2016-03-07 14:23:13 CET
2016-03-07 14:23:13 CET
REGULATED INFORMATION
Talvivaaran Kaivososakeyhtiö Oyj - Annual Financial Report
Talvivaara Mining Company annual results review for the year ended 31 December 2015
Stock Exchange Release
Talvivaara Mining Company Plc
7 March 2016
Talvivaara Mining Company annual results review for the year ended 31 December
2015
Key events of 2015
* Talvivaara's Financial Statements for the financial year ended 31 December
2015 have not been prepared on a going concern basis. The chosen reporting
basis results from the existence of material uncertainties that cast
significant doubt upon the Company's ability to realise its assets and
discharge its liabilities in the normal course of business and from the lack
of visibility on the Company's operational environment twelve months beyond
the date of reporting
* The draft restructuring programme was supported by approximately 97.5
percent of the creditors of unsecured debt participating in the voting and
over 53 percent of creditors whose receivables represent all known debts.
The requisite support from the creditors set forth in the Restructuring of
Enterprises Act for the approval of the draft restructuring programme was
thereby obtained
* The Annual General Meeting held on 25 June 2015 authorised the Board of
Directors to resolve on the share issue of up to 4,500,000,000 new shares in
aggregate in deviation from the pre-emptive subscription rights of the
shareholders through one or several share issues to conduct the conversion
of the unsecured restructuring debts. The decision made was one of the
special conditions set for the confirmation and entry into force of the
draft restructuring programme
* The Administration and Laboratory Services Agreement of 19 November 2014 and
the Agreement on Lease of Lime and Limestone Handling Plant and Reception
Station of 19 November 2014 were transferred to Terrafame Oy, a 100%
subsidiary of the state-owned company Terrafame Group Oy on 13 August 2015.
The transfer of the mining business from the bankruptcy estate of Talvivaara
Sotkamo Ltd to Terrafame Oy was completed on 14 August 2015
* Nyrstar Sales & Marketing AG assigned all its rights, title, benefit and
interest under the Zinc in Concentrate Purchase Agreement and the Loan and
Streaming Holiday Agreement to Winttal Oy, a company fully owned by
Terrafame Group Oy, under an assignment deed dated 30 November 2015
* The suspension of trading of Talvivaara Mining Company Plc's shares
continues on the date of the Company's annual results announcement 7 March
2016
* Reported operating loss EUR 0.2 million
Key events of 2016 to date
* As a result of Terrafame Oy replacing the guarantee insurance of EUR 31.9
million placed by Talvivaara Sotkamo that covered the environmental bond
requirement under the current environmental permit with a new environmental
bond on 21 January 2016, Atradius Credit Insurance NV notified the Company
that the original guarantee insurance and the corresponding counter-
indemnity provided by the Company have terminated on 21 January 2016
* On 27 January 2016, Talvivaara, Terrafame Group Oy, Terrafame Oy and Winttal
Oy, signed a letter of intent, in which the parties provisionally agreed on
the essential terms and conditions for the sale of Talvivaara's assets
related to the Sotkamo mining operations. Assets to be sold would include,
among others, the lime plant needed in the Sotkamo operations, laboratory
business, as well as ownership of the geological data associated with the
mine
* Upon completion of the arrangements under the letter of intent, all main
assets of Talvivaara currently generating income for the Company would
transfer to Terrafame Oy, whilst it would enable the completion of
Talvivaara's corporate restructuring proceedings and the payments to the
creditors under the restructuring programme, and facilitate the development
of the Company's existing and potential new business opportunities
Enquiries:
Talvivaara Mining Company Plc Tel. +358 20 712 9800
Pekka Perä, CEO
Pekka Erkinheimo, Deputy CEO
Talvivaara's annual results review 2015
Introduction
Following the bankruptcy of Talvivaara Mining Company Plc's ("Talvivaara" or the
"Company") operating subsidiary Talvivaara Sotkamo Ltd ("Talvivaara Sotkamo") on
6 November 2014, trading of Talvivaara's shares on the Helsinki Stock Exchange
was suspended. The suspension of trading continues on the date of the Company's
annual results announcement 7 March 2016.
Talvivaara has been in corporate reorganisation throughout the review period of
1 January 2015 - 31 December 2015. During the corporate reorganisation
proceedings, all major decisions and decisions outside the ordinary course of
business have required consent of the administrator of the corporate
reorganisation proceedings (the "Administrator").
Talvivaara's Financial Statements for the financial year ended 31 December 2015
have not been prepared on a going concern basis. The chosen reporting basis
results from the existence of material uncertainties that cast significant doubt
upon the Company's ability to realise its assets and discharge its liabilities
in the normal course of business and from the lack of visibility on the
Company's operational environment twelve months beyond the date of reporting.
Talvivaara's ability to revise its reporting basis and to regain its status as a
going concern is dependent on the successful completion of the Company's
corporate reorganisation proceedings, which in turn requires that the Company is
able to complete an arrangement that secures the necessary cash flow for the
Company to discharge all of its liabilities and the continuance of the Company's
viable business. In the view of the Company, the transactions contemplated by
the Letter of Intent signed by and between Talvivaara, Terrafame Group Oy,
Terrafame Oy and Winttal Oy, a subsidiary of Terrafame Group Oy, on 27 January
2016 would, when completed, constitute such an arrangement. More information is
available in sections "Reporting basis" and "Events after review period".
Review of Operations
Prior to the bankruptcy of Talvivaara Sotkamo, the activities of the Talvivaara
group comprised of the operations at the Talvivaara mine primarily carried out
by Talvivaara Sotkamo and a broad range of support functions and expert services
provided by the Company. Throughout its existence, the Company has employed the
majority of the group's managerial resources and technical experts and therefore
provided the operating subsidiary with e.g. administrative, financial,
communications, technical, laboratory, commercial, legal and sustainability
services against agreed fees. In addition, the Company owns a lime and limestone
handling plant and reception station, which are critical for the production and
water treatment processes of the mine, and which the Company has leased to
Talvivaara Sotkamo since 2009.
Talvivaara and the bankruptcy estate of Talvivaara Sotkamo entered on 19
November 2014 into the Administration and Laboratory Services Agreement and the
Agreement on Lease of Lime and Limestone Handling Plant and Reception Station.
The agreements detailed the Company's personnel resources and equipment that are
available and critical for the environmentally and occupationally safe
operations at the Sotkamo mine and state the agreed pricing for the services
provided. Invoicing of personnel resources is based on hourly rates, expenses
incurred in the provision of the services are charged at cost added with an
administrative margin, and for the limestone plant a monthly rent has been
agreed. The rights and obligations of the bankruptcy estate of Talvivaara
Sotkamo under the aforementioned agreements were transferred to Terrafame Oy, a
100% subsidiary of the state-owned company Terrafame Group Oy on 13 August
2015. The transfer of the mining business from the bankruptcy estate of
Talvivaara Sotkamo to Terrafame Oy was completed on 14 August 2015.
The Annual General Meeting of the Company resolved on 25 June 2015 to authorise
the Board of Directors to resolve on the share issue of up to 4,500,000,000 new
shares in aggregate in deviation from the pre-emptive subscription rights of the
shareholders through one or several share issues to conduct the conversion of
the unsecured restructuring debts into new shares in the Company. The
subscription price of the shares would be EUR 0.1144 per share and the
subscription price shall be paid by setting off the subscriber's unsecured
restructuring debt claim including any possible interest and costs relating
thereto from the Company. The share issue authorisation is valid until 31
December 2017. The decision made was one of the special conditions set for the
confirmation and entry into force of the Company's draft restructuring
programme.
