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Key figures

All reported figures in this release are unaudited.

CEO Pekka Perä comments: The past quarter was a challenging period for us, but at the same it was operationally very promising. Since the re-start of mining in mid-May, ore production and materials handling operations have continued at record levels. Leaching of newly stacked ore has also progressed well. A new primary heap section was completed in September, and by the end of October the entire heap was producing metals according to plan and in line with our best ever heaps. Our nickel production increased by 46% and zinc production by 26% from the previous quarter, indicating that the worst is now over and we can look forward to continued improvement in our production volumes in the coming months.

Excess water has continued to impact the leaching performance of our older heaps, reducing the metal grades in solution both through dilution and poor reactivity. The relative significance of this issue will diminish over time as the older heaps are replaced by new ones, but during the third quarter, our production still continued to suffer from this. In September, we also lost some production due to a planned maintenance stoppage, during which we successfully removed bottlenecks to allow increased flow rates through the plant.

Whilst our production volumes improved during the third quarter, they still remained modest. This, together with the remarkably low nickel price, weakened our financial results significantly. However, we believe this to be a temporary situation. Whilst we cannot influence metal prices, we are improving our operations and we expect to produce more metals in the second half of the year than we did in the first, although our short term production planning may in part be driven by cash optimization rather than production volume maximization. In October, we achieved a new monthly record in ore production, which also speaks for our ability to continue ramping up towards full production.

As we announced in October, the persistently weak nickel price and the prolonged effect of excess water on our production volumes have contributed to our liquidity position weakening more than anticipated over the recent months. We have put considerable effort into securing sufficient funding to get us through this difficult period, and I am satisfied we are now in advanced discussions with our stakeholder concerning a financing solution that would address Talvivaara`s current liquidity needs.

Our personnel has worked under considerable pressure during the recent months, but nevertheless performed phenomenally despite the challenging situation. Our aim is to demonstrate that our bioheapleaching technology and operations can deliver sustainable and profitable production on a consistent basis.

Enquiries:

Talvivaara Mining Company Plc. Tel. +358 20 712 9800
Pekka Perä, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO

College Hill Tel. +44 20 7457 2020
David Simonson
Anca Spiridon

Webcast and conference call on 7 November 2013 at 2:00 pm EET / 12:00 pm GMT

A combined webcast and conference call on the January-September 2013 Interim Result will be held on
7 August 2013 at 2:00 pm EET / 12:00 pm GMT. The call will be held in English.

The webcast can be accessed through the following link:

http://qsb.webcast.fi/t/talvivaara/talvivaara_2013_1107_q3/

A conference call facility will be available for a Q&A with senior management following the presentation.

Participant - Finland: +358 (0)9 2313 9201
Participant - UK: +44 (0)20 7162 0077
Participant - US: +1 334 323 6201

Conference ID: 937163
The webcast will also be available for viewing on the Talvivaara website shortly after the event.

Financial review

Q3 2013 (July - September)

Net sales and financial result

Talvivaara`s net sales for nickel and cobalt deliveries to Norilsk Nickel and for zinc deliveries to Nyrstar during the quarter ended 30 September 2013 amounted to EUR 24.4 million (Q3 2012: EUR 44.8 million). The net sales increased by 87% compared to Q2 2013 primarily due to an increase of 51% in nickel deliveries and an increase of 239% in zinc deliveries. However, the increase in product deliveries was partially offset by the nickel price which remained weak throughout the quarter. The product deliveries in Q3 2013 amounted to 2,646 tonnes of nickel, 88 tonnes of cobalt and 7,062 tonnes of zinc.

Changes in inventories of finished goods and work in progress amounted to EUR 18.1 million (Q3 2012: EUR 10.4 million) and included an impairment of EUR 1.0 million based on the anticipated metals prices and the Group`s profit generating capability in the near term.

