THIS DOCUMENT AND THE ENCLOSED FORM OF PROXY AND REGISTRATION FORM ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION.

Transcription

1 THIS DOCUMENT AND THE ENCLOSED FORM OF PROXY AND REGISTRATION FORM ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. It contains the Resolutions to be voted on at an Extraordinary General Meeting of Talvivaara Mining Company Plc (the Company ) to be held on 8 March If you are in any doubt about the contents of this document or the action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser, who is authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser. If you sell or transfer or have sold or otherwise transferred all of your Shares, please send this document, together with the accompanying Form of Proxy and Registration Form, as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee, except that such documents should not be sent in or into any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including but not limited to, the United States and any of the Excluded Territories. If you sell or transfer or have sold or otherwise transferred part of your holding of Shares, you should consult with the stockbroker, bank or other agent through whom the sale or transfer was effected. The distribution of this document and/or its accompanying documents into jurisdictions other than Finland and the United Kingdom may be restricted by law and, therefore, persons into whose possession this document and/or the accompanying Form of Proxy and Registration Form comes should inform themselves about and observe such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, subject to certain exceptions, this document and any related document should not be distributed, forwarded to, or transmitted in or into the United States, or any of the Excluded Territories. This document should be read as a whole. However, your attention is drawn to the letter from the Chairman of the Company which is set out in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document and which recommends that you vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting referred to below. For a discussion of certain risk factors which should be taken into account when considering whether to vote in favour of the Resolutions, see Part II (Risk Factors) of this document. See Part I (Letter from the Chairman of Talvivaara Mining Company Plc) for more detailed information on actions that should be taken by CDI Shareholders in order to attend and vote at the Extraordinary General Meeting. TALVIVAARA MINING COMPANY PLC (Incorporated and registered in the Republic of Finland with business identity code ) Proposed Rights Issue authorisation of up to 26,000,000,000 New Shares and Authorisation to the Board to decide to issue up to 600,000,000 new Shares in connection with an adjustment to the terms of the Convertible Bonds due 2013 and Circular and Notice of Extraordinary General Meeting The Notice of the Extraordinary General Meeting to be held at 10:00 a.m. (GMT+2) on 8 March 2013 at Finlandia Hall, Mannerheimintie 13 e, FI Helsinki, Finland, is set out at the end of this document. Qualifying CDI Shareholders will find enclosed with this document a Form of Proxy and Registration Form for use at the Extraordinary General Meeting. Qualifying non-cdi Shareholders should follow the instructions included in the Notice of the Extraordinary General Meeting on actions that should be taken in order to attend and vote at the Extraordinary General Meeting. This document does not constitute a prospectus or a prospectus equivalent document. Nothing in this document should be interpreted as an offer of securities or a term or condition of the Proposed Rights Issue. The Prospectus containing details of the Proposed Rights Issue is not expected to be posted to Shareholders but, subject to the approval by the FFSA, is expected to be published on Talvivaara s website at on or around 13 March 2013 following the requisite Resolutions being passed. Investors should read the Prospectus for information about the Proposed Rights Issue before deciding whether or not to invest in the Subscription Rights or the New Shares referred to in this document. Investors should not subscribe for or acquire any Subscription Rights or New Shares except on the basis of the information, and the terms and conditions of the Proposed Rights Issue, to be contained in the Prospectus. This document cannot be relied on for any investment contract or decision. In making an investment decision, each investor must rely on their own examination, analysis and enquiry of the Company and the terms of Proposed Rights Issue, including the merits and risks involved. None of the Company, J.P. Morgan Cazenove or any of the other Managers, or any of their respective representatives, is making any representation to any offeree, subscriber or purchaser of the Subscription Rights or the New Shares regarding the legality of an investment in such Subscription Rights or New Shares by such offeree, subscriber or purchaser under the laws applicable to such offeree, subscriber or purchaser. Each investor shall consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Subscription Rights or the New Shares. This document does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. There will be no such offer, invitation or solicitation in any jurisdiction in which such an offer, an invitation or a solicitation is unlawful. The securities referred to herein which may be offered pursuant to the Proposed Rights Issue have not been, and will not be, registered under the Securities Act, or under any securities laws of any state or other jurisdiction of the United States, or under any securities laws of any Excluded Territory, and may not be offered, sold, taken up, exercised, pledged, resold or renounced, or otherwise transferred, delivered or distributed, directly or indirectly, within the United States, except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, exercised, pledged, resold or renounced, or otherwise transferred, delivered or distributed, directly or

2 indirectly, within any Excluded Territory, except pursuant to an exemption from, and in compliance with (or in a transaction not subject to), any applicable securities laws. There will be no public offer in the United States or in any Excluded Territory. J.P. Morgan Cazenove, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as sole sponsor for Talvivaara and no one else in connection with the Proposed Rights Issue and the Resolutions and will not regard any other person (whether or not a recipient of this document) as a client in relation to either the Proposed Rights Issue or the Resolutions and will not be responsible to anyone other than Talvivaara for providing the protections afforded to its clients nor for giving advice in connection with either the Proposed Rights Issue, the Resolutions or any other transaction, arrangement or matter referred to in this document. The Managers are acting exclusively for Talvivaara and no one else in connection with the Proposed Rights Issue. They will not regard any other person (whether or not a recipient of this document) as their respective clients in relation to the Proposed Rights Issue, the Adjustment or the Resolutions and will not be responsible to anyone other than Talvivaara for providing the protections afforded to their respective clients nor for giving advice in connection with the Proposed Rights Issue, the Adjustment, the Resolutions or any other transaction or arrangement referred to herein. Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove and any of the other Managers by the Financial Services and Markets Act 2000 or any other applicable laws, neither J.P. Morgan Cazenove nor any of the other Managers accept any responsibility whatsoever for the contents of this document, and no representation or warranty, express or implied, is made by J.P. Morgan Cazenove or any other Manager in relation to the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with J.P. Morgan Cazenove, the other Managers, the Proposed Rights Issue or the Resolutions. To the fullest extent permitted by law, J.P. Morgan Cazenove and the other Managers accordingly disclaim all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement. Except as otherwise indicated, capitalised terms have the meaning ascribed to them in Part VI (Definitions). A glossary of certain technical terms is included in Part V (Glossary of Technical Terms). This document is dated 14 February (ii)

3 TABLE OF CONTENTS Page EXPECTED TIMETABLE OF PRINCIPAL EVENTS... 1 DIRECTORS AND ADVISERS... 2 PART I LETTER FROM THE CHAIRMAN OF TALVIVAARA MINING COMPANY PLC... 3 PART II RISK FACTORS PART III SOME QUESTIONS AND ANSWERS ON THE PROPOSED RIGHTS ISSUE PART IV ADDITIONAL INFORMATION PART V GLOSSARY OF TECHNICAL TERMS PART VI DEFINITIONS NOTICE OF EXTRAORDINARY GENERAL MEETING REGISTRATION FORM FORM OF PROXY * * * Where to Find Help Part III (Some Questions and Answers on the Proposed Rights Issue) of this document answers some of the questions Shareholders may have about this document and about the Proposed Rights Issue. Financial Information Talvivaara has published its audited consolidated financial statements as at and for the year ended 31 December 2012 on its website, on the date of this document. (iii)

4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS Each of the times and dates in the table below is indicative only and may be adjusted by the Company in consultation with its advisers. Announcement of Talvivaara s results of operations for the year ended 31 December February 2013 Publication of this document and the Form of Proxy and Registration Form February 2013 Latest time and date for receipt of Forms of Proxy and Registration Forms... 4:00 p.m. on 26 February 2013 Extraordinary General Meeting... 10:00 a.m. (GMT+2) on 8 March 2013 Announcement of the terms of the Proposed Rights Issue... 8 March 2013 Publication of the Prospectus by the Company March 2013 Notes: (i) (ii) All references in this document to time are to London time (GMT) unless otherwise stated. Further details of the timetable for the Proposed Rights Issue will be set out in the Prospectus expected to be published, subject to the approval of the FFSA, on or around 13 March

5 DIRECTORS AND ADVISERS Directors Tapani Järvinen (Chairman of the Board) Pekka Perä (Chief Executive Officer and Executive Director) Graham Titcombe (Non-Executive Director) Edward Haslam (Non-Executive Director) Eileen Carr (Non-Executive Director) Stuart Murray (Non-Executive Director) Michael Rawlinson (Non-Executive Director) Kirsi Sormunen (Non-Executive Director) Registered Office Ahventie 4 B 47 FI Espoo Finland Sponsor Legal Advisers to the Company Legal Advisers to the Sponsor Registrars Auditor Financial PR J.P. Morgan Cazenove 25 Bank Street Canary Wharf London E14 5JP United Kingdom White & Case LLP Eteläranta 14 5 Old Broad Street FI Helsinki London EC2N 1DV Finland United Kingdom Latham & Watkins (London) LLP 99 Bishopsgate London EC2M 3XF United Kingdom Computershare Investor Services (Jersey) Limited Queensway House Hilgrove Street St. Helier Jersey, JE1 1ES PricewaterhouseCoopers Oy Itämerentori 2 FI Helsinki Finland College Hill Ltd. International business communications consultancy The Registry, Royal Mint Court London EC3N 4QN United Kingdom 2

6 PART I LETTER FROM THE CHAIRMAN OF TALVIVAARA MINING COMPANY PLC TALVIVAARA MINING COMPANY PLC (Incorporated and registered in the Republic of Finland with business identity code ) Directors: Registered Office: Tapani Järvinen (Chairman of the Board) Ahventie 4 B 47 Pekka Perä (Chief Executive Officer and Executive Director) FI Espoo Graham Titcombe (Non-Executive Director) Finland Edward Haslam (Non-Executive Director) Eileen Carr (Non-Executive Director) Stuart Murray (Non-Executive Director) Michael Rawlinson (Non-Executive Director) Kirsi Sormunen (Non-Executive Director) 14 February 2013 To Shareholders and, for information only, to the holders of Options and Convertible Bonds Dear Shareholder, Proposed Rights Issue authorisation of up to 26,000,000,000 New Shares and Authorisation to the Board to decide to issue up to 600,000,000 new Shares in connection with an adjustment to the terms of the Convertible Bonds due Introduction and Notice of Extraordinary General Meeting Talvivaara has faced a number of operational challenges during the ramp-up of its operations since it commenced production of saleable products in February These challenges have resulted in Talvivaara not achieving its original production targets for 2010, 2011 and Initially, the output of Talvivaara s crushing circuit did not meet targeted levels and required significant modifications and additional capacity. The crushing issues restricted the production of new ore, thereby delaying the ramp-up of production, and slow heap build-up also impacted bioheapleaching performance as metals back-precipitated in the oldest section of the heap. In 2010 and 2011, Talvivaara faced further operational bottlenecks with the poor performance of primary heap reclaiming equipment and the restricted availability of the metals recovery plant. Following the steps taken to de-bottleneck operations and the promising results seen in metals production in the fourth quarter of 2011, Talvivaara set its original production target for 2012 of between 25,000 and 30,000 tonnes of nickel. However, over the course of 2012, Talvivaara faced increasing challenges with the water balance of the mine, as rapid snow melting in the spring and historically heavy rainfall in the spring and summer materially increased the amount of excess water that had been accumulating at the mine site. The challenging water balance led to Talvivaara temporarily suspending the production of new ore as of September 2012, diluted metal grades in leach solution and impacted the efficiency of aeration, leading to reduced metals production and culminated in a leakage of the gypsum pond in November These issues have underlined the need to focus on stabilising and improving Talvivaara s production processes in order to return to a sustainable ramp-up path towards the targeted full capacity of 50,000 tonnes of nickel per year. Talvivaara has instituted a number of measures aimed at addressing these challenges in the near term, including removing excess water from the Talvivaara mine site, implementing steps to achieve a closed water circulation system, improving bioheapleaching performance and further improving and maintaining the stability that has been achieved across Talvivaara s production processes. For more detailed information on these and other measures that Talvivaara is taking, see 4. Talvivaara s actions to stabilise and improve its production processes below. 3

7 On 12 February 2013, Talvivaara received a decision from the Kainuu ELY Centre allowing Talvivaara (subject to certain limitations) to discharge 1.8 million cubic metres of water. This decision, combined with the 1.3 million cubic metre discharge limit in Talvivaara s current environmental permit, allows Talvivaara to progress, in part, with its water management plans. Talvivaara s water management plans aim to prepare for environmental and other risks caused by excess water at the Talvivaara mine site and excess water within the safety dams as a result of the gypsum pond leakage before the spring melt, as well as to ensure that ore production can resume by July 2013 in accordance with Talvivaara s production schedule. Resuming ore production also aids the water balance as fresh ore absorbs considerable amounts of water. For more detailed information on the Kainuu ELY Centre s decision, see Removing the excess water from the Talvivaara mine site below. Talvivaara s results of operations in 2012 were further negatively affected by the prevailing low London Metal Exchange nickel price during 2012, which averaged USD 17,530 per tonne, as compared to USD 22,843 per tonne in 2011 and USD 21,811 per tonne in Talvivaara s operational challenges and the weak nickel price environment have resulted in increased levels of indebtedness and a strained liquidity position. As at 31 December 2012, Talvivaara had cash and cash equivalents of EUR 36.1 million, total debt of EUR million and a net debt position of EUR million. The Board believes that Talvivaara s strained liquidity position is likely to be exacerbated in 2013 by the production impact caused by the prevailing water balance issues as well as the maturity of the Convertible Bonds due 2013 in May As explained below, Talvivaara is implementing a number of measures to overcome its near-term operational challenges. However, the full effect of these actions will only materialise over time, and Talvivaara currently expects material production ramp-up only from the second half of For 2013, Talvivaara expects total nickel production of approximately 18,000 tonnes, total capital expenditure of EUR 60 million and total operating expenditure (including financial leasing) of EUR 230 million. Water balance management measures and improvements are expected to account for approximately EUR 20 million of the total expected capital expenditure and EUR 10 to 15 million of the total expected operating expenditure. Talvivaara s nickel production target for 2013 is lower than its original production targets for 2010, 2011 and As Talvivaara s revenues are heavily dependent on its production volumes, Talvivaara does not expect to generate sufficient revenues in 2013 to finance its operations, including costs and additional investments relating to the water balance issue and environmental incidents at the Talvivaara mine site, and to finance the repayment of the Convertible Bonds due For more information on Talvivaara s results of operations, see the audited consolidated financial statements of Talvivaara as at and for the year ended 31 December 2012, which were published on Talvivaara s website, on the date of this document. As at 31 December 2012, the Company had drawn EUR 70 million of the Previous Facility, which was signed in June 2010 when Talvivaara expected to reach an annualised production rate in excess of 30,000 tonnes of nickel by the end of 2010 and the full scale annual production target of 50,000 tonnes of nickel in Talvivaara obtained waivers of the failure to satisfy the financial and the production covenants in the Previous Facility Agreement, which were tested quarterly, from the lenders for the third and fourth quarters of On 13 February 2013, the Company entered into the Amended Facility Agreement, which, among other things, amended the financial and production covenants in the Previous Facility Agreement to reflect Talvivaara s current business and, therefore, reduces Talvivaara s risk in relation to compliance with its covenants. Among other conditions subsequent under the Amended Facility Agreement, the Proposed Rights Issue must be completed and the Company must receive net proceeds therefrom of at least EUR 240 million. If any of such conditions subsequent are not satisfied by 30 April 2013, an event of default would occur under the Amended Facility Agreement. A summary of the Amended Facility Agreement (including relevant conditions) is set out in Part IV (Additional Information) of this document. The Board remains confident in Talvivaara s longer-term potential, with its significant sulphide nickel resources and cost effective bioheapleaching process following ramp-up, and in the long-term fundamentals of the nickel industry. The Board s primary focus continues to be preserving and enhancing value for all Shareholders. The primary operational focus of Talvivaara in the near term is on improving its productivity by taking actions designed to address the recent challenges. The Board believes that Talvivaara needs to secure additional funds in order to meet its working capital needs and finance its debt maturities, including the Convertible Bonds due 2013, in the short term. The Board has concluded that it is necessary to raise additional equity through the Proposed Rights Issue, which is expected to secure liquidity for the continued ramp-up of operations towards full capacity, and provide an appropriate capital structure to enable repayment or refinancing of short- and medium-term indebtedness. Receipt of the proceeds from the Proposed Rights Issue will also satisfy a condition subsequent under the Amended Facility Agreement. 4