The liquidation processes of the Company's subsidiaries were completed and the
subsidiaries dissolved on 26 June 2015. Talvivaara continues its business as a
single reporting entity.
On 7 December 2015, Talvivaara was informed by Nyrstar Sales & Marketing AG
("Nyrstar") that Nyrstar has assigned all its rights, title, benefit and
interest under the Zinc in Concentrate Purchase Agreement ("Streaming
Agreement") and the Loan and Streaming Holiday Agreement ("Streaming Holiday
Agreement") to Winttal Oy, a company fully owned by Terrafame Group Oy, under an
assignment deed dated 30 November 2015. The liability of the Company under the
Streaming Agreement is based on the guarantee issued by the Company for the due
payment by its former subsidiary Talvivaara Sotkamo of the termination sum
amounting to EUR 203.4 million and payable upon premature termination of the
Streaming Agreement. Furthermore, upon the bankruptcy of Talvivaara Sotkamo, the
holder of the loan receivable has been entitled to declare that all or part of
the loans drawn by Talvivaara Sotkamo from Nyrstar under the Streaming Holiday
Agreement (in total ca. EUR 12.8 million) shall be payable on demand by
Talvivaara in its capacity as the guarantor.
To date, Talvivaara continues to pursue its target of securing sufficient
financing to participate in the acquisition of the Sotkamo mining operations or
securing a different financial and/or operative arrangement that will secure the
viability of the Company's future business operations. The Company has on 27
January 2016 signed a letter of intent with Terrafame Group Oy, and its
subsidiaries Terrafame Oy and Winttal Oy, in which the parties provisionally
agree on the essential terms and conditions for the sale of Talvivaara's assets
related to the Sotkamo mining operations against a cash consideration and a full
and final discharge of the Company's secured debt and all liabilities
transferred from Nyrstar to Winttal Oy (the "Letter of Intent").
Financial review
Financial result
The operating loss for 2015 was EUR (0.2) million (2014: EUR (702.6) million).
Revenues of the Company consist mainly of income generated from equipment leases
as well as laboratory and consultancy services rendered, whereas the costs are
mainly personnel and other operating expenses. The operating loss for 2014 EUR
(702.6) million resulted from substantial impairment charges and write-offs
resulting from the bankruptcy of Talvivaara Sotkamo on 6 November 2014 and from
the application of the non-going concern principle. In addition, a provision for
the potential 203.4 EUR million termination sum guarantee liability towards
Nyrstar as well as the write-off of the Company's 24.9 EUR million unsecured
receivable from Talvivaara Sotkamo were booked in other operating expenses for
2014.
Finance income for 2015 was EUR 0.01 million (2014: EUR 37.5 million) and
consisted mainly of interests on deposits and receivables. Finance costs of EUR
(25.8) million (2014: EUR (109.7) million) resulted mainly from accrued interest
and related financing expenses accrued on borrowings.
The loss for 2015 amounted to EUR (26.0) million (2014: EUR (774.9) million)
mainly due to accrued finance costs. Earnings per share was EUR (0.01) (2014:
EUR (0.41).
Liquidity
As at 31 December 2015, the Company's cash and cash equivalents amounted to EUR
4.7 million (EUR 5.3 million as at 31 December 2014).
To date, the Company finances its day-to-day operations by providing
administrative and technical services and the lease of machinery and equipment
to Terrafame Oy (business previously operated by the bankruptcy estate of
Talvivaara Sotkamo).
Financing
During 2015, the Company has financed its operations entirely with operative
cash flow.
Equity
Following Talvivaara Sotkamo's bankruptcy in 2014, the Company wrote off fully
its receivables from and the shares held in Talvivaara Sotkamo. As a result,
Talvivaara lost its equity, which was acknowledged by the Company's Board and
notified to the trade register. Talvivaara recognised the weakening of its
financial position already in November 2013 and took measures to mitigate this
by applying for corporate reorganisation.
Provisions and other items recognised based on restructuring programme
In the Company's 2014 Financial Statements, Talvivaara recorded a provision of
EUR 203.4 million for the potential termination sum guarantee towards Nyrstar.
The guarantee concerns the consequences of a premature termination of the
Streaming Agreement between Nyrstar and Talvivaara Sotkamo, which as of 1 April
2014 was guaranteed by the Company. The Company provided the full amount as a
provision in 2014.
The Company decided to leave the provision on the balance sheet in 2015, even if
there are facts and circumstances which may lead to the unrecognition of the
provision in the future. Reasons for possible unrecognition of the provision are
twofold:
1. The provision of EUR 203.4 million would be settled if Talvivaara and
Terrafame Oy conclude a final contract for selling the Company's assets
related to the Sotkamo mining operations to Terrafame.
Talvivaara, Terrafame Group Oy, Terrafame Oy and Winttal Oy signed a Letter of
Intent on the essential terms and conditions for the sale of Talvivaara's assets
related to the Sotkamo mining operations. By means of the contracts contemplated
by the Letter of Intent, Talvivaara would pay to Winttal Oy EUR 3.8 million as a
full and final settlement of all Talvivaara's debts and liabilities, which were
transferred to Winttal Oy from Nyrstar in November 2015. The arrangement is,
however, among others, conditional on a favorable decision by the Vaasa
Administrative Court on the Nuasjärvi discharge pipe line, enabling the
continuance of Terrafame's mining operations. The decision of the Vaasa
Administrative Court has not been received by the date of the Company's
Financial Statements 7 March 2016. More information on the transaction
contemplated by the Letter of Intent is available in section "Events after the
Review Period".
2. If the Letter of Intent does not result in a final contract between
Talvivaara and the Terrafame entities, there will still be uncertainties
related to the treatment of the Company's guarantee obligation. For example,
the ranking priority of liabilities may cause that the guarantee obligation
cannot be paid.
More information on the background of the potential termination sum guarantee is
available in the Company's 2014 Financial Statements.
In addition, the Company has issued a floating charge security for the loans
drawn from Finnvera by Talvivaara Sotkamo, amounting in aggregate to EUR 58.7
million, including accrued interest. The aggregate amount consists of two parts:
EUR 50.7 million the Company has guaranteed as its own debt, and EUR 8.0 million
the Company has secured with a floating charge security issued as a third-party-
security. In the Administrator's final draft restructuring programme, liability
of the Company under the floating charge security to Finnvera has been valued to
EUR 3.4 million. This is a liability referred to in section 3(3) of the
Restructuring of Enterprises Act, and it is subject to the same rules as the
secured debt of the Company. As Finnvera's EUR 8.0 million claim is not the
Company's own debt, it has not been taken into account as restructuring debt.
However, this liability has been taken into account in the calculation of the
amount of secured and business mortgage debt, and payments will be made on it in
the same manner as on the Company's debts secured by collateral and business
mortgages. However, due to the applied non-going concern principle, the Company
has also recognised the full EUR 8.0 million as a liability on the balance
sheet. Upon completion of the restructuring proceedings, the part of the
Finnvera loans taken into account as secured debt (EUR 3.4 million) would be
finally and fully discharged, whilst the balance would be treated as unsecured
debt in the Company's restructuring programme and repaid according to the
authorized payment schedule.
