Talvivaara Mining Company Plc: Operational update

Stock Exchange Release

Talvivaara Mining Company Plc

3 July 2012



Operational update

Steady progress in production after re-start of metals plant in April



Highlights
* Nickel production of 3,194t and zinc production of 6,686t in Q2 2012
* Output impacted by dilution of leach solutions due to rapid spring flooding
and excessive rain and scheduled maintenance and previously announced
fatality related stoppage in April
* New CEO Harri Natunen conducted operational review and will adopt a more
sustainable production approach during ramp-up aimed at improving the
efficiency and reliability of the operations and minimising environmental
impact
* Metals recovery plant in continuous and stable operation with close to 100%
availability since late April
* Substantial production increase from 2011 expected but 2012 guidance
unlikely to be achieved. Guidance anticipated to be updated with Q2/2012
interim results on 16 August 2012

Production update
The second quarter production output of 3,194t of nickel and 6,686t of zinc was
impacted by dilution of leach solutions due to spring flooding and excessive
rain, and a scheduled maintenance and a regrettable fatality related stoppage in
April.
After the re-start in late April, the metals plant has operated continuously and
steadily, producing 1,477t of nickel in May and 1,519t in June. The average flow
rate of metal containing leach solution to the plant reached a new monthly
record of 1,318 m(3)/h in June, and the availability of the plant was
effectively 100%.
Nickel output in April only amounted to 198t with production at the plant
restricted for most of the month due to the stoppage and subsequent changes to
certain operating procedures, the implementation of which slowed down early
ramp-up after the re-start. The production stoppage that followed the fatality
at the plant in March continued through the early part of April whilst the
occupational safety related clarifications and improvements requested by the
Finnish Safety and Chemicals Agency were completed. Simultaneously the scheduled
maintenance was brought forward from May to April in order to minimise the
overall stoppage time.
Throughout the second quarter, metals production was affected by flooding that
followed the rapid melting of snow and the unusually heavy rainfall that has
amounted to over 190mm during the spring in comparison to the long term average
of approximately 100mm. The excess water in circulation has diluted the leach
solutions such that the average nickel grade in solution pumped to the metals
plant was 1.8 g/l in the second quarter. The Company estimates the dilutive
effect of the recent rainfall having been around 25-30% compared to the long-
term average water balance in the process. The water balance is expected to
return to more normalised levels during the summer months, aided by increased
evaporation and reduction of raw water intake for the metals recovery process.
The Company is also implementing measures to prevent rainy seasons impacting
production in the future. These include e.g. additional reverse osmosis capacity
beyond the level announced on 24 April 2012, which enables the Company to
further increase recycling of purified process waters and to reduce raw water
intake.
Elsewhere in the process, mining and materials handling continued to operate
steadily at comparable levels to those achieved in the first quarter. With
reclaiming of the primary heap continuously improving and thereby eliminating a
bottle-neck from materials handling, the ore production volumes are expected to
grow during the second half of the year. As mining and materials handling have
progressed reasonably well during the first half of 2012 while metals recovery
has had lower availability, the nickel inventory under leaching in the heaps has
continued to grow, providing additional flexibility for increasing the metals
production rates in the coming months.  Operational review
CEO Harri Natunen joined in mid-March and has since conducted a detailed
operational review. Going forward the Company will adopt a more sustainable
production approach during ramp-up aimed at improving the efficiency and the
reliability of the operations. In practice this means implementing a relatively
moderate rate of production increase in order to keep all processes operating in
a stable manner such that good product quality can be maintained, environmental
discharges can be minimised, and occupational safety can be continuously
improved.
In addition to previously announced management changes on 11 May 2012, two new
task forces have been established to further develop the key processes of water
management and bioheapleaching. Both task forces are headed by Lassi
Lammassaari, Vice President of Strategic Projects.
Production guidance
The combination of the dilution effect of the excessive water in circulation and
a more sustainable production approach during ramp-up means that the Company can
no longer be confident of achieving the previous guidance of 25,000-30,000t of
nickel in 2012.
However, the Company continues to evaluate opportunities for production
increases in the near term and anticipates that it will be in a position to give
updated guidance for the current year at the interim results on 16 August 2012.
The Company remains confident that a substantial production increase over last
year's output of 16,087t of nickel can be delivered and anticipates the
annualised production rate to sustainably reach more than 25,000tpa of nickel
during the remainder of the year.
Financial update
Talvivaara's financial result for the second quarter will be impacted by the
weak nickel price that has recently traded in the range of USD 16,000-17,000/t.
The net sales for the period will also be affected by nickel product inventory
build-up at the mine site due to an annual maintenance stoppage at the Company's
off-taker Norilsk Nickel Harjavalta. The inventory build-up is anticipated to be
fully recovered during the third quarter.
Harri Natunen, Talvivaara's CEO commented: "After joining Talvivaara in mid-
March, I have had the pleasure of getting to know and working with a very
talented and motivated team. The management team has also been strengthened and
restructured during the spring, and together we have set out to establish a
sustainable ramp-up track that secures safe, efficient and reliable production
with minimised environmental impact.
I am confident that all the prerequisites for successful completion of the ramp-
up are in place. Whilst all production processes still need some improvement, we
have seen evidence that the stability of production has improved significantly
and I don't see any reason why this trend would not continue.
The improving reliability of operations helps us in achieving operating cost
savings and, importantly, also minimises our environmental footprint. I am
particularly happy to note that the month of May was the first month since we
went into production when no complaints about hydrogen sulphide odours were
recorded from the local residents; this is a record that we look forward to
maintaining.
Despite concluding that we are unlikely to achieve our previously stated
production guidance for the year, we continue anticipating substantial ramp-up
over last year's nickel output and also expect to sustainably reach annualised
production rates of over 25,000tpa of nickel during the latter half of the year.
Over the summer, we will focus on recovering from the water balance issues
caused by the wettest spring recorded since 1983 in the Kainuu region, and we
also continue evaluating our production outlook in more detail with the
intention of re-establishing production guidance for 2012 in August at the time
of our second quarter results."


ENQUIRIES

Talvivaara Mining Company Plc Tel: +358 20 712 9800
Harri Natunen, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO

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


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 update 3.7.2012:
http://hugin.info/136227/R/1623678/519070.pdf



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Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
[HUG#1623678]




Unternehmen: Talvivaaran Kaivososakeyhtiö Oyj - ISIN: FI0009014716