Talvivaara Mining Company Plc Operational Update Stock

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. [HUG#1734699]