RNS Number:9807C
Talvivaara Mining Company Ltd
30 August 2007
Talvivaara Mining Company Ltd unaudited interim results
for the six month period ended 30 June 2007
30 August 2007
Talvivaara Mining Company Ltd ("Talvivaara" or "the Company"), the Finnish
mining company with a primary focus on nickel and zinc, is pleased to announce
its first set of financial results following its successful listing on the Main
Market of the London Stock Exchange on 1 June this year.
Highlights
*Bankable Feasibility Study for the Talvivaara mine completed on 23 March
*Environmental permit and starting order obtained on 29 March
*Project finance facility of Euro236 million signed on 7 May
*Initial Public Offering on the London Stock Exchange Main Market with
gross proceeds of Euro302 million successfully closed on 1 June
*Investment plan for the Talvivaara mine approved on 8 June
*Resolution by the Finnish Parliament on 20 June for an addition to the
national budget in excess of Euro50 million to support Talvivaara's
infrastructure investments
*Personnel successfully recruited in key positions for the construction
phase of the Talvivaara mine
*Construction of the Talvivaara mine underway and proceeding according to
timetable and budget
*Loss for the period Euro11.2 million (H1/2006: Euro1.6 million)
*Cash at bank on 30 June of Euro286 million
*Capital expenditure commitments totalled approximately Euro280 million as of
30 August, representing more than 60% of the anticipated development phase
(2007-2009) capital expenditure of Euro452 million
Commenting on the results, Pekka Pera, Chief Executive Officer of the Company
said:
"I am delighted to report that Talvivaara achieved all major operational and
financial goals it had set for the first six months of 2007. Following the
approval of the investment plan in June, we must now show we can complete the
construction of our world class production facility on timetable and on budget.
I have every confidence that, working together with our industrial partners and
contractors, our highly experienced team will deliver on this task."
ENQUIRIES
Talvivaara Mining Company Ltd Tel: +358 20 712 9800
Pekka Pera Tel: +358 40 585 9225
Saila Miettinen-Lahde Tel: +358 40 548 3695
Merlin Tel: +44 207 653 6620
David Simonson
Tom Randell
Maria Suleymanova
NOTES TO EDITORS
Company Overview
*Talvivaara aims to become an internationally significant base metals
producer with its primary focus on nickel and zinc using a technology known
as bioheapleaching to extract metal out of ore
*The Company's main activity is the development and exploitation of two
polymetallic deposits, Kuusilampi and Kolmisoppi, in Sotkamo, Finland
(together the "Talvivaara deposits") using bioheapleaching technology
- The Talvivaara deposits comprise one of the largest known sulphide
nickel resources in Europe with 266 million tonnes of ore in measured and
indicated resources
- Resources are sufficient to support anticipated production for a
minimum of 24 years, expected to start in late 2008, with an expected annual
nickel output of approximately 33,000 tonnes; the Company has the potential
to provide approximately 2.3% of the world's current annual production of
primary nickel by 2010
- In addition to the mining of nickel, the mine is also expected to
produce zinc (approximately 60,000 tpa), copper (approximately 10,000 tpa)
and cobalt (approximately 1,200 tpa) as by-products of the process
- The mine site is situated close to existing energy and transportation
infrastructure
* The Group plans to develop the Talvivaara deposits using
bioheapleaching technology
- Bioheapleaching harnesses locally occurring, live bacteria for the
extraction of metals from ore
- This technology is already globally widely used for other metals,
notably copper and gold
- During the last two years, the Group has demonstrated the viability of
using the bioheapleaching technology for the extraction of nickel in sub-arctic
climatic conditions in large on-site pilot trials
* The Talvivaara deposits are well-suited for open pit mining due to
their thin overburden, favourable resource geometry and a low waste to ore ratio
- The ore has a nickel content of 0.27 per cent. and is well-suited to
bioheapleaching due to both its high sulphide content and its low pH,
which enables rapid leaching with reduced need for chemical catalysis
* The Company has secured a 10-year off-take agreement for 100 per cent.
