Stock Exchange Release
Talvivaara Mining Company Plc
22 September 2016
Talvivaara Interim Report for period January - June 2016
Key events for reporting period Jan-Jun 2016
- Talvivaara and Terrafame Oy agreed on the sale of Talvivaara's assets related to the Sotkamo mining operations and the settlement of Talvivaara's guarantee liabilities under the Loan and Streaming Holiday Agreement, with the principal amount of approximately EUR 14 million (including interest up until 30 June 2016), and the Zinc in Concentrate Purchase Agreement, amounting to approximately EUR 203.4 million
- A reversal of the provision of EUR 203.4 million and the EUR 11 million capital gains resulting from the sale of the assets boosted the Company's profit for the period to EUR 207.7 million
Key events following the end of the reporting period Jan - Jun 2016
- On 11 August 2016, Talvivaara's Extraordinary General Meeting approved the sale of mining related assets to Terrafame
- On 20 September 2016, the Administrator confirmed his view, according to which the special conditions (b) 2 and (c) set for the entry into force of the Company's draft restructuring programme are still to be fulfilled at to date. The Administrator's stated further that due compliance with all the special conditions and the Restructuring Act will require that one or more of the Company's new business opportunities is developed sufficiently so as to provide more tangible prospects for future viable business operations
- To date, the Company continues assessing new business opportunities, and focuses on fulfilling all the remaining special conditions set for the entry into force of the draft restructuring programme.
Enquiries:
Talvivaara Mining Company Plc Tel. +358 20 712 9800
Pekka Perä, CEO
Pekka Erkinheimo, Deputy CEO
| Key financial figures | ||||
| Six months to 30 Jun 16 | Unaudited Six months to 30 Jun 15 | Twelve months to 31 Dec 15 | ||
| Other operating income | EUR '000 | 14,019 | 3,437 | 6,702 |
| Operating profit/loss | EUR '000 | 215,870 | (491) | (180) |
| Operating profit/loss percentage | 1,539.8 % | (14.3 %) | (2.7 %) | |
| Profit/loss before tax | EUR '000 | 207,713 | (14,978) | (26,010) |
| Profit/loss for the period | EUR '000 | 207,713 | (14,978) | (26,010) |
| Return on equity | n/a | n/a | n/a | |
| Equity-to-assets ratio | (7,950.1 %) | (7,392.8 %) | (7,525.6 %) | |
| Net interest-bearing debt | EUR '000 | 460,849 | 499,523 | 473,183 |
| Debt-to-equity ratio | (88.2 %) | (67.1 %) | (64.8 %) | |
| Return on investment | n/a | n/a | n/a | |
| Capital expenditure | EUR '000 | - | - | 284 |
| Property, plant and equipment | EUR '000 | 22 | 5,000 | 4,693 |
| Borrowings | EUR '000 | 465,043 | 503,956 | 477,845 |
| Cash and cash equivalents | EUR '000 | 4,194 | 4,433 | 4,663 |
FINANCIAL REVIEW
Introduction
Following the bankruptcy of Talvivaara Mining Company Plc's ("Talvivaara" or the "Company") operating subsidiary Talvivaara Sotkamo Ltd ("Talvivaara Sotkamo") on 6 November 2014, trading of Talvivaara's shares on the Helsinki Stock Exchange was suspended. The suspension of trading continues on the date of the Company's Interim Report 22 September 2016.
Talvivaara has been in corporate reorganisation throughout the review period of 1 January 2016 - 30 June 2016. During the corporate reorganisation proceedings, all major decisions and decisions outside the ordinary course of business have required consent of the administrator of the corporate reorganisation proceedings (the "Administrator").
Talvivaara's Interim Report has not been prepared on a going concern basis. The chosen reporting basis results from the existence of material uncertainties that cast significant doubt upon the Company's ability to realise its assets and discharge its liabilities in the normal course of business and from the lack of visibility on the Company's operational environment twelve months beyond the date of reporting. Talvivaara's ability to revise its reporting basis and to regain its status as a going concern is dependent on the successful completion of the Company's corporate reorganisation proceedings, which in turn requires that the Company is able to complete an arrangement that secures the necessary cash flow for the Company to discharge all of its liabilities and the continuance of the Company's viable business. The arrangement concluded with Terrafame Oy on 30 June 2016 will, in the view of the Company, materially improve the possibility for the completion of Talvivaara's corporate restructuring proceedings and facilitate the development of Talvivaara's new business opportunities.
Review of Operations
Talvivaara and the bankruptcy estate of Talvivaara Sotkamo entered into the Administration and Laboratory Services Agreement and the Agreement on Lease of Lime and Limestone Handling Plant and Reception Station on 19 November 2014. The agreements detailed the Company's personnel resources and equipment that are available and critical for the environmentally and occupationally safe operations at the Sotkamo mine and state the agreed pricing for the services provided. The rights and obligations of the bankruptcy estate of Talvivaara Sotkamo under the aforementioned agreements were transferred to Terrafame Oy, a 100% subsidiary of the state-owned company Terrafame Group Oy on 13 August 2015. The transfer of the mining business from the bankruptcy estate of Talvivaara Sotkamo to Terrafame Oy was completed on 14 August 2015.
On 27 January 2016, Talvivaara, Terrafame Group Oy and its subsidiaries, Terrafame Oy and Winttal Oy, signed a letter of intent ("Letter of Intent"), in which the parties provisionally agreed on the essential terms and conditions for the sale of Talvivaara's assets related to the Sotkamo mining operations. Assets to be sold would have included, among others, the lime plant needed in the Sotkamo operations, laboratory business, as well as ownership of the geological and production data associated with the mine.
The transactions under the Letter of Intent would have consisted of two separate phases. In the first phase, Terrafame Oy would have bought the laboratory business required in the production process, and the geological and production data associated with the Sotkamo mine. The laboratory personnel would have been transferred to Terrafame Oy as old employees. In addition, the parties would have agreed on the possibility for Talvivaara's key personnel working at the mine to transfer to Terrafame Oy's service. In the first phase of the arrangement, Terrafame Oy would have paid a purchase price of EUR 3.8 million to Talvivaara. Upon completion of the second phase of the arrangement, Terrafame Oy would have bought from Talvivaara the lime plant required in the production process of the mine. Terrafame Oy would have paid to Talvivaara a purchase price of EUR 12.5 million. Simultaneously, Talvivaara would have paid to Winttal Oy EUR 3.8 million as a full and final settlement of Talvivaara's debts and liabilities, which were transferred to Winttal Oy from Nyrstar in November 2015. These debts and liabilities comprise of Talvivaara's guarantee liability of approximately EUR 12.8 million under the Streaming Holiday Agreement and a guarantee liability for a termination sum of approximately EUR 203.4 million under the Streaming Agreement, which thereby would have been considered fully and finally settled upon completion of the arrangement.