8 The Proposed Rights Issue is conditional upon the Resolutions being passed by Shareholders at the Extraordinary General Meeting. Therefore, if the Resolutions are not passed at the Extraordinary General Meeting, the Proposed Rights Issue will not proceed. If the Company does not receive net proceeds of at least EUR 240 million from the Proposed Rights Issue by 30 April 2013, an event of default would immediately occur under the Amended Facility Agreement. An event of default could cause a significant portion of Talvivaara s borrowings to become repayable on demand. Furthermore, without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May Such events may require the sale of the Talvivaara mine, the Company or the Company s 84 per cent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the Company. As a result, Shareholders could lose their investment in the Company. In order to ensure that it has sufficient liquidity until it receives the proceeds from the Proposed Rights Issue, Talvivaara has entered into amendment agreements with Cameco and Nyrstar to secure additional liquidity. On 12 February 2013, Talvivaara Sotkamo entered into an amendment agreement with Cameco concerning the uranium take-in-kind agreement entered into in February 2011 pursuant to which the amount of the up-front investment that Cameco is to pay to Talvivaara Sotkamo for the construction of the uranium extraction facility was increased by USD 10 million to USD 70 million. For information on the uranium take-in-kind agreement, including the terms of repayment for the up-front investment, see Part IV (Additional Information) of this document. In addition, on 14 February 2013, Talvivaara Sotkamo entered into an amendment agreement with Nyrstar regarding the zinc in concentrate streaming agreement entered into in January 2010 pursuant to which Nyrstar is to make an up-front payment of EUR 12 million to Talvivaara Sotkamo in return for Talvivaara Sotkamo agreeing not to charge Nyrstar the EUR 350 per tonne extraction and processing fee on the next 38,000 tonnes of zinc in concentrate delivered to Nyrstar as was agreed in the original zinc in concentrate streaming agreement. The Board expects that the terms of the Proposed Rights Issue will be announced on or around 8 March 2013, and that full details of the Proposed Rights Issue, including the terms, pricing and expected net proceeds of the Proposed Rights Issue, will be included in a Prospectus to be published, subject to approval by the FFSA, on or around 13 March The Board expects that the Proposed Rights Issue will seek to raise approximately EUR 260 million in gross proceeds (approximately EUR 249 million in net proceeds). In connection with the Proposed Rights Issue, the Company has entered into the Standby Underwriting Letter with the Managers, pursuant to which the Managers have undertaken to underwrite, subject to certain conditions discussed in detail in Part IV (Additional Information) of this document, such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments. As at the date of this document, the Managers obligation to underwrite the Proposed Rights Issue under the Standby Underwriting Letter remains subject to certain conditions precedent discussed in detail in Part IV (Additional Information) of this document, including (i) the approval of Resolutions at the Extraordinary General Meeting; (ii) the Shareholder Commitments and the Mr Perä Additional Subscription Commitment remaining valid and enforceable; (iii) the Managers and their advisors completing to their satisfaction their respective business, technical, environmental, financial and legal due diligence investigations; (iv) the decision of the Kainuu ELY Centre to permit Talvivaara to discharge 1.8 million cubic metres of water being in full force and effect; (v) the Amended Facility being in full force and effect; and (vi) certain other conditions precedent, including no material adverse change, or any development or event involving or reasonably likely to have a prospective material adverse change, in the business, condition (financial, legal or otherwise) or results of operations or prospects of Talvivaara having occurred; no force majeure event having occurred; and no breach of warranty having occurred. The Company will only proceed with the Proposed Rights Issue if Shareholders approve the Resolutions at the EGM and such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments is fully underwritten. The Company has received irrevocable undertakings from its three largest Shareholders, Mr Pekka Perä, Solidium and Varma Mutual Pension Insurance Company, to vote in favour of the Resolutions in respect of 104,181,306 Shares in aggregate, representing approximately 38.3 per cent of the Shares in issue on the date of this document. The number of New Shares to be issued will be determined by the Board after the Resolutions have been passed at the Extraordinary General Meeting and it will depend on the subscription price to be determined by the Board based on the authorisation for the Proposed Rights Issue from the Shareholders. The subscription price is expected to be in euros and to be set with reference to a discount to the theoretical ex-rights price, which will be in line with similar rights issues undertaken in the UK and Finnish markets, and having regard to, amongst other things, investor feedback, Talvivaara s operational performance, market conditions, any relevant requirements of the Listing Rules and the market price of the Shares over the five days preceding the determination of the subscription price. The subscription price is expected to be announced on or around 8 March The Proposed Rights Issue 5

9 will be structured as is customary for Finnish companies. For more information, see Part III (Some Questions and Answers on the Proposed Rights Issue) of this document. The maximum number of New Shares that may be issued by the Company pursuant to the authority sought in the Rights Issue Resolution is 26,000,000,000. This authority has been proposed by the Board to (i) ensure that it has authority to allot sufficient Shares to raise approximately EUR 260 million in the Proposed Rights Issue; (ii) provide it with the flexibility to propose an appropriate exchange ratio in respect of the Proposed Rights Issue; and (iii) limit, to the extent practicable, the extent to which fractional entitlements arise from the Proposed Rights Issue. Further, as a result of the Proposed Rights Issue, an adjustment to the conversion price in accordance with the terms and conditions of the Convertible Bonds must be made if the Company undertakes a rights issue at a price which is less than 95 per cent of the market price of the Shares on the date of the first public announcement of the terms of the rights issue, as specified in more detail in the terms and conditions of the Convertible Bonds. As a result of such adjustment, the number of Shares to be issued by the Company upon conversion of the Convertible Bonds will increase. The Adjustment Authorisation Resolution will enable the Board to decide upon the requisite Adjustment regarding the Convertible Bonds due 2013 once the terms of the Proposed Rights Issue have been decided. In addition, the Proposed Rights Issue would require an adjustment to the share subscription prices of the Options and to the number of Shares available for subscription based on the Options. No separate share issuance authorisations are required for the adjustment of the conversion price of the Convertible Bonds due 2015 or the number of Shares available for subscription based on the Options because the decisions regarding the issuance of special rights in relation to the Convertible Bonds due 2015 and of the Options were made at the general meeting of Shareholders. The purpose of this document is to (i) explain the background and reasons for the Proposed Rights Issue; (ii) explain why the Board unanimously considers the Proposed Rights Issue to be in the best interests of Shareholders as a whole; (iii) explain why the Board unanimously considers the authorisation to the Board to decide to issue up to 600,000,000 new Shares to address the Adjustment to the terms of the Convertible Bond due 2013 to be in the best interests of Shareholders as a whole; and (iv) present the recommendation of the Board that you vote in favour of the Resolutions as, in its opinion, the Proposed Rights Issue and the authorisation to the Board to decide to issue up to 600,000,000 new Shares to address the Adjustment to the terms of the Convertible Bond due 2013 are in the best interests of Shareholders as a whole. 2. Business of Talvivaara 2.1 Overview Talvivaara is an internationally significant base metals producer with a primary focus on nickel and zinc. Talvivaara s main asset is the Talvivaara mine in Sotkamo, Finland. The Talvivaara polymetallic deposits, Kuusilampi and Kolmisoppi, together comprise one of the largest known sulphide nickel resources in Europe. The classified mineral resources are currently estimated by Talvivaara at 2,053 million tonnes of ore, of which 1,305 million tonnes are in measured and indicated categories according to the JORC Code. The mining license and mining concession covering the Talvivaara deposits are owned by Talvivaara Sotkamo, which is an 84 per cent owned subsidiary of the Company. Talvivaara develops its deposits using a technology known as bioheapleaching. This technology harnesses locally occurring, live bacteria to extract metals from ore. Since commencing commercial operations in 2009, Talvivaara has demonstrated the viability of bioheapleaching technology to extract nickel from the Talvivaara ore. As byproducts of nickel production, Talvivaara produces zinc and cobalt and also commenced production of saleable quantities of copper in October In addition, in February 2010, Talvivaara announced its plan to recover uranium oxide in the form of yellow cake as a by-product of nickel production. Talvivaara has already obtained a permit from the Finnish Government for uranium extraction under the Nuclear Energy Act (990/1987, as amended) and the necessary European Union permits, but Talvivaara s uranium production remains subject to, amongst other conditions, receipt of the environmental permit for uranium extraction. The permit decision for uranium extraction is expected in the first half of 2013 in conjunction with the renewal of Talvivaara s environmental permit. Construction of the uranium extraction facility began following the receipt of the construction permit in August 2011 and was almost completed at the end of Talvivaara produces metal intermediates, which it supplies to companies with metal refining operations. In February 2005, Talvivaara Sotkamo entered into a 10-year sale and purchase agreement with Norilsk Nickel for all of the Talvivaara mine s nickel and cobalt production, at market prices, until at least 300,000 tonnes of nickel have been delivered. In January 2010, Talvivaara Sotkamo entered into a zinc in concentrate streaming agreement with Nyrstar for the sale of its entire zinc in concentrate production until a total of 1.25 million tonnes has been 6

10 delivered. Further, Talvivaara Sotkamo entered into a uranium off-take agreement with Cameco in February Talvivaara sells its copper production under spot arrangements. 2.2 Mineral Resources The following table sets forth mineral resource information on the Talvivaara deposits as a whole: Grade Tonnage (1) Ni Zn Co Cu U (tonnes in (per cent) millions) Measured Indicated Sub total... 1, Inferred Total... 2, (1) Mineral resources are quoted at 0.07 per cent cut-off for nickel. The mineral resources in these ore bodies have been classified according to the JORC Code. The Competent Person as defined by the JORC Code is currently Mr Hannu Lahtinen. 2.3 Production Upon the successful completion of the ramp-up of its production, Talvivaara s full-scale annual production targets are 50,000 tonnes of nickel, 90,000 tonnes of zinc, 15,000 tonnes of copper, 1,800 tonnes of cobalt and 350 tonnes of uranium. Talvivaara s existing environmental permit, which is currently being renewed, relates to nickel production of 30,000 tonnes per year, and the application for an environmental permit allowing full-scale production is expected to be submitted in The following table sets forth Talvivaara s key production information for the years indicated: For the year ended 31 December (tonnes in millions, unless otherwise indicated) Mining Ore production Waste production Materials handling Stacked ore Bioheapleaching Ore under leaching Metals recovery Nickel metal content, tonnes... 12,916 16,087 10,382 Zinc metal content, tonnes... 25,867 31,815 25,462 7

11 The following diagram sets forth the production process at the Talvivaara mine: Talvivaara s production process begins with large-scale open-pit mining, followed by materials handling covering all the physical ore processing steps from primary crushing to stacking and leaching of the ore in heaps. During the leaching process, metals are leached from the ore as a result of bacterial catalysis. Crushed ore is used as the starting material and leaching is activated by the irrigation and aeration of ore in the heaps. The heap is equipped with piping for aeration and irrigated with leach solution, which is recycled through the heap until its metal content is sufficient for metals recovery. Several physico-chemical and microbiological process parameters, such as the acidity of the irrigation solution, the rate of irrigation, the rate of removal of the pregnant leach solution ( PLS ) and the rate of aeration, are continuously monitored and adjusted in order to help Talvivaara enhance and speed up the leaching process. The ore is first leached on the primary heap pad (for approximately 13 to 14 months at full-scale production), after which the partially leached ore is reclaimed, conveyed and re-stacked on the secondary heap pad. After secondary leaching, the leached ore remains on the secondary heaps permanently. Once a sufficient metal concentration is reached, a continuous side stream of metal-containing PLS is led from leaching solution circulation to the metals recovery plant, where metals are precipitated from the PLS using chemicals. The resulting products are metal intermediates copper and zinc sulphides and a mixed nickel cobalt sulphide which are sold to companies with metal refining operations. Talvivaara is also constructing an extraction circuit to recover uranium oxide in the form of yellow cake from the PLS, with production expected to commence during the summer of 2013, subject to receiving all the necessary permits. Process waste, primarily gypsum, is taken to designated waste ponds. Water, from which the saleable metals and other elements such as iron have been removed, is returned to circulation to irrigate the ore heaps. All structures in contact with ore or leach solutions are insulated from the surrounding environment by permanent physical barrier layers. 8

12 3. Background to and Reasons for the Proposed Rights Issue 3.1 Introduction The construction of the Talvivaara mine commenced in April 2007 and Talvivaara completed its build-up phase in less than two years, commencing production of saleable products in February Following this, however, Talvivaara has faced a number of challenges during the ramp-up of its operations, which have resulted in Talvivaara not achieving its original production targets for 2010, 2011 and In particular, events during 2012 have underlined the need to focus on stabilising and improving Talvivaara s production processes, including addressing water balance issues and enhancing bioheapleaching performance, in order to return to a sustainable ramp-up path towards the targeted full capacity of 50,000 tonnes of nickel per year. Talvivaara has instituted a number of measures aimed at addressing these challenges in the near term, which are described in more detail below. As production volumes, along with the price of nickel and other metals that Talvivaara produces, are the primary factors affecting Talvivaara s revenues, lower than expected production volumes and weak nickel prices in 2012 have resulted in increased levels of indebtedness and strained Talvivaara s liquidity position. 3.2 Production Review Shortfall in Achieved Production Levels Talvivaara has faced a number of challenges during the ramp-up of its operations, resulting in lower than expected production levels. Initially, the output of Talvivaara s crushing circuit did not meet targeted levels and required significant modifications and the construction of additional capacity. The crushing issues restricted the production of new ore, thereby delaying the ramp-up of production, and slow heap build-up also impacted bioheapleaching performance as metals back-precipitated in the oldest section of the heap. In 2010 and 2011, Talvivaara faced further operational bottlenecks with the poor performance of primary heap reclaiming equipment and the restricted availability of the metals recovery plant. Whilst these challenges have delayed the progress of production ramp-up, no fundamental issues preventing production at full capacity have been identified, and Talvivaara has been successful in implementing measures to remove the identified bottlenecks. In 2010, Talvivaara produced 10,382 tonnes of nickel, as compared to the original production target of approximately 30,000 tonnes of nickel, and in 2011, 16,087 tonnes of nickel, as compared to the original production target of between 30,000 and 35,000 tonnes of nickel. Notwithstanding the challenges in 2011, Talvivaara produced 4,769 tonnes of nickel during the fourth quarter of 2011, which was more than it had produced in any previous quarter. The monthly volumes that Talvivaara achieved in December 2011 indicated that the production rates required to achieve the original annual production target for 2012 of between 25,000 and 30,000 tonnes of nickel had nearly been reached. Production during the fourth quarter of 2011 benefitted from improved availability of the metals recovery plant, which, at 85 per cent, was at the level expected to be maintained in However, as described in more detail below, Talvivaara again faced a number of challenges during 2012, which led to Talvivaara producing 12,916 tonnes of nickel during the year, as compared to its original production target for 2012 of between 25,000 and 30,000 tonnes, which had been set based on the promising results achieved during the fourth quarter of Despite the operational challenges faced during 2012, particularly in relation to the water balance, Talvivaara has continued to achieve significant improvements in equipment availabilities and run-rates. The average leach solution flow rate through the metals recovery plant increased to 1,043 cubic metres per hour in 2012, as compared to 880 cubic metres per hour in 2011 and 685 cubic metres per hour in Solution flow rates at the metals recovery plant in December 2012 varied from around 800 cubic metres per hour to 1,400 cubic metres per hour, outside of short-term disturbances in the automation systems, which resulted in short periods of lower flow rates, and reached 1,500 cubic metres per hour in January Talvivaara achieved a record average solution flow rate at the metals recovery plant of 1,422 cubic metres per hour in January 2013 and the process availability of the metals recovery plant was 98 per cent for the month. Talvivaara expects to ramp-up to approximately 1,600 cubic metres per hour in the near future. Furthermore, equipment availabilities in materials handling approached levels required for production at full capacity before the suspension of ore production in September 2012 as detailed below and Talvivaara believes that there is strong evidence of leaching performance quickly improving in heap sections from which excess water has been removed. In January 2013, Talvivaara produced 1,034 tonnes of nickel. The Board believes that these positive developments position Talvivaara well for future production ramp-up once the nearterm water balance and bioheapleaching performance challenges have been addressed. 9

13 3.2.2 Fatality at the Metals Recovery Plant In mid-march 2012, a Talvivaara employee died following a fatal incident at its metals recovery plant area. The fatality was caused by a localised, temporary discharge of excess hydrogen sulphide gas from the metals recovery process. Following the incident, Talvivaara immediately lowered solution flow into the metals recovery plant and subsequently also started a maintenance stoppage at the metals recovery plant, which was prolonged by an unscheduled stoppage focused on preventive occupational safety-related modifications and improvements. The metals recovery plant was re-started by mid-april 2012; however, production at the metals recovery plant was restricted for most of April due to the stoppage and subsequent changes to certain operating procedures, the implementation of which slowed the ramp-up after the re-start. In order to further improve occupational safety and minimise the risk of incidents at the Talvivaara mine site, a number of measures have been implemented in Operationally, safety instructions have been further refined and developed, access practices in the vicinity of the metals recovery plant have been altered and additional fixed gas detectors have been installed. Occupational safety-related modifications in the metals recovery process include, among others, increased scrubbing of hydrogen sulphide gases and improved control of the hydrogen sulphide feed into the process Water Balance Challenges and Leaching Performance Since the spring and summer of 2012, Talvivaara has faced an increasingly challenging water balance situation. In addition to raw water from lake Kolmisoppi, the water intake includes rainfall, melt water and natural catchment water from an extensive area including the primary heaps, secondary heaps, process ponds, gypsum pond, open pit and all areas where water is contaminated by exposed ore. Some excess water has accumulated at the mine site over time as Talvivaara s existing environmental permit limits the amount of water that can be released into the environment to 1.3 million cubic metres per year. The water balance situation became increasingly challenging during the course of 2012 as a result of the rapid snow melting in the spring and historically heavy rainfall in the spring and summer, which materially increased the amount of excess water that had been accumulating at the mine site. Because of the excess water accumulating, Talvivaara has been forced to store excess water in the solution circulation, process ponds, open-pit mine and gypsum pond. The challenging water balance situation impacted Talvivaara s metals production throughout 2012 as metal grades in the leach solution were diluted by the addition of increasing amounts of excess water into the solution circulation. It also led to Talvivaara temporarily suspending the production of new ore as of September 2012 and eventually culminated in a leakage of the gypsum pond in November The excess water in circulation and reduced evaporation diluted the metal grades in the leach solution, and the high water content in the heaps also negatively affected leaching performance by reducing the efficiency of aeration. As a result, the average nickel grade in the solution pumped to the metals recovery plant decreased from the second quarter of 2012 through to the end of 2012, recording 1.8 grams per litre in the second quarter of 2012, between 1.5 and 1.6 grams per litre in the third quarter of 2012 and 1.3 grams per litre in the fourth quarter of Towards the end of the year, the solution grade was further affected by the gypsum pond leakage discussed below, which has forced Talvivaara to maintain maximum levels of water in heap solution circulation to manage the overall water balance at the mine site. The depressed metal grades in leach solution significantly impacted Talvivaara s metals production throughout most of 2012 and Talvivaara currently expects it to continue to significantly impact production in Temporary Suspension of New Ore Production The water balance situation at the Talvivaara mine in 2012 also affected Talvivaara s mining operations. Talvivaara had to mine lower-grade ore from a more distant location than originally planned starting in the summer of 2012 as a portion of the excess water that had accumulated at the mine site was stored in the open pit. Despite this, a record level of 1.5 million tonnes of ore was mined and subsequently crushed in July 2012 and equipment availabilities in materials handling approached the levels required for full-scale production. However, due to the prevailing water balance issues and as Talvivaara already had a significant inventory of nickel in the heaps, Talvivaara decided to alter its production scheme starting in September 2012 such that mining and crushing operations were restricted and the equipment and resources of Talvivaara s mining department were used to enhance reclaiming of the primary heaps and in safeguarding measures in relation to the gypsum pond leakage. During the suspension of ore production, some waste rock mining continued during the fourth quarter of 2012 and the mining department produced 1.2 million tonnes of waste rock, which was used in the construction of secondary heap foundations. 10

