Talvivaara Mining Company Operational Update

Stock Exchange Release
Talvivaara Mining Company Plc
16 January 2013


Talvivaara Operational Update

Metals production stabilized after the gypsum pond leakage
Water balance situation being resolved but continues to be challenging

Highlights

* Nickel production of 2,317t in Q4 2012 and 12,916t for FY 2012
* Production impacted by gypsum pond leakage in November and continuing
challenging water balance situation throughout the fourth quarter
* Metals plant operations stabilized; current flow rates at 1,500 m(3)/h
* Sustainable solutions to water balance issues being evaluated by a special
task force;
initial measures being implemented
* Following Pekka Perä's return as CEO in November 2012, further management
changes taking effect on 16 January
* Co-operation consultations that may lead to temporary lay-off of a maximum
of 230 employees for up to 90 days to start on 17 January


Production guidance

The achieved full year 2012 nickel production of 12,916t was in line with the
Company's most recent guidance of approximately 13,000t, as updated on 28
November 2012 following the gypsum pond leakage.

Talvivaara intends to announce its production guidance for 2013 on 14 February
2013 in conjunction with its FY 2012 results. In the meantime, the Company
continues to evaluate the impact of the key drivers for the production level,
including the near term development in the water balance, the timing of re-start
of ore production and the effectiveness of the bioheapleaching process following
the measures being taken to reverse the recent effects of excess water and
insufficient aeration. Talvivaara continues to believe that the greater than
50,000t of nickel currently in the heaps will provide a sufficient inventory for
a reasonable increase in metals production in 2013 despite the temporary
suspension of ore production, in effect since September 2012 and anticipated to
continue through June 2013.

Production update

Metals recovery

Talvivaara's metals recovery plant was temporarily suspended between 4 and 21
November 2012 as a precautionary measure due to the gypsum pond leakage. Since
the successful re-start on 21 November, plant performance has in general been
satisfactory. However, some short term disturbances in the automation systems
impacted production in December and are being investigated to avoid future re-
occurrence.

Solution flow rates at the plant varied from around 900 m(3)/h to 1,400 m(3)/h
in December and have reached 1,500 m(3)/h in early January. Ramp-up to around
1,600 m(3)/h is anticipated in the near future.

Bioheapleaching

Bioheapleaching has continued to suffer from the excess water in circulation
that has affected the process since the spring of 2012. The water balance issues
were further aggravated in November by the gypsum pond leak, which forced the
Company to pump additional excess water into the heap circulation in order to
minimize the environmental effects of the leak. As a result, nickel grades in
solution pumped to metals recovery continued to decline in December and reached
a level of around 1.3 g/l at year-end, down from around 2.0 g/l in early 2012.
In January 2013, a positive trend in solution grades has again emerged, but the
Company estimates it will take some months before substantial improvement in the
grades can be expected. Nickel grades in solution well in excess of 3.0 g/l have
already been previously reached, and the Company believes that such grades will
again be achievable in the longer term.

Measures to improve the leaching performance are being taken based on the
findings from extensive operational bioheapleaching studies carried out during
the autumn of 2012. Multiple changes are being implemented to ensure constant
and balanced distribution of air within the primary heaps, and additional
aeration into the secondary heaps is being introduced. Reclaiming and re-
stacking of the existing primary heaps also continues in order to enable
efficient recovery of the existing nickel inventory under leaching.

Ore production

As previously announced, Talvivaara's ore production has been suspended since
September 2012 due to the prevailing water balance situation. The Company
anticipates re-commencing mining of new ore by the end of June 2013 once the
main part of the Kuusilampi open pit has been de-watered. In the meantime, some
waste mining will continue, which the Company believes will reduce any risk of
production problems upon re-start. Part of the mining fleet is also being used
in reclaiming ore from the primary heaps.

Cost effects

By year-end 2012, Talvivaara estimates having achieved approximately EUR 20
million in operating cost savings due to the temporary suspension of ore
production since September. Further savings of at least EUR 30 million are
expected to be realized assuming the suspension of ore production continues
through June 2013.

In the fourth quarter, the Company incurred approximately EUR 13 million in non-
recurring costs from stemming the gypsum pond leak and minimizing its
environmental effects.

Talvivaara considers systematic cost savings to be one of its key targets in the
near term.

Water balance management

Talvivaara's special task force on water management, Operation Otter led by Jari
Voutilainen reporting directly to CEO Pekka Perä, focuses on the planning and
execution of necessary water storage and pumping arrangements and waste water
neutralization measures to secure a sustainable water balance at the mine site.

At the metals recovery plant, iron precipitation and final neutralization
capacities of process waters are being improved in order to further increase
recycling of process waters and to ensure that any discharged waters are of
sufficiently good quality. Similarly, the utilization of the reverse osmosis
based water treatment plant is being optimized and additional capacity will be
installed during the spring. Furthermore, Talvivaara is investing in additional
lime slaking and milk of lime capacity to increase its neutralization capacity
for the treatment of mine and process waters.

