2016-09-22 09:24:49 CEST
2016-09-22 09:24:49 CEST
REGULATED INFORMATION
Talvivaaran Kaivososakeyhtiö Oyj - Half Year financial report
Talvivaara Mining Company Plc Interim Report for period January - June 2016
Stock Exchange Release
Talvivaara Mining Company Plc
22 September 2016
Talvivaara Interim Report for period January - June 2016
Key events for reporting period Jan-Jun 2016
* Talvivaara and Terrafame Oy agreed on the sale of Talvivaara's assets
related to the Sotkamo mining operations and the settlement of Talvivaara's
guarantee liabilities under the Loan and Streaming Holiday Agreement, with
the principal amount of approximately EUR 14 million (including interest up
until 30 June 2016), and the Zinc in Concentrate Purchase Agreement,
amounting to approximately EUR 203.4 million
* A reversal of the provision of EUR 203.4 million and the EUR 11 million
capital gains resulting from the sale of the assets boosted the Company's
profit for the period to EUR 207.7 million
Key events following the end of the reporting period Jan - Jun 2016
* On 11 August 2016, Talvivaara's Extraordinary General Meeting approved the
sale of mining related assets to Terrafame
* On 20 September 2016, the Administrator confirmed his view, according to
which the special conditions (b) 2 and (c) set for the entry into force of
the Company's draft restructuring programme are still to be fulfilled at to
date. The Administrator's stated further that due compliance with all the
special conditions and the Restructuring Act will require that one or more
of the Company's new business opportunities is developed sufficiently so as
to provide more tangible prospects for future viable business operations
* To date, the Company continues assessing new business opportunities, and
focuses on fulfilling all the remaining special conditions set for the entry
into force of the draft restructuring programme.
Enquiries:
Talvivaara Mining Company Plc Tel. +358 20 712 9800
Pekka Perä, CEO
Pekka Erkinheimo, Deputy CEO
Key financial figures
Unaudited
Six Six Twelve
months to months to months to
30 Jun 16 30 Jun 15 31 Dec 15
------------------------------------
Other operating income EUR '000 14,019 3,437 6,702
Operating profit/loss EUR '000 215,870 (491) (180)
Operating profit/loss percentage 1,539.8 % (14.3 %) (2.7 %)
Profit/loss before tax EUR '000 207,713 (14,978) (26,010)
Profit/loss for the period EUR '000 207,713 (14,978) (26,010)
Return on equity n/a n/a n/a
Equity-to-assets ratio (7,950.1 %) (7,392.8 %) (7,525.6 %)
Net interest-bearing debt EUR '000 460,849 499,523 473,183
Debt-to-equity ratio (88.2 %) (67.1 %) (64.8 %)
Return on investment n/a n/a n/a
Capital expenditure EUR '000 - - 284
Property, plant and equipment EUR '000 22 5,000 4,693
Borrowings EUR '000 465,043 503,956 477,845
Cash and cash equivalents EUR '000 4,194 4,433 4,663
FINANCIAL REVIEW
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
Interim Report 22 September 2016.
Talvivaara has been in corporate reorganisation throughout the review period of
1 January 2016 - 30 June 2016. 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 Interim Report has 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. The arrangement concluded with
Terrafame Oy on 30 June 2016 will, in the view of the Company, materially
improve the possibility for the completion of Talvivaara's corporate
restructuring proceedings and facilitate the development of Talvivaara's new
business opportunities.
Review of Operations
Talvivaara and the bankruptcy estate of Talvivaara Sotkamo entered into the
Administration and Laboratory Services Agreement and the Agreement on Lease of
Lime and Limestone Handling Plant and Reception Station on 19 November 2014. 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. 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.
On 27 January 2016, Talvivaara, Terrafame Group Oy and its subsidiaries,
Terrafame Oy and Winttal Oy, signed a letter of intent ("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 have included, among others, the lime plant needed in the
Sotkamo operations, laboratory business, as well as ownership of the geological
and production data associated with the mine.
The transactions under the Letter of Intent would have consisted of two separate
phases. In the first phase, Terrafame Oy would have bought the laboratory
business required in the production process, and the geological and production
data associated with the Sotkamo mine. The laboratory personnel would have been
transferred to Terrafame Oy as old employees. In addition, the parties would
have agreed on the possibility for Talvivaara's key personnel working at the
mine to transfer to Terrafame Oy's service. In the first phase of the
arrangement, Terrafame Oy would have paid a purchase price of EUR 3.8 million to
Talvivaara. Upon completion of the second phase of the arrangement, Terrafame Oy
would have bought from Talvivaara the lime plant required in the production
process of the mine. Terrafame Oy would have paid to Talvivaara a purchase price
of EUR 12.5 million. Simultaneously, Talvivaara would have paid 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 would have been considered fully
and finally settled upon completion of the arrangement.
In addition, as part of the arrangements, Terrafame Group Oy would have acquired
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 will be paid
approximately EUR 1.2 million. Upon completion of the second phase of the
arrangements, Talvivaara would have paid 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.