Off-balance sheet and contingent liabilities
Talvivaara Sotkamo covered largely the environmental bond requirement under the
current environmental permit by a guarantee insurance provided by Atradius
Credit Insurance NV ("Atradius"). As at 31 December 2015, the coverage amounted
to EUR 31.9 million. As a result of Terrafame Oy replacing the guarantee
insurance placed by Talvivaara Sotkamo with a new environmental bond, Atradius
notified the Company that the original guarantee insurance and the corresponding
counter-indemnity have terminated on 21 January 2016. More information can be
found in section "Events after the Review Period".
Following the authorisation by the Espoo District Court of the Company's
corporate reorganization proceedings in accordance with the Administrator's
final draft restructuring programme, the Company will pay one percent of the
aggregate amount of the Company's unsecured restructuring debts not converted
into equity, and a total of EUR 7.5 million for the debts secured with the
business mortgage issued by the Company. The exact amount of the total payment
on the unsecured restructuring debts will depend on the extent to which such
debts have been converted into equity of the Company.
Assets
On the statement of financial position as at 31 December 2015, property, plant
and equipment totalled EUR 4.7 million (31 December 2014: EUR 5.0 million).
Intangible assets totalled EUR 0.1 million (31 December 2014: EUR 0.6 million).
Corporate reorganisation
The Company and Talvivaara Sotkamo applied for corporate reorganisation on 15
November 2013 by filing related applications with the District Court of Espoo,
Finland. The District Court of Espoo took the decision to commence a corporate
reorganisation process in respect of the Company on 29 November 2013 and in
respect of Talvivaara Sotkamo on 17 December 2013. The District Court of Espoo
appointed Mr. Pekka Jaatinen, Attorney-at-Law, from Castrèn & Snellman Attorneys
to act as the Administrator in respect of the corporate reorganisation of both
the Company and Talvivaara Sotkamo. In reorganisation proceedings governed by
the Finnish Restructuring of Enterprises Act (47/1993, as amended), both the
business operations and the debts of a company may be reorganised and
restructured. As a result of such reorganisation, a company can either continue
its operations or, if the reorganisation fails, initiate bankruptcy proceedings.
On 13 March 2015, the Administrator of the corporate reorganisation of
Talvivaara filed the final draft restructuring programme to the District Court
of Espoo. The total amount of the restructuring debts to be taken into account
in the restructuring proceedings is approximately EUR 513 million, out of which
approximately EUR 508 million is considered unsecured debt. This amount does not
include debts with lowest priority. In addition, the Company has approximately
EUR 8 million liability relating to a granted third-party security. The
Administrator proposed that the restructuring debts be cut by 99% which would
leave 1% of the amount of such debt to be repaid. The restructuring debts
secured by business mortgage will not be cut and no payments would be made on
debts with lowest priority. The final draft restructuring programme does not
include a provision on a duty to make supplementary payments.
The approval of the draft restructuring programme required inter alia explicit
support from the necessary number of creditors. The creditors' voting procedure
was completed on 6 May 2015 and the Administrator submitted the voting report on
the outcome of the creditors' voting procedure to the District Court of Espoo on
25 May 2015. The Administrator's draft restructuring programme was supported by
approximately 97.5 percent of the creditors of unsecured debt participating in
the voting. In total, creditors whose receivables represent over 53 percent of
all known debts recognized for the purposes of the voting procedure voted in
favour of the draft restructuring programme. The requisite support from the
creditors set forth in the Restructuring of Enterprises Act for the approval of
the draft restructuring programme was thereby obtained.
The Annual General Meeting held on 25 June 2015 authorised the Board of
Directors to resolve on the share issue of up to 4,500,000,000 new shares in
aggregate in deviation from the pre-emptive subscription rights of the
shareholders through one or several share issues to conduct the conversion of
the unsecured restructuring debts. The decision made was one of the special
conditions set for the confirmation and entry into force of the draft
restructuring programme.
The confirmation and entry into force of the final draft restructuring programme
is still subject to a number of conditions relating to inter alia the business
and financing arrangements of the Company.
Reporting basis
Talvivaara's financial statements for the financial year ended 31 December 2015
have not been prepared on a going concern basis. The basis for preparation is
that the operations of the Company may end in near future. This results from
material uncertainties that cast significant doubt upon the Company's ability to
realise its assets and discharge its liabilities in the normal course of
business. There is also lack of visibility on the Company's operational
environment twelve months beyond the date of reporting.
Talvivaara's ability to revise its reporting basis and to regain its status as a
going concern is to a paramount extent dependent on the successful completion of
the Company's corporate reorganisation proceedings, which requires that:
i. Talvivaara succeeds in completing an arrangement that will secure the
necessary cash flow for the Company to discharge all of its liabilities and
the continuance of the Company's viable business, and
ii. the District Court of Espoo authorizes the execution of the Company's debt
restructuring in accordance with the Administrtor's final draft
restructuring programme of 13 March 2015.
As of the date of the Company's annual results announcement 7 March 2016, there
is no certainty as to whether all the set requirements can be fulfilled within
the given time frame.
Business development projects
Talvivaara acquired in 2011-2012 an approximately 60MW capacity share in the
Fennovoima nuclear project in Finland. Due to the Company's ongoing corporate
reorganisation proceedings, Talvivaara is currently not in a position to make
further investments into the project and has therefore not been able to commit
to further funding of the project.
Legal proceedings
Investigation on Talvivaara's disclosure practices
In April 2015, Talvivaara confirmed that a number of current and former members
of Talvivaara's management have been heard in connection with an investigation
relating to the Company's disclosure practices. The police ended the pre-trial
investigations and transferred the case for the consideration of charges in
February 2016. The Company has already in the past gone through the applied
disclosure practices extensively and in great detail with the Financial
Supervisory Authority and sees no grounds for any charges being brought.
Alleged misuse of insider information
The Company was notified on 20 October 2015 that charges have been brought
against a member of its Executive Committee in the Helsinki District Court on a
case concerning alleged misuse of insider information. The Company is not a
party to the case. In the Company's view, the charges have no impact on the
Company, its financial position or on the employment of the member of the
Executive Committee in the Company.
Gypsum pond leakages and discharges into water ways
The main hearing in the criminal case relating to the gypsum pond leakages at
the Sotkamo mine site and the discharges of the mine into water ways, where the
prosecutor has brought charges against four members of Talvivaara's management,
including CEO Pekka Perä and former CEO Harri Natunen, ended on 1 October 2015.
The ruling of the district court is expected during the spring of 2016.
Recovery claim from the bankruptcy estate of Talvivaara Sotkamo
The Company received on 21 October 2015 a recovery claim amounting to
approximately EUR 700,000 from the bankruptcy estate of Talvivaara Sotkamo. The
claim concerned payments made to the Company in early November 2014. The
bankruptcy estate has requested the Company to either pay the required amount or
to provide grounds for why the payments should not be recoverable to the
bankruptcy estate. Although the Company contested the claim, the matter was
settled amicably between the bankruptcy estate and the Company in December 2015.