In addition, as part of the arrangements, Terrafame Group Oy would have acquired debts of Talvivaara from certain commercial banks and Finnvera Plc. The nominal value of these debts is approximately EUR 129.6 million in aggregate. These debts are considered restructuring debts under Talvivaara's draft restructuring programme, which will receive a payment of EUR 7.5 million under the business mortgage claims, whilst the unsecured part of the debts will be paid approximately EUR 1.2 million. Upon completion of the second phase of the arrangements, Talvivaara would have paid to Terrafame Group Oy for the debts transferred by the commercial banks and Finnvera Plc a total sum of EUR 8.7 million in accordance with the final restructuring programme.
Based on the transactions contemplated by the Letter of Intent, the difference between the total purchase price and the sums payable by Talvivaara to Terrafame entities on the basis of Talvivaara's debts would have been EUR 3.8 million, which Terrafame Oy would have paid to Talvivaara as a net purchase price for all assets transferred. The arrangements remained conditional on the approval by Talvivaara's General Meeting of Shareholders and on confirmation of Talvivaara's restructuring programme with a targeted dead line of 30 April 2016. The whole arrangement under the Letter of Intent was also conditional on a favorable decision by the Vaasa Administrative Court on the Nuasjärvi discharge pipe line, enabling the continuation of Terrafame Oy's mining operations.
On 3 February 2016, the Company announced that the parties have agreed to extend the deadline set for the finalization and approval of the detailed agreements under the Letter of Intent until the decision of the Administrative Court has been received.
On 28 April 2016, the Vaasa Administrative Court gave its ruling, among others, on the Nuasjärvi discharge pipe line. The outcome of the ruling deviated adversely from the one applied for by Terrafame Oy, in addition to which the ruling changed the essential environmental permits of the Sotkamo mining operations into temporary permits. The Company and Terrafame started assessing the decision and its effects on the contemplated arrangement under the Letter of Intent.
On 2 June 2016, the Terrafame -entities informed the Company that they would no longer pursue the contemplated arrangement under the Letter of Intent of 28 January 2016. Terrafame Oy also informed the Company that Winttal Ltd had assigned to Terrafame Oy all its rights, title, benefit and interest under the Streaming Agreement and the Streaming Holiday Agreement and requested the Company to immediately pay the receivable under the Streaming Holiday Agreement amounting in total to approximately 12.8 million euros. The liability of the Company under the Streaming Holiday Agreement was based on the guarantee issued by the Company for the due payment of loans drawn by Talvivaara Sotkamo from Nyrstar under the Streaming Holiday Agreement. Furthermore, Terrafame Oy stated that, given lack of immediate repayment, it would offset the above mentioned receivables against the receivables of the Company from Terrafame Oy under the service and lease agreements between the parties.
On 30 June 2016, Talvivaara and Terrafame Oy signed agreements, in which the parties agreed on the sale of Talvivaara's assets related to the Sotkamo mining operations and settlement of Talvivaara's guarantee liabilities under the Streaming Holiday Agreement, with the principal amount of approximately EUR 14 million (including interest up until 30 June 2016), and the Streaming Agreement, amounting to approximately EUR 203.4 million. The assets sold include, among others, the lime plant needed for the Sotkamo operations, laboratory, as well as rights to the geological, laboratory and production related data associated with the Sotkamo mine. The purchase price for the assets sold consisted of two components: (i) a full and final settlement of the guarantee liabilities of the Company under the Holiday Agreement and the Streaming Agreement, and (ii) a cash component of EUR 1.4 million payable by Terrafame Oy at closing. The agreement had no effect on the identified restructuring debts of the Company, including the receivables of certain commercial banks and Finnvera Plc.
The parties had further agreed on the transfer of the laboratory personnel to Terrafame as old employees, as well as on the possibility for Terrafame to recruit certain of Talvivaara's personnel currently providing services related to operation of the mine. The parties agreed to terminate the service agreement and the lime plant lease agreement of 19 November 2014, which were transferred to Terrafame Oy on 14 August 2015, with immediate effect as of 30 June 2016.
The agreements included a cancellation clause whereby the transactions under the agreements would become null and void in the event the extraordinary general meeting of shareholders of Talvivaara did not approve the transactions under the agreements. The extraordinary general meeting of shareholders of Talvivaara approved the transactions at its meeting held on 11 August 2016. For further information, please refer to section 'Events after the review period'.
Under the agreements, all main assets of Talvivaara previously generating income for Talvivaara were transferred to Terrafame Oy. Even though the concluded agreements provided less beneficial terms than those contemplated under the Letter of Intent, the arrangement materially improved the possibility for the completion of Talvivaara's corporate restructuring proceedings and facilitated the development of Talvivaara's new business opportunities.
To date, the Company continues to identify and assess new business opportunities and to develop its business outside the Sotkamo mine. The Company is also focused on fulfilling all the remaining special conditions set for the confirmation and entry into force of the draft restructuring programme.
Financial review
Financial result
The operating profit for the review period was EUR 215.9 million (1-6/2015: EUR (0.5) million). Revenues of the Company consist of income generated from equipment leases as well as laboratory and consultancy services rendered to Terrafame, capital gains crystallised from the sale of the Company's mining-related assets to Terrafame (EUR 11 million), and of the reversal of the EUR 203.4 million provision, which is reported as an adjustment to the other operating expenses. The costs are mainly personnel and other operating expenses.
Finance income for the review period was EUR 0.01 million (1-6/2015: EUR 0.002 million) and consisted mainly of interest on deposits and receivables. Finance costs of EUR (8.2) million (1-6/2015: EUR (14.5) million) resulted mainly from accrued interest and related financing expenses accrued on borrowings.
The profit for the review period amounted to EUR 207.7 million (1-6/2015: EUR (15.0) million). Earnings per share were EUR 0.10 (1-6/2015: EUR (0.01)).
Liquidity
As at 30 June 2016, the Company's cash and cash equivalents amounted to EUR 4.2 million (EUR 4.4 million as at 30 June 2015).
To date, the Company finances its day-to-day operations from its cash reserves.
Financing
During the review period, the Company has financed its operations entirely with operative cash flow.
Equity
Following Talvivaara Sotkamo's bankruptcy in 2014, the Company fully wrote off its receivables from, and the shares held in, Talvivaara Sotkamo. As a result, Talvivaara forfeited its equity, which was acknowledged by the Company's Board and notified to the trade register. Talvivaara had already recognised the weakening of its financial position in November 2013 and took measures to mitigate this by applying for corporate reorganisation.
Provisions and other items recognised based on restructuring programme
In the Company's 2014 Financial Statements, Talvivaara recorded a provision of EUR 203.4 million for the potential termination sum guarantee towards Nyrstar. The guarantee concerns the consequences of a premature termination of the Streaming Agreement between Nyrstar and Talvivaara Sotkamo, which as of 1 April 2014 was guaranteed by the Company. The Company provided the full amount as a provision in 2014 and decided to leave the provision on the balance sheet in the 2015 Financial Statements. As a result of the transactions concluded with Terrafame Oy on 30 June 2016, the guarantee liability was finally settled and confirmed terminated. Consequently, the provision of EUR 203.4 million was reversed from the Company's balance sheet as of 30 June 2016.