14 Talvivaara currently expects the temporary suspension of ore production to continue through June 2013 and that mining will recommence by July 2013 once the open pit has been de-watered and the overall measures to improve the water balance have been implemented. De-watering of the open pit started in September 2012, but experienced a set-back in November, when the gypsum pond leakage forced Talvivaara to again divert water into the open pit in order to minimise the environmental effects of the leakage. Despite the temporary suspension of ore production, Talvivaara believes that the existing inventory of approximately 50,000 tonnes of nickel in the heaps will provide sufficient supply of metals for a reasonable production increase in 2013 in order to meet the nickel production target of approximately 18,000 tonnes. Talvivaara is also considering mining ore from the Southern end of the open pit, which is not affected by the excess water, prior to the currently planned re-start of mining at the main part of the open pit by July Talvivaara estimates that the suspension of ore production generated cost savings of approximately EUR 20 million in the fourth quarter of 2012, and expects further savings of at least EUR 30 million in 2013 assuming that the suspension of ore production continues through June Gypsum Pond Leakage On 4 November 2012, Talvivaara announced that it had detected a leakage in the gypsum pond, where a portion of the water that accumulated at the Talvivaara site in 2012 was stored in order to prevent the release of water in excess of the limit of 1.3 million cubic meters in Talvivaara s environmental permit. As a precautionary measure, the operations of the metals recovery plant were temporarily suspended when Talvivaara discovered the leakage in order to avoid further pumping into the gypsum pond while the leakage was being repaired. The leakage was located on 7 November 2012, the majority of it was stemmed during the following days and it was completely stopped on 14 November While most of the water that leaked from the pond was contained within the mining concession area by existing dams and the newly built fourth safety dam, some of the leakage water was discharged into the environment while the fourth safety dam was being constructed. Talvivaara took action to neutralise the released waters using lime, which reduced the metals contents in the leakage water and increased its ph prior to it flowing into the downstream waters. Before the leakage was completely stopped, some elevated nickel concentrations were detected in the nearby waters, but the effects were only seen in the vicinity of the mining concession area. On 21 November 2012, the Kainuu ELY Centre granted Talvivaara a permit to restart its metals recovery plant following the stoppage and Talvivaara successfully restarted the plant the same day. Since the successful re-start on 21 November 2012, plant performance has in general been satisfactory. However, some shortterm disturbances in the automation systems impacted production in December 2012 and are being investigated to avoid future recurrence. In January 2013, the average solution flow rate at the metals recovery plant exceeded 1,400 cubic metres per hour and Talvivaara expects to ramp-up approximately 1,600 cubic metres per hour in the near future. In the fourth quarter of 2012, Talvivaara recorded EUR 23.0 million in non-recurring costs and provisions related to the gypsum pond leakage and water management. Talvivaara and the authorities continue to monitor the situation and expect to be able to determine the eventual impact of the leakage during summer of In November 2012, the Board established a committee to investigate the circumstances and reasons that led to the gypsum pond leakage and to reduce the risk of similar problems in the future. The committee is chaired by the Chairman of the Board, Mr Tapani Järvinen, and the committee also includes Ms Kirsi Sormunen. In December 2012, Talvivaara announced that the committee had commissioned VTT Technical Research Centre of Finland to conduct an independent study of the reasons and circumstances leading to the leakage. 3.3 Nickel Price Environment Talvivaara s results of operations in 2012 were further negatively affected by the prevailing low London Metal Exchange nickel price during 2012, which averaged USD 17,530 per tonne, as compared to USD 22,843 per tonne in 2011 and USD 21,811 per tonne in Reasons for the Proposed Rights Issue The Board believes that Talvivaara has demonstrated the technological and commercial viability of the Talvivaara Sotkamo operation, including the use of the bioheapleaching technology for the extraction of metals from the Talvivaara ore in a subarctic climate. The challenges described above, however, have resulted in increased levels of indebtedness and a strained liquidity situation. As at 31 December 2012, Talvivaara had cash and cash equivalents of EUR 36.1 million, total debt of EUR million and a net debt position of EUR million. During 2013, Talvivaara plans to focus on improving and stabilising its production processes and addressing the water balance issues using the knowledge it has gained during the ramp-up of its operations so far in order to subsequently return to a sustainable ramp-up path towards the targeted full capacity of 50,000 tonnes of nickel per year. However, the measures Talvivaara is taking to stabilise and increase production on a sustainable basis are 11

15 expected to take several months, and during this time, metals production is expected to remain restricted by depressed metals grades in leach solution. Accordingly, Talvivaara has set a nickel production target for 2013 of approximately 18,000 tonnes, which is lower than its original production targets for 2010, 2011 and The key drivers for Talvivaara s production level in 2013 include the near-term development in the water balance, the timing of restart of ore production and the effectiveness of bioheapleaching following the measures being taken to reverse the recent effects of excess water and insufficient aeration. The Board believes that Talvivaara s strained liquidity position is likely to be exacerbated in 2013 by the production impact caused by the prevailing water balance issues as well as the maturity of the Convertible Bonds due 2013 in May For 2013, Talvivaara expects total nickel production of approximately 18,000 tonnes, total capital expenditure of EUR 60 million and total operating expenditure (including financial leasing) of EUR 230 million. Water balance management measures and improvements are expected to account for approximately EUR 20 million of the total expected capital expenditure and EUR 10 to 15 million of the total expected operating expenditure. Talvivaara s nickel production target for 2013 is lower than its original production targets for 2010, 2011 and As Talvivaara s revenues are heavily dependent on its production volumes, Talvivaara does not expect to generate sufficient revenues in 2013 to finance its operations, including costs and additional investments relating to the water balance issue and environmental incidents at the Talvivaara mine site, and to finance the repayment of the Convertible Bonds due If the Resolutions are not passed, the Proposed Rights Issue is not completed and the Company does not receive net proceeds therefrom of at least EUR 240 million, or if other conditions subsequent under the Amended Facility Agreement are not satisfied by 30 April 2013, an event of default would immediately occur under the Amended Facility Agreement. An event of default could cause a significant proportion of Talvivaara s borrowings to become repayable on demand. Furthermore, without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May Such events may require the sale of the Talvivaara mine, the Company or the Company s 84 per cent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the Company. As a result, Shareholders could lose their investment in the Company. The Proposed Rights Issue is expected to secure liquidity for the continued ramp-up of operations towards full capacity and provide an appropriate capital structure to enable repayment or refinancing of short- and medium-term indebtedness. 4. Talvivaara s Actions to Stabilise and Improve its Production Processes 4.1 Overview Talvivaara s focus in the near term is on stabilising and improving its production processes and addressing the water balance issues in order to allow it to return to a sustainable ramp-up path towards full capacity. Talvivaara has instituted a number of measures aimed at addressing the near-term operational challenges, which are described in more detail below. However, the full effect of these actions will only materialise over time, and Talvivaara currently expects material production ramp-up only from the second half of 2013 onwards. In support of this focus, Talvivaara re-organised its management and Mr Tapani Järvinen was appointed Chairman of the Board and Mr Pekka Perä was appointed CEO in November In addition, Mr Harri Natunen was appointed Chief Operations Officer. The appointments are of interim nature and will be in place until further notice and at least until Talvivaara s operations have been stabilised following the challenges faced in For information on additional recent changes to the Company s management see 5. Management Update below. 4.2 Addressing the Water Balance Issues Talvivaara has taken a number of steps to address the water balance issues since they first appeared. Talvivaara s original strategy was to gradually address the issue of excess water at the Talvivaara mine site; however, the gypsum pond leakage exacerbated the situation and highlighted the necessity to take more immediate action. In order to facilitate an efficient and sustainable solution to the water balance issues, Talvivaara has established a special task force, Operation Otter. Operation Otter is headed by Ms Maija Vidqvist, General Manager, Water Management, reporting directly to the Company s CEO, Mr Pekka Perä. Ms Vidqvist has extensive experience in environmental and water treatment technologies and processes across various industries and countries, including, for example, membrane technology and reverse osmosis-based water treatment. Several of Talvivaara s key experts have been seconded to the team, which focuses on the planning and execution of necessary water storage and 12

16 pumping arrangements and waste water neutralisation measures to secure a sustainable water balance at the mine site Removing the Excess Water from the Talvivaara Mine Site In order to reach a sustainable water balance situation, Talvivaara believes that it must treat and release into the environment approximately 3.8 million cubic metres of water, a substantial proportion of which is rain and natural catchment water that has accumulated at the mine site over time. On 22 January 2013, Talvivaara submitted a notification to the Kainuu ELY Centre of its plan to discharge 3.8 million cubic metres of water. On 12 February 2013, Talvivaara received a decision from the Kainuu ELY Centre allowing Talvivaara (subject to certain limitations) to discharge 1.8 million cubic metres of water. This decision, combined with the 1.3 million cubic metre discharge limit in Talvivaara s current environmental permit, allows Talvivaara to progress, in part, with its water management plans. In addition, Talvivaara may direct 0.5 million cubic metres of water from the open pit into the Kuusilampi pond, which is in the vicinity of the open pit. According to the Kainuu ELY Centre, the AVI, the agency responsible for Talvivaara s environmental permit, can permit Talvivaara to discharge additional water by amending the term of Talvivaara s current environmental permit. Talvivaara has applied to have the discharge limit removed in connection with the renewal of its environmental permit and the Kainuu ELY Centre has informed Talvivaara that it has officially notified the AVI about the matter and requested that the AVI make a formal decision on whether the terms of Talvivaara s environmental permit could be amended in relation to the permitted amount of water discharge. Talvivaara believes that this may assist in having the discharge limit removed prior to receiving the decision on the renewal of Talvivaara s environmental permit. The Kainuu ELY Centre has informed Talvivaara that it can consider increasing the discharge limit beyond the initially granted 1.8 million cubic metres of water if applied for by Talvivaara and if no executable decision has been received from the AVI for the amendment or removal of the discharge limit in Talvivaara s current environmental permit and the discharge limit of 1.8 million cubic metres under the decision is about to be exhausted. Talvivaara believes that the Kainuu ELY Centre s decision will enable the commencement and partial implementation of the planned water management arrangements in the short term as well as enable the re-start of ore production by July 2013 in accordance with its production plan. However, the Kainuu ELY Centre s decision can be appealed by interested persons, interest groups and public sector bodies, including municipalities. The Finnish Nature Conservation Society, an NGO, has filed such an appeal together with a request that any discharges of water immediately be prohibited until the appeal has been ruled upon. Under certain circumstances provided for under Finnish law (e.g., if the applicant had submitted materially erroneous or incomplete information), the Kainuu ELY Centre can modify or rescind its decision. A rescission or modification by the Kainuu ELY Centre may result in a prohibition of or otherwise impede (temporarily or permanently) the discharge of excess water. Furthermore, the appeal by the Finnish Nature Conservation Society or any other appeal may take an extended period of time to resolve, and may eventually result in a prohibition of or otherwise impede (temporarily or permanently) the discharge of excess water. If Talvivaara were required to comply with its current environmental permit allowing for the discharge of only 1.3 million cubic metres of water per year, the excess water could delay recommencement of ore production at Talvivaara s mine significantly beyond the planned recommencement by July Talvivaara considers that the discharge of the entire 3.8 million cubic metres of water is necessary to moderate the current water balance and lower the operational risk level in the longer term. In order to reach a sustainable longer-term water balance, Talvivaara considers the removal of the 1.3 million cubic metre water discharge limit from Talvivaara s environmental permit to be necessary. Talvivaara will commence neutralisation and discharge of waters from the mine site without delay. The quality of the discharged waters is targeted to be in line with Talvivaara s current environmental permit and will be continuously monitored. The environmental impact of the release is anticipated to be mainly caused by its sulphate content, whereas Talvivaara expects any metal burden to the environment to remain limited. At the metals recovery plant, iron precipitation and final neutralisation capacities of process waters are being improved in order to further increase recycling of process waters and to ensure that any discharged waters are of sufficiently good quality. Similarly, the utilisation of the reverse osmosis based water treatment plant is being optimised and additional capacity will be installed during the spring of Furthermore, Talvivaara is investing in additional lime slaking capacity to increase its neutralisation capacity for the treatment of mine and process waters. 13

17 Talvivaara continues to neutralise the waters currently stored within the safety dams and in the Kuusilampi pit, and is constructing additional neutralisation facilities at the Southern end of the mine area close to the Kortelampi safety dam as well as close to the open pit. The Kortelampi safety dam, which was initially built to contain the leak, was elevated to its final height in early January In addition, several additional dam structures both in the Southern and Northern directions from the mine are planned and will be constructed as part of Operation Otter, thereby further preparing the mine area for the forthcoming spring melt and mitigating the risk of environmental impacts from any potential future leak situation. Water balance management measures and improvements are expected to account for approximately EUR 20 million of the total expected capital expenditure and EUR 10 to 15 million of the total expected operating expenditure. However, evaluation and planning of the necessary measures continues and may still have some impact on the expenditure Resuming Mining Operations As at the date of this document, approximately 1.8 million cubic metres of excess water are in the open pit. Talvivaara expects to resume mining operations at the open-pit mine once it has been de-watered as described above. Talvivaara currently estimates based on available information that mining operations in the open pit will resume by July Prior to the currently planned re-start of mining of the main part of the open pit, Talvivaara is considering mining up to 3 million tonnes of ore at the Southern end of the open pit, which is not affected by the excess water. This option would provide additional support for the planned ramp-up in late 2013 and also benefit the water balance, as newly mined and crushed ore absorbs substantial amounts of water Achieving a Closed Water Circulation System in the Medium Term In the medium term, Talvivaara s goal is to implement a closed water circulation system, which is expected to reduce the risk of weather conditions impacting Talvivaara s operations or environmental safety. Key elements of the targeted closed water circulation system include additional purification of process waters and more efficient separation of process waters and captured rain and natural catchment water. Talvivaara commissioned a new water treatment plant utilising two reverse osmosis-based units in November 2012 for purposes of process water purification, and a third unit is expected to be commissioned in the spring of The reverse osmosis technology enables Talvivaara to significantly reduce or completely stop raw water intake into the process, which is necessary to achieve a closed water circulation system. Overall, Talvivaara believes that the necessary equipment and structures are already in place to achieve a closed water circulation system. However, the excess water currently in the mine site has to be neutralised and discharged and the overall water balance moderated before a closed water circulation system can be achieved. 4.3 Enhancing Bioheapleaching Performance In recent years, Talvivaara has focused primarily on the build-up of infrastructure and the operation of the crushing circuit and the metals recovery plant at the Talvivaara mine and less on the bioheapleaching process. Talvivaara believes that it has demonstrated that the bioheapleaching process works by achieving nickel recoveries of up to 85 per cent in less than two years of primary leaching in certain heap sections, which is above original expectations. However, performance across all production heaps has not yet been uniform and Talvivaara is now focusing on enhancing it. Talvivaara has undertaken an extensive study to further identify the factors impacting leaching performance, and as a result identified a number of additional measures to improve leaching results. As part of the study, production heap sections have been opened to determine leaching properties within the heap. Whilst some areas in the opened sections had been well oxidised and leaching results were optimal, several other areas were found where aeration had been inefficient and where the ore remained clearly unreacted. Multiple changes are being implemented to ensure constant and balanced distribution of air within heaps, including elimination of aeration pipe blockages, alterations in the physical design of future primary heaps and aeration pipes, and an improved drainage system. In the near term, Talvivaara continues to focus on reclaiming and re-stacking of the existing primary heaps in order to enable efficient recovery of the existing nickel inventory in the heaps. Preliminary results since September 2012 indicate improved leaching, as less effectively leached sections are being oxidised better. Development work is also on-going to improve agglomeration quality, as the moisture content and stability of agglomerates are key factors affecting leaching times and recovery rates. Data from copper heap leaching operations suggests up to 30 to 50 per cent improvements in leaching times depending on the quality of agglomerates. 14