Risk management and key risks
Talvivaara's near-term risk factors include particularly such risks that relate
to its ongoing negotiations with the Terrafame group of companies, the corporate
reorganisation proceedings, financing and sufficiency of funds to meet its
actual and potential liabilities:
If an adequate overall financial solution for the continuance of Talvivaara's
business operations is not found, Talvivaara's restructuring programme may not
be authorised and stakeholders could lose their entire investment in the Company
The authorisation of the proposed restructuring programme of Talvivaara is
conditional, among other things, on Talvivaara succeeding in completing an
arrangement that will secure the necessary cash flow for the Company to
discharge all of its liabilities and restructuring debts and the continuance of
the Company's viable business. Although completion of the transactions
contemplated by the non-binding Letter of Intent signed by the Company and the
Terrafame group of companies would secure or significantly facilitate achieving
such target, there is, as of the date of the Company's annual results
announcement 7 March 2016 no certainty as to whether the Company and the
Terrafame group can complete the transactions and whether the Company can fulfil
all the requirements set for the authorisation of the restructuring programme
within the given time frame. If the restructuring programme is not authorised,
the Company may have to file for bankruptcy and, as a result, the shareholders
and creditors of the Company could lose their entire investment in the Company.
Further, as a result of the completion of the transactions contemplated in the
Letter of Intent, Talvivaara's guarantee liabilities relating to Talvivaara
Sotkamo's obligations under the Zinc Streaming Agreement and the Streaming
Holiday Agreement would be fully and finally settled. Therefore, failure to
complete the transactions contemplated in the Letter of Intent would cause the
guarantee liabilities to remain outstanding, which would have a significant
negative effect on the Company's ability to raise new funds required for the
succesfull fulfillment of the conditions for the entry into force of the
Company's restructuring programme.
A payment demand by the holder of the EUR 12.8 million loan receivable
guaranteed by the Company could result in a bankruptcy of the Company
Talvivaara Sotkamo has drawn down EUR 12.8 million (including interest through
October 2014), in loans from Nyrstar under the Loan and Streaming Holiday
Agreement of 1 April 2014 between Talvivaara, Talvivaara Sotkamo and Nyrstar.
Upon the bankruptcy of Talvivaara Sotkamo, Nyrstar has been entitled to declare
that all or part of the loans, together with accrued interest, be payable on
demand by Talvivaara, in its capacity as the guarantor. If Winttal Oy, as the
current holder of the receivable, was to demand immediate repayment of the EUR
12.8 million loans guaranteed by the Company, the Company might not have
sufficient cash reserves or access to additional liquidity to make the required
payment, which could result in the Company having to file for bankruptcy and, as
a result, the shareholders and creditors could lose their entire investment in
the Company.
If the corporate reorganisation proceedings of Talvivaara are not successful,
stakeholders could lose their entire investment in the Company
Although the Board of Directors believes that a corporate reorganisation is a
viable option for Talvivaara, there can be no assurance that the proposed
restructuring programme of the Company will be authorised or be ultimately
successful. The corporate reorganisation process can fail for a number of
reasons, including due to an insufficiency of funds to implement or complete the
restructuring programme, changes in circumstances affecting the financial
viability of Talvivaara, or insufficient income from the services provided to
Terrafame Oy. If the corporate reorganisation fails for these or any other
reasons, it could result in the bankruptcy of the Company. As a result,
shareholders and creditors could lose their entire investment in the Company.
The right of conversion of debt into equity included in the restructuring
programme of Talvivaara and/or the issuance of new equity instruments may lead
to a significant dilution of the existing shareholding of the Company
The right of conversion of debt into equity included in the restructuring
programme of Talvivaara and/or the issuance of new equity instruments may lead
to a significant dilution of the existing shareholding of the Company. The
extent of dilution will eventually be determined by the aggregate amount of the
restructuring debts to be converted into shares at the determined conversion
rate of EUR 0.1144 per share as well as by the subscription price of the newly
issued shares offered and the amount of funds raised in the potential equity
financing.
In case Talvivaara acquires a stake in Terrafame Oy, the Sotkamo mine may not be
able to successfully address various operational, environmental and other
difficulties facing the mine and shareholders could ultimately lose their entire
investment in the Company
The Sotkamo mine has faced various difficulties since the commissioning of the
mine in 2008 and 2009. These difficulties include, among others, operational
difficulties concerning the mine's production and performance, environmental
issues as well as legal and administrative proceedings involving the Sotkamo
mine and certain members of Talvivaara's and Terrafame Oy's management. Further,
there can be no certainty that the financing potentially available to the
Sotkamo mine would be sufficient to ramp-up production or that it would ever
achieve profitability. Accordingly, even if Talvivaara were able to obtain
sufficient financing in order to participate in the acquisition of the Sotkamo
mining operations and the restructuring programme for Talvivaara would be
authorized, shareholders and creditors could ultimately lose their entire
investment in the Company, should the Sotkamo mining operations be the only or a
significant part of the Company's business operations going forward.
Personnel
Headcount and remuneration
Talvivaara's headcount decreased somewhat from the previous year and was 39 at
the end of 2015 (2014: 53). At the end of 2015, 59 % (2014: 49 %) of
Talvivaara's employees were men and 41 % (2014: 51 %) were women. The average
age of the Company's employees was 40.2 years (2014 40.5 years).
Talvivaara's personnel comprises an expert organisation, the core competences of
which include, for example, analytical laboratory services, bioheapleaching and
other production processes, procurement, environmental safety, risk management
and communications. The organisation has in the past provided critical services
to Talvivaara Sotkamo and it continues to provide similar services to Terrafame
Oy, which currently operates the Sotkamo mine.
The salaries of Talvivaara's personnel are based on industry-wide collective
agreements. The total compensation of the key individuals has traditionally
consisted of a base salary and short and long term incentive schemes based on
annual bonuses, stock options and other share-based incentive schemes. However,
due to exceptional circumstances surrounding the Company there are currently no
short term or long term incentive schemes in place.
Management changes
The finance function has been reporting to the Deputy CEO Pekka Erkinheimo since
1 February 2015 following the departure of CFO Saila Miettinen-Lähde.
The Chief Human Resources Officer Maija Kaski resigned from her position on 17
June 2015 to pursue her career outside the Company. The Chief Sustainability
Officer Eeva Ruokonen resigned from her position on 17 August 2015.
Corporate governance statement
Talvivaara issues its Corporate Governance Statement of 2015 and publishes it on
the Company's website at www.talvivaara.com on the week starting 21 March 2016.
The Corporate Governance Statement does not form part of the Board of Directors'
Report.
Resolutions of the Annual General Meeting
Talvivaara's Annual General Meeting was held on 25 June 2015 in Espoo, Finland.
All the resolutions proposed, as set out in the notice of the meeting, were duly
passed with the exception of the proposals of the Shareholders' Nomination Panel
regarding the number of Board members and the composition of the Board, which
were amended to include Mr. Kari Järvinen as a new member of the Board of
Directors. The resolutions of the AGM included:
* that no dividend be paid for the financial year 2014;
* that the annual fee payable to the members of the Board for the term until
the close of the Annual General Meeting in 2016 be as follows: Chairman of
the Board of Directors EUR 84,000/year and other Non-executive Directors:
EUR 48,000/year. No separate meeting fees are paid for the Board or the
Committee work. The remuneration of the Executive Directors is included in
their base salary, and it is not paid out separately;
* that the number of Board members be five (5) and that Mr. Tapani Järvinen,
Mr. Pekka Perä, Mr. Stuart Murray and Ms. Solveig Törnroos-Huhtamäki were
re-elected. Mr. Kari Järvinen was elected as a new member to the Board;
* that the auditor be reimbursed according to the approved auditor's invoice
and authorised public accountants PricewaterhouseCoopers Oy be elected as
the Company's auditor for the financial year 2015;
* that the Board of Directors be authorised to resolve on the share issue of
up to 4,500,000,000 new shares in aggregate in deviation from the pre-
emptive subscription rights of the shareholders through one or several share
issues to conduct the conversion of the unsecured restructuring debts into
new shares in the Company. The subscription price of the shares shall be EUR
0.1144 per share and the subscription price shall be paid by setting off the
subscriber's unsecured restructuring debt claim including any possible
interest and costs relating thereto from the Company. The share issue
authorisation is valid until 31 December 2017.
