Capital Markets Day. 19 November 2009

Transcription

1 Capital Markets Day 19 November 2009 August 2009

2 DISCLAIMER The following information contains, or may be deemed to contain, forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995). These statements relate to future events that involve known and unknown risks and other uncertainties. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. All forward-looking statements made in this presentation based on information presently available and Talvivaara Mining Company Plc. assumes no obligation to update any forward-looking statements. Nothing in this presentation constitutes investment advice and this presentation shall not constitute an offer to sell or the solicitation of an offer to buy any securities or otherwise to engage in any investment activity.

3 Introducing the Talvivaara team Pekka Perä, Chief Executive Officer Saila Miettinen-Lähde, Chief Financial Officer Lassi Lammassaari, Chief Operations Officer Pekka Erkinheimo, Chief Commercial Officer Tapio Ikonen, Chief Administration Officer Jukka Pitkäjärvi, Chief Geologist Leif Rosenback, Chief Technology Officer Tapio Hyödynmaa, General Manager Projects Kari Vyhtinen, General Manager Business Development Timo Laatio, Investor Relations

4 Agenda 9:30 Corporate and Strategic Update - Pekka Perä, CEO Financial Update - Saila Miettinen-Lähde, CFO Resource Update - Jukka Pitkäjärvi, Chief Geologist Production Ramp-up and Operations Lassi Lammassaari, COO 12:00 Conclusion Pekka Perä, CEO Q&A Lunch buffet and further discussion

5 Corporate and Strategic Update Pekka Perä, CEO August 2009

6 Talvivaara Internationally significant base metals producer with primary focus on nickel and zinc Targeted full scale production from 2012 Nickel approx. 50,000 tonnes p.a. Zinc approx. 90,000 tonnes p.a. Copper approx. 15,000 p.a. Cobalt approx. 1,800 tonnes p.a. Estimated mine life approx. 46 years 1

7 Latest developments Production Biggest challenges have been overcome; target for 2010 remains at 30,000 tonnes of nickel All processes are working and ramp-up continues Primary crusher modified in October and now operating at 60,000 tonnes per day levels Upgraded fine crushing circuit installed in August and in operation since September In bioheapleaching, metal grades in solution continue to rise despite larger than planned bleed rate to metals recovery Metals recovery in continuous operation and ramping up to 900 m3/h solution flow by year end Finance Successful equity placing of EUR 82.7m in July to fund capacity expansion to 50,000 tpa nickel production Cash at end September EUR 68.6 m Intermediate storage of primary crushed ore 2

8 Latest developments continued Geology Over 18,000 meters drilled YTD Exploration not a priority at present Further increased in resources expected Permitting Permits for Talvivaara-Murtomäki railhead obtained in September, followed by commencement of regular traffic Rail yard at Talvivaara 3

9 Environment, Health and Safety Absolute priority Environment Environmental processes being prepared for ISO certification Audit of the environmental system is targeted for Q Personnel Current number of personnel 283 Recruitment and training continue with targeted number of personnel by the end of 2010 at around Talvivaara personnel e Safety 4 Lost Time Injuries (LTIs) to Talvivaara personnel in 2009, none serious 11 LTIs per a million working hours substantially 50 below industry average 0 Number of personnel Sep

10 2010 targets Production Continued ramp-up according to plan Approx. 30,000 tonnes of nickel production Approx. 55,000 tonnes of zinc production Safety Zero LTI s Business development Long term zinc agreement Partnering agreement for manganese production and sales 5

11 Strategy maintained Complete development of the Talvivaara mine Achieve planned annual output Achieve strong financial profile Maintain strong cash position Maintain operating and capital cost discipline Longer term expansion following ramp-up of operations Increase capacity and product selection at Talvivaara Consider acquisitions Seek opportunities to utilise bioheapleaching technology Enhancement of metals processing facility To allow processing of challenging polymetallic concentrates from other sources Manganese recovery technology 6

12 Commercial Update 7

13 Talvivaara nickel/cobalt and zinc concentrates NiCo sulphide: Offtake with Norilsk Nickel Harjavalta Oy: Commercial deliveries started in February 2009 Calcium extraction circuit at the Harjavalta refinery was commissioned in the summer 2009 Zn sulphide: Product has been sold to very receptive spot market in Europe/China: Detailed negotiations on long-term offtake ongoing with prospective buyers 8