In addition, the Company has issued a floating charge security for the loans drawn from Finnvera by Talvivaara Sotkamo, amounting in aggregate to EUR 58.7 million, including accrued interest. The aggregate amount consists of two parts: EUR 50.7 million the Company has guaranteed as its own debt, and EUR 8.0 million the Company has secured with a floating charge security issued as a third-party-security. In the Administrator's final draft restructuring programme, the EUR 8.0 million liability of the Company under the floating charge security to Finnvera has been valued to EUR 3.4 million. This is a liability referred to in section 3(3) of the Restructuring of Enterprises Act, and it is subject to the same rules as the secured debt of the Company. As Finnvera's EUR 8.0 million claim is not the Company's own debt, it has not been taken into account as restructuring debt. However, this liability has been taken into account in the calculation of the amount of secured and business mortgage debt, and payments will be made on it in the same manner as on the Company's debts secured by collateral and business mortgages. However, due to the applied non-going concern principle, the Company has also recognised the full EUR 8.0 million as a liability on the balance sheet. Upon completion of the restructuring proceedings, the part of the Finnvera loans taken into account as secured debt (EUR 3.4 million) would be finally and fully discharged, whilst the remaining balance would be treated as unsecured debt in the Company's restructuring programme and repaid according to the authorized payment schedule.
Off-balance sheet and contingent liabilities
Talvivaara Sotkamo largely met its environmental bond requirement under the environmental permit through guarantee insurance provided by Atradius Credit Insurance NV ("Atradius"). As at 31 December 2015, the coverage amounted to EUR 31.9 million. In the event restoration of the mine's waste areas (gypsum ponds, heap areas) would have taken place without Talvivaara Sotkamo carrying the cost, the expenses would have initially been covered by Atradius and eventually Atradius would have claimed the cost back from the Company, which has given counter-indemnity for such costs to Atradius. However, as a result of Terrafame Oy replacing the guarantee insurance placed by Talvivaara Sotkamo with a new environmental bond on 21 January 2016, Atradius notified the Company that the original guarantee insurance and the corresponding counter-indemnity were terminated on 21 January 2016 and that the beneficiaries, Kainuun ELY-keskus or Atradius, have no claims against Talvivaara Sotkamo or the Company on the basis of the guarantee insurance or the counter-indemnity issued by the Company. Therefore, the full amount of the liability under the counter-indemnity given by the Company has been removed from the Company's restructuring debts, and no payment will be made on it under the authorised payment schedule.
Following the authorisation by the Espoo District Court of the Company's corporate reorganization proceedings in accordance with the Administrator's final draft restructuring programme, the Company will pay one percent of the aggregate amount of the Company's unsecured restructuring debts not converted into equity, and a total of EUR 7.5 million for the debts secured with the business mortgage issued by the Company. The exact amount of the total payment on the unsecured restructuring debts will depend on the extent to which such debts have been converted into equity of the Company.
Assets
On the statement of financial position as at 30 June 2016, property, plant and equipment totalled EUR 0.02 million (30 June 2015: EUR 5.0 million). Intangible assets totalled EUR 0 (30 June 2015: EUR 0.5 million). Due to the applied non-going concern reporting basis, the Company has written down the value of its shares in Fennovoima.
Corporate reorganisation
The Company and Talvivaara Sotkamo applied for corporate reorganisation on 15 November 2013 by filing related applications with the District Court of Espoo, Finland. The District Court of Espoo took the decision to commence a corporate reorganisation process in respect of the Company on 29 November 2013 and in respect of Talvivaara Sotkamo on 17 December 2013. The District Court of Espoo appointed Mr. Pekka Jaatinen, Attorney-at-Law, from Castrèn & Snellman Attorneys to act as the Administrator in respect of the corporate reorganisation of both the Company and Talvivaara Sotkamo. In reorganisation proceedings governed by the Finnish Restructuring of Enterprises Act (47/1993, as amended), both the business operations and the debts of a company may be reorganised and restructured. As a result of such reorganisation, a company can either continue its operations or, if the reorganisation fails, initiate bankruptcy proceedings.
Following the asset deal concluded with Terrafame Oy on 30 June 2016, the Company is currently focusing on fulfilling the remaining special conditions set for the confirmation and entry into force of the draft restructuring programme.
Reporting basis
Talvivaara's Interim Report for the first six months of 2016 have not been prepared on a going concern basis. The basis for preparation is that the operations of the Company may end in near future. This results from material uncertainties that cast significant doubt upon the Company's ability to realise its assets and discharge its liabilities in the normal course of business. There is also lack of visibility on the Company's operational environment twelve months beyond the date of reporting.
Talvivaara's ability to revise its reporting basis and to regain its status as a going concern is to a paramount extent dependent on the successful completion of the Company's corporate reorganisation proceedings, which requires that:
- Talvivaara succeeds in completing an arrangement that will secure the necessary cash flow for the Company to discharge all of its liabilities and the continuance of the Company's viable business, and
- the District Court of Espoo authorizes the execution of the Company's debt restructuring in accordance with the Administrator's final draft restructuring programme of 10 April 2015.
Business development projects
Talvivaara acquired in 2011-2012 an approximately 60MW capacity share in the Fennovoima nuclear project in Finland. Due to the Company's ongoing corporate reorganisation proceedings, Talvivaara is currently not in a position to make further investments into the project and has therefore not been able to commit to further funding of the project.
Legal proceedings
Investigation on Talvivaara's disclosure practices
In April 2015, Talvivaara confirmed that a number of current and former members of Talvivaara's management have been heard in connection with an investigation relating to the Company's disclosure practices. On 16 May 2016 the Company was informed that the consideration of charges had been completed and that the prosecutor had decided to bring charges for security markets information offence against CEO Pekka Perä, former CEO Harri Natunen and former CFO and Deputy CEO Saila Miettinen-Lähde. The prosecutor also requests a corporate fine of 500 000 euros to be imposed on Talvivaara. Should any corporate fine be imposed on the Company in the final and binding decision such fine would be considered unsecured restructuring debt and cut and paid out in accordance with the restructuring programme of the Company.
The Company has already in the past gone through the applied disclosure practices extensively and in great detail with the Financial Supervisory Authority and the Company's view is that no crime has been committed.
Alleged misuse of insider information
The Company was notified on 20 October 2015 that charges have been brought against a member of its Executive Committee in the Helsinki District Court on a case concerning alleged misuse of insider information. The Company is not a party to the case. In the Company's view, the charges have no impact on the Company, its financial position or on the employment of the member of the Executive Committee in the Company
Gypsum pond leakages and discharges into water ways
On 13 May 2016 the District Court of Kainuu ("the District Court") gave its ruling on the case concerning the gypsum pond leakages of the Sotkamo mine in November 2012 and April 2013 and the sodium, sulphate and manganese discharges that exceeded the anticipated amounts stated in the original environmental permit application of the Sotkamo mine. Originally the charges were brought against four members of Talvivaara's management, including CEO Pekka Perä and former CEO Harri Natunen. The charges concern aggravated impairment of the environment. Harri Natunen has not been employed by the Company since the autumn of 2015.
The case concerning the discharge of raffinate from the metals recovery plant and dilute secondary heap solutions into the open pit during the period of 19 December 2013 - 31 January 2014 was handled together with the above mentioned case. The charges were brought against CEO Pekka Perä for impairment of the environment.