Operating loss for Q3 2013 was EUR (29.2) million (Q3 2012: EUR (4.3) million), corresponding to an operating margin of (120.0%) (Q3 2012: (9.6%)). During the period, materials and services amounted to EUR (32.3) million (Q3 2012: EUR (29.3) million) and other operating expenses to EUR (18.3) million (Q3 2012: EUR (13.9) million). Materials and services and other operating expenses increased by 59% compared to Q2 2013. The largest cost items were production chemicals, external services, electricity and maintenance. Low metal grades in leach solution decreased the chemicals efficiency in Q3 2013, and treatment and discharge of excess waters from the mine area also continued to have a significant cost impact. Furthermore, the efforts to reverse the effects of excess water in the older heaps have impacted the operating result.

Loss for the quarter amounted to EUR (29.2) million (Q3 2012: EUR (12.1) million).

Balance sheet and financing

Capital expenditure during the third quarter of 2013 totalled EUR 20.6 million (Q3 2012: EUR 32.5 million). The expenditure related primarily to uranium extraction circuit and the construction of secondary leaching areas.

Q1-Q3 2013 (January-September)

Net sales and financial result

Talvivaara`s net sales for nickel and cobalt deliveries to Norilsk Nickel and for zinc deliveries to Nyrstar during the nine month period ended 30 September 2013 amounted to EUR 65.0 million (Q1-Q3 2012: EUR 117.3 million). Throughout the year nickel production has suffered from the prolonged effects of excess water on the older heaps and consequent low nickel concentration in leach solution. In addition, zinc production was impacted in the early part of 2013 by poor recoveries at the metals recovery plant resulting from a process modification that proved unsuccessful and has since been reversed. Owing to these factors the product deliveries in Q1-Q3 2013 only amounted to 7,148 tonnes of nickel, 243 tonnes of cobalt and 11,359 tonnes of zinc (Q1-Q3 2012: 10,457 tonnes of nickel, 285 tonnes of cobalt, 21,078 tonnes of zinc).

The Group`s other operating income amounted to EUR 1.4 million (Q1-Q3 2012: EUR 4.0 million) and came mainly from indemnities on property damages.

Changes in inventories of finished goods and work in progress amounted to EUR 41.3 million (Q1-Q3 2012: EUR 56.7 million). Due to a temporary discontinuation of mining and crushing operations, no new ore was stacked during Q1 2013 and part of Q2 2013. Consequently the work in progress grew less than during normal operations during the first half of 2013. Ore production was successfully re-commenced in May and has since proceeded according to plan. Due to the prevailing low nickel prices and the Group`s anticipated profit generating capability in the near term, an impairment of EUR 4.8 million has been recognized in the inventories of finished goods and work in progress in January-September 2013.

Employee benefit expenses were EUR (23.1) million in Q1-Q3 2013 (Q1-Q3 2012: EUR (20.7) million). The increase was attributable to the increased number of personnel. The increase was partially offset by temporary lay-offs, which Talvivaara started in February 2013 and ended in April 2013, and the co-operation consultations concluded in August 2013 and resulting in the reduction of 68 jobs through retirement or terminations of employment.

Operating loss for Q1-Q3 2013 was EUR (73.1) million (Q1-Q3 2012: EUR (26.6) million. Materials and services were EUR (74.1) million in Q1-Q3 2013 (Q1-Q3 2012: EUR (97.8) million) and other operating expenses were EUR (43.6) million (Q1-Q3 2012: EUR (47.8) million). The largest cost items were production chemicals, external services and electricity. Mining and materials handling costs were lower than in 2012 during Q1-Q3 2013 due to the temporary suspension of ore mining. In metals recovery, the unit production costs per tonne of nickel produced were significantly higher than the year before due to inefficiencies in chemicals consumption caused by low metals grades in feed solution. In addition, the costs of neutralizing the excess waters in process have affected the operating result in Q1-Q3 2013.

Finance income for Q1-Q3 2013 was EUR 0.4 million (Q1-Q3 2012: EUR 2.1 million). Finance costs of EUR (34.2) million (Q1-Q3 2012: EUR (34.1) million) were mainly caused by interest and related financing expenses on borrowings.

Loss for Q1-Q3 2013 and the total comprehensive income amounted to EUR (80.7) million (Q1-Q3 2012: EUR (44.5) million) reflecting the depressed nickel price, lower than anticipated level of product deliveries, high cost of treatment and discharge of excess waters and reassessment of environmental provisions. Earnings per share were EUR (0.07) in Q1-Q3 2013 (Q1-Q3 2012: EUR (0.16)).