18 Leaching results may also be affected by the accumulation of certain elements in the solution circulation, the impact of which is being actively managed through control of the composition of the irrigation solution. In addition, attention is being paid to the proper distribution of the irrigation solution. In order to achieve its goal of producing 50,000 tonnes of nickel per year, which is subject to Talvivaara being granted a new environmental permit allowing for such level (the current environmental permit allowing for production of 30,000 tonnes of nickel per year), Talvivaara estimates that the PLS that enters the metals recovery plant must contain approximately 3 grams of nickel per litre of PLS. As discussed above, the water balance issues experienced during 2012 led to lower average concentrations of nickel in the PLS pumped into the metals recovery plant. The approximate average nickel grade in solution pumped to the metals recovery plant decreased from the second quarter of 2012 through to the end of 2012, recording 1.8 grams per litre in the second quarter of 2012, between 1.5 and 1.6 grams per litre in the third quarter of 2012 and 1.3 grams per litre in the fourth quarter of In January 2013, there was again a positive trend in solution grades; however, Talvivaara estimates that it will take some months before substantial improvement in the grades can be expected. In the summer of 2011, Talvivaara reached nickel grades in solution pumped into the metals recovery plant of above 3 grams per litre, consistent with the requirements of full-scale production, and Talvivaara believes that such grades will again be achievable in the longer term. 4.4 Maintaining the Stability of and Optimising other Production Processes Despite the challenges experienced in 2012 and earlier years, Talvivaara has continued to remove bottlenecks from its operations and make significant progress in equipment availabilities and run-rates across process stages. Prior to the temporary restriction of ore production, a record level of 1.5 million tonnes of ore was mined and subsequently crushed in July 2012 and equipment availabilities in materials handling approached the levels required for full-scale production. The remaining material bottleneck in ore production has been reclaiming of the primary heaps, which restricted the stacking of new ore in 2011 and early Talvivaara is in the process of implementing changes to the reclaiming process and adding reclaiming capacity to ensure that the stacking of new ore is not restricted in the future. Due to the continued reclaiming of primary heaps during the ore production stoppage, empty space has also been created on the primary heap area. This is expected to allow for the planned rates of stacking new ore while the reclaiming process is being optimised. Talvivaara has also experienced issues with the metals recovery plant, and utilisation rates have been below expectations. Continued efforts have been made to ensure stable operation of the plant, and operational stability has improved significantly. The average leach solution flow rate through the metals recovery plant increased to 1,043 cubic metres per hour in 2012, as compared to 880 cubic metres per hour in 2011 and 685 cubic metres per hour in Solution flow rates at the metals recovery plant in December 2012 varied from around 800 cubic metres per hour to 1,400 cubic metres per hour, outside of short-term disturbances in the automation systems, which resulted in short periods of lower flow rates, and reached 1,500 cubic metres per hour in January Talvivaara achieved a record average solution flow rate at the metals recovery plant of 1,422 cubic metres per hour in January 2013 and Talvivaara expects to ramp-up to approximately 1,600 cubic metres per hour in the near future. The stability of hydrogen sulphide production also improved in 2012 following maintenance of both hydrogen sulphide plants during the year and focus on the quality of the sulphur raw material. Further, the overall improved process control helped in minimising the odour discharges such that noticeable odour discharges are only expected to be associated with process disturbances, or start-up or shut-down phases relating to production stoppages. While some further optimisation and improvement is required, the availabilities of Talvivaara s production processes are nearing the levels required for full-scale production. Talvivaara is focusing on maintaining and further improving the stability of the processes, while the water balance issues are being addressed and bioheapleaching performance is being enhanced. 4.5 Cost Savings Initiatives Talvivaara considers systematic cost savings to be one of its key targets in the near term given the recent disruptions in production, additional costs incurred in stemming the gypsum pond leakage and minimising its environmental impact as well as the recent weak nickel price environment. Talvivaara estimates that suspension of ore production generated cost savings of approximately EUR 20 million in the fourth quarter of 2012, and estimates further savings of at least EUR 30 million in 2013 assuming that the suspension of ore production continues through June

19 On 31 January 2013, the Company announced that it had concluded cooperation consultations for temporary layoffs for all personnel groups. Following the consultations, Talvivaara will temporarily lay off 184 employees between 18 February and 30 June The maximum duration of the layoff period is 90 days per individual employee. As at 31 December 2012, Talvivaara had 588 employees. The layoffs are being carried out to support Talvivaara s cost savings initiatives and overall efficiency, and to adjust the level of personnel to the temporarily suspended ore production. 5. Management Update The Company has reorganised its management during January and February 2013 as follows: Mr Pertti Pekkala, formerly General Manager, Research and Development, was appointed Chief Production Officer (Metals Recovery); Mr Kari Vyhtinen, formerly Chief Investment Officer, was appointed Chief Mining Officer; Mr Mikko Korteniemi, formerly Chief Production Officer (Metals Recovery), was appointed Chief Maintenance Officer with responsibility for maintenance, procurement and warehousing; and Ms Maija Vidqvist was appointed General Manager, Water Management (position previously held by Mr Jari Voutilainen). All four appointees are members of the Executive Committee, with Mr Pertti Pekkala and Ms Maija Vidqvist being new additions to it. Messrs Pertti Pekkala, Kari Vyhtinen and Mikko Korteniemi report to the Chief Operations Officer, Mr Harri Natunen, and Ms Maija Vidqvist reports to the CEO, Mr Pekka Perä. Ms Maija Vidqvist, M.Sc. (Chem. Eng.), who was appointed General Manager, Water Management, has been Managing Director of Teollisuuden Vesi Oy since Ms Vidqvist has extensive experience in environmental and water treatment technologies and processes across various industries and countries, including, for example, membrane technology and reverse osmosis-based water treatment. With the reorganisation and formation of a central maintenance unit comprising procurement, warehousing and all maintenance activities, Talvivaara aims to optimise its maintenance operations and increasingly focus on preventive maintenance for increased operational and cost efficiency. 6. Interim Financing Arrangements 6.1 Overview In order to ensure that it has sufficient liquidity until it receives the proceeds from the Proposed Rights Issue, Talvivaara has entered into amendment agreements with Cameco and Nyrstar to secure additional liquidity. 6.2 Amended Uranium Take-in-Kind Agreement with Cameco On 12 February 2013, Talvivaara Sotkamo and Cameco entered into an amendment agreement to the uranium takein-kind agreement entered into in February Pursuant to the amendment agreement, the amount of the up-front investment paid by Cameco to Talvivaara Sotkamo to be used for the construction of the uranium extraction facility was increased by USD 10 million to USD 70 million. For information on the uranium take-in-kind agreement, including the terms of repayment for the up-front investment, see Part IV (Additional Information) of this document. 6.3 Amended Zinc in Concentrate Agreement with Nyrstar On 14 February 2013, Talvivaara Sotkamo entered into an amendment agreement with Nyrstar regarding the zinc in concentrate streaming agreement pursuant to which Nyrstar is to make an up-front payment of EUR 12 million to Talvivaara Sotkamo in return for Talvivaara Sotkamo agreeing not to charge Nyrstar the EUR 350 per tonne extraction and processing fee on the next 38,000 tonnes of zinc in concentrate delivered to Nyrstar as was agreed in the original zinc in concentrate streaming agreement. 16

20 7. Talvivaara s Fundamental Strengths The Board remains confident of Talvivaara s longer term potential, which is supported by the following fundamental strengths: Extensive sulphide nickel resource with a long mine life. The Talvivaara polymetallic deposits, Kuusilampi and Kolmisoppi, comprise one of the largest known sulphide nickel resources in Europe. The Talvivaara deposits have an estimated 1,305 million tonnes of ore in measured and indicated categories, which is estimated by the Company to support projected production for several decades. With an estimated nickel grade in the ore of 0.23 per cent, the Company estimates that the Talvivaara deposits contain 3.0 million tonnes of nickel in measured and indicated categories. Favourable characteristics of the Talvivaara deposits. The Talvivaara deposits have a thin overburden and a low average waste to ore ratio of 1:1, making the deposits easy to mine. The ore is of a relatively low grade (0.22 per cent nickel), but is well-suited to open-pit mining, and also to bioheapleaching due to its high sulphide content and low ph, which enables rapid leaching and reduces the need for chemical catalysis. Demonstrated feasibility of using bioheapleaching to extract nickel. Talvivaara believes that it has already demonstrated the commercial and technical feasibility of the bioheapleaching process and is taking further measures to improve the leaching performance of the heaps. Nickel recoveries of up to 85 per cent in less than two years of primary leaching have been demonstrated in certain heap sections, which is above original expectations. While further efforts are required to ensure stable performance of the heaps, Talvivaara believes that the achieved recoveries demonstrate the fundamental feasibility of the process. Cost-effective and scalable bioheapleaching technology. While Talvivaara recognises the need to continually develop the leaching performance for all its extraction metals to achieve targeted production ramp-up, it believes that the bioheapleaching technology that it uses has proven to enable cost-effective development and exploitation of the sulphide nickel resource. When fully operational, Talvivaara believes that the technology will provide it with significant cost advantages, both in terms of capital and operational costs. Through constant monitoring and testing of the heaps, Talvivaara has gained significant knowledge about the bioheapleaching process. Long-term agreements for nickel, cobalt, zinc and uranium. Talvivaara supplies metal intermediates, such as mixed nickel cobalt sulphide, zinc sulphide and copper sulphide, to companies with metal refining operations. In 2005, Talvivaara Sotkamo entered into a 10-year sale and purchase agreement for nickel and cobalt with Norilsk Nickel and it has entered into a zinc in concentrate streaming agreement with Nyrstar for the sale of its zinc concentrate production until a total of 1.25 million tonnes have been delivered. Talvivaara is also constructing a uranium extraction facility and has entered into a long-term off-take agreement with Cameco for the sale of its anticipated uranium production until Attractive long-term supply-demand dynamics of the nickel industry. Talvivaara believes that the longterm fundamentals of the nickel industry support strong nickel price development. While demand growth is expected to continue to be driven by China and other emerging markets, the supply pipeline appears relatively shallow beyond the next few years. As sulphidic nickel deposits have been gradually depleting, the industry has increasingly focused on lateritic deposits, where multiple projects have experienced technological issues and delays as well as significant capital cost overruns and operating cost inflation. In Talvivaara s view, a significantly higher nickel price compared to current levels is required to incentivise investment commitments to new large-scale nickel projects. Experienced management team. Talvivaara has a dedicated team of leading geology and mining experts, including Mr Tapani Järvinen, the Chairman of the Board, who has significant experience in the mining industry having served as the Senior Advisor at VTT Technical Research Centre of Finland, the President and CEO of Outotec Oyj (formerly Outokumpu Technology Oyj) as well as serving on boards of several other companies. Mr Pekka Perä, the Company s founder and CEO, has approximately 16 years of experience in successfully managing a number of large mining projects both in Finland and internationally. Mr Harri Natunen, the Company s Chief Operations Officer, has over 30 years of operational and managerial experience in the international mining industry, including a long term successful track record in the Finnish mining sector. The core team is supported by industry experts, some of whom have worked with the Talvivaara ore body for nearly 20 years. 17

21 8. Use of Proceeds It is intended that the proceeds of the Proposed Rights Issue will be used to ensure that Talvivaara has sufficient liquidity to repay the remaining EUR 76.9 million of the Convertible Bonds due 2013 if there are no attractive refinancing options available at the time when they mature, fulfil a condition subsequent under the Amended Facility Agreement, secure liquidity for the continued ramp-up of operations towards full capacity (including the capital expenditure of approximately EUR 20 million for the water management measures and improvements in 2012) and provide an appropriate capital structure to enable repayment or refinancing of short- and medium-term indebtedness. 9. Details of the Proposed Rights Issue The Board proposes that the Extraordinary General Meeting would authorise the Board to undertake a Share issue for consideration pursuant to the Shareholders pre-emptive subscription right. The Board would have the right to decide upon the offering to parties determined by the Board of any Shares that may remain unsubscribed for pursuant to the Shareholders pre-emptive subscription right. A maximum number of 26,000,000,000 New Shares may be issued in the Proposed Rights Issue. The Board would be authorised to determine the subscription price for the New Shares, which is expected to be in euros, and the other terms and conditions of the Proposed Rights Issue. Further details of the Proposed Rights Issue are set out in Part IV (Additional Information) of this document. 10. Share Issuance Authorisations In order for the Company to proceed with the Proposed Rights Issue, the Extraordinary General Meeting needs to grant the authorisation to the Board to decide to issue up to 26,000,000,000 New Shares in the Proposed Rights Issue (representing approximately 9,548.0 per cent of the Shares in issue on the date of this document). The authorisation of the Board to issue New Shares would be valid until 31 December Pursuant to the terms and conditions of the Convertible Bonds, a customary adjustment to the conversion price of the Convertible Bonds shall be made if the Company undertakes a rights issue at a price which is less than 95 per cent of the market price of the Shares on the date of the first public announcement of the terms of the rights issue, as specified in more detail in the terms and conditions of the Convertible Bonds. As a result of an adjustment to such conversion price of the Convertible Bonds, the number of Shares to be issued by the Company upon conversion of the Convertible Bonds will increase. The Adjustment Authorisation Resolution will enable the Board to decide upon the requisite Adjustment once the terms of the Proposed Rights Issue have been decided. In order for the Company to carry out the Adjustment, the Extraordinary General Meeting needs to grant the authorisation to the Board to decide to issue up to 600,000,000 new Shares through one or several Share issues and/or by granting of special rights entitling to Shares, as referred to in Chapter 10, Section 1, of the Finnish Companies Act with three-quarters majority in accordance with Article 14 of the Articles of Association. The authorisation of the Board to issue new Shares would be valid until 31 December No separate Share issuance authorisations are required for the adjustment of the conversion price of the Convertible Bonds due 2015 or of the number of Shares available for subscription based on the Options because the decisions regarding the issuance of special rights in relation to the Convertible Bonds due 2015 and of the Options were made at the general meeting of Shareholders. 11. Irrevocable Undertakings The Company has received irrevocable undertakings from its three largest Shareholders, Mr Pekka Perä, Solidium and Varma Mutual Pension Insurance Company, to vote in favour of the Resolutions in respect of 104,181,306 Shares in aggregate, representing approximately 38.3 per cent of the Shares in issue on the date of this document. Mr Pekka Perä, representing approximately 20.7 per cent of the Shares in issue on the date of this document, has irrevocably committed to subscribe for such number of New Shares based on a total subscription price equal to (i) EUR 5 million (the Mr Perä Subscription Commitment ) plus (ii) 76 per cent of any net proceeds received by him from the sale of (A) any Subscription Rights during the subscription period of the Proposed Rights Issue and (B) any Shares at any time prior to the end of such subscription period as well as agreed to a lock-up undertaking with respect to his Shares that will be in force for 90 days after the completion of the Proposed Rights Issue (the Mr Perä Additional Subscription Commitment ). Mr Pekka Perä has agreed to use his reasonable best efforts to raise funds on terms that are reasonably acceptable to him, whether through borrowing, the sale of Shares, the sale of 18

22 Subscription Rights, or other means, in order to subscribe for New Shares in excess of his commitment to subscribe New Shares based on a total subscription price of EUR 5 million referred to above. Solidium, representing approximately 8.9 per cent of the Shares in issue on the date of this document, has irrevocably committed to subscribe in full for New Shares on the basis of the Subscription Rights allocated to it (the Solidium Subscription Commitment ). In addition, Solidium has agreed to subscribe for any New Shares not otherwise subscribed and paid for pursuant to Subscription Rights or in the secondary subscription up to an aggregate subscription price of EUR 30 million (the Solidium Subscription Guarantee ). Varma Mutual Pension Insurance Company, representing approximately 8.7 per cent of the Shares in issue on the date of this document, has irrevocably committed to subscribe in full for New Shares on the basis of the Subscription Rights allocated to it (the Varma Subscription Commitment ). 12. Extraordinary General Meeting In order for the Company to proceed with the Proposed Rights Issue, a resolution authorising the Board to decide to issue up to 26,000,000,000 New Shares will be proposed by the Board at the Extraordinary General Meeting. The Rights Issue Resolution is conditional upon the granting of the Adjustment Authorisation Resolution. In order to enable the proposed Adjustment to be effected, a resolution authorising the Board to decide to issue up to 600,000,000 new Shares (representing approximately per cent of the Shares in issue on the date of this document) through one or several Share issues and/or by granting of special rights entitling to Shares, as referred to in Chapter 10, Section 1, of the Finnish Companies Act will be proposed by the Board at the Extraordinary General Meeting. The Adjustment is conditional upon the completion of the Proposed Rights Issue. You will find, set out at the end of this document, the Notice of EGM setting out the Resolutions in full. The EGM is to be held at Finlandia Hall, Mannerheimintie 13 e, FI Helsinki, Finland, at 10:00 a.m. (GMT+2) on 8 March Additional Information and Risk Factors Your attention is drawn to the additional information set out in this document. In particular, your attention is drawn to Part II (Risk Factors) and Part IV (Additional Information) of this document. You are advised to read the whole of this document and not to rely solely on the information contained in this letter. 14. Participation of CDI Shareholders at the EGM Whilst a CDI Shareholder is entitled to receive dividends, and generally to exercise all other financial rights attaching to the Shares held in its name, a CDI Shareholder may not exercise any administrative rights attached to the underlying Shares, such as the right to attend and vote at shareholders meetings without first registering as a holder of the underlying Shares. CDI Shareholders who wish to participate in the EGM (whether in person or by proxy) may seek a temporary registration (by completing a Registration Form) on the shareholders register in order to enable them to attend and vote at the EGM. In order for the votes of a CDI Shareholder to be validly exercised, CDI Shareholders must be registered on the CDI register as at 4:30 p.m. (GMT) on 26 February 2013, and such CDI Shareholders must submit their respective registration forms and potential proxies to Computershare Investor Services (Jersey) Limited by no later than 4:00 p.m. (GMT) on 26 February 2013 in accordance with the instructions given by Computershare Investor Services (Jersey) Limited. Entitlement of a CDI Shareholder to attend and vote at the EGM (and the number of votes which may be cast thereat by such CDI Shareholder) will be determined by reference to the CDI register at 4:30 p.m. (GMT) on 26 February Only CDI Shareholders who are registered on the CDI register at 4:30 p.m. (GMT) on 26 February 2013 and who have submitted their Registration Forms and Forms of Proxy to the Registrars prior to 4:00 p.m. (GMT) on 26 February 2013 will be eligible to attend and vote at the EGM (in person or by proxy). 19

