter and also later into the summer as a result of
evaporation, recycling of process waters and discharge of purified water.
Consequently, there is now significant capacity available for possible emergency
situations. Excess free water from the gypsum ponds has been removed down to a
level required by normal operations.
The environmental monitoring results of 2014 from the nearby lakes indicate no
unexpected outcomes. The waters in the small lakes to the north (Lake Salminen
and Lake Kalliojärvi) and to the south (Lake Kivijärvi) are still stratified.
However, sulphate concentrations in the first larger water body to the north,
Lake Kolmisoppi, have decreased substantially during the year and no long-term
stratification has been detected. In Lakes Jormasjärvi and Laakajärvi, which are
the first significant lakes outside the mine area in terms of their recreational
use, the sulphate concentrations are at expected levels. Beyond the sulphate
concentrations which are still elevated from their natural levels, no other
effects, e.g. on fish, have been found.
Talvivaara places significant emphasis on timely and transparent communication
on environmental matters with the neighbouring communities and other interested
stakeholders. The locally focused Finnish language website www.paikanpaalla.fi
continued to be successfully used for the delivery of locally relevant, timely
information and for interaction with interested stakeholders. The Company also
conducted well received Twitter question and answer sessions with Talvivaara's
sustainability experts.
Permitting
Talvivaara Sotkamo received an environmental permit decision relating to the
whole Talvivaara operation and an environmental permit for the uranium recovery
from the Northern Finland Regional State Administrative Agency ("AVI") on 30
April 2014. Talvivaara appealed against several parts of the permit decision,
including the method of assessment of the guarantees to be set under the permit.
The required guarantees under the new permit have been stated at EUR 107
million, which the Company does not believe to be justified under the applicable
law and permitting practice, and which exceeds the current level of guarantees,
EUR 34 million, by more than three-fold.
For the time being, Talvivaara continues operating under the previously
obtained, existing permits until the new permit is final. It is expected that
the appeal process in a case of this scale will last for a number of years.
Legal proceedings
The Kainuu Centre for Economic Development, Transport and the Environment (the
"ELY Centre") has issued administrative injunction decisions requesting
Talvivaara Sotkamo to acquire additional reverse osmosis water purification
capacity and to construct more pond capacity for excess waters at the mine area.
The ELY Centre has also imposed a threat to purchase the required additional
reverse osmosis capacity at Talvivaara Sotkamo's expense. In the meantime,
Talvivaara Sotkamo has had its own plans to purchase additional reverse osmosis
capacity and continued negotiations relating thereto. According to Talvivaara's
plans the additional reverse osmosis capacity will be delivered and commissioned
during the fall of 2014. Also the additional pond capacity is under
construction and will be ready by the end of 2014. As the decisions of the ELY
Centre are, due to Talvivaara Sotkamo's own plans, unnecessary and unfeasible
and are not in the Company's view based on law, Talvivaara has appealed the ELY
Centre's decisions to the Vaasa Administrative Court.
In September, the ELY Centre has concluded the Talvivaara Sotkamo's own actions
in the acquisition of the required reverse osmosis capacity are sufficient, as
further described in the events after the review period.
Business development and commercial arrangements
Participation in Fennovoima nuclear power project
Talvivaara announced on 21 February 2014 its support for the Fennovoima nuclear
power project, but noted that under the current circumstances the Company
focuses all its financial resources on the Sotkamo operation and the ongoing
corporate reorganisation process. For the time being Talvivaara is not in a
position to commit to additional funding of the Fennovoima project, but will
reassess its ability for further participation once more clarity into its
financing situation is obtained and the corporate reorganisation process
proceeds. There was no change in Talvivaara's position relating to Fennovoima
during the second quarter of 2014.
Annual General Meeting
Talvivaara's Annual General Meeting was held on 12 June 2014 in Sotkamo,
Finland. The resolutions of the AGM included:
* that the annual fee payable to the members of the Board of Directors for the
term until the close of the Annual General Meeting in 2015 be as follows:
Chairman of the Board of Directors: EUR 84,000/year, Deputy Chairman (Senior
Independent Director): EUR 48,000/year, Chairmen of the Board Committees:
EUR 48,000/year, other Non-executive Directors: EUR 33,500/year and
Executive Directors EUR 33,500/year. In addition to the annual fee, a fee of
EUR 600 per meeting shall be payable.
* that the number of Board members be seven (7) and that Mr. Tapani Järvinen,
Mr. Pekka Perä, Mr. Graham Titcombe, Mr. Edward Haslam, Mr. Stuart Murray
and Ms. Maija-Liisa Friman be re-elected to the Board and that Ms. Solveig
Törnroos-Huhtamäki be elected as a new member to the Board.
* that the corporate reorganisation application of the Company, based on which
the Espoo District Court decided on 29 November 2013 to commence corporate
reorganisation proceedings, be continued.
