TALV.L Regulatory News (TALV)

30 Aug 2007 07:01

Talvivaara Mining Company Ltd30 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 Finnishmining company with a primary focus on nickel and zinc, is pleased to announceits first set of financial results following its successful listing on the MainMarket 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 €236 million signed on 7 May •Initial Public Offering on the London Stock Exchange Main Market with gross proceeds of €302 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 €50 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 €11.2 million (H1/2006: €1.6 million) •Cash at bank on 30 June of €286 million •Capital expenditure commitments totalled approximately €280 million as of 30 August, representing more than 60% of the anticipated development phase (2007-2009) capital expenditure of €452 million Commenting on the results, Pekka Pera, Chief Executive Officer of the Companysaid: "I am delighted to report that Talvivaara achieved all major operational andfinancial goals it had set for the first six months of 2007. Following theapproval of the investment plan in June, we must now show we can complete theconstruction of our world class production facility on timetable and on budget.I have every confidence that, working together with our industrial partners andcontractors, our highly experienced team will deliver on this task." ENQUIRIES Talvivaara Mining Company Ltd Tel: +358 20 712 9800Pekka Pera Tel: +358 40 585 9225Saila Miettinen-Lahde Tel: +358 40 548 3695 Merlin Tel: +44 207 653 6620David SimonsonTom RandellMaria 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 orcomparable 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 expectationsconcerning, 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'soperations, financial position and liquidity, and the development of the markets and the industry in which the Group operates, may differ materially from thosedescribed in, or suggested by, the forward-looking statements contained in thisannouncement. 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, expectationsregarding 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 recoverytechnology 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 ofthe Company's shares on the Main Market of the London Stock Exchange. JPMorganCazenove and Nordea Bank Finland, respectively, acted as Lead and Co-LeadManagers. This landmark event initiated the process which will soon transformTalvivaara into a globally important base metals producer supported by a strongand diversified shareholder base including stakes held by our business partnersOutokumpu and Norilsk Nickel. Talvivaara has one of Europe's largest known sulphide nickel resources. Thecompany's two polymetallic deposits located at Kuusilampi and Kolmisoppi inSotkamo, Finland, contain some 266 million tonnes of nickel resources from whichwe expect to produce by 2010 an annual output of around 33,000 tonnes of nickelor approximately 2.3% of the world's current demand. Talvivaara will have theresources 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 financefacility and €302 million of equity, the entire financing requirement to bringthe Company into production. Structured by Standard Bank, the project financefacility was completed in only five months with Standard Bank, Societe Generale,Bayerische Hypo- und Vereinsbank and Nordea Bank Finland as mandated leadarrangers. I would like to thank them for their confident support. I would also like to thank the Finnish authorities at the national and regionallevels as well as the broader community in the area surrounding our operationsin Sotkamo who together have helped to ensure that we will be able to developthis 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 ofDirectors with the combination of skills, experience and competencies requiredfor the successful execution of our strategic and operational plans, and whichat the same time fully complies with current best practice Corporate Governancerequirements. Despite the recent turmoil in the equity markets and the moderation in thenickel price we remain confident that the underlying fundamentals areunchanged and remain well above the very conservative parameters used inTalvivaara's strategic planning. Finally, and on a personal note, it has been most gratifying for me to see PekkaPera's vision coming closer and closer to fruition. It will be the realisationof 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 togetherwe can look forward to busy and rewarding times ahead. Edward HaslamChairman30 August 2007 CEO's statement During the first six months of 2007, Talvivaara achieved several majormilestones on its way to becoming a significant nickel producer. These includedthe securing of financing for the construction of the Talvivaara nickel mine inSotkamo, Finland, through a successful Initial Public Offering ("IPO") of €302million and a committed project finance facility of US$320 million (€236million). Together with the environmental permit obtained in March 2007, thisfunding enabled the Company to commit to and commence mine construction targetedat starting metal production during the fourth quarter of 2008. To date, theconstruction project is proceeding on timetable and on budget. Review of operating activities Talvivaara completed the Bankable Feasibility Study for the Talvivaara mine inMarch. The technical solutions described in the study were largely based onsuccessful 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 economicfeasibility of the project using relatively conservative assumptions for keyparameters such as metal recoveries and metal prices. The study was audited bySRK Consulting, who provided the Mineral Expert's Report for Talvivaara'slisting and the Technical Audit for the project finance facility. The environmental permit and starting order for the Talvivaara mine werepublished by the Northern Finland Environmental Permitting Office on 29 March.The permit will be final and binding upon completion of the customary appealprocess. Following the successful financing transactions completed in the beginning ofJune, the Company made a formal investment decision for the construction of theTalvivaara 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 longlead-time production equipment have also been placed in accordance with thedevelopment plan. Talvivaara has continued to be successful in recruiting key personnel,attracting a number of managers with significant experience