Talvivaara Mining administrator's reorganization proposals due May 28

By Caroline Salls

Pittsburgh, April 30 - Talvivaara Mining Co. said that administrator reports on the financial status of Talvivaara Mining and Talvivaara Sotkamo Ltd. revealed that, in the administrator's view, a reorganization program can be set up for both companies if financing solutions for the interim period and longer term are achieved.

According to a news release, proposals for both companies' respective reorganization plans are due to be submitted by the administrator by May 28.

Talvivaara said the District Court of Espoo has appointed creditor committees for both reorganizations. Secured creditors, other debt financiers, business partners and subcontractors essential for the operations of both companies are represented in the creditor committees, which have the same composition.

The company said the reorganization plans had not been submitted to or approved by the court, so Talvivaara's board of directors is not aware of the contents of the administrator's plan proposals.

According to the release, the restructuring debts of the company and Talvivaara Sotkamo are expected to be considerably reduced as part of the reorganization plan.

The boards of directors of both companies must to take into account any other alternatives available before considering the administrator's proposals. Talvivaara said the failure of the reorganization process could result in bankruptcy under which the companies would be replaced by their respective bankruptcy estates and be controlled by the creditors.

Going concern status

Talvivaara said its financial statements for the year ended Dec. 31 were prepared on a going concern basis, which assumes that the company will be able to realize its assets and discharge its debt in the normal course of business for the foreseeable future.

However, the company's liquidity situation continues to cause uncertainty that casts significant doubt on the Talvivaara entities' ability to continue as a going concern, the group may be unable to realize its assets and discharge its debt in the normal course of business.

The group's ability to continue as a going concern depends on the successful completion of previously announced financing transactions and the development and authorization of restructuring programs.

2014 'promising'

"Whilst the early part of 2014 has been promising, the difficulties of 2013 nevertheless left us in a challenging situation," chief executive officer Pekka Pera said in the release.

"Financing solutions for the group are now being sought in order to secure Talvivaara's ability to continue its production ramp-up and become a viable business in the long term.

"The uncertainties relating to the corporate reorganization and our financing solutions going forward as well as the weak nickel market prevailing at the end of 2013 are also reflected in our financial results, where we made €593 million write-downs on property, plant and equipment and inventories and a €76 million impairment on deferred tax assets.

"Such write-downs have recently been rather common-place in the mining industry due to the difficult market situation and are hence not unique to Talvivaara, but they have nevertheless a profound impact on the Company's results and balance sheet.

"Operationally Talvivaara suffered throughout 2013 from the prolonged inhibiting effects of water on the bioleaching process. Further, we were only able to mine new ore for six months, from mid-May to November, as the open pit contained excess water during the first months of the year, whilst our liquidity problems forced us to again suspend mining closer to the year-end.

"Despite this, the operational outlook grew increasingly positive going into 2014

"Having been depressed for most of 2013 due to over-supply and weak demand, the nickel market has shown a remarkable recovery in 2014 with nickel price improving by around 30% from the levels seen in the beginning of the year. The market outlook is now more positive than in the last few years with the nickel over-supply being foreseen to turn into a deficit possibly as early as this year.

"For our long term future, our most important target in the near term is to secure sufficient funds to allow us to re-start our re-claiming and mining operations.

"Now that our corporate reorganization proceedings and re-financing efforts are ongoing, we have had to lay off part of our personnel for the time being," Pera added in the release.

Financing negotiations

As previously reported, Talvivaara is in continued negotiations with Nyrstar Sales and Marketing AG to secure financing, and the company has already entered into an agreement with Nyrstar for a loan facility of up to €20 million with an option to enter into a streaming holiday agreement.

The facility will be available to the company in several tranches, with the amount of each advance calculated with reference to a corresponding delivery by Talvivaara Sotkamo of zinc in concentrate under the zinc streaming agreement.

Nyrstar's obligation to extend financing under the loan facility will cease at the earlier of the total amount outstanding including accrued interest exceeding €20 million or the commencement of a streaming holiday.

Helsinki-based Talvivaara Mining is a base metals producer with its primary focus on nickel and zinc.

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