Balance sheet

Capital expenditure in Q1-Q3 2013 totalled EUR 53.2 million (Q1-Q3 2012: EUR 67.9 million). The expenditure related primarily to water management structures such as dams, pipings, pumps and water treatment ponds, uranium extraction circuit and secondary leaching. On the consolidated statement of financial position as at 30 September 2013, property, plant and equipment totalled EUR 812.6 million (31 December 2012: EUR 809.5 million).

In the Group`s assets, inventories amounted to EUR 344.1 million on 30 September 2013 (31 December 2012: EUR 297.8 million). The increase in inventories reflects the ramp-up of production and the consequent increase in the amount of ore stacked on heaps, valued at cost. The temporary suspension of ore mining reduced the rate at which the inventories increased during first half of 2013. In addition, Talvivaara has recognized an impairment of EUR 3.6 million relating to work in progress and an impairment of EUR 1.3 million relating to the inventories of finished goods on 30 September 2013 based on the Group`s profit generating outlook for Q4 2013. However, it should be noted that work in progress added by the estimated costs to complete production, i.e. operational expenditure related to metals recovery, does not exceed the estimated revenue in the long run.

Trade receivables amounted to EUR 21.5 million on 30 September 2013 (31 December 2012: EUR 32.2 million). Trade receivables increased by 139% compared to the previous quarter due to increased product deliveries.

On 30 September 2013, cash and cash equivalents totalled EUR 46.5 million (31 December 2012: EUR 36.1 million).


In equity and liabilities, the total equity amounted to EUR 475.3 million on 30 September 2013 (31 December 2012: EUR 306.8 million). During the reporting period, Talvivaara raised EUR 250.8 million, net of transaction costs, from a rights issue completed in April 2013. In addition, interest cost of EUR 3.2 million of a perpetual capital loan has been capitalized in equity during 2013.

Provisions decreased from EUR 27.5 million on 31 December 2012 to EUR 16.7 million at the end of September 2013. The costs related to Water Management and Gypsum Pond Leakage of November 2012 amounted to EUR 14.9 million in Q1-Q3 2013 and the corresponding provisions were de-recognised. Treatment and discharge of excess waters from the mine area continued throughout the period, reducing the water management related risk level whilst also allowing mining activities to be re-started and subsequently continued according to plan. During Q3 2013 Talvivaara has reviewed the provision related to Water Management, Gypsum Pond Leakage and Environmental Restoration and recognized additional provisions amounting to EUR 4.6 million.

Borrowings decreased from EUR 599.8 million on 31 December 2012 to EUR 510.0 million at the end of September 2013. The changes in borrowings during Q1-Q3 2013 mainly related to the repayment of Senior Unsecured Convertible Bonds of 2008 and termination of finance lease contracts amounting to EUR 7.5 million. Total advance payments as at 30 September 2013 amounted to EUR 287.3 million, representing an increase of EUR 13.6 million from EUR 273.7 million on 31 December 2012. During Q1-Q3 2013, Talvivaara received a total of EUR 7.4 million in advance payments from Cameco Corporation based on the amended uranium off-take agreement between the companies and EUR 12.0 million in advance payments from Nyrstar based on the amendment agreement regarding the zinc in concentrate streaming agreement (see section Financing), whilst the advance payments from Nyrstar was amortised by EUR 5.8 million as a result of zinc deliveries.

Total equity and liabilities as at 30 September 2013 amounted to EUR 1,340.9 million (31 December 2012: EUR 1,260.8 million).

Financing

On 12 February 2013 Talvivaara Sotkamo entered into an amendment agreement with Cameco concerning the uranium take-in-kind agreement 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. In addition, the duration of the agreement was extended to 31 December 2017 and commercial terms revised accordingly. Talvivaara received the additional up-front investment in February 2013.

On 14 February 2013, Talvivaara Sotkamo entered into an amendment agreement with Nyrstar regarding the zinc in concentrate streaming agreement pursuant to which Nyrstar made an additional 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 up-front payment was received in February 2013. As at 30 September, 11,359 tonnes of zinc had been delivered towards the 38,000 tonnes commitment agreed in the amendment agreement.

