Terrafame to withdraw from the term sheet signed with Talvivaara Mining Company Plc and collect its receivables from Talvivaara Mining Company Plc 3.6.2016 10:41
Terrafame Group Ltd., Terrafame Ltd., Winttal Oy (together “Terrafame companies”) and Talvivaara Mining Company Plc signed a term sheet in January 2016 on the key terms and conditions of the sale and purchase of the assets concerning the operation of the Sotkamo mine. The assets to be acquired included, among other assets, the lime plant necessary for the production process, the laboratory and ownership of the geological data concerning the mine.
As part of the term sheet, it was agreed that Talvivaara Mining Company Plc was to be granted a right to subscribe for shares in Terrafame Ltd. equalling a 10.1 per cent holding in the company, conditional to the other parts of the agreement being completed. According to the term sheet, Talvivaara Mining Company Plc could use this right between 1 November 2016 and 30 April 2017. Furthermore, it was agreed that by paying a separate compensation of EUR 3.8 million to Talvivaara Mining Company Plc, Terrafame Group Ltd. may cancel Talvivaara Mining Company Plc’s right to subscribe for shares.
The completion of the agreement in its entirety was also subject to the decision of the Vaasa Administrative Court regarding the Nuasjärvi discharge pipe enabling the continuation of Terrafame’s mining operations.
Terrafame has assessed that the conditions for the completion of the arrangement in accordance with the term sheet do not exist
The term sheet was signed in a situation where it was understood that the Vaasa Administrative Court would give its decision on the mine’s environmental permits in January 2016. In addition, it was expected that the Administrative Court’s decision would have enabled the continuation of the mining operations essentially in accordance with the environmental permit granted by the Regional State Administrative Agency for Northern Finland for the Nuasjärvi discharge pipe in April. If the ownership arrangement defined in the term sheet could have been finalised within the schedule during the winter and early spring of 2016, Terrafame would have strived to complete the negotiations and arrangements for further funding with private investors in summer 2016 at the latest. After this, Talvivaara Mining Company Plc would have been able to obtain financing, and if successful, it would have had the right to subscribe for shares in Terrafame Ltd. in accordance with the term sheet.
In accordance with the decision announced by the state-owner on 25 May 2016, preparations for the closure of Terrafame’s mine will be carried out during a transition period that lasts until the end of 2016. If Terrafame obtains a significant amount of additional private funding during this transitional period, the company’s mining operations can continue.
After the decision announced by the State of Finland and the decision issued by the Vaasa Administrative Court, Terrafame Group Ltd. and Terrafame Ltd. have estimated that in the current situation, the conditions do not exist for the completion of the arrangement in accordance with the term sheet. The state-owner has been informed about this assessment of the situation. Terrafame continues its active efforts for obtaining additional private funding but does not consider it realistic to proceed in accordance with the term sheet signed in January 2016 under these different circumstances. Therefore, Terrafame Group Ltd. and Terrafame Ltd. have withdrawn from the term sheet signed with Talvivaara Mining Company Plc.
“The term sheet with Talvivaara Mining Company Plc was signed in a situation where it was understood that the Vaasa Administrative Court would give its decision on the mine’s environmental permits in January 2016. The Administrative Court’s decision in April gave rise to significant uncertainty around the permit terms concerning the mine’s operational conditions. Furthermore, according to the state-owner’s decision, Terrafame has the opportunity to obtain additional private funding by the end of the year. Despite the good efforts and well advanced preparations of the Terrafame companies and Talvivaara Mining Company Plc, in these circumstances we do not consider it possible to proceed in accordance with the term sheet signed in January 2016,” says Matti Hietanen, CEO of Terrafame Group Ltd.
Terrafame to set off its receivables from Talvivaara Mining Company Plc
Terrafame still leases the lime plant, which is located in the mining area and necessary for the production process, from Talvivaara Mining Company Plc, and it also purchases other services, such as laboratory services. Terrafame pays approximately a total of EUR 400,000 per month to Talvivaara Mining Company Plc. On the basis described above and since it aims for a more efficient use of the company’s assets, Terrafame Ltd. has decided to collect its receivables from Talvivaara Mining Company Plc. In practice, Terrafame will immediately start setting off the receivables from Talvivaara Mining Company Plc against the monthly leases and fees charged by the company.
“Terrafame aims for environmentally sustainable and financially profitable business. The company has stayed within its expense budgets throughout its period of operation. The company’s management and Board of Directors are responsible for ensuring that the financing allocated for the mining operations by the state-owner is used in a cost-effective manner. As the term sheet has now been terminated, Terrafame considers it justified in terms of cost management to start setting off the receivables from Talvivaara Mining Company Plc,” states Lauri Ratia, Chairman of the Board at Terrafame Ltd.
In December 2015, Terrafame Group Ltd. acquired Winttal Oy to which Nyrstar Sales & Marketing AG had sold its receivables from Talvivaara Mining Company Plc. These receivables included rights pertaining to a zinc streaming agreement and to an agreement on the temporary discontinuance of a loan and zinc streaming agreement. As for the zinc streaming agreement, the responsibility of Talvivaara Mining Company Plc is related to a suretyship it granted on behalf of Talvivaara Sotkamo Ltd concerning an end-of-agreement compensation of EUR 203.4 million. Furthermore, based on the discontinuance agreement, Talvivaara Mining Company Plc has provided a suretyship for a loan of approximately EUR 12.8 million drawn by Talvivaara Sotkamo Ltd.
Terrafame Group Ltd.
CEO Matti Hietanen, Tel. +358 40 823 8806
Chairman of the Board Lauri Ratia, Tel. +358 50 2922
Terrafame Group Ltd. is a special-purpose company wholly owned by the State of Finland. It is responsible for managing the state ownership and exercising the owner's power at Terrafame Ltd. Terrafame Group's role is to secure private supplementary financing and support the stabilisation and development of the mining company's operations. Terrafame Group is also responsible for helping the development of new technological solutions related to mine water purification.
Terrafame Ltd. is a Finnish mining company producing primarily nickel and zinc by bioheapleaching at its mine located in Sotkamo. The aim is environmentally sustainable, safe and economically viable mining operations. Terrafame is owned by Terrafame Group Ltd.