23 15. Action to be Taken by CDI Shareholders A. If you wish to attend and vote at the EGM in person, you must: complete and sign the enclosed Registration Form and return it to the Company s Registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February You do not need to complete and sign the Form of Proxy if you wish to attend and vote at the EGM in person. B. If you wish to attend and vote at the EGM by proxy, you must: (i) (ii) complete and sign the enclosed Registration Form and return it to the Company s Registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February 2013; and complete and sign the enclosed Form of Proxy and return it (together with any power of attorney or other authority pursuant to which the Form of Proxy was signed (or an officially certified copy of such power of attorney or authority) together with an authorised signatures list) to the Company s Registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February The completion and return of a Form of Proxy will preclude a CDI Shareholder from voting at the EGM in person. Please note that under the Finnish Companies Act, only beneficial holders of shares in a Finnish company may participate and vote (in person or by proxy) in its shareholders meetings. Any Forms of Registration and/or Forms of Proxy incorrectly completed, signed and/or submitted will be invalid and may be disregarded for the purposes of determining entitlement to attend and vote at the EGM (in person or by proxy). However, the Company reserves the right (acting in its absolute discretion and with no obligation to do so) to treat any such Form of Registration and/or Form of Proxy as valid. If you do not wish to attend or vote at the EGM (in person or by proxy), you do not need to take any action. 16. Overseas Shareholders The Prospectus will contain information in relation to the Proposed Rights Issue for overseas Shareholders who have a registered address outside the United Kingdom or Finland, or who are residents of or located in countries other than the United Kingdom or Finland. Subject to certain exceptions, Qualifying Shareholders who are resident or located in the United States or one of the Excluded Territories will not be entitled to participate in the Proposed Rights Issue. 17. Statement on Working Capital The Company is of the opinion that as at the date of this document, Talvivaara does not have sufficient working capital for its present requirements, that is for at least 12 months from the date of this document. This is as a result of: Talvivaara s strained liquidity situation due to the operational challenges discussed above and the recent weak nickel price environment; the continuing production impact of the prevailing water balance issues and the related suspension of ore production as discussed above; and 20

24 the upcoming maturity of the Convertible Bonds due 2013 in May Talvivaara is implementing a number of measures to overcome its near-term operational challenges as discussed above. However, the full effect of these actions will only materialise over time, and Talvivaara currently expects material production ramp-up only beginning in the second half of Accordingly, Talvivaara has set a nickel production target for 2013 of approximately 18,000 tonnes, which is lower than its original production targets for 2010, 2011 and As Talvivaara s revenues are heavily dependent on its production volumes, Talvivaara does not expect to generate sufficient revenues in 2013 to finance its operations, including costs and additional investments relating to the water balance issue and environmental incidents at the Talvivaara mine site, and to finance the repayment of the Convertible Bonds due The Board believes that without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May In order to address Talvivaara s liquidity situation: the Company has taken measures to reduce its costs and improve its overall efficiency, including temporarily suspending ore production since September 2012 and undertaking temporary layoffs due to the suspension of ore production; the Company entered into the Amended Facility Agreement on 13 February 2013, which, among other things, amended the financial and production covenants in the Previous Facility Agreement to reflect Talvivaara s current business and, therefore, reduces Talvivaara s risk in relation to compliance with its covenants; and the Company is undertaking the Proposed Rights Issue. The Amended Facility Agreement remains subject to certain conditions subsequent, including the completion of the Proposed Rights Issue and the Company receiving net proceeds therefrom of at least EUR 240 million. If any of such conditions subsequent are not satisfied by 30 April 2013, an event of default would occur under the Amended Facility Agreement, which could cause a significant proportion of Talvivaara s borrowings, including all amounts under the Amended Facility, to become repayable on demand. In such circumstances, Talvivaara would not have sufficient funds to repay all of its debts. As at 31 December 2012, Talvivaara s total debt was EUR million and net debt was EUR million. In connection with the Proposed Rights Issue, the Company has entered into the Standby Underwriting Letter with the Managers, pursuant to which the Managers have undertaken to underwrite, subject to certain conditions discussed in detail in Part IV (Additional Information) of this document, such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments. Based on the Standby Underwriting Letter and the Shareholder Commitments being in place, the Board is confident that the Company will be able to raise at least EUR 240 million in net proceeds from the Proposed Rights Issue, as is required under the Amended Facility Agreement. The Company will only proceed with the Proposed Rights Issue if Shareholders approve the Resolutions at the EGM and such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments is fully underwritten. The Board believes that taking into account receipt of the net proceeds of the Proposed Rights Issue and subject to the conditions subsequent under the Amended Facility Agreement having been satisfied, Talvivaara will have sufficient working capital for its present purposes, that is for at least 12 months from the date of this document. Beyond the 12-month period from the date of this document, in the event that Talvivaara s planned production ramp-up cannot be completed as currently anticipated or Talvivaara otherwise has lower than expected production volumes, the market prices of the metals produced by Talvivaara drop below certain assumed levels and/or Talvivaara s estimated operating and capital expenditures are not sufficient to achieve the planned production ramp-up, Talvivaara may not be able to comply with the liquidity requirements set forth in the Amended Facility Agreement. Pursuant to the Amended Facility Agreement, if the amount of Talvivaara s liquidity (defined as the sum of cash and cash equivalents and any undrawn amounts under the Amended Facility Agreement) at the end of any month is less than EUR 70 million, then the Company is required to provide to the facility agent a detailed plan including (i) a description of its endeavours, roadmap and execution strategy to enhance its liquidity position to exceed EUR 100 million, (ii) detailed refinancing solutions for the maturing debt, (iii) forecasts of its future liquidity position and cash flows for the next four financial quarters, and (iv) an update on its operations. If the plan is not satisfactory to the lenders (acting reasonably), then the Company is required to submit a revised plan together with evidence of committed additional funding to Talvivaara needed for total liquidity to reach EUR 100 million 21

25 within 30 days. If the Company is unable to submit a revised plan together with evidence of committed additional funding, and the lenders do not grant a relaxation or waiver of the requirement, an event of default would occur under the Amended Facility Agreement. An event of default could cause a significant portion of Talvivaara s borrowings to become repayable on demand. 18. Importance of Vote If the Resolutions are not passed, the Proposed Rights Issue is not completed and the Company does not receive net proceeds therefrom of at least EUR 240 million, or if other conditions subsequent under the Amended Facility Agreement are not satisfied by 30 April 2013, an event of default would immediately occur under the Amended Facility Agreement. An event of default could cause a significant proportion of Talvivaara s borrowings to become repayable on demand. Furthermore, without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May Such events may require the sale of the Talvivaara mine, the Company or the Company s 84 per cent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the Company. As a result, Shareholders could lose their investment in the Company. 19. Recommendation The Board considers that the proposed Resolutions and the Proposed Rights Issue are in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own legal and/or beneficial shareholdings, amounting in aggregate to 56,654,906 Shares (representing approximately 20.8 per cent of the Shares in issue on the date of this document). Yours sincerely, Tapani Järvinen Chairman 22

26 PART II RISK FACTORS All of the information set out in this document, including but not limited to the risks described below, should be carefully considered. The Board considers the following risk factors to be material risks in connection with the proposals to be considered by Shareholders at the Extraordinary General Meeting. If any of the following risks actually materialise, the business, financial condition and results of operations of Talvivaara and the market price of the Shares could be materially and adversely affected to the detriment of the Company and Shareholders, and you may lose all or part of your investment in the Shares. The risks described below are those material risks of which the Board is aware; however, further risks that are not presently known to the Board, or that the Board currently deems immaterial, may also have a material and adverse effect on the Company s business, financial condition and results of operations and the market price of the Shares. If the Resolutions are not passed and if the Proposed Rights Issue is not completed, Shareholders could lose their investment in the Company. The Proposed Rights Issue is conditional upon the Resolutions being passed by Shareholders at the Extraordinary General Meeting. Therefore, if the Resolutions are not passed at the Extraordinary General Meeting, the Proposed Rights Issue will not proceed. On 13 February 2013, the Company entered into the Amended Facility Agreement, which, among other things, reduces Talvivaara s risk in relation to compliance with its financial and production covenants. Among other conditions subsequent under the Amended Facility Agreement, the Proposed Rights Issue must be completed and the Company must receive net proceeds therefrom of at least EUR 240 million. If any of such conditions subsequent are not satisfied by 30 April 2013, an event of default would occur under the Amended Facility Agreement. An event of default could cause a significant proportion of Talvivaara s borrowings, including all amounts under the Amended Facility (with drawings under the Previous Facility amounting to EUR 70 million as at 31 December 2012), to become repayable on demand. In such circumstances, Talvivaara would not have sufficient funds to repay its debts. As at 31 December 2012, Talvivaara s net debt was EUR million. If the Resolutions are not passed, an event of default would occur on 30 April 2013 under the Amended Facility Agreement. Furthermore, the Board believes that without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May Such events may require the sale of the Talvivaara mine, the Company or the Company s 84 per cent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the Company. As a result, Shareholders could lose their investment in the Company. Shareholders who do not exercise or sell their Subscription Rights will experience dilution in their ownership. If the Resolutions are passed, the Board will have the authority to issue up to 26,000,000,000 New Shares by way of a rights issue. If Shareholders do not exercise or sell their Subscription Rights or are unable to do so because of applicable laws, or if Shareholders or financial intermediaries fail to comply with the procedures set out in the terms and condition of the Proposed Rights Issue, which will be published after the Extraordinary General Meeting, their Subscription Rights will expire without any value or compensation. Accordingly, such Shareholders proportionate ownership and their share of the total votes related to the Shares will be reduced, and due to the substantial size and terms of the Proposed Rights Issue, their ownership would be diluted significantly. Even if Shareholders sell their unexercised Subscription Rights, the consideration that they receive on the trading market for their Subscription Rights may not reflect the immediate dilution of their percentage ownership in the Company as a result of the completion of the Proposed Rights Issue. In the event that all of the New Shares are not subscribed for pursuant to the exercise of the Subscription Rights, any remaining New Shares would be allocated to those Shareholders and other investors who have subscribed for New Shares in the secondary subscription. The subscription price for the New Shares will be the same regardless of whether they are subscribed for pursuant to the exercise of the Subscription Rights or in the secondary subscription. Accordingly, the Company will not seek to place any New Shares not subscribed for pursuant to the exercise of the Subscription Rights at a premium, with the amount of such premium being remitted to those Shareholders who have not exercised or sold their Subscription Rights. As a result, such Shareholders would not receive any value or compensation for their Subscription Rights in the Proposed Rights Issue. 23

27 Certain Shareholders may be unable to exercise their pre-emptive rights. Certain Shareholders resident in, or with a registered address in, certain jurisdictions other than Finland and the United Kingdom, including Shareholders in the United States, may not be able to exercise their pre-emptive rights in respect of their Shares in the Proposed Rights Issue or any future offerings unless a registration statement, or the equivalent thereof under the applicable laws of their respective jurisdictions, is effective with respect to such Shares, or an exemption from any registration or similar requirements under the applicable laws of their respective jurisdictions is available. If the number of Shareholders who cannot exercise their pre-emptive rights is large and the subscription rights of such Shareholders are sold on the market (including the Subscription Rights to be issued in the Proposed Rights Issue), this may have an adverse effect on their price. The terms of the Proposed Rights Issue will not be determined until after the EGM and the subscription price is expected to be in euros. In line with the common practice in Finland, the specific terms of the Proposed Rights Issue will be decided based on the authorisation proposed to be voted on by the EGM. Therefore, Shareholders will not have information on the specific number of New Shares to be issued, the subscription price or other terms of the Proposed Rights Issue at the time the Resolutions will be voted on at the EGM and they will not be in a position to evaluate the actual dilutive effect of the Proposed Rights Issue. 24

28 1. What is a Rights Issue? PART III SOME QUESTIONS AND ANSWERS ON THE PROPOSED RIGHTS ISSUE A rights issue is a way for companies to raise money by giving their existing shareholders the right to buy further shares in proportion to their existing holdings, usually at a discount to the market price as at the date of announcement of the terms of the rights issue. The terms of the offer under the Proposed Rights Issue, for example in relation to the price at which Shareholders will be entitled to acquire New Shares, the ratio of New Shares to Existing Shares that will be offered and the key dates in the Proposed Rights Issue, will be set out in the Prospectus which will be published after the Extraordinary General Meeting following the Board decision to undertake the Proposed Rights Issue. If you hold Existing Shares and, subject to certain exceptions, you are not a Shareholder resident or with a registered address in the Excluded Territories or in the United States, you will be entitled to subscribe for New Shares in the Proposed Rights Issue. New Shares are expected to be offered to Shareholders under the terms of the Proposed Rights Issue at a discount to the Share price on the last dealing day before the terms of the Proposed Rights Issue are announced (which is currently expected to be on or around 8 March 2013). Because the market value of an Existing Share is expected to exceed the subscription price per New Share in the Proposed Rights Issue, the right to subscribe for New Shares is potentially valuable. If you are a Shareholder other than, subject to certain exceptions, a Shareholder with a registered address, or who is resident, in one of the Excluded Territories or the United States and you do not want to buy the New Shares to which you will be entitled under the Proposed Rights Issue, you will instead be able to sell or transfer your rights (called Subscription Rights) to subscribe for those New Shares and receive the net proceeds, if any, of the sale or transfer in cash. Certain Shareholders resident in, or with a registered address in, certain jurisdictions other than Finland and the United Kingdom may not be able to exercise pre-emptive rights in respect of their Shares unless a registration statement, or an equivalent thereof under the applicable laws of their respective jurisdictions, is effective or an exemption from any registration or similar requirements under the applicable laws of their respective jurisdictions is available. 2. How does the Finnish Rights Issue Structure Work? As a Finnish company, the Company will follow the customary Finnish rights issue structure in the Proposed Rights Issue. A Prospectus containing pricing details will be published once the Extraordinary General Meeting authorises the issuance of New Shares by adoption of the Rights Issue Resolution and the Board, based on the authority granted by the Extraordinary General Meeting, sets the price and other terms of the Proposed Rights Issue. An Extraordinary General Meeting has been convened for 8 March 2013 to decide on the Resolutions, including the Rights Issue Resolution. The Board meeting typically takes place on the date of the Extraordinary General Meeting or one or two days thereafter and the Prospectus is typically approved on the same day as the Board meeting (or the business day following the Board meeting). Publication of the Prospectus would typically take place one or two business days following its approval and, in any event, at least two business days before the commencement of the subscription period. The Board is scheduled to decide on the terms of the Proposed Rights Issue on or around 8 March 2013 and the Prospectus is expected to be published on or around 13 March It is expected that the subscription price will be set in euros. Admission of Subscription Rights and commencement of the subscription period and Subscription Rights trading would take place three business days after the record date of the Proposed Rights Issue. The record date is three business days after the Board sets the price and other terms of the Proposed Rights Issue. In most rights issues by Finnish companies, so-called secondary subscription has been used. When adopting the secondary subscription approach, during the subscription period, both existing holders of subscription rights and investors who do not hold subscription rights may submit orders to subscribe for new shares at the subscription price in excess of any subscription rights that they might have based on their share ownership. 25

29 In the event that all of the New Shares are not subscribed for pursuant to the exercise of Subscription Rights, further allocations would be made in accordance with the relevant terms and conditions of the Proposed Rights Issue. Typically this would be as follows: first, to those that also subscribed for New Shares pursuant to Subscription Rights. If the Proposed Rights Issue is oversubscribed by such subscribers, the allocation among such subscribers shall be determined per book-entry account in proportion to the number of Subscription Rights exercised by subscribers for subscription of New Shares and, where this is not possible, by drawing of lots; second, to those that have submitted orders to subscribe for New Shares without holding any Subscription Rights. If the Proposed Rights Issue is oversubscribed by such subscribers, the allocation among such subscribers shall be determined per book-entry account in proportion to the number of New Shares which such subscribers have subscribed for and, where this is not possible, by drawing of lots; and third, to subscribers procured by the Managers or, failing which, to the Managers. The subscription period will be approximately three weeks. The Subscription Rights trading period ends five business days before the end of the subscription period in order to allow all trades in Subscription Rights to settle in the settlement cycle of T+3 before the subscription period ends. This practice is designed to ensure that all Subscription Rights purchased in the secondary market will be capable of being exercised before the end of the subscription period. Due to a requirement of the Helsinki Stock Exchange, the Company will issue so-called Interim Shares, which represent the New Shares subscribed for pursuant to the exercise of the Subscription Rights, before the completion of the Proposed Rights Issue. Such Interim Shares will be recorded on the subscriber s book-entry account after the subscription with Subscription Rights has been processed. Interim Shares are a separate class of securities and have their own ISIN code. Interim Shares do not carry voting or economic rights until they are converted into New Shares upon completion. Interim Shares are admitted to trading on the Helsinki Stock Exchange on the first trading date following the end of the subscription period and trading in Interim Shares ceases on the completion date of the Proposed Rights Issue. Trading in Interim Shares is conditional on the completion of the Proposed Rights Issue. On completion, Interim Shares will be automatically converted into the New Shares on investors book-entry accounts. Completion occurs when the New Shares are registered with the Finnish Trade Register upon receipt by the Company of all proceeds from the Proposed Rights Issue and the Board having approved all subscriptions. Completion typically takes place one to two weeks after the end of the subscription period. New Shares issued in the Proposed Rights Issue would typically be admitted to trading on the Helsinki Stock Exchange on the first business day following completion. The Interim Shares will be admitted to trading on the London Stock Exchange, but will not be listed on the Official List. 3. Why is the Company Undertaking the Proposed Rights Issue? As further described in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document, the Board remains confident in Talvivaara s longer-term potential, with its significant sulphide nickel resources and cost effective bioheapleaching process following ramp-up, and in the long-term fundamentals of the nickel industry. The Board s primary focus continues to be preserving and enhancing value for all Shareholders. Talvivaara has faced a number of operational challenges during the ramp-up of its operations since it commenced production of saleable products in February These challenges have resulted in Talvivaara not achieving its original production targets for 2010, 2011 and In particular, events during 2012, including increased challenges with the water balance leading to the gypsum pond leakage, bioheapleaching performance and the resulting restricted metals production, have underlined the need to focus on stabilising and improving Talvivaara s production processes in order to return to a sustainable ramp-up path towards the targeted full capacity of 50,000 tonnes of nickel per year. Talvivaara has instituted a number of measures aimed at addressing these challenges in the near term, which are described in more detail in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document. Talvivaara s results of operations in 2012 were further negatively affected by the prevailing low London Metal Exchange nickel price during 2012, which averaged USD 17,530 per tonne, as compared to USD 22,843 per tonne in 2011 and USD 21,811 per tonne in Talvivaara s operational challenges and the recent weak nickel price environment have resulted in increased levels of indebtedness and a strained liquidity position. As at 31 December 2012, Talvivaara had cash and cash equivalents of EUR 36.1 million, total debt of EUR million and a net debt position of EUR million. The Board believes that Talvivaara s strained liquidity position is likely to be 26