On 8 March 2013 an Extraordinary General Meeting of Talvivaara Mining Company resolved to approve the proposal by the Board of Directors to authorise the Board of Directors to undertake a share issue for consideration pursuant to the shareholders` pre-emptive subscription right. The share issue was finalised in April and all 1,633,857,840 new shares offered in the rights issue were subscribed for. The gross proceeds amounted to approximately EUR 261 million. Total number of shares in Talvivaara Mining Company increased to 1,906,167,480 shares.

On 20 May 2013, Talvivaara completed the repayment of its Senior Unsecured Convertible Bonds of 2008. The remaining convertible bonds amounted to EUR 76.9 million and the repayment was made according to the terms.

Production review

Metals production

Talvivaara produced 2,595t of nickel and 5,645t of zinc in Q3 2013. In January-September 2013, nickel production amounted to 7,103t and zinc production to 13,239t. Metals production continued to be impacted by low metal grades in leach solution. However, the average feed flow to the metals recovery plant during Q3, excluding scheduled maintenance, was 1,375 m3/h, which is a new quarterly record and indicates continued improvement in plant availability and production stability.

A scheduled maintenance break at the metals recovery plant was held at the end of September with a total stoppage time of seven days. The maintenance was primarily designed to remove bottlenecks from the plant and it was successfully executed to allow feed flow rates of up to 1,750m3/h following the stoppage. Other works carried out during the break included e.g. reactor maintenance, scheduled inspection of thickeners, cleaning of vent gas scrubbers and doubling of the critical process automation stations in order to increase plant availability.

In the plant operation, focus has remained on improving chemical efficiency as part of the broader efficiency and productivity programme.

Ore production

Ore production during the quarter amounted to 4.1Mt. The amount of nickel stacked during the period was approximately 11,000t, which exceeds the 2012 quarterly average of 7,000t by 57%. The increase is both a result of increased tonnages of ore production and of improved grade control. The average nickel grade of the ore stacked in Q3 was 0.27%.

Bioheapleaching

The excess water in the heaps stacked prior to the shut-down of mining in September 2012 has diluted metal grades in leach solution, reduced the efficiency of aeration, slowed down the leaching reactions and impacted the rate of evaporation throughout the current year. Efforts to reverse the effects of excess water continued through the third quarter and resulted in the release of substantial amounts of solution from the older heaps. Consequently, aeration has become more efficient and signs of increasing reactivity in these heaps are emerging. The rate of improvement has, however, remained below expectations and resulted in the leach solutions remaining diluted throughout the third quarter. The nickel grade in solution pumped to metals recovery averaged 1.0 g/l during the quarter, reflecting the subdued performance of the older heaps.

Improved metal grades in leach solution are expected to be seen in the fourth quarter as a result of the newly stacked primary heap 4 coming into production. Stacking of this heap was completed in the beginning of September and its leaching has progressed well as a result of efficient aeration, appropriate water balance and careful maintenance. Leach solution temperature remained at around 45°C through then end of the quarter despite the seasonal drop in ambient temperature.

Following the completion of heap 4, stacking of a new round of heap 1 commenced in early September and has progressed according to plan. This heap section is anticipated to be completed at around the year-end and to start contributing to metals production in the middle of the first quarter of 2014.

Production key figures

Efficiency and productivity programme

Talvivaara is committed to a broad efficiency and productivity programme, which was launched in June 2013 and targets at achieving a EUR 100 million cash flow effect from savings and productivity improvements within 12 months.

The programme commenced with an intensive five-week diagnostics phase which was completed in early July. Approximately 30 initiatives to enhance efficiency and productivity were identified and are now being implemented. These consist of, among others, improving the leaching performance of existing heaps, further optimizing the production throughput and chemicals usage of the metals plant, working capital management, capital expenditure cuts, sale of certain non-operational assets and financing elements. The co-operation consultations concluded in August 2013 also formed a part of the programme.

The efficiency and productivity programme is headed by COO Darin Cooper since 16 September and is proceeding according to plan.