of its main product output of nickel and cobalt to Norilsk Nickel
* With good infrastructure, progressive mining laws, subsidy policies,
an economically and politically stable operating environment and readily
available mining expertise, Finland provides a favourable environment for
operating a mine
This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be identified
by the use of forward-looking terminology, including the terms "believes",
"estimates", "plans", "projects", "anticipates", "expects", "intends", "may",
"will", or "should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans, objectives, goals,
future events or intentions. These forward-looking statements include all
matters that are not historical facts. They include, but are not limited to,
statements regarding the Group's intentions, beliefs or current expectations
concerning, amongst other things, the results of operations, financial position,
liquidity, prospects, growth, strategies and the mining industry.
By their nature, forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances. Forward-looking statements are
not guarantees of future performance and the actual results of the Group's
operations, financial position and liquidity, and the development of the markets
and the industry in which the Group operates, may differ materially from those
described in, or suggested by, the forward-looking statements contained in this
announcement. A number of factors could cause results and developments to differ
materially from those expressed or implied by the forward-looking statements,
including, without limitation, expectations regarding the commencement of
commercial mining operations at the Talvivaara Project area, expectations
regarding the Group's planned capital expenditure and financial commitments, the
Group's ability to finance the planned Talvivaara Project and manage
expenditure, expectations regarding the Group's ability to generate revenue,
expectations regarding the use of the bioheapleaching and metal recovery
technology in large-scale production, general economic and business conditions,
industry trends and competition, expectations regarding commodity prices,
changes in regulation, and fluctuations in interest and exchange rates. The
Company does not intend and does not assume any obligation to update any
forward-looking statements contained herein unless required by applicable
legislation. As a result of these factors, prospective investors are cautioned
not to rely on any forward-looking statement.
Chairman's Statement
The highlight of the period under review was the successful listing on 1 June of
the Company's shares on the Main Market of the London Stock Exchange. JPMorgan
Cazenove and Nordea Bank Finland, respectively, acted as Lead and Co-Lead
Managers. This landmark event initiated the process which will soon transform
Talvivaara into a globally important base metals producer supported by a strong
and diversified shareholder base including stakes held by our business partners
Outokumpu and Norilsk Nickel.
Talvivaara has one of Europe's largest known sulphide nickel resources. The
company's two polymetallic deposits located at Kuusilampi and Kolmisoppi in
Sotkamo, Finland, contain some 266 million tonnes of nickel resources from which
we expect to produce by 2010 an annual output of around 33,000 tonnes of nickel
or approximately 2.3% of the world's current demand. Talvivaara will have the
resources to produce at least this amount for more than two decades.
This year saw us able to secure, by way of a US$320 million project finance
facility and Euro302 million of equity, the entire financing requirement to bring
the Company into production. Structured by Standard Bank, the project finance
facility was completed in only five months with Standard Bank, Societe Generale,
Bayerische Hypo- und Vereinsbank and Nordea Bank Finland as mandated lead
arrangers. I would like to thank them for their confident support.
I would also like to thank the Finnish authorities at the national and regional
levels as well as the broader community in the area surrounding our operations
in Sotkamo who together have helped to ensure that we will be able to develop
this project and bring welcome economic stimulus to the local economy.
I am also pleased to report that we have been able to attract a Board of
Directors with the combination of skills, experience and competencies required
for the successful execution of our strategic and operational plans, and which
at the same time fully complies with current best practice Corporate Governance
requirements.
Despite the recent turmoil in the equity markets and the moderation in the
nickel price we remain confident that the underlying fundamentals are
unchanged and remain well above the very conservative parameters used in
Talvivaara's strategic planning.
Finally, and on a personal note, it has been most gratifying for me to see Pekka
Pera's vision coming closer and closer to fruition. It will be the realisation
of many years' work by him together with a dedicated team of experts. I have,
and continue, to enjoy working with his impressive and growing team and together
we can look forward to busy and rewarding times ahead.