At its constituent meeting on 25 June 2015, the Board of Directors re-elected
Mr. Tapani Järvinen as the chairman of the Board.
Shares and shareholders
On 30 December 2015 the total number of Talvivaara shares increased by
2,035,396 to 2,098,817,876 as a result of conversions of the convertible bonds
of 2010 amounting in aggregate to EUR 4,600,000. In addition, by the end of
2015 Talvivaara received conversion notices pursuant to which the bonds
amounting in aggregate to EUR 21,100,000 were to be converted to a total of
9,336,276 new Talvivaara shares. These new Talvivaara shares were registered in
the Trade Register on 14 January 2016.
The number of shares issued and outstanding and registered on the Euroclear
Shareholder Register as of 31 December 2015 was 2,098,817,876. Including the
effect of the EUR 225 million convertible bond of 16 December 2010, the
authorized full number of shares of the Company amounted to 2,195,543,540.
As at 31 December 2015, the shareholders who held more than 5% of the shares and
votes of Talvivaara were Solidium Oy (15.2%) and Mr. Pekka Perä (5,9%).
Talvivaara held 9.2% of the shares in the Company. The shares held in treasury
by the Company do not carry any voting rights.
As at 31 December 2015 the shares held in treasury by the Company amounted to in
aggregate 192,883,000. The figure comprises of 190,615,000 new shares issued to
the Company without consideration as resolved by the Annual General Meeting of
shareholders of 2014 and 2,268,000 shares previously held by Talvivaara
Management Oy. The Company dismantled the shareholding scheme organized through
Talvivaara Management Oy in December 2014 by acquiring all the shares of
Talvivaara Management Oy from the participants for a nominal purchase price.
Talvivaara Management Oy was placed in liquidation together with Talvivaara's
other dormant subsidiaries in December 2014 and Talvivaara Management Oy was
dissolved in June 2015.
Share based incentive plans
The subscription periods for 2007A, 2007B and 2007C Stock Options issued to the
Talvivaara group's key personnel expired on 31 March 2012, 31 March 2013 and 31
March 2014, respectively. As at 31 December 2015 there are no Stock Options
2007 outstanding.
As the vesting criteria for Stock Options 2011A, 2011B and 2011C issued to the
key employees and personnel of the Company and its subsidiaries were not
fulfilled the options were cancelled at the end of 2012, 2013 and 2014,
respectively. As at 31 December 2015 there are no Stock Options 2011
outstanding.
Events after the review period
Release of the counter-indemnity given for the guarantee insurance issued by
Atradius
Talvivaara Sotkamo covered largely the environmental bond requirement under the
current environmental permit by a guarantee insurance provided by Atradius. As
at 31 December 2015, the coverage amounted to EUR 31.9 million. In the event
restoration of the mine's waste areas (gypsum ponds, heap areas) took place
without Talvivaara Sotkamo carrying the cost, the expenses would have initially
been covered by Atradius and eventually Atradius would have claimed the cost
back from the Company, which has given counter-indemnity for such costs to
Atradius. However, as a result of Terrafame Oy replacing the guarantee insurance
placed by Talvivaara Sotkamo with a new environmental bond on 21 January 2016,
Atradius notified the Company that the original guarantee insurance and the
corresponding counter-indemnity have terminated on 21 January 2016 and that the
beneficiary Kainuun ELY-keskus or Atradius have no claims against Talvivaara
Sotkamo or the Company on the basis of the guarantee insurance or the counter-
indemnity issued by the Company.
Therefore, the full amount of the liability under the counter-indemnity given by
the Company will be removed from the Company's restructuring debts, and no
payment will be made on it under the authorised payment schedule.
Letter of Intent on the sale of the Company's mining assets to Terrafame group
On 27 January 2016, Talvivaara, Terrafame Group Oy and its subsidiaries,
Terrafame Oy and Winttal Oy, signed a Letter of Intent, in which the parties
provisionally agreed on the essential terms and conditions for the sale of
Talvivaara's assets related to the Sotkamo mining operations. Assets to be sold
would include, among others, the lime plant needed in the Sotkamo operations,
laboratory business, as well as ownership of the geological data associated with
the mine.
The transactions under the Letter of Intent would consist of two separate
phases. In the first phase, Terrafame Oy will buy the laboratory business
required in the production process, and the geological data associated with the
Sotkamo mine. The laboratory personnel will be transferred to Terrafame Oy as
old employees. In addition, the possibility for Talvivaara's key personnel
working at the mine to transfer to Terrafame Oy's service will be agreed. In the
first phase of the arrangement, Terrafame Oy will pay a purchase price of EUR
3.8 million to Talvivaara.
Upon completion of the second phase of the arrangement, Terrafame Oy will buy
from Talvivaara the lime plant required in the production process of the mine.
Terrafame Oy shall pay to Talvivaara a purchase price of EUR 12.5 million.
Simultaneously, Talvivaara will pay to Winttal Oy EUR 3.8 million as a full and
final settlement of Talvivaara's debts and liabilities, which were transferred
to Winttal Oy from Nyrstar in November 2015. These debts and liabilities
comprise of Talvivaara's guarantee liability of approximately EUR 12.8 million
under the Streaming Holiday Agreement and a guarantee liability for a
termination sum of approximately EUR 203.4 million under the Streaming
Agreement, which thereby shall be considered fully and finally settled upon
completion of the arrangement.
In addition, as part of the arrangements, Terrafame Group Oy will acquire debts
of Talvivaara from certain commercial banks and Finnvera Plc. The nominal value
of these debts is approximately EUR 129.6 million in aggregate. These debts are
considered restructuring debts under Talvivaara's draft restructuring programme,
which will receive a payment of EUR 7.5 million under the business mortgage
claims, whilst the unsecured part of the debts would be paid approximately EUR
1.2 million. Upon completion of the second phase of the arrangements, Talvivaara
shall pay to Terrafame Group Oy for the debts transferred by the commercial
banks and Finnvera Plc a total sum of EUR 8.7 million in accordance with the
final restructuring programme.
The difference between the total purchase price and the sums payable by
Talvivaara to Terrafame entities on the basis of Talvivaara's debts is thus EUR
3.8 million, which Terrafame Oy would pay to Talvivaara as a net purchase price
for all assets transferred.
The signed Letter of Intent is, with certain limited exceptions, legally non-
binding and conditional upon the detailed agreements concerning the arrangement
being finalized and accepted by all parties no later than 3 February 2016, or on
another date agreed by the parties, at which instant the first phase of the
arrangements would be completed. The second phase of the arrangements is also
conditional on the approval by Talvivaara's General Meeting of Shareholders and
on confirmation of Talvivaara's restructuring programme with a targeted dead
line of 30 April 2016. The whole arrangement under the Letter of Intent is also
conditional on a favorable decision by the Vaasa Administrative Court on
Nuasjärvi discharge pipe line, enabling the continuance of Terrafame Oy's mining
operations.