The District Court dismissed the charge concerning aggravated impairment of the environment and moderated the type of the crime to impairment of the environment. Penalties in the form of a fine were imposed on Pekka Perä, Harri Natunen and the former chief operations officer of the mine, who acts as a member of the Executive Committee of the Company. The prosecutor's demands concerning a suspended prison sentence and compensation for the benefit obtained from the crime were dismissed in relation to the private defendants. All charges were dismissed in relation to the fourth defendant. The charges concerning the discharge of raffinate from the metals recovery plant and dilute secondary heap solutions into the open pit made against Pekka Perä were dismissed.
Talvivaara has not been a party to the court case.
The decision is not yet final and binding. The three defendants and the prosecutor have appealed the case to the Court of Appeal.
Risk management and key risks
Talvivaara's near-term risk factors include particularly such risks that relate to the corporate reorganisation proceedings, financing and sufficiency of funds to meet its actual and potential liabilities:
If an adequate overall financial solution for the continuance of Talvivaara's business operations is not found, Talvivaara's restructuring programme may not be completed and stakeholders could lose their entire investment in the Company
The authorisation of the proposed restructuring programme of Talvivaara is conditional, among other things, on Talvivaara succeeding in completing an arrangement that will secure the necessary cash flow for the Company to discharge all of its liabilities and restructuring debts and the continuance of the Company's viable business. Although completion of the sale of the Company's mining-related assets to Terrafame Oy and the simultaneous settlement and discharge of the Company's guarantee liabilities under the Streaming Agreement and the Streaming Holiday Agreement on 30 June 2016 materially facilitated achieving such target, there is, as of the date of the Company's Interim Report 22 September 2016 no certainty as to whether the Company can fulfil the remaining special conditions set under the restructuring programme within the given time frame. If the restructuring programme is not authorised, the Company may have to file for bankruptcy and, as a result, the shareholders and creditors of the Company could lose their entire investment in the Company.
If the corporate reorganisation proceedings of Talvivaara are not successful, stakeholders could lose their entire investment in the Company
Although the Board of Directors believes that a corporate reorganisation is a viable option for Talvivaara, there can be no assurance that the proposed restructuring programme of the Company will ultimately be successful. The corporate reorganisation process can fail for a number of reasons, including due to an insufficiency of funds to implement or complete the restructuring programme, changes in circumstances affecting the financial viability of Talvivaara, or insufficient income or cash reserves. If the corporate reorganisation fails for these or any other reasons, it could result in the bankruptcy of the Company. As a result, shareholders and creditors could lose their entire investment in the Company.
The right of conversion of debt into equity included in the restructuring programme of Talvivaara and/or the issuance of new equity instruments will lead to a significant dilution of the existing shareholding of the Company
The right of conversion of debt into equity included in the restructuring programme of Talvivaara and/or the issuance of new equity instruments may lead to a significant dilution of the existing shareholding of the Company. The extent of dilution will eventually be determined by the aggregate amount of the restructuring debts to be converted into shares at the determined conversion rate of EUR 0.1144 per share as well as by the subscription price of the newly issued shares offered and the amount of funds raised in the potential equity financing.
Personnel
Headcount and remuneration
Talvivaara's personnel comprises an expert organisation, the core competences of which include, for example, production processes, procurement, environmental safety, risk management and communications. The salaries of Talvivaara's personnel are based on industry-wide collective agreements. The total compensation of the key individuals has traditionally consisted of a base salary and short and long term incentive schemes based on annual bonuses, stock options and other share-based incentive schemes. However, due to exceptional circumstances surrounding the Company there are currently no short term or long term incentive schemes in place.
As a result of the sale of assets concluded on 30 June 2016, Talvivaara's headcount decreased substantially and was 16 at the end of the review period on 30 June 2016 (1-6/2015: 51). 69 % (1-6/2015: 51 %) of Talvivaara's employees were men and 31 % (1-6/2015: 49 %) were women. The average age of the Company's employees was 44 years (1-6/2015: 41 years).
Resolutions of the Annual General Meeting
Talvivaara's Annual General Meeting was held on 15 June 2016 in Espoo, Finland. All the resolutions proposed, as set out in the notice of the meeting, were duly passed. The resolutions of the AGM included:
- that no dividend be paid for the financial year 2015;
- that the annual fee payable to the members of the Board for the term until the close of the Annual General Meeting in 2017 be as follows: Chairman of the Board of Directors EUR 84,000/year and other Non-executive Directors: EUR 48,000/year. No separate meeting fees are paid for the Board or the Committee work. The remuneration of the Executive Directors is included in their base salary, and it is not paid out separately;
- that the number of Board members be four (4) and that Mr. Tapani Järvinen, Mr. Pekka Perä, Mr. Stuart Murray and Ms. Solveig Törnroos-Huhtamäki were re-elected;
- that the auditor be reimbursed according to the approved auditor's invoice and authorised public accountants PricewaterhouseCoopers Oy be elected as the Company's auditor;
- that article 2§ of the Articles of Association of the Company concerning the line of business be amended in accordance with the proposal by the Board of Directors. The line of business was made more versatile to cover also the development of new types of businesses. The amended article 2§ of the Articles of Association concerning the line of business reads as follows:
"The line of business of the Company is to engage in ore exploration, exploitation, excavation and other mining activities and in metals, machine, chemical and construction industries and any business activities supporting them. The Company may also engage in the business operations based on know-how acquired in aforementioned sectors or related to or compatible with them. The Company may operate either directly or through subsidiaries, associated companies or joint ventures."
At its constituent meeting on 15 June 2016, the Board of Directors re-elected Mr. Tapani Järvinen as the chairman of the Board.
Shares and shareholders
By the end of 2015 Talvivaara received conversion notices pursuant to which the bonds amounting in aggregate to EUR 21,100,000 were to be converted to a total of 9,336,276 new Talvivaara shares. These new Talvivaara shares were registered in the Trade Register on 14 January 2016.
The number of shares issued and outstanding and registered on the Euroclear Shareholder Register as of 31 December 2015 was 2,098,817,876. Including the effect of the EUR 225 million convertible bond of 16 December 2010, the authorized full number of shares of the Company amounted to 2,195,543,540.
As at 31 December 2015, the shareholders who held more than 5% of the shares and votes of Talvivaara were Solidium Oy (15.2%) and Mr. Pekka Perä (5.9%).
As at 30 June 2016 the shares held in treasury by the Company amounted to in aggregate 192,883,000 (9.2% of the shares in the Company). The shares held in treasury by the Company do not carry any voting rights.
Share based incentive plans
As at 30 June 2016, the Company has no share based incentive schemes in place.
Events after the review period
Approval by the EGM of the sale of assets
The extraordinary general meeting of shareholders of the Company held on 11 August 2016 approved the resolution proposed by the Board of Directors concerning the sale by Talvivaara of its assets related to the Sotkamo mining operations to Terrafame Oy. Whilst all the income generating assets of Talvivaara were transferred to Terrafame, the Company believes that the arrangement has materially improved the possibility for the successful completion of Talvivaara's corporate restructuring proceedings, and facilitated the development of Talvivaara's new business opportunities.