30 exacerbated in 2013 by the production impact caused by the prevailing water balance issues as well as the maturity of the Convertible Bonds due 2013 in May As described in in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document, Talvivaara is implementing a number of measures to overcome its near-term operational challenges. However, the full effect of these actions will only materialise over time, and Talvivaara currently expects material production ramp-up only from the second half of For 2013, Talvivaara expects total nickel production of approximately 18,000 tonnes, total capital expenditure of EUR 60 million and total operating expenditure (including financial leasing) of EUR 230 million. Water balance management measures and improvements are expected to account for approximately EUR 20 million of the total expected capital expenditure and EUR 10 to 15 million of the total expected operating expenditure. Talvivaara s nickel production target for 2013 is lower than its original production targets for 2010, 2011 and As Talvivaara s revenues are heavily dependent on its production volumes, Talvivaara does not expect to generate sufficient revenues in 2013 to finance its operations, including costs and additional investments relating to the water balance issue and environmental incidents at the Talvivaara mine site, and to finance the repayment of the Convertible Bonds due As at 31 December 2012, the Company had drawn EUR 70 million of the Previous Facility, which was signed in June 2010 when Talvivaara expected to reach an annualised production rate in excess of 30,000 tonnes of nickel by the end of 2010 and the full scale annual production target of 50,000 tonnes of nickel in Talvivaara obtained waivers of the failure to satisfy the financial and production covenants in the Previous Facility Agreement, which were tested quarterly, from the lenders for the third and fourth quarters of On 13 February 2013, the Company entered into the Amended Facility Agreement, which, among other things, amended the financial and production covenants in the Previous Facility Agreement to reflect Talvivaara s current business and, therefore, reduces Talvivaara s risk in relation to compliance with its covenants. Among other conditions subsequent under the Amended Facility Agreement, the Proposed Rights Issue must be completed and the Company must receive net proceeds therefrom of at least EUR 240 million. A summary of the Amended Facility Agreement is set out in Part IV (Additional Information) of this document. If the Resolutions are not passed, the Proposed Rights Issue is not completed and the Company does not receive net proceeds therefrom of at least EUR 240 million, or if other conditions subsequent under the Amended Facility Agreement are not satisfied by 30 April 2013, an event of default would immediately occur under the Amended Facility Agreement. An event of default could cause a significant proportion of Talvivaara s borrowings to become repayable on demand. Furthermore, the Board believes that without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May Such events may require the sale of the Talvivaara mine, the Company or the Company s 84 per cent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the Company. As a result, Shareholders could lose their investment in the Company. Against this background, the Board has concluded that raising equity now, by way of the Proposed Rights Issue, is in the best interests of the Company and Shareholders as a whole. 4. What Happens if I do not Exercise or Sell my Subscription Rights? If you do not exercise or sell your Subscription Rights or are unable to do so because of applicable laws, or if you or your financial intermediary fails to comply with the procedures set out in the terms and condition of the Proposed Rights Issue, which will be published after the Extraordinary General Meeting, your Subscription Rights will expire without any value or compensation. Accordingly, your proportionate ownership and share of the total votes related to the Shares will be reduced, and due to the likely substantial size and terms of the Proposed Rights Issue, your ownership interest in the Company would be diluted significantly. The maximum dilution you may suffer (in the event you do not exercise any of your Subscription Rights) will be specified in the Prospectus. Even if you sell your unexercised Subscription Rights, the consideration that you receive on the trading market for your Subscription Rights may not reflect the immediate dilution of your percentage ownership in the Company as a result of the completion of the Proposed Rights Issue. In the event that all of the New Shares are not subscribed for pursuant to the exercise of the Subscription Rights, any remaining New Shares would be allocated to those Shareholders and other investors who have subscribed for New Shares in the secondary subscription. The subscription price for the New Shares will be the same regardless of whether they are subscribed for pursuant to the exercise of the Subscription Rights or in the secondary subscription. Accordingly, the Company will not seek to place any New Shares not subscribed for pursuant to the exercise of the 27

31 Subscription Rights at a premium, with the amount of such premium being remitted to those Shareholders who have not exercised or sold their Subscription Rights. As a result, you would not receive any value or compensation for your Subscription Rights in the Proposed Rights Issue. 5. Will my Current Shareholding in the Company Remain the Same Following the Proposed Rights Issue? If you exercise all of the Subscription Rights to which you are entitled, the proportion of your holding in the Company will, subject to fractional entitlements, remain the same as it was before the Proposed Rights Issue. If your entitlement to New Shares is not a whole number, your entitlement will be rounded down. As described above, if you sell or do not exercise some or all of your Subscription Rights, the proportion of your holding in the Company will be smaller once the Proposed Rights Issue has been completed, as New Shares are being issued. In these circumstances, your interest in the Company would be diluted. 6. Why is an Extraordinary General Meeting Being Held? The Extraordinary General Meeting is being convened for the purposes of considering and, if thought fit, passing the Resolutions. Shareholders are being asked to vote on the Resolutions in order to provide the Board with the necessary authority to proceed with the Proposed Rights Issue and make the Adjustment. The Proposed Rights Issue and the Adjustment are conditional on the passing of the Resolutions and the Adjustment is conditional on the Proposed Rights Issue. If the Resolutions are not approved at the Extraordinary General Meeting, the Company will be unable to undertake and complete the Proposed Rights Issue and make the Adjustment. 7. What Action Should I, as a CDI Shareholder, Take in Relation to the Extraordinary General Meeting? Action to be Taken by CDI Shareholders A. If you wish to attend and vote at the EGM in person, you must: complete and sign the enclosed Registration Form and return it to the Company s Registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February You do not need to complete and sign the Form of Proxy if you wish to attend and vote at the EGM in person. B. If you wish to attend and vote at the EGM by proxy, you must: (i) (ii) complete and sign the enclosed Registration Form and return it to the Company s Registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February 2013; and complete and sign the enclosed Form of Proxy and return it (together with any power of attorney or other authority pursuant to which the Form of Proxy was signed (or an officially certified copy of such power of attorney or authority) together with an authorised signatures list) to the Company s Registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February The completion and return of a Form of Proxy will preclude a CDI Shareholder from voting at the EGM in person. Please note that under the Finnish Companies Act, only beneficial holders of shares in a Finnish company may participate and vote (in person or by proxy) in its shareholders meetings. Any Forms of Registration and/or Forms of Proxy incorrectly completed, signed and/or submitted will be invalid and may be disregarded for the purposes of determining entitlement to attend and vote at the EGM (in person or by proxy). However, the Company reserves the right (acting in its absolute discretion and with no obligation to do so) to treat any such Form of Registration and/or Form of Proxy as valid. 28

32 If you do not wish to attend or vote at the EGM (in person or by proxy), you do not need to take any action. 29

33 PART IV ADDITIONAL INFORMATION 1. Responsibility The Company and the Directors accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. 2. Working Capital The Company is of the opinion that as at the date of this document, Talvivaara does not have sufficient working capital for its present requirements, that is for at least 12 months from the date of this document. This is as a result of: Talvivaara s strained liquidity situation due to the operational challenges discussed in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document and the recent weak nickel price environment; the continuing production impact of the prevailing water balance issues and the related suspension of ore production as discussed in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document; and the upcoming maturity of the Convertible Bonds due 2013 in May Talvivaara is implementing a number of measures to overcome its near-term operational challenges as discussed in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) of this document. However, the full effect of these actions will only materialise over time, and Talvivaara currently expects material production ramp-up only beginning in the second half of Accordingly, Talvivaara has set a nickel production target for 2013 of approximately 18,000 tonnes, which is lower than its original production targets for 2010, 2011 and As Talvivaara s revenues are heavily dependent on its production volumes, Talvivaara does not expect to generate sufficient revenues in 2013 to finance its operations, including costs and additional investments relating to the water balance issue and environmental incidents at the Talvivaara mine site, and to finance the repayment of the Convertible Bonds due The Board believes that without securing additional funds through the Proposed Rights Issue, Talvivaara will likely run out of cash and will be unable to finance its planned operations or repay its debts, including the Convertible Bonds due 2013 when they mature in May In order to address Talvivaara s liquidity situation: the Company has taken measures to reduce its costs and improve its overall efficiency, including temporarily suspending ore production since September 2012 and undertaking temporary layoffs due to the suspension of ore production; the Company entered into the Amended Facility Agreement on 13 February 2013, which, among other things, amended the financial and production covenants in the Previous Facility Agreement to reflect Talvivaara s current business and, therefore, reduces Talvivaara s risk in relation to compliance with its covenants; and the Company is undertaking the Proposed Rights Issue. The Amended Facility Agreement remains subject to certain conditions subsequent, including the completion of the Proposed Rights Issue and the Company receiving net proceeds therefrom of at least EUR 240 million. If any of such conditions subsequent are not satisfied by 30 April 2013, an event of default would occur under the Amended Facility Agreement, which could cause a significant proportion of Talvivaara s borrowings, including all amounts under the Amended Facility, to become repayable on demand. In such circumstances, Talvivaara would not have sufficient funds to repay all of its debts. As at 31 December 2012, Talvivaara s total debt was EUR million and net debt was EUR million. 30

34 In connection with the Proposed Rights Issue, the Company has entered into the Standby Underwriting Letter with the Managers, pursuant to which the Managers have undertaken to underwrite, subject to certain conditions discussed in detail in Part IV (Additional Information) of this document, such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments. Based on the Standby Underwriting Letter and the Shareholder Commitments being in place, the Board is confident that the Company will be able to raise at least EUR 240 million in net proceeds from the Proposed Rights Issue, as is required under the Amended Facility Agreement. The Company will only proceed with the Proposed Rights Issue if Shareholders approve the Resolutions at the EGM and such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments is fully underwritten. The Board believes that taking into account receipt of the net proceeds of the Proposed Rights Issue and subject to the conditions subsequent under the Amended Facility Agreement having been satisfied, Talvivaara will have sufficient working capital for its present purposes, that is for at least 12 months from the date of this document. Beyond the 12-month period from the date of this document, in the event that Talvivaara s planned production ramp-up cannot be completed as currently anticipated or Talvivaara otherwise has lower than expected production volumes, the market prices of the metals produced by Talvivaara drop below certain assumed levels and/or Talvivaara s estimated operating and capital expenditures are not sufficient to achieve the planned production ramp-up, Talvivaara may not be able to comply with the liquidity requirements set forth in the Amended Facility Agreement. Pursuant to the Amended Facility Agreement, if the amount of Talvivaara s liquidity (defined as the sum of cash and cash equivalents and any undrawn amounts under the Amended Facility Agreement) at the end of any month is less than EUR 70 million, then the Company is required to provide to the facility agent a detailed plan including (i) a description of its endeavours, roadmap and execution strategy to enhance its liquidity position to exceed EUR 100 million, (ii) detailed refinancing solutions for the maturing debt, (iii) forecasts of its future liquidity position and cash flows for the next four financial quarters, and (iv) an update on its operations. If the plan is not satisfactory to the lenders (acting reasonably), then the Company is required to submit a revised plan together with evidence of committed additional funding to Talvivaara needed for total liquidity to reach EUR 100 million within 30 days. If the Company is unable to submit a revised plan together with evidence of committed additional funding, and the lenders do not grant a relaxation or waiver of the requirement, an event of default would occur under the Amended Facility Agreement. An event of default could cause a significant portion of Talvivaara s borrowings to become repayable on demand. 3. Standby Underwriting Letter The Company has entered into a Standby Underwriting Letter with the Managers pursuant to which the Managers have undertaken to underwrite, subject to certain conditions discussed below, such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments. Full details of the Proposed Rights Issue, including the subscription price and timetable, will be set out in an Underwriting Agreement to be entered into between, among others, the Company and the Managers. As at the date of this document, the Managers obligation to underwrite the Proposed Rights Issue under the Standby Underwriting Letter remains subject to certain conditions precedent, including (i) the approval of Resolutions at the Extraordinary General Meeting; (ii) the Shareholder Commitments and the Mr Perä Additional Subscription Commitment remaining valid and enforceable; (iii) the Managers and their advisors completing to their satisfaction their respective business, technical, environmental, financial and legal due diligence; (iv) the decision of the Kainuu ELY Centre to permit Talvivaara to discharge 1.8 million cubic metres of water being in full force and effect; (v) the Amended Facility being in full force and effect; and (vi) certain other conditions precedent, including no material adverse change, or any development or event involving or reasonably likely to have a prospective material adverse change, in the business, condition (financial, legal or otherwise) or results of operations or prospects of Talvivaara having occurred; no force majeure event having occurred; and no breach of warranty having occurred. Under the Standby Underwriting Letter, the Company has agreed to a lock-up undertaking that will be in force for 180 days after the completion of the Proposed Rights Issue. In addition, the Company has given certain customary representations, warranties, undertakings and indemnities to the Managers. The provisions of the Standby Underwriting Letter shall automatically terminate on the earlier of 14 May 2013 and the date on which the Underwriting Agreement is entered into. 31

35 4. Amended Facility General On 30 June 2010, the Company entered into a three-year committed EUR 100 million multicurrency revolving credit facility agreement with a syndicate of banks led by Nordea as facility agent. On 17 October 2011, the Company signed an amendment and restatement agreement to the revolving credit facility agreement. The amount available under the facility was increased to EUR 130 million and the maturity of the facility was extended by a year to 30 June In June 2012, the parties entered into the second amendment and restatement agreement. The principal amount available under the Previous Facility was reduced to EUR 100 million pursuant to an amendment agreed on 18 December On 13 February 2013, the Company entered into a third amendment and restatement agreement in relation to the Previous Facility Agreement (the Amended Facility Agreement ) with a syndicate of banks led by Nordea as facility agent. The Amended Facility is intended for general corporate purposes and provision of financing to Talvivaara, excluding the repayment or prepayment of any capital market indebtedness of Talvivaara. Among other conditions subsequent under the Amended Facility Agreement, the Proposed Rights Issue must be completed and the Company must receive net proceeds therefrom of at least EUR 240 million. If any of such conditions subsequent are not satisfied by 30 April 2013, an event of default would occur under the Amended Facility Agreement. The termination date of the Amended Facility is 30 October Borrower The borrower under the Amended Facility is the Company. Guarantee The obligations of the Company under the Amended Facility Agreement and the other finance documents referred to therein are guaranteed by Talvivaara Sotkamo. The guarantee constitutes a direct, unconditional and unsubordinated obligation of the guarantor and ranks at least pari passu with all other future unsubordinated obligations of the guarantor, except as mandatorily preferred by law. Security The Company has given the following securities under the Amended Facility Agreement: (i) a pledge of all shares in Talvivaara Sotkamo owned by the Company; (ii) a pledge of floating charge notes registered over assets of the Company in the aggregate nominal amount of EUR 300 million; (iii) a pledge of floating charge notes registered over assets of Talvivaara Sotkamo in the aggregate nominal amount of EUR 425 million; (iv) a pledge of the Company s intra-group receivables from Talvivaara Sotkamo; (v) a pledge of real estate mortgage in the aggregate nominal amount of EUR 425 million over the real property owned by Talvivaara Sotkamo; (vi) a pledge of the Company s insurance receivables; and (vii) a pledge of mining rights of Talvivaara Sotkamo in respect of the mining concession of Talvivaara mining district with registration number Amount and Repayment of Loans The Amended Facility Agreement changed the facility to be a single currency, euro, facility. Each loan under the Amended Facility must be repaid on the last day of the loan s interest period, which can be a period of one, two, three or six months or any other period agreed between the Company and the facility agent. The Company cannot draw more than four loans with an interest period of one month within a financial year. All loans under the Amended Facility must be repaid in full on the termination date referred to above. As is customary for a revolving loan facility of this type, if a further revolving loan is to be taken on the repayment date of the previous loan then, depending on the quantum of the loan, the borrower will not be required to make any payment in cash and the revolving loan will be rolled over into the new interest period. If the Company issues capital market instruments (notes, loans, equity or equity-like) (excluding the New Shares to be issued in the Proposed Rights Issue) and following such issue, the aggregate of Talvivaara s cash and cash equivalent investments exceeds EUR 100 million, the Company must repay loans outstanding under the Amended Facility with proceeds from the issuance until the amount of cash and cash equivalent investments is EUR 100 million or less. This repayment obligation does not apply in the event the Company has applied the proceeds from such issuance towards prepaying or repaying any other existing indebtedness of Talvivaara, provided that the 32