Edward Haslam
Chairman
30 August 2007
CEO's statement
During the first six months of 2007, Talvivaara achieved several major
milestones on its way to becoming a significant nickel producer. These included
the securing of financing for the construction of the Talvivaara nickel mine in
Sotkamo, Finland, through a successful Initial Public Offering ("IPO") of Euro302
million and a committed project finance facility of US$320 million (Euro236
million). Together with the environmental permit obtained in March 2007, this
funding enabled the Company to commit to and commence mine construction targeted
at starting metal production during the fourth quarter of 2008. To date, the
construction project is proceeding on timetable and on budget.
Review of operating activities
Talvivaara completed the Bankable Feasibility Study for the Talvivaara mine in
March. The technical solutions described in the study were largely based on
successful pilot trials of bioheapleaching and metals recovery which,
respectively, demonstrated high yields from the ore and from the leach solution.
In all, the results of the study confirmed both the technical and economic
feasibility of the project using relatively conservative assumptions for key
parameters such as metal recoveries and metal prices. The study was audited by
SRK Consulting, who provided the Mineral Expert's Report for Talvivaara's
listing and the Technical Audit for the project finance facility.
The environmental permit and starting order for the Talvivaara mine were
published by the Northern Finland Environmental Permitting Office on 29 March.
The permit will be final and binding upon completion of the customary appeal
process.
Following the successful financing transactions completed in the beginning of
June, the Company made a formal investment decision for the construction of the
Talvivaara mine on 8 June. Work on the mining site has since progressed rapidly,
with focus on infrastructure, foundations for the primary bioheapleaching pad,
and design and construction of the metals recovery facilities. Orders for long
lead-time production equipment have also been placed in accordance with the
development plan.
Talvivaara has continued to be successful in recruiting key personnel,
attracting a number of managers with significant experience of the mining and
metals industries, hydrometallurgical processes, construction and project
management. The high competence level of the team has enabled the Company to
choose a strategy whereby no overall project contractor is engaged. The team's
strong credentials were similarly a supportive factor in the arrangement of the
project finance facility. The total number of personnel employed by the Group on
30 June 2007 was 53 (20 on 30 June 2006), while the number of contractors'
personnel working on the mining site was approximately 250 at the end of June,
and had exceeded 400 by 30 August 2007.
Safety record on the mining site was excellent, with no reported Lost Time
Injuries during the period. The Company is also committed to maintaining a first
class record in this respect.
Financing transactions
A senior loan project finance facility of US$320 million (Euro236 million) was
signed on 7 May with Standard Bank, Societe Generale, Bayerische Hypo- und
Vereinsbank and Nordea Bank Finland as the mandated lead arrangers. The facility
was arranged in record time, enabling Talvivaara to become fully financed as
soon as it obtained its listing. First draw downs of the loan are expected in
2008.
Official trading in Talvivaara shares on the London Stock Exchange Main Market
began on 1 June following the closing of the all-primary IPO of Euro302 million.
JPMorgan Cazenove acted as the Lead Manager and Sole Bookrunner in the
transaction, with Nordea Bank Finland as the Co-Lead Manager. The offering was
significantly over-subscribed with coverage from first tier international mining
investors as well as key institutional investors in Finland. The timing of the
listing coincided with historically high nickel prices and significant mergers
and acquisitions activity in the mining sector, contributing to good market
conditions for the transaction.
Financial review
The Company had no revenues during the period ended 30 June 2007 (H1/2006: Euro0).
Other operating income consisted largely of unrealized gains in trees
(biological assets). The operating profit amounted to Euro1.2 million (H1/2006:
Euro1.5 million), and loss for the period to Euro11.2 million (H1/2006: Euro1.6 million),
the difference between the corresponding periods being mainly attributable to
finance cost related to the project finance facility and partial redemption of a
Euro33 million convertible note drawn in October 2006, income tax expense, and
increased employee benefit expenses stemming from the growth of the Company's
administrative function.
On the balance sheet as at 30 June 2007, the Company's current assets amounted
to Euro290.4 million (30 June 2006: Euro4.4 million) with the increase attributable
mainly to the proceeds of the IPO. The Company's total equity also increased in
a corresponding manner to Euro313.4 million (30 June 2006: Euro0.9 million). The
Company's total assets amounted to Euro345.3 million (30 June 2006: Euro7.9 million).