Corporate reorganisation proceedings
The Administrator of Talvivaara's corporate restructuring proceedings has on 20 September 2016 confirmed his view, according to which the following special conditions set for the entry into force of the Company's draft restructuring programme are still to be fulfilled at the date of these Interim Report 22 September 2016:
- Special condition (b) (2):
The general meeting of Talvivaara arranges or authorises the Company's board of directors to arrange a financing arrangement (e.g. a share issue, bond or other financial instrument) to raise the funds to make the investment necessary for carrying out the arrangement referred to in special condition (a) (2) of the final draft restructuring programme and/or to pay the claims of those creditors who did not exercise their right to convert their restructuring debt claims into shares in the Company in the manner provided for in the restructuring programme and to cover other possible liabilities to the extent the Company's other funds are not sufficient for this purpose; and
- Special condition (c):
The proceedings for converting the restructuring debts into shares in the Company have been completed, and the new shares have been registered in the Trade Register.
In addition, in the Administrator's view, due compliance with all the special conditions and Restructuring Act will require that one or more of the Company's new business opportunities is developed sufficiently so as to provide more tangible prospects for future viable business operations.
Currently, the Company is focusing on fulfilling all the remaining special conditions set for the entry into force of the draft restructuring programme.
The Company announced on 20 September 2016 that the Company has started preparations for the share issue in accordance with the special condition (c) of the restructuring programme. The Company also announced that it will continue investigating and developing its new projects into concrete business opportunities. The new business opportunities of the Company include projects, amongst others, in the recycling and energy saving sectors.
Short-term outlook
The operational outlook for Talvivaara is greatly dependent on the authorisation and a successful completion of the Company's corporate reorganisation proceedings within the prescribed time frame, and the materialisation and further development of the Company's new income generating business opportunities currently under contemplation. To facilitate this, a new line of business of the Company was approved by the Annual General Meeting in June 2016 enabling the Company to develop new business opportunities also outside the mining industry.
Whilst the Administrator's final draft restructuring programme gives the Company reasonably ample time to complete the reorganization proceedings, there is no certainty that the Company will be successful in developing its new business opportunities and, ultimately, in completing the corporate reorganisation proceedings through due payments.
Talvivaara Mining Company Plc
Board of Directors
BALANCE SHEET
| (All amounts in EUR) | As at 30 Jun 2016 | Unaudited As at 30 Jun 2015 | As at 31 Dec 2015 | |
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 21,592 | 4,999,546 | 4,692,782 | |
| Intangible assets | - | 497,088 | 94,547 | |
| Other receivables | 26,822 | 30,926 | 27,640 | |
| Total non-current assets | 48,414 | 5,527,559 | 4,814,970 | |
| Current assets | ||||
| Trade receivables | 898,184 | 63,678 | 37,850 | |
| Other receivables | 1,432,458 | 46,599 | 188,138 | |
| Cash and cash equivalents | 4,193,678 | 4,432,729 | 4,662,572 | |
| Total Current assets | 6,524,320 | 4,543,006 | 4,888,559 | |
| TOTAL ASSETS | 6,572,734 | 10,070,565 | 9,703,529 | |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to the owners | ||||
| Share capital | 80,000 | 80,000 | 80,000 | |
| Share premium | 8,085,842 | 8,085,842 | 8,085,842 | |
| Other reserves | 797,348,200 | 771,648,199 | 797,348,200 | |
| Retained deficit | (1,328,054,020) | (1,524,313,624) | (1,535,766,741) | |
| Total equity | (522,539,978) | (744,499,583) | (730,252,700) | |
| Current liabilities | ||||
| Provisions | - | 203,444,456 | 203,444,456 | |
| Borrowings | 465,042,831 | 503,955,559 | 477,845,205 | |
| Trade payables | 2,162,258 | 2,743,335 | 2,723,003 | |
| Other payables | 61,907,624 | 44,426,799 | 55,943,564 | |
| Total liabilities | 529,112,712 | 754,570,148 | 739,956,228 | |
| TOTAL EQUITY AND LIABILITIES | 6,572,734 | 10,070,565 | 9,703,529 |
INCOME STATEMENT
| (All amounts in EUR) | Period ended 30 Jun 2016 | Unaudited Period ended 30 Jun 2015 | Year ended 31 Dec 2015 | |
| Other operating income | 14,019,322 | 3,436,664 | 6,702,480 | |
| Materials and services | (174,762) | (138,698) | (257,536) | |
| Personnel expenses | (1,512,874) | (2,132,041) | (3,807,345) | |
| Depreciation and amortisation | (299,324) | (342,470) | (971,024) | |
| Impairment charges on intangible assets | (93,626) | - | - | |
| Impairment charges on investments | - | - | 421,333 | |
| Other operating expenses | 203,931,287 | (1,314,824) | (2,267,625) | |
| Operating profit/loss | 215,870,023 | (491,368) | (179,717) | |
| Finance income | 9,338 | 1,620 | 12,841 | |
| Finance cost | (8,166,640) | (14,488,035) | (25,842,689) | |
| Finance cost (net) | (8,157,302) | (14,486,415) | (25,829,848) | |
| Profit/Loss before income tax | 207,712,721 | (14,977,782) | (26,009,565) | |
| Income tax | - | - | - | |
| PROFIT/LOSS FOR THE FINANCIAL PERIOD | 207,712,721 | (14,977,782) | (26,009,565) | |
| Profit/Loss attributable to the owners of the Company, | ||||
| (€/share) | Period ended 30 Jun 16 | Period ended 30 Jun 2015 | Year ended 31 Dec 15 | |
| Diluted and undiluted | 0,10 | (0,01) | (0,01) |
STATEMENT OF CASHFLOWS
| (all amounts in EUR) | Period ended 30 Jun 2016 | Unaudited Period ended 30 Jun 2015 | Year ended 31 Dec 2015 |
| Cash flows from operating activities | |||
| Profit/Loss for the period | 207,712,721 | (14,977,782) | (26,009,565) |
| Adjustments for | |||
| Depreciation and amortisation | 299,324 | 342,470 | 971,024 |
| Other non-cash income and expenses | (216,005,213) | - | 215,257 |
| Impairment charges on investments | - | - | (421,333) |
| Interest income | (9,338) | (1,620) | (12,841) |
| Interest expenses | 8,166,640 | 14,488,035 | 25,842,689 |
| Cash flow before change in working capital | 257,760 | (148,898) | 585,230 |
| Change in working capital | |||
| Decrease(+)/increase(-) in trade and other receivables | 203,656 | 211,314 | 98,898 |
| Decrease(-)/increase(+) in trade and other payables | (864,554) | (891,319) | (1,287,347) |
| Change in working capital | (660,898) | (680,005) | (1,188,449) |
| Net cash used in operating activities before financing activities and taxes | (403,139) | (828,903) | (603,219) |
| Interest and other finance cost paid | (65,785) | (84,749) | (91,801) |
| Interest and other finance income | 30 | - | 11,211 |
| Net cash generated (used) in operating activities | (468,894) | (913,652) | (683,809) |
| Cash flows from investing activities | |||
| Net cash generated (used) in investing activities | 0 | 0 | 0 |
| Cash flows from financing activities | |||
| Net cash generated from financing activities | 0 | 0 | 0 |
| Net (decrease)/increase in cash and bank overdrafts | (468,894) | (913,652) | (683,809) |
| Cash and bank overdrafts at beginning of the year | 4,662,572 | 5,346,381 | 5,346,381 |
| Cash and bank overdrafts at end of the period | 4,193,678 | 4,432,729 | 4,662,572 |
STATEMENT OF CHANGES IN EQUITY
| EUR | Share capital | Share issue | Share premium | Other reserves | Retained deficit | Total |
| 31 Dec 2014 | 80,000 | - | 8,085,842 | 771,648,200 | (1,509,757,176) | (729,943,134) |
| Absorption of subsidiaries | - | - | - | - | 421,333 | 421,333 |
| Profit (loss) for the period | - | - | - | - | (14,977,782) | (14,977,782) |
| 30 Jun 2015 | 80,000 | - | 8,085,842 | 771,648,200 | (1,524,313,625) | (744,499,583) |
| Conversion of convertible bonds | - | - | - | 25,700,000 | - | 25,700,000 |
| Reversal of absorption of subsidiaries to income statement | - | - | - | - | (421,333) | (421,333) |
| Profit (loss) for the period | - | - | - | - | (11,031,783) | (11,031,783) |
| 31 Dec 2015 | 80,000 | - | 8,085,842 | 797,348,200 | (1,535,766,741) | (730,252,700) |
| Profit (loss) for the period | - | - | - | - | 207,712,721 | 207,712,721 |
| 30 Jun 2016 | 80,000 | - | 8,085,842 | 797,348,200 | (1,328,054,020) | (522,539,978) |
Financials for the period ended on 30 June 2016 and for the financial year ended on 31 December 2015 are audited. Financials for the period ended on 30 June 2015 are unaudited.
