Talvivaara Operational and Management Update Oct 2011

Stock Exchange Release

Talvivaara Mining Company Plc

7 October 2011





Operational and Management Update



Revised operating strategy focused on optimising profitability over

production volume in the short term



Organisational changes commenced to reflect Talvivaara's ongoing

evolution from a project to an operating company



Highlights

* In response to the current market environment and decline in nickel prices,
short term focus shifted from maximising production volume to optimising
profitability
* Full year 2011 production target a minimum of 16,000t of nickel
* Q3 2011 nickel production 3,153t, year-to-date output at the end of
September 11,319t
* Unscheduled down-time in Q3 in metals recovery due to reduced availability
of the hydrogen sulphide generators
* Significant progress in materials handling and bioheapleaching with newly
stacked heap section 1 and secondary heap being taken into production in the
next few weeks; nickel inventory in heaps approximately 55,000t
* Management systems being improved through organisational changes and
performance enhancing projects
* Metal Workers Union have warned of a potential strike in October/November
2011 which may impact operations

Near term focus on profitability due to current market environment

In view of the current volatility and uncertainty in the commodity and financial
markets, Talvivaara management has developed a revised operating plan and made
the strategic decision to focus on maximising profitability of operations rather
than the production volume over the remainder of 2011. The Company intends to
defer capital expenditure amounting to approximately EUR 10 million into 2012,
bringing the total estimated capital expenditure for the current year down to
approximately EUR 70 million. Savings in operational expenditure will be sought
by minimising the use of contractors in materials handling and waste mining. The
scale of mining operations will also be optimised with the target of maintaining
the current level, around 55,000t, of nickel inventories in the heaps. Should
there be a significant downward movement in the nickel price over the coming
weeks, further cost savings may be sought by temporarily discontinuing mining
and materials handling operations. Metals recovery will however continue with
the target of steadily increasing production volumes.

Whilst the short term shift in focus may have some impact on Talvivaara's
production volumes in 2012, the effect is not anticipated to be material as long
as the current nickel inventory in the heaps is maintained.

In view of the short term foreseen availability of the metals recovery plant,
the full year 2011 production target has been rebased to a minimum of 16,000t of
nickel.

Production update

Metals recovery

Talvivaara's third quarter production suffered from problems in hydrogen
sulphide generators during the latter half of the period. Because hydrogen
sulphide is an essential reagent in the metals recovery process, the unforeseen
down-time in the hydrogen sulphide generators had a direct impact on the
production output, which for nickel amounted to 3,153t and for zinc to 7,286t
for the quarter. Year-to-date production at the end of September amounted to
11,319t (Q1-Q3 2010: 6,550t) of nickel and 21,291t (Q1-Q3 2010: 16,092t) of
zinc.

Both of Talvivaara's hydrogen sulphide generators were serviced and upgraded in
the maintenance programme carried out during the second quarter. Following the
maintenance, the generators functioned well, but the operating procedure
followed in the hydrogen sulphide process subsequently proved more wearing to
certain heating elements than previous experience would have suggested. The need
for certain spare parts was therefore also higher than anticipated and the spare
parts inventory proved insufficient. As delivery times of the specialty steels
required for the spares were extended, the lack of availability resulted in
limited capacity operation and down-time of the hydrogen sulphide generators and
subsequently the entire metals recovery plant. During the third quarter, the
overall availability of the hydrogen sulphide generators was approximately 57%,
i.e. on average only one generator was operating at any given time. As the
generators also often had to be operated below the name plate capacity, the
overall capacity utilisation for the quarter was around 35%.

As of the beginning of October, approximately half of the hydrogen sulphide
capacity was again in operation, and full capacity is expected to be reached
during the second week of the month. However, the Company anticipates regulating
the running rate of the generators below the full capacity in order to avoid
further unscheduled stoppages and to maximise availability until a sufficient
inventory of spare parts has been received. The spare parts inventory is
expected to be at a sustainable level by the year end. In the meantime,
regulation of the run rate is not expected to impact Talvivaara's ability to
meet its stated production target for the current year.

The operating procedure for the hydrogen sulphide process has recently been
improved such that the use of the heating elements is reduced, which in turn is
anticipated to decrease the need for spare parts in the future.

Given the unscheduled down-time during the third quarter, the maintenance and
upgrade measures originally scheduled for the fourth quarter have already been
taken and no further stoppage is planned for the remainder of the year.

Materials handling

In materials handling, significant progress was made in primary heap reclaiming
in August and September. The improved performance came partly as a result of
allocating more of Talvivaara's own staff and equipment as well as contractor
resources to the process, and partly as a result of better availability of the
purpose-built reclaiming equipment. As a result of all of the measures taken,
reclaiming of the primary heap is no longer a bottle-neck to the stacking of new
ore and the entire materials handling process now operates at a satisfactory
level.