The net cash flow from operating activities was Euro(2.1) million (H1/2006: Euro(2.2)
million), reflecting largely finance costs and a substantial change in working
capital. Cash flow from investing activities amounted to Euro(128.1) million,
largely consisting of project related capital expenditure on property, plant and
equipment (Euro(23.5) million), and purchase of financial assets. Net cash
generated from financing activities amounted to Euro287.1 million.
In all, the financial development of the Company was in line with the
development plan and reflected largely the capital expenditure related to the
Talvivaara project and the successfully closed IPO.
Capital commitments
By 30 August, the capital commitments in the project had reached approximately
Euro280 million, which constitutes more than 60 % of the total anticipated
development phase (2007-2009) capital expenditure of Euro452 million. This
commitment level has been achieved within the overall budget and timetable.
The most significant capital commitments to date have included the agreement
with Sandvik Mining and Construction for the engineering, supply and erection of
a crushing and screening plant, the agreement with FAM Magdeburger Forderanlagen
und Baumaschinen for the stacking and reclaiming equipment, and the agreement
with Outotec for reactors and thickeners to be used in the metals recovery
process, which together total approximately Euro110 million in value. Some of these
or other capital commitments may be financed through leasing arrangements.
The Company's primary activity during the second half of 2007 will continue to
be the construction of the Talvivaara mine, which is expected to increase
further the capital commitment level before the year end.
Conclusion
In conclusion, I am delighted to report that Talvivaara achieved all major
operational and financial goals it had set for the first six months of 2007.
Accordingly, I would like to thank the Group's personnel and advisors who have
contributed enormously to the Company's success thus far. I would also like to
extend my thanks to the Board of Directors that guided the Company from its
early stages to the listing, and to the newly nominated Directors that have
already assumed active and important roles in the Company's development from the
project phase to production and beyond.
Everyone at Talvivaara is committed to staying on timetable and on budget with
the goal of bringing the project to production before the end of 2008. It has
been the skill, determination and support of our employees, partners and other
supporters that has enabled us to achieve as much as we have in such a short
time. I would like to take this chance to express my confidence that together we
will continue the successful development of the Company.
Pekka Pera
Chief Executive Officer
30 August 2007
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
six months six months twelve months
to 30 June to 30 June to 31 December
(all amounts in Euro'000) 2007 2006 2006
Other operating income 4,944 82 218
Materials and services (840) (819) (856)
Employee benefit expenses (1,266) (486) (1,394)
Depreciation, amortization,
depletion and impairment charges (357) (3) (13)
Other operating expenses (1,299) (253) (32,564)
Operating profit (loss) 1,182 (1,479) (34,609)
Finance income 238 8 2
Finance cost (9,986) (137) (1,514)
Finance cost (net) (9,748) (129) (1,512)
Loss before income tax (8,564) (1,608) (36,121)
Income tax expense (2,657) 35 (15)
Loss for the period (11,221) (1,573) (36,136)
Attributable to:
Equity holders of the Company (10,896) (1,573) (36,124)
Minority interest (325) - (12)
(11,221) (1,573) (36,136)
Earnings per share for loss
attributable to the equity holders
of the Company (expressed in Euro per share)
Basic and diluted (0.10) (0.02) (0.41)
CONSOLIDATED BALANCE SHEET
Unaudited Audited Unaudited
30 June 31 December 30 June
(all amounts in Euro'000) Note 2007 2006 2006
ASSETS
Non-current assets
Intangible assets 5,382 4,771 3,405
Property, plant and
equipment 2 27,117 3,960 54
Biological assets 3 10,062 964 -
Other assets 12,390 - -
54,951 9,695 3,459
Current assets
Other receivables 4,724 694 693
Available-for-sale financial
assets 26,595 22,537 3,198
Other financial assets at
fair value through profit or
loss 100,464 5,040 -
Cash and cash equivalent 158,609 1,784 534
290,392 30,055 4,425
Total assets 345,343 39,750 7,884
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital 16 13 13
Share premium 8,086 2,755 2,755
Other reserves 321,463 1,336 400
Retained earnings (21,962) (4,991) (2,246)
307,603 (887) 922
Minority interest in equity 5,837 87 -