* that the Board of Directors be authorised to cancel the listing of the
Company's shares on the official list maintained by the UK Financial
Services Authority and to remove such shares from trading on the main market
for listed securities of London Stock Exchange plc.
* that a share issue without consideration be directed to the Company; the
number of the new shares issued is 190,615,000.
* that the Board of Directors be authorised to resolve on the conveyance and
repurchase of a maximum of 190.615.000 treasury shares; the authorisation
for share conveyance is valid through 11 June 2019 and the authorisation for
share repurchase through 11 December 2015.
Risk factors
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 Talvivaara's
historical and current operational challenges, environmental hazards and
challenges, including water balance and water management issues, 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, legal proceedings, counterparties,
currency exchange ratios, and risks related to Talvivaara's mining concessions
and permits.
In addition to the above, Talvivaara's risk factors in the short term include
particularly such risks that relate to the ongoing corporate reorganisation
proceedings, financing and going concern:
If an adequate overall financial solution is not found, Talvivaara's
restructuring programme may not be approved and authorised and shareholders
could lose their entire investment in the Company
The approval and authorisation of the proposed restructuring programmes of
Talvivaara and Talvivaara Sotkamo are conditional, among other things, on an
adequate long-term financing solution being secured. If such financial solution
is not found, the restructuring programmes may not be approved and authorised,
the Company and/or Talvivaara Sotkamo may have to file for bankruptcy and the
shareholders could lose their entire investment in the Company.
If the corporate reorganisation proceedings of Talvivaara and Talvivaara Sotkamo
are not successful, shareholders could lose their entire investment in the
Company
Although the Board believes that a corporate reorganisation is a viable option
for Talvivaara, there can be no assurance that the proposed restructuring
programmes of Talvivaara and Talvivaara Sotkamo will be approved and authorised
or be ultimately successful. The corporate reorganisation processes can fail for
a number of reasons, including due to an insufficiency of funds to implement or
complete the restructuring programmes, unforeseen operational or environmental
issues facing Talvivaara's production facilities, changes in the operating
environment affecting the financial viability of Talvivaara and various other
factors. If the corporate reorganisation fails for these or any other reasons,
it could result in the bankruptcy of the Company and/or Talvivaara Sotkamo
unless other alternatives have materialised by that time. Currently, no such
other alternatives are available. As a result, Shareholders could lose their
entire investment in the Company.
If Talvivaara and Talvivaara Sotkamo are not able to continue as a going
concern, the Group may be unable to realise its assets and discharge its
liabilities in the normal course of business, which could lead to shareholders
losing their entire investment in the Company
The Company's liquidity situation continues to cause material uncertainty that
casts significant doubt upon the Group's ability to continue as a going concern
and that, therefore, the Group may be unable to realise its assets and discharge
its liabilities in the normal course of business. Should the going concern basis
prove inappropriate in the foreseeable future, adjustments to the carrying
amounts and/or classifications of Talvivaara's assets and liabilities would be
necessary. Ultimately, not being able to continue as a going concern could lead
to the bankruptcy of the Company and/or Talvivaara Sotkamo and the shareholders
could lose their entire investment in the Company.
Risks related to going concern are further described in the Going Concern
section of this announcement.
Personnel
The number of personnel employed by the Group on 30 June 2014 was 501 (Q2
2013: 673). Wages and salaries paid during the three months to 30 June 2014
totalled EUR 5.2 million (Q2 2013: EUR 6.8 million). Wages and salaries paid
during the six months to 30 June 2014 totalled EUR 10.3 million (H1 2013: EUR
12.8 million).
Talvivaara concluded its co-operation consultations on 7 January 2014. All
personnel groups in the Company and its subsidiaries Talvivaara Sotkamo and
Talvivaara Exploration were within the scope of the consultations. Following the
consultation process, Talvivaara decided to gradually lay off 246 employees for
an indefinite period. The lay-offs were implemented to support the Company and
Talvivaara Sotkamo's corporate reorganisation and to adjust the number of
personnel to the current operating scheme under which ore production is
temporarily suspended.
As at 31 March 2014, 97 employees were laid off, which is less than anticipated
when the co-operation consultations were concluded. The smaller number of lay-
offs resulted from previously sub-contracted work having been taken in-house and
done by the Group's own workforce.
As at 30 June 2014, 41 employees were laid off. In the second quarter,
Talvivaara recalled employees from lay-offs in order to re-commence reclaiming
of old primary heaps on a trial basis. This reduced the number of laid-off
employees further.
Shares and shareholders
The number of shares issued and outstanding and registered on the Euroclear
Shareholder Register as of 30 June 2014 was 1,906,167,480. Including the effect
of the EUR 225 million convertible bond of 16 December 2010 and the Option
Schemes of 2007 and 2011, the authorised full number of shares of the Company
amounted to 2,041,901,379.
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 and expired.