of the mining andmetals industries, hydrometallurgical processes, construction and projectmanagement. The high competence level of the team has enabled the Company tochoose a strategy whereby no overall project contractor is engaged. The team'sstrong credentials were similarly a supportive factor in the arrangement of theproject finance facility. The total number of personnel employed by the Group on30 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 TimeInjuries during the period. The Company is also committed to maintaining a firstclass record in this respect. Financing transactions A senior loan project finance facility of US$320 million (€236 million) wassigned on 7 May with Standard Bank, Societe Generale, Bayerische Hypo- undVereinsbank and Nordea Bank Finland as the mandated lead arrangers. The facilitywas arranged in record time, enabling Talvivaara to become fully financed assoon as it obtained its listing. First draw downs of the loan are expected in2008. Official trading in Talvivaara shares on the London Stock Exchange Main Marketbegan on 1 June following the closing of the all-primary IPO of €302 million.JPMorgan Cazenove acted as the Lead Manager and Sole Bookrunner in thetransaction, with Nordea Bank Finland as the Co-Lead Manager. The offering wassignificantly over-subscribed with coverage from first tier international mininginvestors as well as key institutional investors in Finland. The timing of thelisting coincided with historically high nickel prices and significant mergersand acquisitions activity in the mining sector, contributing to good marketconditions for the transaction. Financial review The Company had no revenues during the period ended 30 June 2007 (H1/2006: €0).Other operating income consisted largely of unrealized gains in trees(biological assets). The operating profit amounted to €1.2 million (H1/2006:€1.5 million), and loss for the period to €11.2 million (H1/2006: €1.6 million),the difference between the corresponding periods being mainly attributable tofinance cost related to the project finance facility and partial redemption of a€33 million convertible note drawn in October 2006, income tax expense, andincreased employee benefit expenses stemming from the growth of the Company'sadministrative function. On the balance sheet as at 30 June 2007, the Company's current assets amountedto €290.4 million (30 June 2006: €4.4 million) with the increase attributablemainly to the proceeds of the IPO. The Company's total equity also increased ina corresponding manner to €313.4 million (30 June 2006: €0.9 million). TheCompany's total assets amounted to €345.3 million (30 June 2006: €7.9 million). The net cash flow from operating activities was •(2.1) million (H1/2006: •(2.2)million), reflecting largely finance costs and a substantial change in workingcapital. Cash flow from investing activities amounted to •(128.1) million,largely consisting of project related capital expenditure on property, plant andequipment (•(23.5) million), and purchase of financial assets. Net cashgenerated from financing activities amounted to €287.1 million. In all, the financial development of the Company was in line with thedevelopment plan and reflected largely the capital expenditure related to theTalvivaara project and the successfully closed IPO. Capital commitments By 30 August, the capital commitments in the project had reached approximately€280 million, which constitutes more than 60 % of the total anticipateddevelopment phase (2007-2009) capital expenditure of €452 million. Thiscommitment level has been achieved within the overall budget and timetable. The most significant capital commitments to date have included the agreementwith Sandvik Mining and Construction for the engineering, supply and erection ofa crushing and screening plant, the agreement with FAM Magdeburger Forderanlagenund Baumaschinen for the stacking and reclaiming equipment, and the agreementwith Outotec for reactors and thickeners to be used in the metals recoveryprocess, which together total approximately €110 million in value. Some of theseor other capital commitments may be financed through leasing arrangements. The Company's primary activity during the second half of 2007 will continue tobe the construction of the Talvivaara mine, which is expected to increasefurther the capital commitment level before the year end. Conclusion In conclusion, I am delighted to report that Talvivaara achieved all majoroperational 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 havecontributed enormously to the Company's success thus far. I would also like toextend my thanks to the Board of Directors that guided the Company from itsearly stages to the listing, and to the newly nominated Directors that havealready assumed active and important roles in the Company's development from theproject phase to production and beyond. Everyone at Talvivaara is committed to staying on timetable and on budget withthe goal of bringing the project to production before the end of 2008. It hasbeen the skill, determination and support of our employees, partners and othersupporters that has enabled us to achieve as much as we have in such a shorttime. I would like to take this chance to express my confidence that together wewill continue the successful development of the Company. Pekka PeraChief Executive Officer30 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 •'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 2Finance 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 • 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 •'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 •'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 •'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 €33 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 €4.6 million, of which €1.5 million was accrued in 2006. NOTES 1. Basis of preparation The interim financial information set out herein has been prepared on the samebasis and using the same accounting policies as were applied in drawing up theGroup'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 2006is unaudited. In the opinion of the Directors, the financial information forthese periods presents fairly the financial position, results of operations andcash flows for the periods in conformity with IAS 34 consistently applied. 2. Property, plant and equipment (all amounts in •'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 €6,809,011 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