Upon completion of the arrangements under the Letter of Intent, all main assets
of Talvivaara currently generating income for the Company would transfer to
Terrafame Oy. However, the completion of the arrangements would enable the
completion of Talvivaara's corporate restructuring proceedings and the payments
to the creditors under the restructuring programme, and it would facilitate the
development of the Company's existing and potential new business opportunities.
In connection with arrangements, Terrafame entities undertake to accept the cuts
proposed in Talvivaara's draft restructuring programme and not to appeal the
district court decision confirming the restructuring programme.
Extension of the dead line set in the Letter of Intent
Since the decision of the Vaasa Administrative Court was not received by the
original dead line of 3 February 2016, the parties agreed on 3 February 2016 to
extend the deadline set for the finalization and approval of the detailed
agreements until such time as the decision of the Administrative Court has been
received.
Short-term outlook
The operational outlook for Talvivaara is greatly dependent on the successful
completion of the Company's corporate reorganisation proceedings and the success
to closing, timing and extent of the requisite transactions currently under
contemplation. Whilst the Administrator's final draft restructuring programme
gives the Company reasonably ample time fulfill the requirements set forth for
the entry into force of the restructuring programme, there is no certainty that
the Company can fulfil all the requirements within the given time frame.
Board of Directors proposal for profit distribution
The Board of Directors is proposing to the Annual General Meeting that no
dividend is declared in respect of the year 2015 and that the loss of the
financial period is entered into the Company's profit/loss account on the
balance sheet.
Talvivaara Mining Company Plc
Board of Directors
STATEMENT OF FINANCIAL POSITION
Audited Audited
as at as at
(All amounts in EUR) 31 Dec 15 31 Dec 14
--------------------------------
ASSETS
Non-current assets
Property, plant and equipment 4,692,782 5,010,758
Intangible assets 94,547 554,887
Other investments 0 0
Other receivables 27,640 31,094
--------------------------------
Total non-current assets 4,814,970 5,596,738
Current assets
Trade receivables 37,850 284,466
Other receivables 188,138 35,336
Cash and cash equivalents 4,662,572 5,346,381
--------------------------------
Total Current assets 4,888,559 5,666,183
TOTAL ASSETS 9,703,529 11,262,921
--------------------------------
EQUITY AND LIABILITIES
Equity attributable to the owners
Share capital 80,000 80,000
Share premium 8,085,842 8,085,842
Other reserves 797,348,200 771,648,200
Retained deficit (1,535,766,741) (1,509,757,176)
--------------------------------
Total equity (730,252,700) (729,943,134)
Current liabilities
Provisions 203,444,456 203,444,456
Borrowings 477,845,205 500,720,066
Trade payables 2,723,003 2,759,678
Other payables 55,943,564 34,281,855
--------------------------------
Total liabilities 739,956,228 741,206,055
TOTAL EQUITY AND LIABILITIES 9,703,529 11,262,921
--------------------------------
INCOME STATEMENT
Audited Audited
as at as at
(All amounts in EUR) 31 Dec 15 31 Dec 2014
---------------------------
Other operating income 6,702,480 12,339,864
Materials and services (257,536) (305,207)
Personnel expenses (3,807,345) (5,316,937)
Depreciation and amortisation (971,024) (996,610)
Impairment charges on investments 421,333 (470,596,157)
Other operating expenses (2,267,625) (232,984,659)
Operating profit/loss (179,717) (702,649,108)
Finance income 12,841 37,492,941
Finance cost (25,842,689) (109,742,838)
---------------------------
Finance cost (net) (25,829,848) (72,249,897)
Profit/Loss before income tax (26,009,565) (774,899,005)
Income tax 0 (181)
---------------------------
PROFIT/LOSS FOR THE FINANCIAL PERIOD (26,009,565) (774,899,185)
---------------------------
Loss attributable to the owners of the Company,
(€/share) 2015 2014
Diluted and undiluted (0.01) (0.41)
STATEMENT OF CASH FLOW
Audited Audited
as at as at
(all amounts in EUR) 31 Dec 15 31 Dec 14
---------------------------
Cash flows from operating activities
Profit/Loss for the year (26,009,565) (774,899,185)
Adjustments for
Tax 0 181
Depreciation and amortisation 971,024 996,610
Other non-cash income and expenses 215,257 229,395,770
Impairment charges on property, plant and equipment 0 3,113,402
Impairment charges on investments (421,333) 472,272,157
Interest income (12,841) (37,492,941)
Interest expenses 25,842,689 109,742,838
---------------------------
Cash flow before change in working capital 585,230 3,128,831
Change in working capital
Decrease(+)/increase(-) in trade and other
receivables 98,898 344,830
Decrease(-)/increase(+) in trade and other payables (1,287,347) 179,970
---------------------------
Change in working capital (1,188,449) 524,801
Net cash used in operating activities before
financing
activities and taxes (603,219) 3,653,632
Interest and other finance cost paid (91,801) (1,078,564)
Interest and other finance income 11,211 328,170
---------------------------
Net cash generated (used) in operating activities (683,809) 2,903,237
Cash flows from investing activities
Purchases of intangible assets 0 (9,439)
Purchases of other shares 0 (279,702)
Investments to subsidiaries 0 (1,965,381)
---------------------------
Net cash generated (used) in investing activities 0 (2,254,522)
Cash flows from financing activities
---------------------------
Net cash generated from financing activities 0 0
Net (decrease)/increase in cash and bank overdrafts (683,809) 648,715
Cash and bank overdrafts at beginning of the year 5,346,381 4,697,666
Cash and bank overdrafts at end of the year 4,662,572 5,346,381
STATEMENT OF CHANGES IN
EQUITY
Share Share Share Other Retained
EUR capital issue premium reserves deficit Total
------------------------------------------------------------------
31 Dec 2014 80,000 0 8,085,842 771,648,200 (1,509,757,176) (729,943,134)
------------------------------------------------------------------
Conversion
of
convertible
bonds - - - 25,700,000 - 25,700,000
Profit
(loss) for
the year - - - - (26,009,565) (26,009,565)
------------------------------------------------------------------
31 Dec 2015 80,000 - 8,085,842 797,348,200 (1,535,766,741) (730,252,700)
------------------------------------------------------------------
NOTES
1. Basis of presentation and non-going concern
The 2015 Financial Statements of the Company are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union taking into account the corporate reorganisation proceedings that
commenced in respect of the Company on 29 November 2013. In addition, the
Company has taken into account IAS 1.25 and IAS 1.26 requirements regarding the
disclosure under the non-going concern basis. Talvivaara's Financial Statements
for the financial year ended 31 December 2015 have not been prepared on a going
concern basis. The basis of preparation is that operations may end in near
future.
The chosen reporting basis results from the existence of material uncertainty
that casts significant doubt upon the Company's ability to realise its assets
and discharge its liabilities in the normal course of business and from the lack
of visibility on the Company's operational environment twelve months beyond the
date of reporting.
Talvivaara currently finances its day-to-day operations by providing
administrative and technical services and the lease of machinery and equipment
critical to Terrafame Oy. These contractual arrangements have helped the Company
to discharge all of its new liabilities as and when they fell due.
The requisite adjustments resulting from the chosen reporting basis have, where
applicable, been made in the 2015 financial statements to the carrying amounts
of the Company's assets and liabilities, but no reserve has been made in the
Company's balance sheet for the costs relating to winding down of the
operations.