The share subscription period for stock options 2007B was between 1 April 2011
and 31 March 2013. By the end of the subscription period a total of 48,763
Talvivaara Mining Company's new shares were subscribed for under the stock
option rights 2007B. A total of 2,284,337 stock option rights 2007B remained
unexercised following the end of the subscription period and expired.
After the adjustments to terms and conditions of the 2007 stock options in April
2013, a total of 16,289,000 option rights 2007C have been issued to employees
and the subscription period for stock options 2007C was between 1 April 2012 and
31 March 2014. No new shares of Talvivaara were subscribed for under the stock
option rights 2007C between 1 January and 31 March 2014. A total of 16,289,000
stock option rights 2007C remained unexercised following the end of the
subscription period and expired.
After the adjustments to terms and conditions of the 2011 stock options in April
2013, a total of 9,432,500 option rights 2011B have been issued to key employees
and the subscription period for stock options 2011B is, according to the terms
of the option programme, between 1 April 2015 and 31 March 2017. However, the
implementation criteria for stock options 2011B were not fulfilled and the
options were cancelled at the end of 2013. Stock options 2011A had similarly
been cancelled at the end of 2012.
In March 2013 an Extraordinary General Meeting of Talvivaara Mining Company
resolved to approve the proposal by the Board of Directors to authorise the
Board of Directors to undertake a share issue for consideration pursuant to the
shareholders' pre-emptive subscription rights. The share issue was completed in
April 2013 and the total number of shares in Talvivaara Mining Company Plc
increased to 1,906,167,480 shares.
In June 2014, the Annual General Meeting of shareholders of Talvivaara Mining
Company Plc resolved on a share issue to the Company without consideration. The
190,615,000 new shares that were issued were registered with the Finnish Trade
Register on 25 July 2014. Following the registration of the treasury shares, the
total number of shares in Talvivaara is 2,096,782,480. The new shares, when held
in treasury by the Company, will not carry voting rights or any other
shareholder rights in the Company. Including the effect of the
EUR 225 million convertible bond of 16 December 2010 and the Option Schemes of
2007 and 2011, the authorised full number of shares of the Company amounts to
2,232,516,379
As at 30 June 2014, the shareholders who held more than 5% of the shares and
votes of Talvivaara were Solidium Oy (16.7%) and Pekka Perä (6.5%).
Events after the review period
Progress of corporate reorganisation
According to the estimate of the Administrator of the corporate reorganisation
proceedings of Talvivaara and Talvivaara Sotkamo, the companies' business
operations have during the restructuring proceedings proved to be viable, and
the Administrator has on 30 September 2014 submitted restructuring programme
proposals for both companies to the Espoo District Court.
For Talvivaara, an eight-year restructuring programme is proposed and based on
the cash flow from the services sold by it to its operating subsidiary and on
its role as the entity responsible for the Group's fundraising. In the
Administrator's view, the value of the Group's restructuring debt secured by
collateral is a maximum of EUR 56 million. The proposal suggests a 97% haircut
to all unsecured restructuring debts.
For Talvivaara Sotkamo, the proposal is based on realisation restructuring, in
which the business operations and assets of Talvivaara Sotkamo are sold to a
newly formed entity owned mainly by Talvivaara and the funds obtained from the
sale are used to pay off or purchase restructuring debts; unsecured debts are to
be repaid at 1% of their nominal value
For both companies, approval and implementation of the restructuring programmes
remains subject to sufficient creditor support and an adequate long term
financing solution. The Company continues to explore all possible sources of
finance for Talvivaara and the operating subsidiary to be established, including
e.g. a bond and/or share issue and the involvement of one or more cornerstone
investors.
Administrative injunction by ELY Centre
On 24 September 2014, Talvivaara was informed that the Kainuu ELY Centre is
satisfied with Talvivaara Sotkamo's actions relating to the purchase of
additional water purification capacity and the construction of additional pond
capacity. Consequently, the Kainuu ELY Centre has ceased the planning and
execution of its own actions relating to the matter. The administrative
injunction decisions are in force until the end of 2014.
Consideration of charges relating to the gypsum pond leakages and discharges
into water ways
The consideration of charges, which related to Talvivaara Sotkamo's gypsum pond
leakages and the sodium, sulphate and manganese discharges that exceeded the
anticipated amounts stated in the original environmental permit application of
the mine, was completed on 22 September 2014.
The prosecutor decided not to bring charges against thirteen specialists and
members of the middle management that were heard as suspects. However, the
prosecutor has decided to bring charges against four members of Talvivaara's
management, including CEO Pekka Perä and former CEO Harri Natunen. The charges
concern aggravated impairment of the environment. The prosecutor also requests a
corporate fine imposed on Talvivaara Sotkamo and compensation for the benefit
obtained by the alleged crime.
The Company does not share the prosecutor's view of the threshold for charges
having been met. The Company welcomes, however, the opportunity to have the
facts relating to the matter as well as the then-current operating conditions of
the Company discussed in an open court.
