State owner ensures Terrafame’s ability to complete financing negotiations 11.11.2016 15:38

The Ministerial Committee on Economic Policy has discussed Terrafame’s situation today, 11 November 2016. The Ministerial Committee on Economic Policy has revised its decision made in May 2016 by allowing the negotiations aimed at securing private financing to continue also after 31 December 2016. In addition, the Ministerial Committee on Economic Policy supports allocating an additional capitalisation of EUR 100 million to Terrafame Group Ltd. that will allow the State to continue financing the mining operations of Terrafame, if necessary.

Summary of the decisions of the Ministerial Committee on Economic Policy concerning Terrafame, 11 November 2016

  • Terrafame Group Ltd. and Terrafame Ltd. may continue, if necessary, the ongoing negotiations aimed at securing private financing also after 31 December 2016, if this is appropriate to achieve the best possible outcome for the negotiations.
  • The primary goal is a financing solution and an arrangement to expand the ownership structure of Terrafame Ltd. and to secure the financing needed to complete the ramp-up.
  • The Ministerial Committee on Economic Policy supported the proposal by the Ministry of Economic Affairs and Employment to allocate an additional capitalisation of EUR 100 million to Terrafame Group Ltd. in the draft supplementary budget for 2017.
  • The Ministerial Committee on Economic Policy also decided to prepare for a scenario in which the collateral securities, which concern the mining operations detailed in Terrafame Ltd.’s environmental permit now being processed by the Supreme Administrative Court, would increase significantly.

Background on the decisions of the Ministerial Committee on Economic policy in May 2016

In May 2016, the Ministerial Committee on Economic Policy decided that the operations of Terrafame’s mine will continue over a transition period lasting until the end of 2016. According to the decision, the completion of the ramp-up of the mine will require private financing after the turn of the year. Additionally, the Ministerial Committee on Economic Policy decided that during the transition period and financing negotiations, measures would also be taken to prepare for the managed closing of the mine. At this time, Terrafame Group Ltd. received an additional capitalisation of EUR 144 million to continue its operations during the transition period.

Conditions for profitable mining operations have improved significantly

The ramp-up of Terrafame’s mine has reached or exceeded the set objectives since operations started in August 2015. As operations and the ramp-up have progressed, the conditions for profitable mining operations have improved significantly. The company has reached its key production targets, and costs have remained below budgets. The second production line of the metals recovery plant was opened in October 2016, which will result in a significant increase in production volumes during the rest of the year.

During Terrafame’s operating of the mine, the highly challenging water situation at the mine has improved substantially. So far, the amount of excess waters at the mine has fallen to 4.4 million cubic metres, which is less than half of the 10 million cubic metres a year ago. With efficient bioleaching, a total of 1.5 million cubic metres of water have been led to the bioleaching circulation from the mine area during 2016.

In January–September, the net sales of Terrafame Ltd. totalled EUR 53.3 million. EBITDA was EUR -136.4 million, which was EUR 13.0 million better than budgeted. Terrafame Ltd. estimates that the sales of metals products will reach approximately EUR 100 million in 2016.

Progress in work to secure further financing

Successful operations enabled Terrafame to start looking for private financing in early autumn 2016 in order to complete the ramp-up of the mine. In addition to the successful ramp-up, the main risks related to Terrafame as an investment have decreased substantially when compared to the starting of operations in August 2015. This has been possible thanks to systematic implementation of the ramp-up.

“The ramp-up of the mine has proceeded very successfully, and the conditions for profitable mining operations have improved. The decision made today by the Ministerial Committee on Economic Policy demonstrates the state owner’s confidence in the work done and results achieved so far. The decision also strongly supports the view that the best outcome for Terrafame’s future, and for the State, will be achieved in the negotiations,” says Matti Hietanen, CEO of Terrafame Ltd.’s parent company Terrafame Group Ltd.

“The financing process has proceeded according to plan during the autumn. Our goal remains to secure private financing as soon as possible. The decision made today by the Ministerial Committee on Economic Policy supports conditions to complete the negotiations in a meaningful manner,” concludes Hietanen.

Work continues to reach full operational capacity

In August 2015, the state owner set a target for the mine: to ensure stable operations and environmental safety. An additional target stated that Terrafame Ltd.’s business should develop to an economically viable direction and the company’s cash flow should be positive at the turn of 2017‒2018.

“We have done everything we can at Terrafame to make sure that the ramp-up proceeds as planned and that we create sustainable operational conditions for the mine’s future. The operational and financial results achieved in the ramp-up have further demonstrated that the production process works as planned, that the targeted production volumes are achievable, and that the conditions for profitable mining operations exist. Commercial deliveries have also started according to plan. Our starting point is that Terrafame’s mine and metals production will operate at full capacity at the end of 2018,” says Lauri Ratia, Chairman of the Board of Terrafame Ltd.

“About 990 Terrafame employees and our contractors’ employees work in the mining area. At full operational capacity, Terrafame’s employment impact in Finland would number thousands of person-years in total. The personnel of Terrafame and its partners have worked for the mine’s future with great determination and expertise. The biggest thanks for the successful ramp-up goes to each person working at the mine,” concludes Ratia.

More detailed information on Terrafame Ltd.’s operations and its results have been published in the company’s January–September 2016 interim report, published on 7 November 2016.

 

Further information:

Terrafame Group Ltd.

Matti Hietanen, CEO of Terrafame Group Ltd., tel. +358 40 823 8806

Terrafame Ltd.
Lauri Ratia, Chairman of the Board of Terrafame Ltd., 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 multi-metal 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., which is wholly owned by the State of Finland.