NOTES
1. Basis of presentation and non-going concern
This Interim Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union taking into account the corporate reorganisation proceedings that commenced in respect of the Company on 29 November 2013. In addition, the Company has taken into account IAS 1.25 and IAS 1.26 requirements regarding the disclosure under the non-going concern basis. Talvivaara's Interim Report for the period ended 30 June 2016 have not been prepared on a going concern basis. The basis of preparation is that operations may end in near future.
The chosen reporting basis results from the existence of material uncertainty that casts significant doubt upon the Company's ability to realise its assets and discharge its liabilities in the normal course of business and from the lack of visibility on the Company's operational environment twelve months beyond the date of reporting. The requisite adjustments resulting from the chosen reporting basis have, where applicable, been made in the 2016 Interim Report to the carrying amounts of the Company's assets and liabilities, but no reserve has been made in the Company's balance sheet for the costs relating to winding down of the operations.
The Administrator of Talvivaara's corporate restructuring proceedings has confirmed his view, according to which the following special conditions set for the entry into force of the Company's draft restructuring programme are still to be fulfilled at the date of the Interim Report 22 September 2016:
- Special condition (b) (2):
The general meeting of Talvivaara arranges or authorises the Company's board of directors to arrange a financing arrangement (e.g. a share issue, bond or other financial instrument) to raise the funds to make the investment necessary for carrying out the arrangement referred to in special condition (a) (2) of the final draft restructuring programme and/or to pay the claims of those creditors who did not exercise their right to convert their restructuring debt claims into shares in the Company in the manner provided for in the restructuring programme and to cover other possible liabilities to the extent the Company's other funds are not sufficient for this purpose; and
- Special condition (c):
The proceedings for converting the restructuring debts into shares in the Company have been completed, and the new shares have been registered in the Trade Register.
In addition, in the Administrator's view, due compliance with all the special conditions and Restructuring Act will require that one or more of the Company's new business opportunities is developed sufficiently so as to provide more tangible prospects for future viable business operations.
Currently, the Company is focusing on fulfilling all the remaining special conditions set for the entry into force of the draft restructuring programme.
Until 30 June 2016 the Company financed its day-to-day operations by providing administrative and technical services and the lease of machinery and equipment critical to Terrafame. These contractual arrangements helped the Company to discharge all of its new liabilities as and when they fell due. After the agreement made with Terrafame on 30June 2016, the Company continues identifying and assessing new business opportunities and developing its business outside the Sotkamo mine.
Talvivaara's ability to revise its reporting basis and to regain its status as a going concern is dependent, among other things, on the successful completion of the Company's corporate reorganisation proceedings, which requires that:
- Talvivaara succeeds in completing an arrangement that will secure the necessary cash flow for the Company to discharge all of its liabilities and the continuance of the Company's viable business, and
- the District Court of Espoo authorizes the execution of the Company's debt restructuring in accordance with the Administrator's final draft restructuring programme of 10 April 2015.
As of the date of the Company's Interim Report 22 September 2016, there is no certainty as to whether the Company can fulfill all the set requirements within the given time frame.
For more information on the effects of the draft restructuring programme, please refer to Note 2.
2. Illustrative calculation of the Company equity, if the restructuring programme is confirmed
According to the draft restructuring programme, the creditors of the unsecured restructuring debt may convert their receivables to new shares of the Company. The unsecured restructuring debt of those creditors who decide not to exercise their conversion right would be cut by 99%. The remaining 1% of the unsecured restructuring debt would be paid in one instalment. The amount of unsecured restructuring debt to be paid can only be determined after it is known how many creditors would exercise their right to convert unsecured restructuring debt into Company shares.
The following table illustrates the Company's capital structure based on actual book values as at 30 June 2016, adjusted with the assumed conversion of all non-preferred restructuring loans (totaling EUR 453.6 million) to new shares of the Company as if the conversion would have taken place as at 30 June 2016. In addition, the adjusted capital structure assumes elimination of the accumulated accrued interest since the beginning of the restructuring proceedings amounting to EUR 67.2 million as the obligation to pay such interest will cease upon either the assumed approval of the draft restructuring programme or the conversion of the non-preferred restructuring debt.
| EUR | 30 June 2016 | |||
| Actual | 1) Conversion of unsecured restructuring debt | 2) Elimination of the accrued interest expenses | Adjusted | |
| Cash and cash equivalents | 4,193,678 | 0 | 0 | 4 193 678 |
| Equity | (522,539,820) | 453,578,423 | 67,154,776 | (1,806 622) |
| Borrowings and trade and other payables, of which: | ||||
| Secured restructuring debt and other liabilities to be taken into account | 7,500,000 | 0 | 0 | 7,500,000 |
| Unsecured restructuring debt | 453,578,423 | (453,578,423) | 0 | 0 |
| Accumulated interest since the beginning of the restructuring proceedings | 67,154,776 | 0 | (67,154,776) | 0 |
| Other payables during procedure | 879,514 | 0 | 0 | 879,514 |
| Total liabilities | 529,112,712 | (453,578,423) | (67,154,776) | 8,379,514 |
The calculation is based on the assumption that all unsecured restructuring debt (totaling EUR 453.6 million) will be converted into new shares of the Company with a subscription price of EUR 0.1144 per share. Following the conversion of all unsecured restructuring debt, the equity will increase by the amount of the unsecured restructuring debt of EUR 453.6 million.