Permitting of a discharge pipeline for purified waters to Lake Nuasjärvi
On 2 September 2014 the Kainuu ELY Centre gave a decision on whether there is a
need to conduct a full scale environmental impact assessment ("EIA") relating to
the planned new pipeline for purified discharge waters. The ELY Centre stated
that it is not necessary to conduct a separate EIA for the pipeline, but the
prerequisites of the environmental permit and necessary permit conditions will
be set by AVI in the environmental permit process.
The decision of the ELY Centre will accelerate the permitting process of the
pipeline to some extent and Talvivaara anticipates being able to file an
environmental permit application to AVI in the near future. The new pipeline
would direct the purified discharge waters of the mine to Lake Nuasjärvi, the
water mass of which is hundreds of times greater than that in the current small
discharge waterways of the mine. Although a separate EIA process will not be
needed, the environmental impacts of the pipeline shall be studied and presented
in the environmental permit application.
Pre-trial investigations
The pre-trial investigation relating to the industrial accident of March 2012 is
closing, and the case will be transferred to the prosecutor for consideration of
charges in the near future.
The pre-trial investigation relating to the discharge of raffinate and dilute
secondary heap solutions into the open pit will be completed shortly. The type
of the suspected crime has been changed from impairment of the environment to
environmental infraction (petty crime).
New shares registered with the Finnish Trade Register
On 12 June 2014, the Annual General Meeting of shareholders of Talvivaara
resolved on the share issue to the Company without consideration. All
190,615,000 new shares issued were registered with the Finnish Trade Register on
25 July 2014. Following the registration of the treasury shares, the total
number of shares in Talvivaara is 2,096,782,480. The new shares, when held in
treasury by the Company, do not carry voting rights or any other shareholder
rights in the Company.
Cancellation of London Stock Exchange listing
Talvivaara announced on 14 July 2014 that it has applied to the Financial
Conduct Authority, in its capacity as United Kingdom Listing Authority, to
cancel the listing on the Official List of the United Kingdom Listing Authority
of 1,906,167,480 shares (ISIN code: FI0009014716) (the "Shares") issued by it
with effect from (and including) 14 July 2014. The Shares continue to trade on
the Helsinki Stock Exchange.
Short-term outlook
Operational outlook
Talvivaara's short term operational outlook is based on continuing metals
extraction from the existing heaps, mainly the primary heaps 1 and 4. Due to
the high rate or depletion from these heaps, the metal grades in solution and
therefore also the production volumes are anticipated to decline somewhat going
into the fourth quarter. In order to reduce the rate of decline, the Company is
evaluating the possibilities of re-starting the reclamation of the old, inactive
primary heaps to boost their leaching. Whilst Talvivaara anticipates being able
to resume reclaiming in limited quantities in the near future, the mining
operations will remain suspended until the longer term financing arrangements
have been secured.
Market outlook
The short term market outlook appears slightly more cautious than in the
beginning of the summer. Whilst the Indonesian ban on nickel ore exports has
held well, the Chinese have been able to start sourcing part of their ore
requirement for nickel pig iron production from the Philippines. This, in turn,
has delayed the nickel market turning into deficit and contributed to the recent
softness in nickel prices. In longer term, the nickel market continues to look
more favourable with the stainless steel demand supporting the nickel market
better than in the recent times, and an ore export ban being proposed also in
the Philippines.
30 September 2014
Talvivaara Mining Company Plc.