36 instruments under such issuance mature at the same time as or later than the refinanced indebtedness. As long as the aggregate of cash and cash equivalent investments after such repayment are more than the cash threshold, an amount of the commitment equal to the excess amount cannot be utilised by the Company. Pursuant to the terms of the Amended Facility Agreement, if the Company pays any dividends, the lenders will not be obliged to fund any utilisations under the Amended Facility Agreement, the lenders may require that all loans outstanding under the Amended Facility Agreement be declared immediately due and payable and the lenders respective commitments will then be cancelled. The loans under the Amended Facility Agreement shall be prepaid in part from proceeds of any future insurance claims (net of reasonable costs and expenses incurred in connection therewith) to the extent that such net proceeds exceed an aggregate annual threshold of EUR 10 million and to the extent they are not used as soon as practicable, but in any event within 180 days after receipt, to (i) reinstate or replace with assets of similar type and value; (ii) refinance indebtedness incurred in respect of reinstating or replacing such assets; (iii) to cover operating losses; or (iv) meet a liability in respect of which such moneys are received. Interest Rates and Fees The annual interest rate on loans is calculated based on (i) EURIBOR, plus (ii) a margin of 4.00 per cent until Talvivaara publishes its financial statements for the third quarter of 2013, and thereafter varying between 3.50 and 4.50 per cent per annum, depending on the gearing ratio of Talvivaara (as defined in the Amended Facility Agreement), plus certain mandatory costs. The margin is calculated by reference to the gearing ratio of Talvivaara as follows: Gearing Margin Equal to or greater than 80 per cent Less than 80 per cent, but equal to or greater than 70 per cent Less than 70 per cent Interest is payable on each interest payment date. The borrower is also obligated to pay a commitment fee equal to 45 per cent of the then applicable margin on the undrawn and uncancelled amount of the Amended Facility. The accrued commitment fee is payable on the last day of each successive period of three months that ends during the relevant availability period for the facility, on the last day of that availability period and, if the Amended Facility is cancelled in full, on the cancelled amount of the relevant lender s commitment at the time of cancellation. The Company is also obligated to pay an utilisation fee equal to 0.25 per cent, 0.50 per cent or 0.75 per cent of the amount of all outstanding loans, depending on the utilisation rate of the total commitments. The accrued utilisation fee is payable on the last day of each successive period of three months commencing on the date of the Amended Facility Agreement and on the termination date of the Amended Facility. Financial and Production Covenants The Amended Facility Agreement contains customary financial covenants for a leveraged company, including maximum gearing ratio, restrictions on capital expenditures and minimum amounts of liquidity and cumulative EBITDA. Further, the Company is required to ensure that the amount of nickel produced reaches certain levels during specified periods of time. The Amended Facility Agreement limits capital expenditure to EUR 7.5 million per financial year, excluding capital expenditure related to operational purposes enabling production of 50,000 tonnes of nickel per year and water balance and health and environment investments. Change of Control The Amended Facility Agreement contains a change of control provision whereby, if (i) the Company ceases to be a publicly listed company; (ii) any person or group of persons acting in concert gains control of more than 50 per cent of the issued and outstanding Shares and voting rights in the Company; (iii) the Company ceases to hold at least 80 per cent of the issued and outstanding shares in Talvivaara Sotkamo; (iv) all or part of shares in an Talvivaara group company (other than the Company) are listed; or (v) a sale of all or substantially all of the business or assets of Talvivaara occurs, the Company must notify the facility agent on behalf of the lenders who 33

37 will not be obliged to fund any utilisation (except for the rollover of an existing loan under the Amended Facility) and, if required to do so by a lender, the facility agent must, by not less than ten business days notice to the Company, cancel the commitments of such lender under the Amended Facility Agreement and declare all outstanding loans to such lender, together with accrued interest and all other amounts accrued, immediately due and payable. For the purposes of the change of control clause in the Amended Facility Agreement, control means (a) the power (whether by way of ownership of Shares, proxy, contract, agency or otherwise) to (i) cast, or control the casting of, more than 50 per cent of the maximum number of votes that might be cast at a general meeting of the Company, (ii) appoint or remove all, or the majority, of the Directors or other equivalent officers of the Company, or (iii) give directions with respect to the operating and financial policies of the Company with which the Directors are obliged to comply; or (b) the holding of more than 50 per cent of the issued share capital of the Company (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital). Undertakings Subject in each case to certain customary exceptions, permissions and materiality thresholds, the Amended Facility Agreement contains customary negative covenants and restrictions based on the corresponding Loan Market Association provisions, including, among others, restrictions on the granting of security, incurrence of indebtedness, the provision of guarantees in respect of financial indebtedness, a change of business of Talvivaara, acquisitions or participations in joint ventures and mergers and disposals. The Amended Facility Agreement also contains, among others, the following affirmative covenants: mandatory periodic reporting of financial and other information, notice upon the occurrence of events of default and certain other events, compliance with environmental regulations and reporting of claims, maintenance of insurance coverage and other standard obligations that require Talvivaara group companies to operate their business in an orderly manner. Pursuant to the Amended Facility Agreement, if the amount of Talvivaara s liquidity (defined as the sum of cash and cash equivalents and any undrawn amounts under the Amended Facility Agreement) at the end of any month is less than EUR 70 million, then the Company is required to provide to the facility agent a detailed plan including (i) a description of its endeavours, roadmap and execution strategy to enhance its liquidity position to exceed EUR 100 million, (ii) detailed refinancing solutions for the maturing debt, (iii) forecasts of its future liquidity position and cash flows for the next four financial quarters, and (iv) an update on its operations. If the plan is not satisfactory to the lenders (acting reasonably), then the Company is required to submit a revised plan together with evidence of committed additional funding to Talvivaara needed for total liquidity to reach EUR 100 million within 30 days. If the Company is unable to submit a revised plan together with evidence of committed additional funding, an event of default would occur under the Amended Facility Agreement. Events of Default The Amended Facility Agreement contains customary events of default, such as failure to make payment of amounts due, defaults under any covenants or other obligations under the finance documents, defaults under other agreements evidencing indebtedness, certain events having a material adverse effect on Talvivaara and certain insolvency events (as described in the Amended Facility Agreement). In addition, it is an event of default if the auditor s report relating to any audited annual consolidated financial statements delivered to the facility agent as required by the Amended Facility Agreement contains a material qualification. It is also an event of default under the Amended Facility Agreement if the Proposed Rights Issue has not been completed and the Company has not received net proceeds therefrom of at least EUR 240 million by 30 April The occurrence of an event of default could result in the acceleration of payment obligations under the Amended Facility Agreement. 5. Uranium Take-in-Kind Agreement Pursuant to the uranium take-in-kind agreement entered into on 7 February 2011 and as amended on 12 February 2013, Cameco is providing an up-front investment of up to USD 70 million to be used exclusively for the construction of the uranium extraction facility. Talvivaara Sotkamo is required to deliver all uranium concentrate produced at the Talvivaara mine exclusively to Cameco and Cameco s up-front investment will be repaid through deliveries of uranium concentrate of corresponding value until 31 December If Talvivaara has not delivered sufficient uranium concentrate to Cameco to repay the up-front investment payments in kind by 31 December 2017, Talvivaara will be required to repay the remaining portion of the up-front investment payments, together with the 34

38 interest. Further, if Talvivaara has not completed the construction and commissioning of the uranium extraction facility by 31 December 2017 or if Talvivaara determines that (i) it is unable to obtain necessary approvals on commercially reasonable terms or in a reasonable amount of time, (ii) Finnish governmental authorities are opposed to construction or operation of the uranium extraction facility or (iii) certain materially adverse circumstances have occurred, Talvivaara will be required to repay to Cameco any up-front investment payments it has received, together with the interest. 6. Information Relating to the Securities The number of New Shares to be issued will be determined by the Board after the Resolutions have been passed at the Extraordinary General Meeting and it will depend on the subscription price to be determined by the Board based on the authorisation for the Proposed Rights Issue from the Shareholders. The subscription price, which is expected to be set in euros, is expected to be set with reference to a discount to the theoretical ex-rights price, which will be in line with similar rights issues undertaken in the UK and Finnish markets, and having regard to, amongst other things, investor feedback, market conditions, any relevant requirements of the Listing Rules and the market price of the Shares over the five days preceding the determination of the subscription price. The subscription price is expected to be announced on or around 8 March The maximum number of New Shares that may be issued by the Company pursuant to the authority sought in the Rights Issue Resolution is 26,000,000,000. This authority has been proposed by the Board to (i) ensure that the Board has authority to allot sufficient Shares to raise approximately EUR 260 million in the Proposed Rights Issue; (ii) provide the Board with the flexibility to propose an appropriate exchange ratio in respect of the Proposed Rights Issue; and (iii) limit, to the extent practicable, the extent to which fractional entitlements arise from the Proposed Rights Issue. It is the Company s intention to raise approximately EUR 260 million in the Proposed Rights Issue and the size of the authority sought by the Company in the Rights Issue Resolution should not be interpreted to mean that the Company currently intends to raise more than approximately EUR 260 million in the Proposed Rights Issue. As described in more detail above, the Managers have entered into the Standby Underwriting Letter with the Company and have agreed, subject to certain conditions, to underwrite such portion of the Proposed Rights Issue that is not subject to the Shareholder Commitments. The final terms of the underwriting, the subscription price, the number of New Shares to be issued in the Proposed Rights Issue and the total gross proceeds of the Proposed Rights Issue will be determined at the time when the Board decides upon the terms of Proposed Rights Issue, which the Board currently expects to be on 8 March The New Shares will, when issued, rank pari passu in all respects with the Shares then in issue, including all rights to all dividends and other distributions declared, made or paid following their registration with the Finnish Trade Register. Fractions of New Shares arising under the Proposed Rights Issue will not be allotted to Shareholders and, where necessary, fractional entitlements will be rounded down to the nearest whole number of New Shares. Subject to the passing of the Resolutions at the Extraordinary General Meeting, among other things, if you are a: Qualifying CDI Shareholder (other than, subject to certain exceptions, a Qualifying CDI Shareholder with a registered address in the United States or any of the Excluded Territories), it is expected that you will receive a credit to your appropriate stock accounts in CREST in respect of your Subscription Rights; Qualifying non-cdi Shareholder (other than, subject to certain exceptions, if you are a Qualifying non- CDI Shareholder with a registered address in the United States or any of the Excluded Territories), it is expected that your (or your custodian s) book entry account in Finland will be credited with tradable Subscription Rights. A Qualifying non-cdi Shareholder may participate in the Proposed Rights Issue by subscribing for the New Shares by using the Subscription Rights on the Qualifying non-cdi Shareholder s book-entry account and by paying the subscription price therefor. In order to participate in the Proposed Rights Issue, a Qualifying non-cdi Shareholder must give a subscription assignment in accordance with the instructions provided by the Qualifying non-cdi Shareholder s own book-entry account operator or custodian. Holders of Subscription Rights purchased from the Helsinki Stock Exchange must submit their subscription assignments in accordance with the instructions given by their own book-entry account operator or custodian. Qualifying non-cdi Shareholders and other investors participating in the Proposed Rights Issue, whose Existing Shares or Subscription Rights are held through a nominee, must submit their subscription assignments in accordance with the instructions given by their nominee. More detailed 35

39 instructions regarding the exercise of Subscription Rights and the places of subscription will be set out in the Prospectus. However, the crediting of Subscription Rights to a book entry account of a Qualifying Shareholder with a registered address in the United States or any Excluded Territory will not constitute an offer in those jurisdictions in which it would be illegal to make and/or accept an offer. Accordingly, subject to certain exceptions, no Qualifying Shareholder with a registered address in the United States or any Excluded Territory, receiving a credit of Subscription Rights to a book-entry account, may treat the same as constituting an invitation or offer to him nor should he in any event use or deal with any Subscription Rights credited to him, unless such an invitation or offer could lawfully be made to and accepted by him or the Subscription Rights could lawfully be used or dealt with without contravention of any registration or other legal requirements. In such circumstances, this document, the Prospectus and the formal credit of the Subscription Rights must be treated as sent (or made available) for information purposes only, should not be copied or redistributed and such Qualifying Shareholder should take independent professional advice in relation thereto. The Company will file an application (i) to the UK Listing Authority for the New Shares to be admitted to the premium segment of the Official List; (ii) to the London Stock Exchange for the Subscription Rights, the Interim Shares and the New Shares to be admitted to trading on its main market for listed securities; and (iii) to the Helsinki Stock Exchange for the New Shares to be listed on the Official List of the Helsinki Stock Exchange. It is expected that trading in the Subscription Rights on the London Stock Exchange and on the Helsinki Stock Exchange will commence three business days after the record date of the Proposed Rights Issue. The New Shares subscribed for pursuant to the exercise of the Subscription Rights will be recorded on the subscriber s (or his custodian s) bookentry account as Interim Shares representing the New Shares after the subscription has been effected or as otherwise necessary to comply with the practice of the relevant exchange. The Interim Shares are freely transferable and trading in the Interim Shares on the Helsinki Stock Exchange, as a separate class of securities, will commence on the first trading day following the expiration of the subscription period of the New Shares. The Interim Shares will be admitted to trading on the London Stock Exchange, but will not be listed on the Official List. 7. Consents J.P. Morgan Cazenove has given and has not withdrawn its written consent to the inclusion in this document of the reference to its name in the form and context in which it is included. 8. Treasury Shares The Company does not hold any Shares. 9. Forward-looking Statements This document contains forward-looking statements about Talvivaara that are not historical facts but statements about future expectations. When used in this document, the words aims, anticipates, assumes, believes, could, estimates, expects, intends, may, plans, should, will, would and similar expressions as they relate to Talvivaara or the Company s management identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements are set forth in a number of places in this document, including in Part I (Letter from the Chairman of Talvivaara Mining Company Plc) and Part II (Risk Factors) of this document and wherever this document includes information on the future results, plans and expectations with regard to Talvivaara; the growth and profitability of Talvivaara; and the general economic conditions to which Talvivaara is exposed. These forward-looking statements are based on Talvivaara s present plans, estimates, projections and expectations. They are based on certain expectations that, even though they seem to be reasonable at present, may turn out to be incorrect. Such forwardlooking statements are based on assumptions and are subject to various risks and uncertainties. Prospective investors should not unduly rely on these forward-looking statements. Numerous factors may cause actual results, realised revenues or performance to differ materially from the results, revenues and performance expressed or implied in the forward-looking statements. In light of the risks, uncertainties, assumptions and other factors referred to in this document, events described in the forward-looking statements may not occur or may fail to materialise. Consequently, the Company cannot guarantee the accuracy and completeness of any of the forward-looking statements contained in this document or the actual materialisation of predicted developments. The Company expressly disclaims any obligation to update such forward-looking statements or to adjust them in light of future events or developments except as required by law or regulation. 36

40 10. Presentation of Mineral Resource Data Talvivaara s mineral resources described in this document constitute the Company s estimates that comply with standard evaluation methods generally used in the international mining industry and are stated in conformity with the JORC Code. The resource information included in this document has not been verified by an independent expert. All mineral resources estimates included herein are quoted for the two Talvivaara deposits, Kuusilampi and Kolmisoppi, as a whole and are not attributable with respect to the Company s 84 per cent shareholding in Talvivaara Sotkamo. Mineral resources as defined by the JORC Code are based on mineral occurrences quantified on the basis of geological data and an assumed cut-off grade, and are divided into measured, indicated and inferred categories reflecting decreasing confidence in geological and/or grade continuity. No allowances are included for dilution and losses during mining, but the reporting of resource estimates carries the implication that there are reasonable prospects for eventual economic exploitation. Resources may, therefore, be viewed as the estimation stage prior to the application of more stringent economic criteria for reserve definition, such as a rigorously defined cut-off grade and mine design outlines, along with allowances for dilution and losses during mining. Mineral resource categories are defined as follows: A mineral resource is a concentration or occurrence of material of intrinsic economic interest in or on the Earth s crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories. A measured mineral resource is that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm geological and/or grade continuity. An indicated mineral resource is that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are too widely or inappropriately spaced to confirm geological and/or grade continuity, but are spaced closely enough for continuity to be assumed. An inferred mineral resource is that part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be of limited or uncertain quality and reliability. This document includes various statements relating to the potential at Talvivaara s exploration targets. The disclosure of target potential follows specific guidance in section 18 of the JORC Code, specifically that the target potential should be expressed as a range of quantity and grade, with an explanation of the basis of the statement. The summary statement of potential for each target is expressed explicitly on the basis that (i) the potential range of quantity and grade is conceptual in nature, there has been insufficient exploration to define a mineral resource on the target and it is uncertain if further exploration will result in the discovery of a mineral resource on the target; and (ii) the mineralised potential constitutes a possible mineral deposit that is to be the target of further exploration. 37

41 Bioheapleaching... PART V GLOSSARY OF TECHNICAL TERMS Heapleaching using the catalytic action of bacteria, such as Thiobacillus ferroxidans and Thiobacillus thiooxidans, to accelerate chemical oxidation reactions by as much as 106 times those of chemical reactions alone. Cobalt... A hard, brittle metal resembling iron or nickel in appearance. Cut-off grade... Deposit... When determining economically viable mineral resources, the lowest grade of mineralised material that qualifies as ore. An anomalous occurrence of a specific mineral or minerals within the Earth s crust. Grade... The quantity of ore or metal in a specified quantity of rock. Heapleaching... A process used for the recovery of metals from ore. The crushed material is laid on a slightly sloping, impervious pad and uniformly leached by the percolation of the leach liquor trickling through the beds by gravity to ponds. The metals are recovered by conventional methods from the solution. High grade... Pertaining to ore that is rich in the metal being mined. Indicated mineral resource... Inferred mineral resource... Low grade... Measured mineral resource... Mineral... That part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are too widely or inappropriately spaced to confirm geological and/or grade continuity, but are spaced closely enough for continuity to be assumed. That part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be of limited or uncertain quality and reliability. Pertaining to ore that is comparatively low in content for the metal which is being mined. That part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm geological and/or grade continuity. A natural, inorganic, homogeneous material that can be expressed by a chemical formula. Mineral resource... A concentration or occurrence of material of intrinsic economic interest in or on the Earth s crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories. 38

42 Nickel... ph... PLS... A silvery white metal that takes on a high polish; is hard, malleable, ductile and somewhat ferromagnetic; and is a fair conductor of heat and electricity. A measure of the acidity or alkalinity of a solution, numerically equal to seven for neutral solutions, increasing with increasing alkalinity and decreasing with increasing acidity. The ph scale commonly in use ranges from 0 to 14. Pregnant leach solution. Drainage from a heap leach that contains a high concentration of dissolved metal. Resource... That part of a mineral deposit which has the potential to be exploited. Waste rock... Water balance... Rock that is not ore, but is brought to the surface by mining activities and has no economic value. Traditionally disposed of on the surface, some waste rock may be used to backfill old workings or as construction materials on the mine site. The flow of water into and out of the Talvivaara mine site, including the water circulation system and water storage areas at the mine site. Water entering the mine site includes rainfall and melt water, raw water intake from nearby lakes and catchment water. Water leaving the mine site includes neutralised water that is discharged, water absorbed by the ore and evaporation. Water at the mine site is stored in, among other places, heap circulation, process ponds and storage ponds. 39