The Company has accrued interest expenses of EUR 67.2 million to the balance sheet since the beginning of the restructuring proceedings, despite the fact that the payment obligation on unsecured restructuring debt ceased when the reorganisation proceedings were started.
The calculation does not take into account the interest payable on the secured loans of in total EUR 7.5 million accrued during the restructuring proceedings, which according to the final draft restructuring programme would be 12-month EURIBOR added with 2 percent units. The interest expense on the secured debt accrued from the beginning of the restructuring proceedings 29 November 2013 until 30 June 2016 amounted to approximately EUR 0.4 million. The Company and the secured creditors may agree to adjust this interest liability in terms of the repayable amount and/or the repayment schedule. The secured restructuring loans of EUR 7.5 will remain as liabilities on the balance sheet.
If no unsecured restructuring debts were converted into new shares of the Company and the draft restructuring programme was authorised, the amount of the unsecured debts would be reduced by 99 percent based on the restructuring plan. The remaining amount of unsecured restructuring loans of EUR 4.5 million would remain as short-term debt on the balance sheet. Following the reduction of the unsecured restructuring debt, the Company's equity would increase by the amount of the reduction of the unsecured restructuring debt, EUR 449.0 million.
In the event that the restructuring programme was completed, the accumulated interest since the beginning of the restructuring proceedings accrued in the Interim Report would be derecognized, since the fulfillment of the restructuring plan will verify that the accumulation of interests ceased at the time the restructuring proceedings were started.
3. Property, Plant & Equipment
| (All amounts in EUR) | Buildings | Machinery and equipment | Total |
| Gross carrying amount at 1 Jan 2015 | 11,899,045 | 19,837,595 | 31,736,640 |
| Additions | - | 266,843 | 266,843 |
| Gross carrying amount at 30 Jun 2015 | 11,899,045 | 20,104,438 | 32,003,483 |
| Accumulated depreciation and impairment losses at 1 Jan 2015 | 11,899,045 | 14,826,837 | 26,725,882 |
| Depreciation for the period | - | 278,055 | 278,055 |
| Accumulated depreciation and impairment losses at 30 Jun 2015 | 11,899,045 | 15,104,892 | 27,003,937 |
| Carrying amount at 1 Jan 2015 | 0 | 5,010,758 | 5,010,758 |
| Carrying amount at 30 Jun 2015 | 0 | 4,999,546 | 4,999,546 |
| Deductions | - | (3,463) | (3,463) |
| Gross carrying amount at 31 Dec 2015 | 11,899,045 | 20,100,975 | 32,000,020 |
| Accumulated depreciation and impairment losses at 30 Jun 2015 | 11,899,045 | 15,104,892 | 27,003,937 |
| Depreciation for the period | - | 303,301 | 303,301 |
| Accumulated depreciation and impairment losses at 31 Dec 2015 | 11,899,045 | 15,408,193 | 27,307,238 |
| Carrying amount at 30 Jun 2015 | - | 4,999,546 | 4,999,546 |
| Carrying amount at 31 Dec 2015 | (0) | 4,692,782 | 4,692,782 |
| Gross carrying amount at 1 Jan 2016 | 11,899,045 | 20,100,975 | 32,000,020 |
| Deductions | (11,899,045) | (20,060,775) | (31,959,820) |
| Gross carrying amount at 30 Jun 2016 | - | 40,200 | 40,200 |
| Accumulated depreciation and impairment losses at 1 Jan 2016 | 11,899,045 | 15,408,193 | 27,307,238 |
| Depreciation for the year | - | 298,403 | 298,403 |
| Deductions | (11,899,045) | (15,687,988) | (27,587,032) |
| Accumulated depreciation and impairment losses at 30 Jun 2016 | 0 | 18,608 | 18,608 |
| Carrying amount at 1 Jan 2016 | (0) | 4,692,782 | 4,692,782 |
| Carrying amount at 30 Jun 2016 | - | 21,592 | 21,592 |
Upon liquidation of Talvivaara Exploration Ltd in 2015, all its assets, rights and liabilities transferred to the Company. On 30 June 2016. Talvivaara and Terrafame Oy signed agreements, in which the parties agreed on the sale of Talvivaara's assets related to the Sotkamo mining operations and settlement of Talvivaara's guarantee liabilities under the Streaming Holiday Agreement, with the principal amount of approximately EUR 14 million (including interest up until 30 June 2016). The assets sold include, among others, the lime plant needed for the Sotkamo operations and the laboratory.
4. Borrowings
| EUR | As at 30 Jun 2016 | Unaudited As at 30 Jun 2015 | As at 31 Dec 2015 |
| Restructuring loan capital | 427,500,000 | 453,200,000 | 427,500,000 |
| Restructuring loan interest | 16,510,880 | 18,567,844 | 16,510,880 |
| Accrued interest on restructuring loans after commencement of restructuring proceedings | 12,822,068 | 11,078,282 | 12,822,068 |
| Other borrowings during procedure | 8,209,883 | 21,109,433 | 21,012,257 |
| 465,042,831 | 503,955,559 | 477,845,205 |
Following table specifies borrowings of the Company as at 30 June 2016 in accordance with the draft restructuring programme:
| EUR | As at 30 Jun 2016 |
| Secured restructuring debt and other liabilities to be taken into account | 7,448,870 |
| Unsecured restructuring debt | 444,563,991 |
| Accumulated interest since the beginning of the restructuring proceedings | 13,029 971 |
| Total borrowings | 465,042,831 |
Due to the corporate restructuring proceedings, the Company has reclassified all of its borrowings as current and any unamortised transaction costs have been expensed to the income statement in previous periods in connection with the reclassification accreting the loan carrying amounts to the nominal value. The fair value of the restructuring debt cannot be assessed due to the Company's corporate restructuring proceedings, as the Company does not currently have a credit rating or proper access to debt financing.
Restructuring debt capital
The restructuring debt capital includes the Revolving Credit Facility (EUR 70.0 million), the guarantee liability granted to Finnvera (EUR 50.7 million), the senior unsecured bonds due in 2017 (EUR 110.0 million) and the senior convertible bonds due in 2015 (EUR 197.5 million). Of the restructuring loan capital EUR 7,4 million is secured in accordance with the draft restructuring programme and EUR 428.7 million is unsecured. The details related to these debts can be found later in this section.
According to the draft restructuring programme, the secured debt is entitled to cover an amount corresponding to 50 percent of the assets of the debtor valued at the beginning of the restructuring proceedings. The capital amount of the debt secured with mortgage on the Company's assets will not be cut in the restructuring proceedings and the holder of such debt is not entitled to convert the capital amount of the secured debt into new shares of the Company.