Board of Directors
CONSOLIDATED INCOME STATEMENT
(Applications for corporate reorganisation proceeding
filed on 15 Nov 2013)
Unaudited Unaudited Unaudited Unaudited Audited
three three six six twelve
months to months to months to months to months to
(all amounts in EUR '000) 30 Jun 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
--------------------------------------------------
Net sales 39 160 13 013 68 174 40 618 77 572
Other operating income 102 448 649 1 177 1 864
Changes in inventories of
finished goods and work in
progress (4 202) 15 974 (5 387) 23 262 53 651
Impairment charges on
inventories (93 685)
Materials and services (18 838) (19 126) (33 734) (41 740) (95 593)
Personnel expenses (6 302) (8 211) (12 490) (15 496) (30 879)
Depreciation and
amortization (5 945) (13 300) (11 977) (26 399) (53 197)
Impairment charges on PPE - - - - (499 300)
Other operating expenses (8 129) (12 656) (16 481) (25 268) (62 234)
--------------------------------------------------
Operating loss (4 154) (23 858) (11 246) (43 846) (701 801)
Finance income 132 520 301 408 901
Finance cost (10 113) (13 131) (20 308) (24 760) (57 143)
--------------------------------------------------
Finance income (cost) (net) (9 981) (12 611) (20 007) (24 352) (56 242)
Loss before income tax (14 135) (36 469) (31 253) (68 198) (758 043)
Income tax expense 4 8 889 4 16 686 (54 434)
--------------------------------------------------
Loss for the period (14 131) (27 580) (31 249) (51 512) (812 477)
--------------------------------------------------
Attributable to:
Owners of the parent (8 974) (24 010) (23 544) (45 015) (680 920)
Non-controlling interest (5 156) (3 570) (7 705) (6 497) (131 557)
--------------------------------------------------
(14 131) (27 580) (31 249) (51 512) (812 477)
--------------------------------------------------
Earnings per share for loss attributable to the owners of the parent
(expressed in EUR per share)
Basic and diluted (0,00) (0,03) (0,01) (0,05) (0,48)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Applications for corporate reorganisation proceeding
filed on 15 Nov 2013)
Unaudited Unaudited Unaudited Unaudited Unaudited
three three six six six
(all amounts in EUR months to months to months to months to months to
'000) 30 Jun 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
---------------------------------------------------------
Loss for the period (14 131) (27 580) (31 249) (51 512) (812 477)
Other comprehensive
income, net of tax - - - - -
---------------------------------------------------------
Total comprehensive
income (14 131) (27 580) (31 249) (51 512) (812 477)
---------------------------------------------------------
Attributable to:
Owners of the parent (8 974) (24 010) (23 544) (45 015) (680 920)
Non-controlling
interest (5 156) (3 570) (7 705) (6 497) (131 557)
---------------------------------------------------------
(14 131) (27 580) (31 249) (51 512) (812 477)
---------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Applications for corporate reorganisation proceeding filed on 15 Nov 2013)
Unaudited Audited
(all amounts in EUR '000) 30 Jun 14 31 Dec 13
ASSETS
Non-current assets
Property, plant and equipment 294 850 304 956
Biological assets 6 435 6 641
Intangible assets 6 326 6 582
Investments in associates 7 067 6 968
Other receivables 8 394 8 412
Available-for-sale financial assets 2 2
Total Non-current assets 323 074 333 560
Current assets
Inventories 256 739 261 451
Trade receivables 3 614 10 389
Other receivables 7 974 12 047
Cash and cash equivalent 5 950 5 867
Total Current assets 274 277 289 754
Total assets 597 352 623 314
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 80 80
Share premium 8 086 8 086
Other reserves 764 626 764 603
Retained deficit (949 398) (925 854)
Total equity attributable to owners of the parent (176 606) (153 085)
Non-controlling interest in equity (142 083) (134 378)
Total equity (318 689) (287 463)
Non-current liabilities
Borrowings 21 435 30 592
Advance payments 267 592 270 641
Other payables 21 270
Provisions 11 006 10 785
Total non-current liabilities 300 054 312 288
Current liabilities
Borrowings 537 930 524 011
Advance payments 10 569 15 456
Trade payables 32 946 37 426
Other payables 34 542 19 065
Provisions - 2 531
Total current liabilities 615 987 598 489
Total liabilities 916 041 910 777
Total equity and liabilities 597 352 623 314
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Applications for corporate reorganisation proceeding filed on 15 Nov 2013)
(all amounts in EUR '000)
A. Share capital
B. Share premium
C. Invested unrestricted equity
D. Other reserves
E. Retained deficit
F. Total
G. Non-controlling interest
H. Total equity
A B C D E F G H
--------------------------------------------------------------
1 Jan 13 80 8 086 490 749 48 810 (242 304 763 1 989 306 752
962)
Loss for the - - - - (45 (45 015) (6 497) (51 512)
period 015)
Other
comprehensive
income
- Other - - - - - - - -
comprehensive
income
--------------------------------------------------------------
Total - - - - (45 (45 015) (6 497) (51 512)
comprehensive 015)
income for the
period