Talvivaara's ability to revise its reporting basis and to regain its status as a
going concern is dependent, among other things, on the successful completion of
the Company's corporate reorganisation proceedings, which requires that
i. Talvivaara succeeds in completing an arrangement that will secure the
necessary cash flow for the Company to discharge all of its liabilities and
the continuance of the Company's viable business, and
ii. the District Court of Espoo authorizes the execution of the Company's debt
restructuring in accordance with the Administrator's final draft
restructuring programme of 13 March 2015.
As of the date of the Company's annual results announcement 7 March 2016, there
is no certainty as to whether the Company can fulfil all the set requirements
within the given time frame. More information can be found in Note 2 below and
in the Company's 2014 Financial Statements.
2. Illustrative balance sheet after execution of the Letter of Intent and
Restructuring Programme
Should the draft restructuring programme be approved as proposed by the
Administrator, the following illustrative calculations presented on equity
position can be drawn. The calculation does not take into account potential
revaluation of the Company's remaining assets resulting from regaining the going
concern reporting status.
It should be noted that this calculation is illustrative and aims to give only
an indication of the balance sheet following execution of the Restructuring
Programme as proposed by the Administrator and the transactions contemplated by
the Letter of Intent. All the numbers presented in the calculation are subject
to change.
A. Closing non-going concern IFRS balance sheet as at 31 Dec 2015
B. Debts under the restructuring programme recognised on the Balance sheet
(including all accrued interest)
C. Illustrative Balance sheet after the approval of the restructuring programme
D. Execution of Letter of Intent, settlement of Nyrstar's and restructuring
liabilities
E. Illustrative Balance sheet as at 31 Dec 2015 after execution of the Letter of
Intent and Restructuring Programme
F. Add-back if all restructuring debt convert to shares
G. Illustrative Balance sheet as at 31 Dec 2015 if all debts are converted to
shares
ASSETS
(All amounts in
EUR '000) A. B. C. D. E F. G.
Non-current
assets
Property, plant
and equipment 4,693 0 4,693 (4,672) 21 0 21
Intangible assets 95 0 95 0 95 0 95
Other receivables 28 0 28 0 28 0 28
Current assets 0 0 0
Trade receivables 38 0 38 0 38 0 38
Other receivables 188 0 188 0 188 0 188
Cash and cash
equivalent 4,663 0 4,663 (87) 4,576 3,866 8,442
-------------------------------------------------------------------------------
TOTAL ASSETS 9,704 0 9,704 (4,759) 4,945 3,866 8,811
SHAREHOLDERS
EQUITY
AND LIABILITIES
Share capital 80 0 80 0 80 0 80
Share premium 8,086 0 8,086 0 8,086 0 8,086
Retained deficit
and
other reserves (738,419) 500,510 -237,908 232,394 (5,514) 3,866 (1,648)
Total equity (730,253) 500,510 -229,743 232,394 2,652 3,866 6,518
LIABILITIES
Current
liabilities
Provisions 203,444 0 203,444 (203,444) 0 0 0
Borrowings 477,845 (444,246) 33,599 (33,599) 0 0 0
Trade payables 2,723 (2,052) 671 0 671 0 671
Other payables 55,944 (54,212) 1,731 (109) 1,622 0 1,622
-------------------------------------------------------------------------------
TOTAL LIABILITIES 739,956 (500,510) 239,446 (237,152) 2,293 0 2,293
-------------------------------------------------------------------------------
TOTAL EQUITY
AND LIABILITIES 9,704 0 9,704 (4,759) 4,945 3,866 8,811
-------------------------------------------------------------------------------
3. Property, plant and equipment
Machinery Construction
and in
(All amounts in EUR) Buildings equipment progress Total
----------------------------------------------
Gross carrying amount at 1 Jan
14 11,899,045 19,837,595 - 31,736,640
----------------------------------------------
Gross carrying amount at 31 Dec
14 11,899,045 19,837,595 0 31,736,640
----------------------------------------------
Accumulated depreciation and
impairment losses
at 1 Jan 14 8,521,159 14,265,990 - 22,787,149
Depreciation for the year 292,173 560,847 - 853,020
Impairment losses 3,085,712 - - 3,085,712
----------------------------------------------
Accumulated depreciation and
impairment losses at 31 Dec 14 11,899,045 14,826,837 - 26,725,882
----------------------------------------------
Carrying amoung at 1 Jan 14 3,377,885 5,571,605 0 8,949,490
----------------------------------------------
Carrying amount at 31 Dec 14 0 5,010,758 0 5,010,758
----------------------------------------------
Gross carrying amount at 1 Jan
15 11,899,045 19,837,595 - 31,736,640
Additions - 266,843 - 266,843
Deductions - -3,463 - -3,463
----------------------------------------------
Gross carrying amount at 31 Dec
15 11,899,045 20,100,975 0 32,000,020
----------------------------------------------
Accumulated depreciation and
impairment loss at 1 Jan 15 11,899,045 14,826,837 - 26,725,882
Depreciation for the year - 581,356 - 581,356
Accumulated depreciation and
impairment losses at 31 Dec 15 11,899,045 15,408,193 - 27,307,238
----------------------------------------------
Carrying amoung at 1 Jan 15 0 5,010,758 0 5,010,758
----------------------------------------------
Carrying amount at 31 Dec 15 0 4,692,782 0 4,692,782
----------------------------------------------
4. Borrowings and capital loans
EUR 2015 2014
------------------------
Restructuring loan capital 427,500,000 453,754,499
Restructuring loan interest 16,510,880 18,567,844
Accrued interest on restructuring loans after
commencement of restructuring proceedings 12,822,068 7,465,075
Other borrowings during procedure 21,012,257 20,932,648
------------------------
477,845,205 500,720,066
------------------------
As at 31 December 2015, the Company had borrowings amounting to EUR 477.8
million with contractual maturities of the facilities ranging from 2014 to 2018
(2014: EUR 500.7 million). Following the breach of covenants or events of
default stemming from the Company applying for corporate restructuring, the
Company has reclassified all of its long-term borrowings as current.
Due to the restructuring programme, the interest expense recognised is subject
to significant changes, should the restructuring programme be approved. The
Company has accrued the interest on the balance sheet for all borrowings despite
the fact that the all interests on restructuring debts stopped when the
restructuring proceedings commenced.
Other borrowings include Winttal Oy loan facility of EUR 12.8 million and
Finnvera loan facility of EUR 8.2 million.
The Company has assessed the carrying value and fair value to be equal for all
borrowings and capital loans. The Company's borrowings are denominated in euros.
Of the above tabled borrowings and capital loans, all except other borrowings
during the procedure are reorganisation debts that may be restructured as part
of the corporate reorganisation programme. The secured borrowings, which
comprise Revolving Credit Facility and the Investment and Working Capital Loan,
may only be reduced if and to the extent the security pledged to them does not
cover their nominal amount.
All amounts of reorganisation debts remain subject to change at the time of the
Company's financial statements and may only be finalised as the eventual
reorganisation programmes are authorised. Total borrowings include the
following:
Senior unsecured convertible bonds due 2015
In December 2010 the Company completed an offering of EUR 225.0 million of
senior unsecured convertible bonds due 2015. The bonds are convertible into
98,617,935 million fully paid ordinary shares of the Company. The interest rate
applied to the convertible bond is 4.00% and the yield to maturity 6.50%,
reflecting a redemption price of 114.5% at maturity. The bonds are convertible
into Talvivaara's ordinary shares following the resolution by the Extraordinary
General Meeting of the Company's shareholders in January 2011 to issue special
rights in relation to the Bonds. To the extent the bonds have not been converted
into shares by 10 December 2015, Talvivaara shall repay the debt in one
instalment on maturity date 16 December 2015. The value of the equity component
for the senior unsecured convertible bonds due 2015 was determined after
resolution of the EGM and it is recognised in equity.