Total equity 313,440 (800) 922
Non-current liabilities
Provisions 32 31 30
Borrowings 4 1,149 1,149 6,089
Other payables 58 41 24
Deferred tax liabilities 2,868 194 105
4,107 1,415 6,248
Current liabilities
Borrowings 4 - 36,879 -
Trade payables 23,489 1,037 505
Other payables 4,307 1,219 209
27,796 39,135 714
Total liabilities 31,903 40,550 6,962
Total equity and liabilities 345,343 39,750 7,884
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months twelve months
to 30 June to 30 June to 31 December
(all amounts in Euro'000) 2007 2006 2006
Cash flows from operating activities
Loss for the period (11,221) (1,573) (36,136)
Adjustments for
Tax 2,658 (36) 15
Depreciation and amortization 356 3 13
Other non-cash income and
expenses (4,084) - 31,805
Interest income (238) (8) (2)
Fair value gains on other
financial assets at fair
value through profit or loss (464) - (40)
Interest expense 9,985 137 1,514
(3,008) (1,477) (2,831)
Change in working capital
Decrease(+)/increase(-) in other
receivables (16,404) (396) (396)
Decrease(-)/increase(+) in trade
and other payables 25,579 (293) 949
Change in working capital 9,175 (689) 552
6,167 (2,165) (2,278)
Interest and other finance cost
paid (8,513) (0) (10)
Interest income 223 7 2
Net cash used in operating
activities (2,123) (2,158) (2,286)
Cash flows from investing activities
Purchases of property, plant and
equipment (23,509) (37) (3,932)
Purchases of biological assets (5,335) - (964)
Purchases of intangible assets (615) (403) (1,791)
Proceeds from sale of biological
assets 331 - -
Purchases of available for sale
financial assets (24,000) (3,468) (36,467)
Proceeds from sale of available
for sale financial assets 20,009 1,143 14,953
Purchases of other financial
assets at fair value through
profit or loss (104,000) - (5,000)
Proceeds from sale of other
financial assets at fair value
through profit or loss 9,000 - -
Net cash used in investing
activities (128,119) (2,765) (33,201)
Cash flows from financing activities
Proceeds from share issue net of
transaction costs 287,067 - 825
Proceeds from interest-bearing
liabilities 20,000 5,394 36,284
Payment of interest-bearing
liabilities (20,000) - -
Capital investment by minority
shareholders - - 100
Net cash generated from
financing activities 287,067 5,394 37,209
Net (decrease)/increase in cash
and bank overdrafts 156,825 471 1,721
Cash and bank overdrafts
at beginning of the period 1,784 63 63
Cash and bank overdrafts at
end of the period 158,609 534 1,784
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
__________________________________________________________
(all amounts in Euro'000) Share Share Other Retained Total Minority Total
capital premium reserves earnings interest equity
Balance at 1 January 2006 13 2,755 58 (673) 2,153 - 2,153
Fair value gains net of
tax on available-for-sale
financial assets - - 15 - 15 - 15
Net income/(expense)
recognized directly in equity - - 15 - 15 - 15
Loss for the period - - - (1,573) (1,573) - (1,573)
Total recognised income and
expense for January to June
2006 - - 15 (1,573) (1,558) - (1,558)
Convertible capital loan - - 327 - 327 - 327
Balance at 30 June 2006 13 2,755 400 (2,246) 922 - 922
Balance at 31 December 2006 13 2,755 1,336 (4,991) (887) 87 (800)
Balance at 1 January 2007 13 2,755 1,336 (4,991) (887) 87 (800)
Fair value gains net of tax
on available-for-sale financial
assets - - 50 - 50 - 50
Sales loss of the Talvivaara
Project shares - - - (6,028) (6,028) - (6,028)
External costs, net of tax,
directly attributable to the
issue of new shares - - (16,682) - (16,682) - (16,682)
Net income/(expense) recognized
directly in equity - - (16,632) (6,028) (22,660) - (22,660)
Loss for the period - - - (10,896) (10,896) (325) (11,221)
Total recognised income and
expense for January to June
2007 - - (16,632) (16,925) (33,557) (325) (33,882)
Issue of new shares - - 303,749 - 303,749 - 303,749
Employee share option scheme
- value of employee services - - 11 - 11 - 11
Convertible capital loan
- conversion into shares 3 5,330 - - 5,333 - 5,333
Convertible bond
- conversion into shares - - 33,000 - 33,000 - 33,000
Capital investments to
unrestricted shareholders
equity of subsidiary on behalf
of minority shareholders (a) - - - (1,000) (1,000) - (1,000)
Transfer from equity holders of
the parent to minority due to
the exercise of option (b) - - - 954 954 (954) -
Minority interest arising from
subsidiary - - - - - 7,029 7,029
Balance at 30 June 2007 16 8,086 321,463 (21,962) 307,603 5,837 313,440
(a) Investments were made according to the terms set forth in the Sale and
Option Agreement with Outokumpu Mining Oy.