Sustainable development, safety and permitting

Safety

Talvivaara`s goal is a safe and healthy working environment, and the Company continued to develop its safety culture based on a zero accident philosophy. A company-wide evaluation and training project focusing on safety culture and process safety was commenced in September.

At the end of the third quarter, the injury frequency among the Talvivaara personnel was 26.5 lost time injuries/million working hours on a rolling 12 month basis (30 September 2012: 13.2 lost time injuries/million working hours).

Environment

In environmental management, Talvivaara`s primary focus during the third quarter continued to be on water balance. Treatment and discharge of excess waters from the mine area continued throughout the period. However, the discharge rate was limited by the reference flow in the Kalliojoki river, which remained low throughout the quarter. At the end of September, the water balance overall was at an acceptable level, but the discharge rate limitation had particularly hindered Talvivaara`s ability to empty gypsum pond sections 5 and 6 from excess water.

The quality of discharged waters has remained at planned levels, with environmental impact, if any, anticipated to be mainly caused by the sulphate content. The metal burden to the environment has remained limited.

Whilst continuous improvement work continues, Talvivaara considers historical hydrogen sulphide (odour) and dust emissions to have been largely resolved. Only isolated complaints have been received from neighbouring residents during the first nine months of 2013.

Talvivaara places significant emphasis on timely and transparent communication on environmental matters with the neighbouring communities and other interested stakeholders. The locally focused Finnish language website www.paikanpaalla.fi continued to be successfully used for the delivery of locally relevant, timely information and for interaction with interested stakeholders.

Permitting

On 31 May 2013, the Northern Finland Regional State Administrative Agency ("AVI") granted Talvivaara an environmental permit decision relating to water discharges. The permit decision removed the volume quota on water discharges and amended restrictions based on the amount of contaminants. Instead of the previous volume quota, the new permit decision restricts the water discharge flow rate on the basis of the prevailing flow rate in the nearby Kalliojoki river at any given time. Talvivaara has submitted an appeal to the Vaasa Administrative Court with respect to the flow rate restriction in the permit decision, as the Company considers this permit condition to unnecessarily restrict its ability to remove purified excess waters from the area and thereby reduce the environmental risk level. As at 30 September 2013, no response to the appeal had been obtained.

The environmental permit decision of 31 May 2013 also ruled that excess water from the gypsum pond sections 5 and 6 should be removed by 31 October 2013. Because of the discharge rate restriction tied to the Kalliojoki river flow, this target was not achievable and Talvivaara has applied for an extension to this time limit from the Vaasa Administrative Court and AVI. After the reporting period, in October 2013, the Vaasa Administrative Court gave an interim ruling whereby the deadline was postponed until 31 December 2013. AVI has not yet responded to the Company`s application to extend the time limit for pond section 5 until the end of January 2014, and for pond section 6 until the end of August 2014.

Talvivaara`s existing environmental permit is currently being renewed under a standard process. Decision on the permit by AVI is expected before the end of 2013. The environmental permit application for the planned uranium extraction is also being processed by AVI and a decision on it is similarly expected by the year-end.

Business development and commercial arrangements

Planned uranium extraction and uranium off-take agreement with Cameco

Talvivaara is preparing for the recovery of uranium as a by-product of the Company`s existing operations. Uranium occurs naturally in small concentrations in the Talvivaara area and leaches into the process solution along with Talvivaara`s other products. Annual uranium production is estimated at ca. 350tU (ca. 770,000 pounds), corresponding to approximately 410t (900,000 pounds) of yellow cake (UO₄). Talvivaara`s entire uranium production will be sold under a long-term agreement to Cameco.

The uranium recovery facility is essentially completed, and commissioning is expected to start soon following the receipt of the remaining required permits.

Risk management and key risks

In line with current corporate governance guidelines on risk management, Talvivaara carries out an on-going process endorsed by the Board of Directors to identify risks, measure their impact against certain assumptions and implement the necessary proactive steps to manage these risks.