14 Update on chemicals supply sulphur compounds Sulphuric acid Deliveries for 2010 and onwards are under negotiation with a number of suppliers Current market situation is opportune for long term supply arrangements Sulphur Granulated sulphur has been identified as the preferred form Medium term arrangement for a substantial part of the volume in place with CIECH Poland Discussions are ongoing with 1-2 global producers on long term arrangements Current market situation is opportune for long term supply arrangements 9

15 Update on chemicals supply sulphur price development 10

16 Update on chemicals supply caustic soda price development 11

17 Electricity supply Forward purchases executed as follows: 2010 annual forward: 20MW at EUR33.5/MWh 2011 annual forward: 20MW at EUR34.9/MWh 2012 annual forward: 15MW at EUR41.9/MWh 12

18 Market outlook 13

19 Market outlook Short term market outlook still uncertain Monthly LME nickel stocks and prices Underlying demand yet to grow Temporary fall in commodity prices still possible, but weak USD may counter downward pressure in commodity prices China possibly supporting the prices to secure and/or increase future supply Source: Brook Hunt 14

20 Market outlook continued Positive long term outlook in base metals intact with China driving the growth Indexed Nickel Consumption Growth

21 Financial Update Saila Miettinen-Lähde, CFO

22 Ramping up towards positive cashflow in key positives Successful equity placing of EUR 82.7 million to fund capacity expansion Helsinki Stock Exchange secondary listing 2009 challenges Increased liquidity Broadened shareholder base Delayed ramp-up due to crushing issues; additional working capital requirement mitigated by EUR 45 million Finnvera loan High cost and/or unavailability of leasing arrangements due to difficult financial markets 2010 outlook Continued ramp-up of production Further optimisation of production processes for cost control Positive cashflow H Avg.no. shares traded per month Liquidity of the Talvivaara share in ,600,000 London 1,400,000 Helsinki 1,200,000 1,000, , , , ,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 1

23 Key figures Q1-Q Q3 Q3 Q1-Q3 Q1-Q FY 2008 Turnover EUR ' , Operating profit (loss) EUR '000 (15,303) (4,955) (23,208) (9,576) (4,296) Profit (loss) before taxes EUR '000 (15,314) (9,001) (30,003) (13,452) (8,033) Earnings per share EUR (0.04) (0.03) (0.08) (0.05) 0.03 Capital expenditure EUR '000 24, ,128 82, , ,086 Net interest-bearing debt EUR ' , , , , ,467 Debt-to-equity ratio 84.2 % 28.3 % 84.2 % 28.3 % 67.3 % Cash and cash equivalents at the end of the period EUR '000 68,624 93,028 68,624 93,028 82,713 Derivative financial instruments EUR '000 64,975 74,393 64,975 74, ,545 Number of employees at the end of the period

24 Full year 2009 No guidance for full year revenues due to crushing issues Q1-Q3 Other operating income approx. EUR million Anticipated hedge income Q4 approx. EUR 10 million Operating expenditure approx. EUR million Exceptionally high materials handling costs Q1-Q3; normalising in Q4 Increasing chemicals costs in Q4 upon growing volume of metals production Capital expenditure approx. EUR 90 million Majority of 2009 Capex still related to construction project in accordance with the feasibility study Expansion capex <20% 3

25 Production assumptions for 2010 Mining Ore 24 mt Waste 16 mt Stripping ratio 0.6 Metals recovery Nickel: approx. 30,000 t Zinc: approx. 57,000 t Insignificant amounts of copper and cobalt Annualised production level of nickel in 2010(t) 2nd production line at metals plant Jan Feb Mar Apr May Jun 2nd hydrogen plant Jul Aug Sep Oct Nov Dec 4

26 Operating expenditure 2010 Estimated cash cost of operation EUR million Leasing costs approx. EUR 12 million Maintenance 12% Electricity 12% Fuel 8% Contracting 14% Labour 8% Consumables 9% Metals recovery 38% General and administration 5% Mining 29% Chemicals 37% Bioheapleaching 11% Materials handling 17% 5

27 Capital expenditure Capex 2010 approx. EUR 90 million, mainly Secondary heap pad, ground works for waste rock area Secondary stacker, reclaiming equipment Metals recovery Second production line Hydrogen plant Hydrogen sulphide plant Expansion capex and payments relating to secondary stacking system continue into 2011 Maintenance capex 2012 onwards Estimated capital expenditure (1) (1) Long term Capex estimates are based on current development plans and price assumptions and are subject to change 0 H Capex 6