Transactions
with owners
Senior unsecured - - - (2 417) - (2 417) - (2 417)
convertible
bonds due 2013
Perpetual - - - 2 612 (1 761 121 882
capital loan 851)
Rights issue - - 250 827 - - 250 827 - 250 827
Incentive - - - (140) - (140) - (140)
arrangement for
Executive
Management
Employee share
option scheme
- value of - - - 123 - 123 - 123
employee
services
--------------------------------------------------------------
Total - - 250 827 178 (1 851) 249 154 121 249 275
contribution by
and distribution
to owners
Total - - 250 827 178 (1 851) 249 154 121 249 275
transactions
with owners
--------------------------------------------------------------
30 Jun 13 80 8 086 741 576 48 988 (289 508 902 (4 387) 504 515
828)
--------------------------------------------------------------
--------------------------------------------------------------
31 Dec 13 80 8 086 741 576 23 028 (925 (153 085) (134 (287 463)
854) 378)
--------------------------------------------------------------
1 Jan 14 80 8 086 741 576 23 028 (925 (153 085) (134 (287 463)
854) 378)
Loss for the - - - - (23 (23 544) (7 705) (31 249)
period 544)
Other
comprehensive
income
- Other - - - - - - - -
comprehensive
income
--------------------------------------------------------------
Total - - - - (23 (23 544) (7 705) (31 249)
comprehensive 544)
income for the
period
Transactions
with owners
Incentive - - - 23 - 23 - 23
arrangement for
Executive
Management
Total - - - 23 - 23 - 23
contribution by
and distribution
to owners
Total - - - 23 - 23 - 23
transactions
with owners
--------------------------------------------------------------
30 Jun 14 80 8 086 741 576 23 051 (949 (176 606) (142 (318 689)
398) 083)
--------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Applications for corporate reorganisation proceeding
filed on 15 Nov 2013)
Unaudited Unaudited Unaudited Unaudited Audited
three three six six twelve
months to months to months to months to months to
(all amounts in EUR '000) 30 Jun 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
--------------------------------------------------
Cash flows from operating
activities
Loss for the period (14 131) (27 580) (31 249) (51 512) (812 477)
Adjustments for
Tax (4) (8 889) (4) (16 686) 54 434
Depreciation and
amortization 5 945 13 300 11 977 26 399 53 197
Impairment charges on PPE - - - - 499 300
Impairment charges on
inventories - - - - 93 685
Other adjustments (1 488) (6 877) (627) (13 635) (6 052)
Interest income (132) (794) (301) (408) (901)
Interest expense 10 113 13 405 20 308 24 760 57 143
--------------------------------------------------
303 (17 435) 104 (31 082) (61 671)
Change in working capital
Decrease(+)/increase(-) in
other receivables 1 318 9 691 2 845 17 982 6 523
Decrease (+)/increase (-) in
inventories 4 390 (22 505) 4 712 (31 207) (61 009)
Decrease(-)/increase(+) in
trade and other payables (4 951) (16 558) (7 067) (20 863) (2 006)
--------------------------------------------------
Change in working capital 757 (29 372) 490 (34 088) (56 492)
--------------------------------------------------
1 060 (46 807) 594 (65 170) (118 163)
Interest and other finance
cost paid (667) (17 204) (1 076) (17 993) (27 938)
Interest and other finance
income 13 (37) 25 176 346
Income taxes paid and
received 4 (12) 4 (12) (17)
--------------------------------------------------
Net cash generated (used) in
operating activities 410 (64 060) (453) (82 999) (145 772)
Cash flows from investing
activities
Investments in associates (100) (530) (100) (1 016) (1 274)
Purchases of property, plant
and equipment (112) (15 039) (1 583) (32 124) (60 051)
Purchases of biological
assets - (193) - (245) (262)
Purchases of intangible
assets (5) (36) (34) (212) (221)
Proceeds from sale of
biological assets 154 - 798 92 1 194
--------------------------------------------------
Net cash used in investing
activities (63) (15 798) (919) (33 505) (60 614)
Cash flows from financing
activities
Proceeds from share issue
net of transactions costs - 193 355 - 247 390 247 390
Related party investment in
Talvivaara shares - (186) - (186) (186)
Proceeds from interest-
bearing liabilities 7 641 - 7 641 - -
Proceeds from advance
payments - 8 - 19 488 19 488
Payment of interest-bearing
liabilities (1 376) (78 943) (2 742) (80 260) (82 288)
Payment of financial leasing
liabilities (1 732) (1 927) (3 444) (4 846) (8 209)
--------------------------------------------------
Net cash generated in
financing activities 4 533 112 307 1 455 181 586 176 195
Net increase (decrease) in
cash and cash equivalents 4 880 32 449 83 65 082 (30 191)
Cash and cash equivalents at
beginning of the period 1 070 68 691 5 867 36 058 36 058
--------------------------------------------------
Cash and cash equivalents at
end of the period 5 950 101 140 5 950 101 140 5 867
--------------------------------------------------
Presentation of consolidated statement of cash flows has been changed by
splitting the paid leasing charges to interest cost paid and repayment of
liabilities.
The comparison information of 2013 has been adjusted accordingly.
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 2013.