Talvivaara`s operations are affected by various risks common to the mining industry, such as risks relating to the development of Talvivaara`s mineral deposits, estimates of reserves and resources, infrastructure risks, and volatility of commodity prices. There are also risks related to counterparties, currency exchange ratios, management and control systems, historical losses and uncertainties about the future profitability of Talvivaara, dependence on key personnel, effect of laws, governmental regulations and related costs, environmental hazards, and risks related to Talvivaara`s mining concessions and permits.

In the short term, Talvivaara`s key operational risks continue to relate to water management and the on-going ramp-up of operations. While the Company has demonstrated that all of its production processes work and can be operated on industrial scale, the rate of ramp-up is still subject to risk factors including the time required to reach a sustainable level of water balance, reliability and sustainable capacity of production equipment, and eventual speed of leaching and rates of metals recovery in bioheapleaching. In addition, there may be production and ramp-up related risks that are currently unknown or beyond the Company`s control.

The market price of nickel has historically been volatile and in the Company`s view this is likely to persist, driven by shifts in the supply-demand balance, macroeconomic indicators and variations in currency exchange ratios. Nickel sales currently represent close to 90% of the Company`s revenues and variations in the nickel price therefore have a direct and significant effect on Talvivaara`s financial result and economic viability. Talvivaara is unhedged against variations in metal prices. Full or substantially full exposure to nickel prices is in line with Talvivaara`s strategy and supported by the Company`s view that it can operate the Talvivaara mine, once it has been fully ramped up, profitably also during the lows of commodity price cycles.

Talvivaara`s revenues are almost entirely in US dollars, whilst the majority of the Company`s costs are incurred in Euro. Potential strengthening of the Euro against the US dollar could thus have a material adverse effect on the business and financial condition of the Company. Talvivaara hedges its exposure to the US dollar on a case by case basis with the aim of limiting the adverse effects of US dollar weakness as considered justified from time to time.

Liquidity and refinancing risks may arise as a result of the Company`s inability to produce sufficient volumes of its saleable products, particularly nickel, unexpected increase in production costs, and sudden or substantial changes in the prices of commodities or currency exchange rates. Recent weakness in nickel price and production difficulties stemming from water balance issues since 2012 have resulted in the Company`s liquidity position weakening more than anticipated. As a result, the Company is undertaking an assessment of all available funding options to secure its financial and operational flexibility and a sufficient level of liquidity going forward.

Talvivaara has continued to recognise deferred tax assets on its consolidated balance sheet in 2013 and the amount of deferred tax assets recognized on tax loss carryforwards as at 30 September 2013 amounted to EUR 136.5 million (31 December 2012: EUR 103.8 million). During the reporting period the management has reviewed the past operational challenges which have led to lower than expected production and profitability levels at Talvivaara mine.
If Talvivaara generates future taxable profits lower than those assumed by the management in determining the amounts of the recognized deferred tax assets, the assets may become impaired, either in part or in full. Accordingly, the amounts recognized on the balance sheet could be reversed through profit and loss. This could have a material adverse effect on Talvivaara`s business, financial condition and results of operations.
Due to the historical losses of the mine project and the delays in the ramp-up process, the management will review the amount of deferred tax assets recognized on tax loss carryforwards during the last quarter of 2013. However, the management continues to be confident that the Group can generate sufficient taxable profits so that all deferred tax assets canl be utilized in the foreseeable future.

Personnel and management

The number of personnel employed by the Group on 30 September 2013 was 584 (Q3 2012: 551). Wages and salaries paid during the three months to 30 September 2013 totalled EUR 6.3 million (Q3 2012: EUR 4.8 million). Wages and salaries paid during the nine months to 30 September 2013 totalled EUR 19.1 million (Q1-Q3 2012: EUR 17.1 million).

In the third quarter, Talvivaara conducted co-operation consultations, which were concluded in August and reduced the number of personnel by 68 through terminations of employment and retirement, and by further 96 employees through a decision not to renew temporary contracts.

On 28 August 2013, Talvivaara announced changes in its management to reinforce and achieve the Company`s operational and financial targets. Mr. Darin Cooper, BEng, Metallurgy and MBA (British citizen, born in 1967), was appointed Chief Operating Officer and a member of the Company`s Executive Committee. Following the changes, the members of Talvivaara`s Executive Committee are CEO Pekka Perä, Deputy CEO and Chief Financial Officer Saila Miettinen-Lähde, Chief Commercial Officer Pekka Erkinheimo, Chief Sustainability Officer Eeva Ruokonen, Chief Human Resources Officer Maija Kaski, Chief Operating Officer Darin Cooper, Chief Metals Production Officer Pertti Pekkala and Chief Mining Officer Kari Vyhtinen.