Pursuant to the draft restructuring programme, the holders of unsecured debt are entitled to convert their receivable to new shares in the Company at the conversion rate of EUR 0.1144 per share. To the extent the unsecured creditors do not use their conversion right, the remaining unsecured debt will be cut by 99 percent whilst 1 percent of the capital of the loan will be repaid to the creditor.
Restructuring loan interest
Restructuring loan interests are unsecured debts and payable to the holders of the restructuring debt in accordance with the draft restructuring programme.
Interest accumulated since the beginning of the restructuring proceedings
In addition to the Company's restructuring debts and other liabilities to be considered, the Company's borrowings include EUR 13.0 million and trade and other payables include EUR 54 million of accumulated interest, which will fall due only in case the draft restructuring programme is not approved. The Company has accrued the interest on the balance sheet for all restructuring debt based on the original loan terms described below despite the fact that the accumulation of interest payment obligation on unsecured restructuring debt ceased when the restructuring proceedings were started. In case the restructuring plan is approved the interest accrued will not be paid, since the fulfillment of the restructuring programme will verify that the accumulation of interests ceased at the time the restructuring proceedings were started.
Other short-term borrowings
Other borrowings as at 31 December 2015 included the guarantee liability to Winttal Oy which was settled in connection with the asset deal concluded with Terrafame Oy on 30 June 2016. Currently, the other short-term borrowings consist mainly of the third-party security granted to Finnvera (EUR 8.2 million including accrued interest).
Detailed information on debts under draft restructuring programme based on their original terms
Senior unsecured convertible bonds due 2015
In December 2010 the Company completed an offering of EUR 225.0 million of senior unsecured convertible bonds due 2015. The bonds are convertible into 98,617,935 million fully paid ordinary shares of the Company. The interest rate applied to the convertible bond is 4.00% and the yield to maturity 6.50%, reflecting a redemption price of 114.5% at maturity. The bonds are convertible into Talvivaara's ordinary shares following the resolution by the Extraordinary General Meeting of the Company's shareholders in January 2011 to issue special rights in relation to the Bonds. To the extent the bonds have not been converted into shares by 10 December 2015, Talvivaara shall repay the debt in one instalment on maturity date 16 December 2015.
Senior unsecured bonds due 2017
In March 2012, 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 selected private investors. The bond was settled and the notes were listed on NASDAQ OMX Helsinki in April 2012.
Revolving Credit Facility
On 30 September 2013, Talvivaara had an outstanding revolving credit facility of EUR 100 million with a carrying amount of EUR 70 million (the "Revolving Credit Facility"). With a waiver and amendment letter dated 30 October 2013, the terms of the facility were amended such that the maximum margin was increased to 4.50% from the previous range of 1.75-3.00%, the undrawn amount of EUR 30 million was cancelled, and the liquidity covenant levels were adjusted to levels relevant at the time. As at 30 June 2016 and 2015, the outstanding loan amount was EUR 70 million.
Guarantee liabilities
Guarantee liabilities include Finnvera loan of EUR 50.7 million (including interest) recognised as unsecured restructuring debt under the draft restructuring programme due to the guarantee given on behalf of the debtor Talvivaara Sotkamo and a third-party security granted to Finnvera in the amount of EUR 8.2 million (including accrued interest).
All amounts of reorganisation debts remain subject to change at the time of the Interim Report and may only be finalised following the confirmation of the draft restructuring programme.
5. Contingencies and commitments
| Counter indemnity given as a guarantee for the guarantee insurance provided by Atradius Credit Insurance N.V to Kainuu ELY Centre | |||
| EUR | 30 Jun 2016 | Unaudited 30 Jun 2015 | 31 Dec 2015 |
| Counter indemnity given as a guarantee | - | 31,940,000 | 31,940,000 |
| 0 | 31,940,000 | 31,940,000 | |
Talvivaara Sotkamo largely met its environmental bond requirement under the environmental permit through guarantee insurance provided by Atradius Credit Insurance NV ("Atradius"). As at 31 December 2015, the coverage amounted to EUR 31.9 million. In the event restoration of the mine's waste areas (gypsum ponds, heap areas) would have taken place without Talvivaara Sotkamo carrying the cost, the expenses would have initially been covered by Atradius and eventually Atradius would have claimed the cost back from the Company, which has given counter-indemnity for such costs to Atradius. However, as a result of Terrafame replacing the guarantee insurance placed by Talvivaara Sotkamo with a new environmental bond on 21 January 2016, Atradius notified the Company that the original guarantee insurance and the corresponding counter-indemnity terminated on 21 January 2016 and that the beneficiaries, Kainuun ELY-keskus or Atradius, have no claims against Talvivaara Sotkamo or the Company on the basis of the guarantee insurance or the counter-indemnity issued by the Company. Therefore, the full amount of the liability under the counter-indemnity given by the Company has been removed from the Company's restructuring debts, and no payment will be made on it under the authorised payment schedule.
As at 31 December 2015, the coverage amounted to EUR 31.9 million. As a result of Terrafame replacing the guarantee insurance placed by Talvivaara Sotkamo with a new environmental bond, Atradius notified the Company that the original guarantee insurance and the corresponding counter-indemnity terminated on 21 January 2016.
| The future aggregate minimum lease payments under non-cancellable operating leases | |||
| EUR | 30 Jun 2016 | Unaudited 30 Jun 2015 | 31 Dec 2015 |
| No later than 1 year | 65,454 | 78,178 | 93,497 |
| Later than 1 year and not later than 5 years | 20,436 | 144 | 41,000 |
| 85,890 | 78,322 | 134,497 | |
The Company has not terminated lease agreements on the basis of section 27 of the Restructuring of Enterprises Act.
Securities given by the Company under the Multicurrency Revolving Facility Agreement and the Finnvera Financing Agreements
The securities given under the Multicurrency Revolving Facility Agreement (EUR 70 million) and the Finnvera Financing Agreements (EUR 50 million and EUR 10 million) include:
- Pledge of all shares owned by the Company in Talvivaara Sotkamo
- Pledge of floating charge notes registered over assets of the Company in the amount of EUR 300 million
- Pledge of intra-group receivables of the Company from Talvivaara Sotkamo
- Pledge of insurance receivables
In addition, the Company has guaranteed the obligations of Talvivaara Sotkamo under the Finnvera Promissary Note in the amount of EUR 60 million by a specific Surety Obligation.
| Share-related key figures | 30 Jun 2016 | Unaudited 30 Jun 2015 | 31 Dec 2015 | |
| Earnings per share | EUR | 0.10 | (0.01) | (0.01) |
| Equity per share | EUR | (0.25) | (0.36) | (0.35) |
| Employee-related key figures | ||||
| 30Jun 2016 | Unaudited 30 Jun 2015 | 31 Dec 2015 | ||
| Salaries | EUR '000 | 1,283 | 1,775 | 3,206 |
| Average number of employees | 16 | 51 | 50 | |
| Number of employees at the end of the period | 16 | 51 | 39 |
| Key financial figures of the Group | |
| Return on equity | 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 | 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 | |
| Earnings per share | Loss attributable to equity holders of the Company |
| Adjusted average number of shares | |
| Equity per share | Equity attributable to equity holders of the Company |
| Adjusted average number of shares |