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 14 407 082 105 153 294 778 242 146 1 049 159
Additions 108 1 474 - - 1 582
Disposals - (11 139) - - (11 139)
Transfers 4 098 (20 846) 400 16 348 -
-------------------------------------------------------------------------------
Gross carrying amount at
30 Jun 4 411 288 74 642 295 178 258 494 1 039 601
----------------------------------------------------
Accumulated depreciation
and impairment losses
at 1 Jan 14 293 421 67 305 205 469 178 010 744 204
Disposals - (11 139) - - (11 139)
Transfers 2 407 (12 249) 235 9 607 -
Depreciation for the
period 7 867 - 2 172 1 647 11 686
----------------------------------------------------
Accumulated depreciation
and impairment losses
at 30 Jun 14 303 695 43 917 207 876 189 264 744 751
----------------------------------------------------
Carrying amount at 1 Jan
14 113 662 37 849 89 309 64 136 304 955
----------------------------------------------------
Carrying amount at 30 Jun
14 107 594 30 725 87 302 69 230 294 850
----------------------------------------------------
3. Trade receivables
(all amounts in EUR '000)
As at As at
30 Jun 14 31 Dec 13
--------------------
Nickel-Cobalt sulphide 3 150 9 977
Zinc sulphide 464 375
Copper sulphide - 37
--------------------
Total trade receivables 3 614 10 389
--------------------
4. Inventories
(all amounts in EUR '000)
As at As at
30 Jun 14 31 Dec 13
--------------------
Raw materials and consumables 25 476 24 800
Work in progress 228 169 234 193
Finished products 3 095 2 457
--------------------
Total inventories 256 739 261 451
--------------------
5. Borrowings
(all amounts in EUR '000)
As at As at
Non-current 30 Jun 14 31 Dec 13
--------------------
Finance lease liabilities 13 715 17 000
Other 7 720 13 593
--------------------
21 435 30 592
--------------------
Current
Capital loans 1 405 1 405
Perpetual capital loan 35 106 35 106
Investment and Working Capital loan 57 855 57 855
Finance lease liabilities 6 866 7 032
Revolving Credit Facility 70 000 70 000
Senior Unsecured Bonds due 2017 110 000 110 000
Senior Unsecured Convertible Bonds due 2015 245 848 242 613
Other 10 850 -
--------------------
537 930 524 011
--------------------
--------------------
Total borrowings 559 365 554 603
--------------------
6. Advance payments
(all amounts in EUR '000)
As at As at
Non-current 30 Jun 14 31 Dec 13
--------------------
Deferred zinc sales revenue 213 663 216 713
Deferred uranium sales revenue 53 928 53 928
--------------------
267 591 270 641
--------------------
Current
Deferred zinc sales revenue 10 569 15 456
--------------------
10 569 15 456
--------------------
Total advance payments 278 160 286 097
--------------------
7. Provisions
Gypsum Water
pond balance Environmental Mining
leakage management restoration fee Total
----------------------------------------------------------
31 Dec 13 3 775 2 531 6 849 162 13 316
----------------------------------------------------------
Additional
provisions - - 196 21 217
Unwinding of
discount - - 3 - 3
Used during the
period - (2 531) - - (2 531)
----------------------------------------------------------
30 Jun 14 3 775 - 7 048 183 11 006
----------------------------------------------------------
The non-current and current portions of provisions are as
follows:
As at As at
30 Jun 14 31 Dec 13
--------------------------------
Non-current
Gypsum pond leakage 3 775 3 775
Environmental restoration 7 048 6 849
Mining fee 183 161
--------------------------------
11 006 10 785
Current
Water balance management - 2 531
--------------------------------
- 2 531
--------------------------------
Total 11 006 13 316
--------------------------------
8. Changes in the number of shares issued
Number
of
shares
---------------
31 Dec 13 1 906 167 480
Changes -
---------------
30 Jun 14 1 906 167 480
---------------
9. Contingencies and commitments
(all amounts in EUR '000)
The future aggregate minimum lease payments under non-cancellable operating
leases
As at As at
30 Jun 14 31 Dec 13
--------------------------------------
Not later than 1 year 1 663 1 812
Later than 1 year and not later than 5
years 478 552
Later than 5 years 21 29
--------------------------------------
2 162 2 393
Capital commitments
At 30 June 2014, the Group had capital commitments amounting to EUR 0.1 million
(31 December 2013: EUR 1.2 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.
Talvivaara Mining Company
Plc
Key financial figures of the Three Three Six Six Twelve
Group months to months to months to months to months to
30 Jun 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
--------------------------------------------------
Net sales EUR '000 39 160 13 013 68 174 40 618 77 572
Operating loss EUR '000 (4 154) (23 858) (11 246) (43 846) (701 801)
Operating loss
percentage -10,6 % -183,3 % -16,5 % -107,9 % -904,7 %
Loss before tax EUR '000 (14 135) (36 469) (31 253) (68 198) (758 043)
Loss for the period EUR '000 (14 131) (27 580) (31 249) (51 512) (812 447)
Return on equity na -6,6 % na -12,7 % -8424,0 %
Equity-to-assets
ratio -53,4 % 37,0 % -53,4 % 37,0 % -46,1 %
Net interest-
bearing debt EUR '000 553 415 409 505 553 415 409 505 548 736
Debt-to-equity
ratio -173,7 % 81,2 % -173,7 % 81,2 % -190,9 %
Return on
investment -1,6 % -1,5 % -4,3 % -2,8 % -128,7 %
Capital expenditure EUR '000 114 15 268 1 617 32 581 60 535
Property, plant and
equipment EUR '000 294 850 813 418 294 850 813 418 304 956
Borrowings EUR '000 559 365 510 645 559 365 510 645 554 603
Cash and cash
equivalents
at the end of the
period EUR '000 5 950 101 140 5 950 101 140 5 867
Share-related key figures
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
--------------------------------------------------
Earnings per share EUR (0,00) (0,03) (0,01) (0,05) (0,48)
Equity per
share(1) EUR (0,09) 0,90 (0,09) 0,90 (0,19)
Development of
share price at
London Stock
Exchange
Average trading
price(2) EUR 0,09 0,17 0,08 0,27 0,12
GBP 0,07 0,15 0,07 0,23 0,10
Lowest trading
price(2) EUR 0,05 0,14 0,04 0,14 0,03
GBP 0,04 0,12 0,03 0,12 0,03
Highest trading
price(2) EUR 0,12 0,21 0,12 1,33 1,34
GBP 0,10 0,18 0,10 1,14 1,14
Trading price at
the end of the
period(3) EUR 0,07 0,15 0,07 0,15 0,08
GBP 0,06 0,13 0,06 0,13 0,07
Change during the
period 64,6 % -39,8 % -21,1 % -87,8 % -93,2 %
Price-earnings
ratio neg. neg. neg. neg. neg.