28 Hedging Current hedging policy framed by Project Term Loan requirements Commodity prices Fx: 13,547 tonnes of nickel forwards at an average price of USD 23,452/t remaining between Q and December ,579 tonnes of zinc forwards remaining at an average price of USD 1,949/t between Q and December 2011 Fx hedges for EUR 175 million remaining from Q to Q at EUR/USD Expected hedging policy in long term Little or no hedging of nickel production Some continued hedging of by-products Continued Fx hedging broadly similar to current strategy 7

29 Competitive cash cost of production Estimated cash cost at year end: (1,2) 2010: EUR 2.2/lb nickel (USD 2.7/lb) 12 Cash cost of production (USD/lb nickel) (1,2) 2011: EUR 1.6/lb nickel (USD 2.0/lb) Higher unit cost in 2009 due to Disproportionately high mining and materials handling cost due to technical issues in crushing and ramp -up 9 6 Learning curve in operations 3 (1) By-product credits with the following assumptions for average cost between H : - Zn 0.68/lb ($ 0.85/lb); net smelter return to Talvivaara 60% - Cu 1.27/lb ($ 1.59/lb); net smelter return to Talvivaara 75% - Co 5.44/lb ($ 6.80/lb); net smelter return to Talvivaara 59% - /$ 1.25 (2) After by-product credits and based on current estimates for long term chemicals, power and consumables prices 0 H Cash Cost $/lb 8

30 Debt maturity profile EUR ,000 50,000 40,000 30,000 20,000 10, Project Term Loan Facility R&D Capital loan Government Subsidies (1) Convertible Bond Railroad Loan (2) Finnvera WC Loan Other Borrowings (1) Convertible bond due May 2013 assumed converted into 11.5 million shares at 5.88 GBP/share (2) Railroad loan to be repaid with Government reimbursements 9

31 Financial calendar 2010 Q4 and full year 2009 results 24 February 2010 Annual General Meeting 15 April 2010 Q interim results 6 May 2010 Q interim results 25 August 2010 Q interim results 10 November

32 Resource Update Jukka Pitkäjärvi, Chief Geologist August 2009

33 2009 Exploration update Over meters drilled YTD Target 1: Kuusilampi Southern area infill drilling Target 2: Kuusilampi Northern extension drilling Target 4 Target 3: Kuusilampi Central area geotechnical drilling Target 4: Kolmisoppi resource infill drilling Target 2 Target 3 Target 1 1

34 Kuusilampi and Kolmisoppi - long section looking west

35 Exploration potential The profile follow-up-procedure was applied to the flight lines covering the area of 3 km south from Kuusilampi and 3 km north from Kolmisoppi.The image above shows the potential targets plotted on the filtered aero-magnetics map. 3

36 Kuusilampi and Kolmisoppi deposits with new 2009 drilling profiles 4

37 Kuusilampi and Kolmisoppi - long section looking west, new 2009 drilling profiles 5

38 Kolmisoppi deposit 6

39 Kolmisoppi profile new 2009 drillholes 2008 resource outline New resource outline 7

40 2010 Exploration targets Kolmisoppi resource infill drilling Kuusilampi Northern extension drilling 8

41 Production Ramp-Up and Operations Lassi Lammassaari, COO August 2009

42 Process flow sheet 1

43 Mining Kuusilampi open pit - haul 2009 YTD including contractors Equipment Total 10,6 Mt (Jan-Oct) 4 x production drills 1 x 360 t excavator 1 x 210 t wheel loader 4 x 170 t haul trucks 1 x 360 t excavator and 2 x haul trucks to be commissioned by year end and 2 x haul trucks in % increase in hauling capacity Tonnes Waste t Ore t Month 2

44 Mining in operation Drilling 2. Loading 3. Tipping to primary crusher

45 Materials handling Key achievements 2009 crushing forecast 8 Mt for full year 2009 construction of the new secondary crushing unit and modification of original lines nominal capacity increased from 2,500 t/h to 3,100 t/h maximum achieved to date 2,800 t/h modification of primary crusher primary crushing capacity > 3,000 tph contractor crushing demobilised in October Short term issues Improving availability of crushing system Plans for year 2010 Commissioning of secondary stacking system in October 4