(b) Outokumpu Mining Oy exercised its option to acquire 20% shareholding in
Talvivaara Project Ltd on 14 May 2007, according to the terms set forth in the
Sale and Option Agreement.
Note: In October 2006, the Company drew down a Euro33 million convertible loan with
a partial redemption obligation dependent on the Company's equity valuation at
and timing of the IPO. Based on its initial target to proceed with the IPO
during Q1/2007, the Company assumed in its statutory accounts as at 31 December
2006 that no redemption payment would be payable. With the IPO being realized
during Q2/2007, the redemption assumption in the accounts presented in the
Company's Prospectus dated 1 June 2007 was adjusted to amount to Euro4.6 million,
of which Euro1.5 million was accrued in 2006.
NOTES
1. Basis of preparation
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 2006.
The financial information for the six months ended 30 June 2007 and 30 June 2006
is unaudited. In the opinion of the Directors, the financial information for
these periods presents fairly the financial position, results of operations and
cash flows for the periods in conformity with IAS 34 consistently applied.
2. Property, plant and equipment
(all amounts in Euro'000) Machinery Construction Land and Other Total
and equipment in progress buildings tangible assets
Gross carrying amount
at 1 January 2007 100 1,928 1,905 45 3,978
Additions 187 20,337 2,985 - 23,509
Gross carrying amount
at 30 June 2007 287 22,265 4,890 45 27,487
Accumulated depreciation and impairment losses
at 1 January 2007 19 - - - 19
Depreciation for the period 17 - 335 - 352
Accumulated depreciation
at 30 June 2007 36 - 335 - 370
Carrying amount at
1 January 2007 81 1,928 1,905 45 3,960
Carrying amount at
30 June 2007 251 22,265 4,556 45 27,117
3. Biological assets
Unaudited Unaudited
(all amounts in EUR'000) 2007 2006
Balance at 1 January 964 -
Increases due to purchases 5,335 -
Gain arising from changes in fair
value less estimated point-of-sale costs
attributable physical changes 358 -
Gain arising from changes in fair value
less estimated point-of-sale costs
attributable to price changes 3,736 -
Decreases due to sales (331) -
Balance at 30 June 10,062 -
The company has acquired 4,320 hectares of forest land in January-June 2007 as part of its
activities in connection with the mine construction.
4. Borrowings and capital loans
(all amounts in EUR'000) Unaudited Audited
30 June 31 December
Non-current 2007 2006
Capital loans 1,124 1,124
Other 25 25
1,149 1,149
Current
Borrowings - -
Convertible capital loan (a) - 5,135
Convertible bond (b) - 31,745
- 36,879
Total borrowings 1,149 38,028
(a) The convertible capital loan was fully converted into shares when the Company's listing
took place on June 1, 2007.
(b) The convertible bond was fully converted into shares when the Company's listing took
place on June 1, 2007. A partial redemption payment of Euro6,809,011 was made according to
terms set forth in the loan agreement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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