43 PART VI DEFINITIONS The following definitions apply throughout this document, unless the context requires otherwise. Adjustment... Adjustment Authorisation Resolution... Admission... Amended Facility... The adjustment to the conversion price of the Convertible Bonds due 2013 in accordance with their terms and conditions as a result of the Proposed Rights Issue. The authorisation to the Board to decide to issue up to 600,000,000 new Shares through one or several Share issues and/or by granting of special rights entitling to Shares, as referred to in Chapter 10, Section 1, of the Finnish Companies Act in order to carry out the Adjustment, as set out in Section 7 of the Notice of EGM. The admission of the New Shares and Subscription Rights to the premium segment of the Official List and to trading on the London Stock Exchange s main market for listed securities as well as on the Official List of the Helsinki Stock Exchange becoming effective. The Previous Facility as amended pursuant to the Amended Facility Agreement. Amended Facility Agreement... The agreement in relation to the Amended Facility. Articles of Association... The articles of association of the Company registered on 31 May AVI... Board or Directors... Cameco... CDI... CDI Shareholders... CEO... Company... The Northern Finland Regional Administrative Agency. The board of directors of the Company. Cameco Corporation. CREST depositary interest. The holders of any of CDIs of the Company from time to time. Chief Executive Officer. Talvivaara Mining Company Plc. Convertible Bonds... The Convertible Bonds due 2013 and the Convertible Bonds due Convertible Bonds due The convertible bonds issued by the Company on 20 May 2008 and due on 20 May 2013 that can be converted into Shares. Convertible Bonds due CREST... EUR... The convertible bonds issued by the Company on 16 December 2011 and due on 16 December 2015 that can be converted into Shares. The computerised system for the paperless settlement of sales and purchases of securities and the holding of uncertificated securities operated by Euroclear UK & Ireland Limited in accordance with the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as from time to time amended. The currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. 40

44 Euroclear Finland... Excluded Territories... Existing Shares... Euroclear Finland Ltd. Australia, Canada, Hong Kong, Japan and South Africa. The Shares in issue on the record date of the Proposed Rights Issue. Extraordinary General Meeting or EGM... The extraordinary general meeting of the Company convened for 8 March 2013 by the notice set out at the end of this document (and any adjournment thereof). FFSA... Finnish Companies Act... The Finnish Financial Supervisory Authority. The Finnish Companies Act 624/2006, as amended. Finnish Trade Register... Form of Proxy... The trade register maintained by the National Board of Patents and Registration in Finland. The form of proxy set out at the end of this document pursuant to which a CDI Shareholder may appoint Nordea, a Finnish account operator, as its attorney to participate in the EGM (or any adjournment thereof). Helsinki Stock Exchange... NASDAQ OMX Helsinki Ltd. Interim Shares... JORC Code... The interim shares that represent the New Shares subscribed for pursuant to the exercise of the Subscription Rights. The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. J.P. Morgan Cazenove... J.P. Morgan Securities plc. Kainuu ELY Centre... Listing Rules... The Kainuu Centre for Economic Development, Transport and the Environment. The listing rules made by the UK Listing Authority under Part VI of Financial Services and Markets Act London Stock Exchange... London Stock Exchange plc. Managers... Mr Perä Additional Subscription Commitment... Mr Perä Subscription Commitment... J.P. Morgan Cazenove, Nordea, Merrill Lynch International, BNP PARIBAS and Danske Bank A/S, Helsinki Branch. Mr Pekka Perä s irrevocable commitment to subscribe for such number of New Shares based on a total subscription price equal to 76 per cent of any net proceeds received by him from the sale of (A) any Subscription Rights during the subscription period for the Proposed Rights Issue and (B) any Shares at any time prior to the end of such subscription period as well as his agreement to a lock-up undertaking with respect to his Shares that will be in force for 90 days after the completion of the Proposed Rights Issue. Mr Pekka Perä s irrevocable commitment to subscribe for such number of New Shares based on a total subscription price equal to EUR 5 million. New Shares... The new Shares to be issued pursuant to the Proposed Rights Issue. Nordea... Nordea Bank Finland Plc. 41

45 Norilsk Nickel... Norilsk Nickel Harjavalta Oy. Notice of EGM... The notice of Extraordinary General Meeting, which is set out at the end of this document. Nyrstar... Nyrstar Sales & Marketing NV and Nyrstar NV. Official List... Official List of the Helsinki Stock Exchange... The official list maintained by the UK Financial Services Authority in accordance with section 74(1) of the UK Financial Services Act 2000, as amended. The official list of the Helsinki Stock Exchange. Options... The options to subscribe for Shares issued by the Company. Previous Facility... Previous Facility Agreement... Proposed Rights Issue... Prospectus... Qualifying CDI Shareholders... Qualifying non-cdi Shareholders... The committed EUR 100 million multicurrency revolving credit facility that is made available pursuant to the Previous Facility Agreement. The second amendment and restatement agreement in relation to the Previous Facility. The rights issue to raise approximately EUR 260 million that the Company proposes to undertake following the passing of the Resolutions at the EGM. The Board is scheduled to decide on the terms of the rights issue, including the number of New Shares to be issued and the subscription price per New Share, on or around 8 March The prospectus relating to the Company for the purpose of the Proposed Rights Issue. The CDI Shareholders who are registered on the CDI register as at 4:30 p.m. on 26 February The Shareholders who are registered as the holders of Shares on the shareholders register of the Company maintained by Euroclear Finland at the end of business on 26 February Qualifying Shareholders... Registrars... Qualifying CDI Shareholders and Qualifying non-cdi Shareholders. Computershare Investor Services (Jersey) Limited. Registration Form... The registration form that is set out at the end of this document, which must be completed and signed if a CDI Shareholder wishes to participate in the EGM. Resolutions... The Rights Issue Resolution and the Adjustment Authorisation Resolution. Rights Issue Resolution... The authorisation to the Board to decide to issue up to 26,000,000,000 New Shares for consideration pursuant to the Shareholders pre-emptive subscription right as set out in Section 6 of the Notice of EGM. Securities Act... The U.S. Securities Act of 1933, as amended. Shareholder Commitments... The Mr Perä Subscription Commitment, the Solidium Subscription Commitment, the Solidium Subscription Guarantee and the Varma Subscription Commitment. Shareholders... The holders of any Shares, including CDI Shareholders, from time to time. 42

46 Shares... Solidium... The ordinary shares, without par value, in the Company. Solidium Oy. Solidium Subscription Commitment... Solidium Subscription Guarantee... Standby Underwriting Letter... Subscription Rights... Solidium s irrevocable commitment to subscribe in full for New Shares on the basis of the Subscription Rights allocated to it. Solidium s agreement to subscribe for any New Shares not otherwise subscribed and paid for pursuant to Subscription Rights or in the secondary subscription up to an aggregate subscription price of EUR 30 million. The standby underwriting letter dated 14 February 2013 among the Company and the Managers pursuant to which the Managers have undertaken, subject to certain conditions, to underwrite such portion of the Proposed Rights Issue to raise up to EUR 260 million that is not subject to the Shareholder Commitments. The subscription rights which entitle their holder to subscribe New Shares in the Proposed Rights Issue pursuant to the Shareholders pre-emptive subscription right. Talvivaara... Talvivaara Sotkamo... The Company and its subsidiaries. Talvivaara Sotkamo Ltd. UK Listing Authority... Underwriting Agreement... The Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 of England and Wales, as amended. The underwriting agreement to be entered into between, among others, the Company and the Managers. USD... The currency of the United States of America. Varma Subscription Commitment... Varma Mutual Pension Insurance Company s irrevocable commitment to subscribe in full for New Shares on the basis of the Subscription Rights allocated to it. 43

47 TALVIVAARA MINING COMPANY PLC (Incorporated and registered in the Republic of Finland with business identity code ) NOTICE OF EXTRAORDINARY GENERAL MEETING The shareholders of TALVIVAARA MINING COMPANY PLC (the Company ) are hereby invited to the extraordinary general meeting of the Company to be held on 8 March 2013 at 10:00 a.m. (GMT+2) at Finlandia Hall, Mannerheimintie 13 e, FI Helsinki, Finland. Registration of attendees will start at 9:00 a.m. (GMT+2). THE MATTERS ON THE AGENDA OF THE EXTRAORDINARY GENERAL MEETING The meeting will consider the following matters: 1. Opening of the meeting 2. Calling the extraordinary general meeting to order 3. Election of persons to scrutinise the minutes and to supervise the counting of votes 4. Recording the legality of the extraordinary general meeting 5. Recording the attendance at the extraordinary general meeting and adoption of the list of votes 6. Authorising the Board of Directors to decide on a share issue The Board of Directors proposes that the extraordinary general meeting would authorise the Board of Directors to undertake a share issue for consideration pursuant to the shareholders pre-emptive subscription right. The Board of Directors would have the right to decide upon the offering to parties determined by the Board of Directors of any shares that may remain unsubscribed for pursuant to the shareholders pre-emptive subscription right. A maximum number of 26,000,000,000 new shares could be issued in the share issue. The Board of Directors would be authorised to determine the subscription price for the new shares and the other terms and conditions of the share issue. The authorisation of the Board of Directors to issue shares would be valid until 31 December The authorisation is conditional upon the granting of the authorisation referred to in Section Authorising the Board of Directors to decide to issue new shares and/or special rights entitling to shares in deviation from the pre-emptive subscription rights of the shareholders The Board of Directors proposes that the extraordinary general meeting would, with the majority set forth in Article 14 of the Articles of Association, grant an authorisation to the Board of Directors to decide to issue up to 600,000,000 new shares through one or several share issues and/or by granting of special rights entitling to shares, as referred to in Chapter 10, Section 1, of the Finnish Companies Act in order to carry out an adjustment of the conversion price in accordance with the terms and conditions of the convertible bonds of the Company due 2013 resulting from the share issue referred to in Section 6. The authorisation would be valid until 31 December The use of the authorisation is conditional upon the completion of the share issue referred to in Section Closing of the meeting THE MEETING MATERIALS This notice, which includes the proposals of the Board of Directors on the agenda of the extraordinary general meeting, is available on the Company s website at The Company s annual accounts, the related reviews of the Board of Directors and the related auditor s reports for the years ended 31 December 2011 and 2012, the Interim Report for January March 2012, the Interim Report for January June 2012, the Interim Report for January September 2012, the Annual Results Review 2012 and the statement by the Board of Directors on the events occurring after the Annual Results Review 2012 and having a material effect on the position of the Company are also available on the above-mentioned website. The proposals of the Board of Directors, the Company s annual accounts, the related reviews of the Board of Directors and the related auditor s reports for the years ended 31 December 2011 and 2012, the Interim Report for January March 2012, the Interim Report for January June 2012, the Interim Report for January September 2012 and the Annual Results Review 44

48 2012 and the statement by the Board of Directors on the events occurring after the Annual Results Review 2012 and having a material effect on the position of the Company will also be available at the meeting. Copies of these documents and of this notice will be sent to shareholders upon request. INSTRUCTIONS FOR THE PARTICIPANTS IN THE GENERAL MEETING The right to participate and registration Each shareholder who is registered on 26 February 2013 in the register of shareholders of the Company held by Euroclear Finland Ltd has the right to participate in the extraordinary general meeting. A shareholder whose shares are registered on his/her personal Finnish book-entry account is registered in the shareholders register of the Company. A shareholder wishing to participate in the extraordinary general meeting shall register for the meeting no later than 4:00 p.m. (GMT+2) on 5 March 2013 by giving a notice of attendance. Such notice can be given either by to the address [email protected], by facsimile to the number or by regular mail to the Company s address, Ahventie 4 B, 5th floor, FI Espoo, Finland, or via the Company s website, Internet registration via the Company s website is expected to commence on 14 February In connection with the registration, a shareholder shall notify his/her name, personal identification number/business identity code, address, telephone number and the name of a possible assistant or proxy representative and the personal identification number of a proxy representative. The personal data given to the Company is used only in connection with the extraordinary general meeting and with the processing of related registrations. Pursuant to chapter 5, section 25 of the Finnish Companies Act, a shareholder who is present at the extraordinary general meeting has the right to ask questions with respect to the matters to be considered at the meeting. Proxy representative and powers of attorney A shareholder may participate in the extraordinary general meeting and exercise his/her rights at the meeting by way of proxy representation. A proxy representative shall produce a dated proxy document or otherwise in a reliable manner demonstrate his/her right to represent the shareholder at the extraordinary general meeting. When a shareholder participates in the extraordinary general meeting by means of several proxy representatives representing the shareholder with shares at different securities accounts, the shares by which each proxy representative represents the shareholder shall be identified in connection with the registration for the extraordinary general meeting. Possible proxy documents should be delivered in originals to the Company at the Company s address given above before the last date for registration. Holder of nominee registered shares A holder of nominee registered shares is advised to request without delay necessary instructions regarding the registration in the register of shareholders of the Company, the issuing of proxy documents and the registration for the extraordinary general meeting from his/her custodian bank. The account operator of the custodian bank will register a holder of nominee registered shares, who wants to participate in the extraordinary general meeting, to be temporarily entered into the register of shareholders of the Company at the latest on 5 March 2013 by 10:00 a.m. (GMT+2). Other instructions and information On the date of this notice to the extraordinary general meeting, 14 February 2013, the total number of shares and votes in the Company is 272,309,640. The extraordinary general meeting will be held in the Finnish language, but questions can also be presented in the English language. 45

49 Espoo, Finland, on 14 February 2013 TALVIVAARA MINING COMPANY PLC THE BOARD OF DIRECTORS 46

50 TALVIVAARA MINING COMPANY PLC (Incorporated and registered in the Republic of Finland with business identity code ) EXTRAORDINARY GENERAL MEETING 8 MARCH 2013 REGISTRATION FORM Country of Residence of Incorporation (see Note 1) Name of CDI Holder (see Note 2) Full Address (see Note 3) ID Code (see Note 4) ISIN Code FI Number of shares (see Note 5) We certify that the information in this form is true and accurate in all respects, and we hereby authorise Nordea Bank Finland Plc to enter us on the temporary shareholder register of Talvivaara Mining Company Plc in order to enable us to participate in the Extraordinary General Meeting of Talvivaara Mining Company Plc to be held on 8 March We understand that this temporary shareholder register will be made available until the Extraordinary General Meeting. Signature. Name in block capitals Dated this 2013 (insert date) at.(insert place of signature) 47

51 Notes 1. Please enter your country of incorporation or, in the case of an individual, country of residence. 2. Please enter the full name of the beneficial holder of the CREST Depository Interests ( CDIs ). This name should match the name set out in the Proxy Form. Please note also that under Finnish Companies Act, only beneficial holders of shares in a Finnish company may participate and vote in the shareholders meetings. 3. Please enter your full address (including post code). 4. In the case of a company, your registered number, and in the case of an individual, please enter a personal ID code, such as a social security number, national insurance number, passport number or similar. 5. Please enter the total number of ordinary shares in the capital of Talvivaara Mining Company Plc in respect of which you hold CDIs. 6. In order to participate at the EGM, you must submit your registration form and potential proxies to Computershare Investor Services (Jersey) Limited by no later than 4:00 p.m. (GMT) on 26 February This form of registration and any power of attorney or other authority under which it is signed or an officially certified copy of such power of attorney must be deposited at or posted to the Registrars of the Company, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February If this form is given by an individual, it must be signed by the individual or signed on his behalf by his attorney. If this form is given by a corporation or other legal entity, it must be given under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation (and a list of authorised signatures must be enclosed). 48

52 TALVIVAARA MINING COMPANY PLC (Incorporated and registered in the Republic of Finland with business identity code ) EXTRAORDINARY GENERAL MEETING 8 MARCH 2013 FORM OF PROXY We, (Full name in block capitals please) of (Please insert address) being a holder of CREST Depository Interests representing. ordinary shares (please insert number of ordinary shares) in Talvivaara Mining Company Plc ( CDIs ) hereby appoint Nordea Bank Finland Plc ( Nordea ) as our true and lawful attorney with full powers of delegation and substitution to represent us and vote at the Extraordinary General Meeting of Talvivaara Mining Company Plc to be held at 10:00 a.m. (GMT+2) on 8 March 2013 at Finlandia Hall, Mannerheimintie 13 e, FI Helsinki, Finland and at any adjournment thereof. We wish Nordea to vote on the resolutions as indicated below (see notes 3 and 4). Resolutions For Against Abstain 1. Board s proposal concerning the authority to issue up to 26,000,000,000 new shares to carry out a rights issue 2. Board s proposal concerning the authorisation to the Board to decide to issue up to 600,000,000 new shares through one or several share issues and/or by granting of special rights entitling to shares to address an adjustment to the terms of the Convertible Bonds due 2013 Signature. Name in block capitals Dated this 2013 (insert date) at.(insert place of signature) 49

53 Notes 1. This Form of Proxy and any power of attorney or other authority under which it is signed or an officially certified copy of such power of attorney must be deposited at or posted to the Company s registrars, for the attention of Lucy Burns, Relationship Manager, Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES so as to be received by no later than 4:00 p.m. (GMT) on 26 February The completion and return of a Form of Proxy will preclude you from voting at the EGM in person. 2. In the case of joint holders, the vote of the senior holder who tenders a vote in person or by proxy will be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority is determined by the order in which the names stand in the register of CDIs in respect of the joint holding. Subject to this, the signature of any one of the joint holders will suffice, but if a holder other than the first named holder signs, it will be helpful if the name of the first named holder is also given. 3. Please indicate how you wish to vote by placing a tick in the appropriate box. If no indication is given, the proxy will exercise his or her discretion as to whether, and if so, how, he or she votes. 4. If this form is given by an individual, it must be signed by the individual or signed on his behalf by his attorney. If this form is given by a corporation or other legal entity, it must be given under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation (and a list of authorised signatures must be enclosed). 5. Please note also that under Finnish Companies Act, only beneficial holders of shares in a Finnish company may participate and vote in the shareholders meetings. 50