46 Materials handling crushing performance 120% 100% 80% 60% 40% 20% Actual vs. budget % Crushed ore (t) Production stoppage for installation of upgraded crushing circuit 0% 1,000, , , , , , , , , ,000 - Actual vs. budget % Crushed ore tonnes 5 January 2009 February 2009 March 2009 April 2009 May 2009 June 2009 July 2009 August 2009 September 2009 October 2009

47 Materials handling in operation Primary crusher Start up of the new circuit New secondary crushers Stacking 6

48 Bioheapleaching Primary heap pad 1 Stacking completed in June Solution flow in circulation 2,500 m 3 /h Primary heap pad 2 Stacking in progress, to be completed by Jan 2010 Solution flow in circulation 900 m 3 /h Metal grades in solution 7

49 Bioheapleaching in operation Irrigation Aeration Heap Pregnant Leach Solution 8

50 Bioheapleaching secondary leaching Secondary heap areas to be developed during Length m Width m YEAR 2010 Width m YEAR

51 Metals recovery Metals recovery plant Circuit 1 in production Circuit 2 completion of installation scheduled for June 2010 Production update Two production campaigns in January and May Continuous production started in September 2,000 t Zn and 700 t Ni precipitated to date Production rates and short term guidance Sep-Oct; feed 300 m 3 /h, 9 tpd Ni, 25 tpd Zn Nov; feed 600 m 3 /h, 18 tpd Ni, 45 tpd Zn Dec; feed 900 m 3 /h, 30 tpd Ni, 75 tpd Zn Currently at approx. 10,000 tpa Ni annualised level, targeting to reach approx. 40,000 tpa annualised level by the end of

52 Metals recovery in operation Hydrogen and H2S plant Thickeners Belt Filter End product, Zn 11

53 Production personnel Current number of production personnel 224 Production personnel by department Number of personnel in total (Talvivaara Group) 283 Recruitment target for 2010 approx additional production personnel Training of production personnel through apprenticeship arrangements ongoing Maintenance, 38 Administration, 16 Mining, 58 Metals recovery, 49 Materials handling, 41 Bioheapleaching, 22 12

54 Occupational safety LTI s per million working hours 13

55 R&D themes

56 R&D themes 2009 Bioheapleaching Process optimization Follow-up and interpretation of leach results Agglomeration study Development of agglomeration drum Effect of fines in bioheapleaching Treatment options for fines Manganese recovery Biological iron removal Lime neutralisation 15

57 Bioheapleaching Continuous bleeding of leach solution since mid September >15% of circulating solution fed to metals plant and/or storage ponds Nickel concentrations in solution continue to increase despite solution removal Solution temperatures falling in line with seasons Heap section 1 Heap section 2 Ni, Zn content in PLS (mg/l) PLS temperature ( C) /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/2009 Ni in PLS mg/l ZN in PLS mg/l T PLS ºC Ni, Zn content in PLS (mg/l) PLS temperature ( C) /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/2009 Ni in PLS mg/l ZN in PLS mg/l T PLS ºC 16

58 Bioheapleaching continued Current feed from solution ponds to metals recovery 600 m 3 /h Nickel precipitation t/day Feed rate to be increased to 900 m 3 /h in December 17

59 Manganese recovery Manganese content in solution at steady state anticipated to be approximately 4.5 g/l Possible recovery approx. 50,000 tpa Significant savings in lime costs upon commercial manganese production Potential products Mn metal c. 40,000 tpa Stainless Steel Grade 99.9 % Current price EUR 2,000 3,000 /tonne High grade Mn-salts Intermediate for battery grade Feasibility sensitive to manganese price Laboratory testwork ongoing Preparation of process solution proven successful Manganese cathode has been plated from Talvivaara solutions Acceptable quality achieved Development work continues 18

60 Biological iron removal in a fluid bed reactor Rationale Removal of jarosite iron at low ph for cost savings through reduced use of lime stone Potential savings in lime stone costs Pilot plant operational at Talvivaara Patent application pending Lime stone crushing plant 19

61 Lime neutralisation Rationale Lower neutralisation costs compared to use of limestone and lime for iron, aluminium, manganese and magnesium removal Current estimated lime based neutralisation cost in excess of EUR 30 million p.a. in full capacity Initial tests on alternative neutralisation agents ongoing Various slags and power plant ashes being tested 20

62 Conclusion ramping up to 50,000 tpa nickel Original ramp-up plan Present estimate 50,000 tpa nickel 33,000 tpa nickel