Talvivaara Mining Company Plc Operational Update

Stock Exchange Release
Talvivaara Mining Company Plc
10 October 2013


Talvivaara Operational Update


Highlights

* Talvivaara produced 2,595t of nickel and 5,645t of zinc in Q3 2013, and
7,103t of nickel and 13,239t of zinc in Q1-Q3 2013
* Production continued to be impacted by low metal grades in leach solution
due to prolonged effects of excess water in the older heaps
* Leaching of new ore stacked since the re-start of mining in May continues to
proceed well;
new heap section completed in September and anticipated to start
contributing to metals production in late October
* A scheduled maintenance stoppage to remove bottlenecks from the metals
recovery plant successfully executed in September
* Darin Cooper appointed COO from 16 September
* Company-wide efficiency and productivity  programme continued with targeted
cash flow effect of EUR 100 million by July 2014
* Owing to weak nickel price development since early 2013 and the prolonged
effects of excess water on production levels, Talvivaara's liquidity
position has weakened more than anticipated; as a result, the Company is
undertaking an assessment of all available funding options to secure its
financial flexibility and a sufficient level of liquidity going forward



Production and operational update

Metals production

Talvivaara produced 2,595t of nickel and 5,645t of zinc in Q3 2013, and 7,103t
of nickel and 13,239t of zinc in January-September 2013. Metals production
continued to be impacted by low metal grades in leach solution. However, the
average feed flow to the metals recovery plant during Q3, excluding scheduled
maintenance, was 1,375 m3/h, which is a new quarterly record and indicates
continued improvement in plant availability and production stability.

A scheduled maintenance break at the metals recovery plant was held at the end
of September with a total stoppage time of seven days. The maintenance was
primarily designed to remove bottlenecks from the plant and it was successfully
executed to allow feed flow rates of up to 1,750m3/h following the stoppage.
Other works carried out during the break included e.g. reactor maintenance,
scheduled inspection of thickeners, cleaning of vent gas scrubbers and doubling
of the critical process automation stations in order to increase plant
availability.

In the plant operation, focus has remained on improving chemical efficiency as
part of the broader efficiency and productivity programme.

Ore production

Ore production during the quarter amounted to 4.1Mt. The amount of nickel
stacked during the period was approximately 11,000t, which exceeds the 2012
quarterly average of 7,000t by 57%. The increase is both a result of increased
tonnages of ore production and of improved grade control. The average nickel
grade of the ore stacked in Q3 was 0.27%.

Bioheapleaching

The excess water in the heaps stacked prior to the temporary shut-down of mining
in September 2012 has diluted metal grades in leach solution, reduced the
efficiency of aeration, slowed down the leaching reactions and impacted the rate
of evaporation throughout the current year. Efforts to reverse the effects of
excess water continued through the third quarter and resulted in the release of
substantial amounts of solution from the older heaps. Consequently, aeration has
become more efficient and signs of increasing reactivity in these heaps are
emerging. The rate of improvement has, however, remained below expectations and
resulted in the leach solutions remaining diluted throughout the third quarter.
The nickel grade in solution pumped to metals recovery averaged 1.0 g/l during
the period, reflecting the subdued performance of the older heaps.

Improved metal grades in leach solution are expected to be seen in the fourth
quarter as a result of the newly stacked primary heap 4 coming into production.
Stacking of this heap was completed in the beginning of September and leach
solution from it will be pumped to the metals recovery plant from late October
onwards. Leaching of the new heap 4 has progressed well as a result of efficient
aeration, appropriate water balance and careful maintenance. Leach solution
temperature has remained at around 45°C despite the recent drop in ambient
temperature.

Following the completion of heap 4, stacking of a new round of heap 1 commenced
in early September and has progressed according to plan. This heap section is
anticipated to be completed at around the year-end and to start contributing to
metals production in the middle of the first quarter of 2014.

Water management

Treatment and discharge of excess waters from the mine area continued throughout
the quarter. However, the discharge rate was limited by the reference flow in
the Kalliojoki river, which remained low throughout the quarter. The water
balance overall is currently at an acceptable level, but the discharge rate
limitation has particularly hindered Talvivaara's ability to empty gypsum pond
sections 5 and 6 from excess water by 31 October 2013, as required by the
environmental permit decision of the Northern Finland Regional State
Administrative Agency ("AVI") of 31 May 2013. Talvivaara has applied for an
extension to this time limit from the Vaasa Administrative Court and AVI, and
filed an appeal against the discharge rate limitation to the Vaasa
Administrative Court.

Efficiency and productivity programme

Talvivaara is committed to a broad efficiency and productivity programme, which
was launched in June 2013 and targets at achieving a EUR 100 million cash flow
effect from savings and productivity improvements within 12 months. As part of
the programme, Talvivaara conducted co-operation consultations, which were
concluded in August and reduced the number of personnel by 68 through
terminations of employment and retirement, and by further 96 employees through a
decision not to renew temporary contracts.

The efficiency and productivity programme is headed by COO Darin Cooper since
16 September and is proceeding according to plan.

Production and financing outlook

Talvivaara continues to anticipate its H2 2013 nickel production to increase
substantially compared to the H1 2013 output of 4,508t as the newly stacked
heaps are taken into production in the fourth quarter and start contributing to
the metals grades in leach solution. Following the recent maintenance work, no
scheduled stoppages are planned for the remainder of the year.

As the market price of nickel has declined by more than 20% since the first
quarter of 2013 and the Company's production has continued to be impacted by the
prolonged effects of excess water on older ore heaps, Talvivaara's liquidity
position has weakened more than anticipated. As a result, the Company is
undertaking an assessment of all available funding options to secure its
financial and operational flexibility and a sufficient level of liquidity going
forward.


CEO Pekka Perä comments: "The market environment remained challenging during the
third quarter with nickel price persistently at around USD 13,000 to 14,000 per
tonne. In the short term, we can unfortunately not expect to see material
improvements in commodity prices and will therefore have to keep concentrating
on our efficiency and productivity programme to conserve cash and improve
productivity.

I am pleased to report that our personnel is achieving better than ever
operational performance throughout the production processes despite the
challenges they have faced with the water balance issues as well as the recent
co-operation consultations. Of particular note are the consistent improvements
seen in mining and materials handling tonnages and the good leaching performance
of the newly stacked ore. However, despite our intensive efforts to revive the
older heaps from the effects of excess water, we have only achieved moderate
success, which in turn has limited our production volumes throughout the year.
This, together with the weak nickel price, has impacted our liquidity position
more than anticipated and in order to secure sufficient financial flexibility
and liquidity going forward, we are now assessing all available options for
additional funding."


Enquiries
Talvivaara Mining Company Plc Tel +358 20 7129 800
Pekka Perä, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO

Talvivaara Mining Company Plc
Talvivaara Mining Company is an internationally significant base metals producer
with its primary focus on nickel and zinc using a technology known as
bioheapleaching to extract metals out of ore. Bioheapleaching makes extraction
of metals from low grade ore economically viable. The Talvivaara deposits
comprise one of the largest known sulphide nickel resources in Europe. The ore
body is estimated to support anticipated production for several decades.
Talvivaara has secured a 10-year off-take agreement for 100 per cent of its main
output of nickel and cobalt to Norilsk Nickel and entered into a long-term zinc
streaming agreement with Nyrstar NV. Talvivaara is listed on the London Stock
Exchange Main Market and NASDAQ OMX Helsinki. Further information can be found
at www.talvivaara.com.

Talvivaara Operational Update Oct 10 2013:
http://hugin.info/136227/R/1734699/581074.pdf



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Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
[HUG#1734699]