In addition to the Executive Committee, CEO Pekka Perä set up a Technical Executive Committee consisting of himself, Darin Cooper, Pertti Pekkala, Kari Vyhtinen and Senior Vice President - Projects Lassi Lammassaari.

Shares and shareholders

The number of shares issued and outstanding and registered on the Euroclear Shareholder Register as of 30 September 2013 was 1,906,167,480. Including the effect of the EUR 225 million convertible bond of 16 December 2010 and the Option Schemes of 2007 and 2011, the authorised full number of shares of the Company amounted to 2,041,901,379.

The share subscription period for stock options 2007A was between 1 April 2010 and 31 March 2012. By the end of the subscription period a total of 2,279,373 Talvivaara Mining Company`s new shares were subscribed for under the stock option rights 2007A. A total of 53,727 stock option rights 2007A remained unexercised following the end of the subscription period and expired.

After the adjustments to terms and conditions of the 2007 stock options in April 2013, a total of 16,289,000 option rights 2007C have been issued to employees and the subscription period for stock options 2007C is between 1 April 2012 and 31 March 2014. No new shares of Talvivaara were subscribed for under the stock option rights 2007C in Q3 2013 and a total of 16,289,000 stock options 2007C remain unexercised.

After the adjustments to terms and conditions of the 2011 stock options in April 2013, a total of 9,432,500 option rights 2011B have been issued to key employees and the subscription period for stock options 2011B is between 1 April 2015 and 31 March 2017. A total of 9,432,500 stock options 2011B remain unexercised.

In March 2013 an Extraordinary General Meeting of Talvivaara Mining Company resolved to approve the proposal by the Board of Directors to authorise the Board of Directors to undertake a share issue for consideration pursuant to the shareholders` pre-emptive subscription rights. The share issue was completed in April 2013 and the total number of shares in Talvivaara Mining Company Plc increased to 1,906,167,480 shares.

As at 30 September 2013, the shareholders who held more than 5% of the shares and votes of Talvivaara were Solidium Oy (16.7%) and Pekka Perä (6.5%).

Events after the review period

Liquidity position
On 10 October 2013, Talvivaara announced that, as the market price of nickel had declined by more than 20 per cent. since the first quarter of 2013 and as Talvivaara`s production had continued to be impacted by the prolonged effects of excess water on older ore heaps, Talvivaara`s liquidity position had weakened more than anticipated.

Talvivaara is currently in advanced discussions with certain stakeholders concerning a financing solution that would address Talvivaara`s current liquidity needs. Although there can be no assurance that such additional financing will be obtained, the relevant parties are working towards a definitive agreement in an expeditious manner.

The financial information included in this interim report has been prepared on the basis that Talvivaara will obtain such additional financing and continue operating on a going concern basis, in part, in reliance on such financing. If such additional financing is not obtained, the Board of Directors of Talvivaara will consider other alternatives available to Talvivaara, including filing for a corporate restructuring or bankruptcy.
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Continued improvement in operations
Talvivaara`s mining and materials handling operations reached an all-time monthly record of 1.7Mt of ore processed in October.

Leaching of the ore stacked since the re-commencement of mining in mid-May is progressing in line with the best historical heaps, from which nickel recovery in excess of 70% in approximately 18-20 months has been obtained. All key leaching parameters, including the development of metal grades in solution and solution temperatures, indicate good performance of the new heaps, and the entire primary heap section 4 had started producing metals by the end of October.

Closed circuit of process waters was achieved in October as a result of successful commissioning of reverse osmosis water purification plants to full capacity. Subsequently the raw water intake to the metals recovery plant has discontinued under normal operating conditions.