Market
capitalization at
the end of the
period(4) EUR '000 131 517 277 964 131 517 277 964 159 759
GBP '000 105 411 238 271 105 411 238 271 133 622
Development in
trading volume
1000
Trading volume shares 330 837 117 832 417 826 160 267 776 597
In relation to
weighted average
number of shares 17,4 % 12,4 % 21,9 % 16,9 % 54,2 %
Development of
share price at OMX
Helsinki
Average trading
price EUR 0,09 0,17 0,08 0,25 0,11
Lowest trading
price EUR 0,06 0,14 0,04 0,14 0,03
Highest trading
price EUR 0,12 0,22 0,12 1,39 1,39
Trading price at
the end of the
period EUR 0,07 0,14 0,07 0,14 0,08
Change during the
period 61,8 % -37,0 % -7,5 % -88,5 % -93,9 %
Price-earnings
ratio neg. neg. neg. neg. neg.
Market
capitalization at
the end of the
period EUR '000 134 194 272 582 134 194 272 582 145 059
Development in
trading volume
1000
Trading volume shares 953 119 532 927 1 226 905 646 009 3 086 423
In relation to
weighted average
number of shares 50,0 % 56,1 % 64,4 % 68,0 % 215,6 %
Adjusted average 1 906 167 949 322 1 906 167 949 322 1 431 677
number of shares 480 557 480 557 258
Fully diluted
average number of 1 903 899 947 054 1 903 899 947 054 1 530 295
shares 480 557 480 557 193
Number of shares
at the end of the 1 906 167 1 906 167 1 906 167 1 906 167 1 906 167
period 480 480 480 480 480
(1)) The funds entered into share issue reserve are not included in the
calculation.
(2)) Trading price is calculated on the average of EUR/GBP exchange rates
published by the European Central Bank during the period.
(3)) Trading price is calculated on the EUR/GBP exchange rate published by the
European Central Bank at the end of the period.
(4)) 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 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
--------------------------------------------------
Wages and salaries EUR '000 5 221 6 756 10 313 12 787 23 274
Average number of
employees 502 629 513 607 603
Number of employees
at the end of the
period 501 673 501 673 549
Other figures
Three Three Six Six Twelve
months to months to months to months to months to
30 Jun 14 30 Jun 13 30 Jun 14 30 Jun 13 31 Dec 13
-----------------------------------------------------
Share options outstanding
at
the end of the period 0 25 721 500 0 25 721 500 16 289 000
Number of shares to be
issued
against the outstanding
share options 0 25 721 500 0 25 721 500 16 289 000
Rights to vote of shares
to be issued
against the outstanding
share options 0,0 % 1,3 % 0,0 % 1,3 % 0,8 %
Talvivaara Mining Company Plc
Key financial figures of the Group
Return on equity Profit (loss) for the period
--------------------------------------------
(Total equity at the beginning of period +
Total equity at the end
of period)/2
Equity-to-assets ratio Total equity
--------------------------------------------
Total assets
Interest-bearing debt - Cash and cash
Net interest-bearing debt equivalent
Debt-to-equity ratio Net interest-bearing debt
--------------------------------------------
Total equity
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
Earnings per share holders of the Company
--------------------------------------------
Adjusted average number of shares
Equity attributable to equity holders of
Equity per share the Company
--------------------------------------------
Adjusted average number of shares
Price-earnings ratio Trading price at the end of the period
--------------------------------------------
Earnings per share
Number of shares at the end of the period *
Market capitalization at the end trading price at the
of the period end of the period
[HUG#1859527]
Talvivaara Mining Company Interim Report for January-June 2014
| Source: Talvivaaran Kaivososakeyhtiö Oyj
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