The Company's application for corporate reorganisation on 15 November 2013
constituted an event of default under the convertible bonds. Therefore, as at
31 December 2014 and 2015 the convertible bonds have been reclassified as
current borrowings and any unamortised costs have been expensed to the income
statement accreting the loan carrying amount to the redemption value as at 31
December 2014 and 2015. The repayment schedule and amount of the convertible
bonds will be decided and authorized as part of the Company's contemplated
reorganisation programme.
Senior unsecured bonds due 2017
In March 2012, Talvivaara issued a EUR 110 million senior unsecured bond. The 5-
year bond has an issue price of 100%, pays a coupon of 9.75% and is callable
after 3 years. The bond issue was sold to both Finnish and international
institutional and selected private investors. The bond was settled and the notes
were listed on NASDAQ OMX Helsinki in April 2012. The Company's application for
corporate reorganisation on 15 November 2013 constituted an event of default
under the senior unsecured bonds. Therefore, as at 31 December 2014 and 2015 the
bonds have been reclassified as current borrowings and any unamortised
transaction costs have been expensed to the income statement accreting the loan
carrying amount to the nominal value.
The repayment schedule and amount of the senior unsecured bonds will be decided
and authorized as part of the Company's contemplated reorganisation programme.
Revolving credit facility
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"). With a waiver and amendment letter dated 30 October 2013, the terms
of the facility were amended such that the maximum margin was increased to
4.50% from the previous range of 1.75-3.00%, the undrawn amount of EUR 30
million was cancelled, and the liquidity covenant levels were adjusted to levels
relevant at the time. Despite these amendments, an event of default occurred in
November 2013 as the Company and Talvivaara Sotkamo applied for corporate
reorganisation. As a result, and due to the original maturity of the loan being
October 2014, the loan has been reclassified as current borrowings and any
unamortized transaction costs have been expensed to the income statement
accreting the loan carrying amount to the nominal value. The repayment schedule
and amount of the revolving credit facility will be decided and authorized as
part of the Company's contemplated reorganisation programme. As at 31 December
2014 and 2015, the outstanding loan amount was EUR 70 million.
5. Contingencies and commitments
Counter indemnity given as a guarantee for the guarantee
insurance
provided by Atradius Credit Insurance N.V to Kainuu ELY
Centre
EUR 31 Dec 15 31 Dec 14
----------------------
Counter indemnity given as a guarantee 31,940,000 31,940,000
----------------------
31,940,000 31,940,000
----------------------
Talvivaara Sotkamo has covered the environmental bond requirement under the
current environmental permit by a guarantee insurance provided by Atradius
Credit Insurance NV ("Atradius"). The coverage currently amounts to EUR 31.9
million. According to the environmental permit, the required bond is to be
placed to cover the cost of the restoration of waste areas (gypsum ponds, heap
areas), which is anticipated to take place partly during the life of the mine,
as waste areas are filled to their maximum levels, and partly as part of the
eventual closure of the mine. In the event such restoration activities took
place without Talvivaara Sotkamo carrying the cost, the expenses would initially
be covered by Atradius. However, eventually Atradius would claim the cost back
from the Company, which has given counter-indemnity for such costs to Atradius.
The guaranteed liability is part of the Company's restructuring debt and any
payments that fall due under the guarantee are finally determined in the
Company's restructuring programme and repaid according to the authorized payment
schedule. Hence, the counter-indemnity has been recognized as an off-balance
sheet liability.
As at 31 December 2015, the coverage amounted to EUR 31.9 million. As a result
of Terrafame Oy replacing the guarantee insurance placed by Talvivaara Sotkamo
with a new environmental bond, Atradius notified the Company that the original
guarantee insurance and the corresponding counter-indemnity have terminated on
21 January 2016.
The future aggregate minimum lease payments
under non-cancellable operating leases
EUR 31 Dec 15 31 Dec 14
--------------------
No later than 1 year 93,497 97,637
Later than 1 year and not later than 5 years 41,000 4,672
134,497 102,309
--------------------
The Company has not terminated lease agreements on the basis of section 27 of
the Restructuring of Enterprises Act.
Securities given by the Company under the Multicurrency Revolving Facility
Agreement and the Finnvera Financing Agreements
The securities given under the Multicurrency Revolving Facility Agreement (EUR
70 million) and the Finnvera Financing Agreements (EUR 50 million and EUR 10
million) include:
* Pledge of all shares owned by the Company in Talvivaara Sotkamo
* Pledge of floating charge notes registered over assets of the Company in the
amount of EUR 300 million
* Pledge of intra-group receivables of the Company from Talvivaara Sotkamo
* Pledge of insurance receivables
In addition, the Company has guaranteed the obligations of Talvivaara Sotkamo
under the Finnvera Promissary Note in the amount of EUR 60 million by a specific
Surety Obligation.
Talvivaara Mining Company Plc
Key financial figures
Twelve Twelve
months to months to
31 Dec 15 31 Dec 14
------------------------
Other operating income EUR '000 6,702 12,340
Operating profit/loss EUR '000 (180) (702.649)
Operating profit/loss percentage (2.7 %) (5,694.1 %)
Profit/loss before tax EUR '000 (26,010) (774,899)
Profit/loss for the period EUR '000 (26,010) (774,899)
Return on equity n/a n/a
Equity-to-assets ratio (7,525.6 %) (6480.9 %)
Net interest-bearing debt EUR '000 473,183 495.374
Debt-to-equity ratio (64.8%) (67.9 %)
Return on investment n/a (558.1 %)
Capital expenditure EUR '000 284 2,717
Property, plant and equipment EUR '000 4,693 5,011
Borrowings EUR '000 477,845 500.720
Cash and cash equivalents EUR '000 4,663 5,346
Share-related key figures
Twelve Twelve
months to months to
31 Dec 15 31 Dec 14
--------------------
Earnings per share EUR (0.01) (0.41)
Equity per share EUR (0.35) (0.38)
Employee-related key figures
Twelve Twelve
months to months to
31 Dec 15 31 Dec 14
----------- ----------
Salaries EUR '000 3,206 4,436
Average number of employees 50 56
Number of employees at the end of the period 39 53
Key financial figures of the Company
Return on equity Loss for the period
-----------------------------------------------------
(Total equity at the beginning of period + Total
equity at the end of period)/2
Equity-to-assets ratio Total equity
-----------------------------------------------------
Total assets
Net interest-bearing debt Interest-bearing debt - Cash and cash equivalent
Debt-to-equity ratio Net interest-bearing debt
-----------------------------------------------------
Total equity
Return on investment Loss for the period + Finance cost
-----------------------------------------------------
(Total equity at the beginning of period + Total
equity at the end of period)/2 + (Borrowings at the
beginning of period + Borrowings at the end of
period)/2
Share-related key figures
Earnings per share Loss attributable to equity holders of the Company
-----------------------------------------------------
Adjusted average number of shares
Equity per share Equity attributable to equity holders of the Company
-----------------------------------------------------
Adjusted average number of shares
[HUG#1992349]
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