Bioheapleaching

The newly stacked primary heap section 1 was completed in September and will be
ready to be taken into production in the near future. With the secondary heap
also ready to be taken into production, the amount of pregnant leach solution
available for metals recovery will increase substantially over the next few
weeks. Previously, solution has only been pumped to metals recovery from two
heap sections at a time; hence these developments will approximately double up
the amount of treatable solution and therefore enable significant ramp-up of
production. The increased amount of solution will also make it easier to control
and further improve the metal grades in solution.

Metal recoveries from bioheapleaching are progressing in line with expectations.
Nickel recovery from heap section 3 has reached 65%; production from the heap
started slightly over a year ago. Similar development is being seen also in heap
section 4 with nickel recovery to date at around 45%. Leaching from the
secondary heap is currently progressing faster than from any of the primary
heaps.

Development of management systems and organisation

During the last three years, Talvivaara has held its focus tightly on solving
technical problems in production and on de-bottlenecking all of the process
stages. As a result, and having proven that all process stages can be run at
design capacities, management is confident that no fundamental flaws in process
technology nor any significant technical bottle-necks exist. The management
systems applied in the Company have however received less attention to date and
will require improvement going forward, especially as the most recent delays in
production ramp-up have been the result of systems rather than technology
related matters.

Reflecting Talvivaara's on-going transformation from a project into an operating
entity as well as the increased focus on management systems, Talvivaara has
restructured its production organisation.  Effective as of 1 October 2011, the
organisation has been divided into two operating divisions: the ore processes,
i.e. mining and materials handling, and the metals processes, i.e.
bioheapleaching and metals recovery. Recruitment of senior managers to both
operating divisions is ongoing and the organisation will also be strengthened on
all other levels. The management systems at the operational level will be
addressed through a detailed management consultancy evaluation during the fourth
quarter of 2011 and a performance improvement programme will be implemented in
2012.

All management systems are under review also on corporate level, including
reorganisation of the Executive Committee and redefinition of the duties within
it. Changes in the composition of the Executive Committee will be announced
separately.

Liquidity position

Talvivaara's cash and cash equivalents amounted to EUR 38 million at the end of
September 2011.

In June, Talvivaara signed a EUR 80 million revolving credit facility with
Nordea Bank, primarily as back-up financing relating to the acquisition of
Talvivaara Sotkamo shares from Outokumpu Mining. The facility is currently
available but remains undrawn.
The Company also has obtained credit approvals from all participating banks for
an amendment to an originally EUR 100 million revolving credit facility signed
in June 2010. The amended facility will be expanded to EUR 130 million and its
maturity will be extended by a year until 30 June 2014. The signing of the
amendment agreement is pending approvals by Finnvera and Nyrstar to an amended
intercreditor agreement. Once signed, the EUR 130 million facility will replace
the EUR 80 million Nordea commitment.

Strike warning by the Metal Workers Union

The Finnish Metal Workers Union and the Trade Union Pro have announced an
overtime ban to the Finnish technology industries. The two unions have also
given a strike warning to 44 companies within the technology industries,
including Talvivaara. Should an agreement with the unions not be reached in the
interim, a two week strike from 21 October through 7 November is likely to
follow.

Talvivaara anticipates its metals recovery plant will be declared emergency work
due to environmental reasons and hence outside the scope of the strike. However,
in the event the strike commences, it will have a significant impact on
Talvivaara's mining and materials handling operations during the fourth quarter
and, at worst, also on metals production.

Pekka Perä, CEO of Talvivaara, commented:

"Volatility and uncertainty have returned to the commodity and financial
markets, including the nickel market. Being faced also with ongoing production
constraints we have announced a number of measures today to maximise short-term
profitability and address our operating and management needs."

"We are disappointed that we are experiencing ongoing problems with metals
recovery as a result of difficulties with the hydrogen sulphide generators. We
believe we have now identified improved operating procedures for the generators
and are addressing spares shortages to enable more reliable production. The
overall impact of the metals recovery problems will however constrain our
production for the current year."

"The Board recognises that moving from a development to an operating company
brings with it new requirements, and we are now implementing wide-ranging
changes to our management structure and systems to address these. The changes
will extend throughout the organisation, including the composition and duties of
the Executive Committee. We will communicate further details of these latter
changes shortly."

"Our priority remains to achieve a successful ramp-up to our planned production,
but with great emphasis on cash flow generation and profitability."

ENQUIRIES
Talvivaara Mining Company Plc  Tel: 358 20 712 9800
Pekka Perä, Chief Executive Officer
Saila Miettinen-Lähde, Chief Financial Officer

Merlin PR  Tel: 44 207 726 8400
David Simonson
Anca Spiridon

CONFERENCE CALL

A conference call on the operational and management update will be held on 7
October 2011 at 10:00 GMT/12:00 EET. The call will be held in English.

Participant - Finland: 358 (0)9 23 114 173
Participant - UK: 44 (0)1452 569 372

Conference ID: 17197066






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 and is included in the FTSE 250
Index. Further information can be found at www.talvivaara.com.





Talvivaara Operational and Management Update Oct 2011:
http://hugin.info/136227/R/1552909/478540.pdf




This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.

Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE

[HUG#1552909]


Unternehmen: Talvivaaran Kaivososakeyhtiö Oyj - ISIN: FI0009014716