Short-term outlook

Operational outlook

All production processes at Talvivaara currently operate well and the Company anticipates its production volumes to gradually increase over the coming months, as newly stacked ore on the primary heaps replaces the old heaps still suffering from the effects of excess water. In the near term, Talvivaara anticipates its H2 2013 nickel production to increase compared to the H1 2013 output of 4,508t. However, under the prevailing market conditions, the Company also considers production planning measures that emphasize short term cash flow optimization over maximization of production volumes.

Market outlook

Nickel price has been under significant pressure throughout most of 2013. The LME nickel price declined from a level of USD 18,000-19,000/t in early 2013 to below USD 14,000/t in the summer, and the depressed price level has persisted through the current autumn. In the short term, concerns over the global macroeconomic growth outlook, stainless steel utilisation rates and the build-up of global nickel inventories are likely to continue weighing on the nickel price. On the other hand, the prevailing price level is materially below the marginal cost of production for a large part of the nickel mining industry, which is likely to result in an increasing number of supply restrictions in the absence of a noticeable price correction. The planned introduction of an export ban to nickel pig iron ore from Indonesia from the beginning of 2014 may, if successfully implemented, also contribute to positive price development, but given the current high inventory levels and continuing global economic uncertainty, Talvivaara anticipates the nickel price upside to be relatively limited over the coming months.

7 November 2013

Talvivaara Mining Company Plc.
Board of Directors

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY

A. Share capital
B. Share issue
C. Share premium
D. Invested unrestricted equity
E. Other reserves
F. Retained earnings
G. Total
H. Non-controlling interest
I. Total equity

NOTES

1. Basis of preparation

This interim report has been prepared in compliance with IAS 34.

The interim financial information set out herein has been prepared on the same basis and using the same accounting policies as were applied in drawing up the Group`s statutory financial statements for the year ended 31 December 2012.

On 10 October 2013, Talvivaara announced that, as the market price of nickel had declined by more than 20 per cent. since the first quarter of 2013 and as Talvivaara`s production had continued to be impacted by the prolonged effects of excess water on older ore heaps, Talvivaara`s liquidity position had weakened more than anticipated.

The directors have concluded there exist a material uncertainty that casts significant doubt upon the company`s ability to continue as a going concern and that, therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business. Talvivaara is currently in advanced discussions with certain stakeholders concerning a financing solution that would address Talvivaara`s current liquidity needs. Although there can be no assurance that such additional financing will be obtained, the relevant parties are working towards a definitive agreement in an expeditious manner and the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.

On 30 September 2013, Talvivaara had an outstanding revolving credit facility of EUR 100 million with a carrying amount of EUR 70 million (the "Revolving Credit Facility"). The Revolving Credit Facility was subject to two financial covenants, one of which stated that at the end of each quarter of a fiscal year, the Group`s liquidity (defined in the covenant as the aggregate amount of cash and cash equivalents, and the available undrawn facility) shall exceed EUR 100 million.

Due to the weak nickel price development since early 2013 and the prolonged effects of excess water on production levels, Talvivaara`s liquidity position has weakened more than anticipated. As a result, the Group was unable to meet the covenant for liquidity at the end of the third quarter of 2013. As Talvivaara had not received a waiver relating to the breach of the liquidity covenant by 30 September 2013, the outstanding loan amount of EUR 70 million is presented as a current liability in accordance with IFRS.

On 30 October 2013 Talvivaara received a waiver from the lenders relating to the breach of the liquidity covenant. Simultaneously the terms, including the financial covenants and the margin, of the Revolving Credit Facility were amended and the undrawn commitment of EUR 30 million was cancelled.

Capital commitments
At 30 September 2013, the Group had capital commitments amounting to EUR 6.8 million (31 December 2012: EUR 15.1 million) principally relating to the completion of the Talvivaara mine, improving the reliability and expansion of production capacity. These commitments are for the acquisition of new property, plant and equipment.

^1. Trading price is calculated on the average of EUR/GBP exchange rates published by the European Central Bank during the period.
2. Trading price is calculated on the EUR/GBP exchange rate published by the European Central Bank at the end of the period.
3. Market capitalization is calculated on the EUR/GBP exchange rate published by the European Central Bank at the end of the period.

Talvivaara Interim Report_Jan-Sep 2013 7.11.2013

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Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
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