Following the gypsum pond leakage, Talvivaara continues to neutralize the waters
currently stored in the safety dams and in the Kuusilampi pit, and is
constructing additional neutralization facilities at the Southern end of the
mine area close to the Kortelampi dam as well as close to the open pit. The
Kortelampi safety dam, which was initially built to contain the leak, was
elevated to its final height during December and early January. In addition,
several additional dam structures both in the Southern and Northern directions
from the mine are planned and will be constructed as part of Operation Otter,
thereby further preparing the mine area for the forthcoming spring melt and
mitigating the risk of environmental impacts from any potential future leak
situation.

The soil contaminated during the leak by neutralization precipitates is being
removed and treated. The approximately four hectares of marsh area around the
Southern edge of the mine concession area that contains the precipitates is
uninhabited and was recently acquired by Talvivaara.

In order to reach a sustainable water balance situation, Talvivaara will have to
treat and release into the environment approximately 3.8 million m(3) of water,
out of which a substantial proportion is rain and natural catchment water
accumulated at the mine site over time. The discharge water quality is targeted
to be in line with the specifications applied for in Talvivaara's upcoming
environmental permit update, which is expected to be received in the spring. The
environmental impact of the release is anticipated to be mainly caused by its
sulphate content, whereas the Company expects any metal burden to the
environment to remain limited. The effects of the sulphate discharge on the
downstream waters will be simulated over the coming weeks.

At present Talvivaara anticipates the capital expenditure required for the water
management improvements to amount to approximately EUR 17 million, largely
incurred in 2013. However, evaluation and planning of the necessary measures
continues and may still have some impact on the expenditure. In the medium term,
Talvivaara continues to target a nearly closed circuit water circulation system,
reducing the risk of weather conditions impacting the Company's operations or
environmental safety. As a result of existing water management capacity, the
investments described above and release of excess waters currently at the
minesite, Talvivaara expects to be in a position to achieve this target.

Environmental update following the gypsum pond leakage

As in November, shortly after the gypsum pond leakage, only local environmental
impact within the immediate vicinity of the mine area has been detected to date.
The Company and authorities continue to monitor the situation and expect to be
able to determine the eventual impact of the leak during the coming summer.

Management changes

Talvivaara will re-organize its management, effective as of 16 January 2013, as
follows:

* Pertti Pekkala, formerly General Manager, Research and Development, is
appointed
Chief Production Officer (Metals Recovery)
* Kari Vyhtinen, formerly Chief Investment Officer, is appointed Chief Mining
Officer
* Mikko Korteniemi, formerly Chief Production Officer (Metals Recovery), is
appointed Chief Maintenance Officer with responsibility for maintenance,
procurement and warehousing
* Jari Voutilainen, formerly Chief Mining Officer, is appointed General
Manager,
Water Management with full-time responsibility for water management


All four appointees are members of the Executive Committee, with Pertti Pekkala
a new addition to it. Pertti Pekkala, Kari Vyhtinen and Mikko Korteniemi will
report to COO Harri Natunen, and Jari Voutilainen will report to CEO Pekka Perä.

With the re-organisation and formation of a central maintenance unit comprising
procurement, warehousing and all maintenance activities, Talvivaara aims to
optimize its maintenance operations and increasingly focus on preventive
maintenance for increased operational and cost efficiency.

Co-operation consultations for temporary lay-offs

To support the Company's cost savings initiatives and overall efficiency, and to
adjust the level of personnel to the temporarily suspended ore production,
Talvivaara is considering temporary lay-offs. The Company estimates that the
maximum number of employees impacted is 230 and that the estimated maximum
duration of the lay-offs would be 90 days between 18 February and 30 June 2013.
All three corporate entities: Talvivaara Mining Company Plc, Talvivaara Sotkamo
Ltd and Talvivaara Exploration Ltd are within the scope of the consultations.
Talvivaara has invited employee representatives to co-operation consultations in
accordance with the applicable law.

Financing

As previously announced in connection with the Company's Q3 2012 interim report,
Talvivaara is undertaking an assessment of a range of funding options, including
debt, convertible bonds, royalty streams and equity, in order to secure its
financial flexibility and a sufficient level of liquidity.


Pekka Perä, CEO of Talvivaara, commented: "Our team has mobilized very
effectively and has worked extremely hard to mitigate the impact of the gypsum
pond leak on our operations and the environment as much as possible. Some of the
results of this hard work are beginning to show in the stability and
availability of the metals plant, which has been operating to encouraging levels
over the past few weeks. We are putting a lot effort on the comprehensive water
balance management measures and enhancing bioheapleaching performance. This work
has progressed well, but it will take some time for the full benefits to be
realized.

Challenges remain over the next few months. Due to the water balance we may
temporarily have to lay off a number of our employees whilst mining activities
remain suspended during the first half of the year. Every effort is being made
to provide full support to all our employees and minimize the negative impact of
these potential measures. To achieve this, we are working very closely with
employee representatives as part of a comprehensive consultation process. We
have every confidence that the measures we are taking to preserve the long term
financial stability of the Company will be of short duration and that we will be
able to return to a sustainable ramp-up path towards full capacity during the
second half of this year."


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

Talvivaara Operational Update 16.1.2013:
http://hugin.info/136227/R/1670730/543012.pdf



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Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
[HUG#1670730]




Unternehmen: Talvivaaran Kaivososakeyhtiö Oyj - ISIN: FI0009014716