Based on the transactions contemplated by the Letter of Intent, the difference
between the total purchase price and the sums payable by Talvivaara to Terrafame
entities on the basis of Talvivaara's debts would have been EUR 3.8 million,
which Terrafame Oy would have paid to Talvivaara as a net purchase price for all
assets transferred. The arrangements remained 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 was also conditional on a favorable
decision by the Vaasa Administrative Court on the Nuasjärvi discharge pipe line,
enabling the continuation of Terrafame Oy's mining operations.
On 3 February 2016, the Company announced that the parties have agreed to extend
the deadline set for the finalization and approval of the detailed agreements
under the Letter of Intent until the decision of the Administrative Court has
been received.
On 28 April 2016, the Vaasa Administrative Court gave its ruling, among others,
on the Nuasjärvi discharge pipe line. The outcome of the ruling deviated
adversely from the one applied for by Terrafame Oy, in addition to which the
ruling changed the essential environmental permits of the Sotkamo mining
operations into temporary permits. The Company and Terrafame started assessing
the decision and its effects on the contemplated arrangement under the Letter of
Intent.
On 2 June 2016, the Terrafame -entities informed the Company that they would no
longer pursue the contemplated arrangement under the Letter of Intent of 28
January 2016. Terrafame Oy also informed the Company that Winttal Ltd had
assigned to Terrafame Oy all its rights, title, benefit and interest under the
Streaming Agreement and the Streaming Holiday Agreement and requested the
Company to immediately pay the receivable under the Streaming Holiday Agreement
amounting in total to approximately 12.8 million euros. The liability of the
Company under the Streaming Holiday Agreement was based on the guarantee issued
by the Company for the due payment of loans drawn by Talvivaara Sotkamo from
Nyrstar under the Streaming Holiday Agreement. Furthermore, Terrafame Oy stated
that, given lack of immediate repayment, it would offset the above mentioned
receivables against the receivables of the Company from Terrafame Oy under the
service and lease agreements between the parties.
On 30 June 2016, Talvivaara and Terrafame Oy signed agreements, in which the
parties agreed on the sale of Talvivaara's assets related to the Sotkamo mining
operations and settlement of Talvivaara's guarantee liabilities under the
Streaming Holiday Agreement, with the principal amount of approximately EUR 14
million (including interest up until 30 June 2016), and the Streaming Agreement,
amounting to approximately EUR 203.4 million. The assets sold include, among
others, the lime plant needed for the Sotkamo operations, laboratory, as well as
rights to the geological, laboratory and production related data associated with
the Sotkamo mine. The purchase price for the assets sold consisted of two
components: (i) a full and final settlement of the guarantee liabilities of the
Company under the Holiday Agreement and the Streaming Agreement, and (ii) a cash
component of EUR 1.4 million payable by Terrafame Oy at closing. The agreement
had no effect on the identified restructuring debts of the Company, including
the receivables of certain commercial banks and Finnvera Plc.
The parties had further agreed on the transfer of the laboratory personnel to
Terrafame as old employees, as well as on the possibility for Terrafame to
recruit certain of Talvivaara's personnel currently providing services related
to operation of the mine. The parties agreed to terminate the service agreement
and the lime plant lease agreement of 19 November 2014, which were transferred
to Terrafame Oy on 14 August 2015, with immediate effect as of 30 June 2016.
The agreements included a cancellation clause whereby the transactions under the
agreements would become null and void in the event the extraordinary general
meeting of shareholders of Talvivaara did not approve the transactions under the
agreements. The extraordinary general meeting of shareholders of Talvivaara
approved the transactions at its meeting held on 11 August 2016. For further
information, please refer to section 'Events after the review period'.
Under the agreements, all main assets of Talvivaara previously generating income
for Talvivaara were transferred to Terrafame Oy. Even though the concluded
agreements provided less beneficial terms than those contemplated under the
Letter of Intent, the arrangement materially improved the possibility for the
completion of Talvivaara's corporate restructuring proceedings and facilitated
the development of Talvivaara's new business opportunities.
To date, the Company continues to identify and assess new business opportunities
and to develop its business outside the Sotkamo mine. The Company is also
focused on fulfilling all the remaining special conditions set for the
confirmation and entry into force of the draft restructuring programme.
Financial review
Financial result
The operating profit for the review period was EUR 215.9 million (1-6/2015: EUR
(0.5) million). Revenues of the Company consist of income generated from
equipment leases as well as laboratory and consultancy services rendered to
Terrafame, capital gains crystallised from the sale of the Company's mining-
related assets to Terrafame (EUR 11 million), and of the reversal of the EUR
203.4 million provision, which is reported as an adjustment to the other
operating expenses. The costs are mainly personnel and other operating expenses.
Finance income for the review period was EUR 0.01 million (1-6/2015: EUR 0.002
million) and consisted mainly of interest on deposits and receivables. Finance
costs of EUR (8.2) million (1-6/2015: EUR (14.5) million) resulted mainly from
accrued interest and related financing expenses accrued on borrowings.
The profit for the review period amounted to EUR 207.7 million (1-6/2015: EUR
(15.0) million). Earnings per share were EUR 0.10 (1-6/2015: EUR (0.01)).
Liquidity
As at 30 June 2016, the Company's cash and cash equivalents amounted to EUR 4.2
million (EUR 4.4 million as at 30 June 2015).
To date, the Company finances its day-to-day operations from its cash reserves.
Financing
During the review period, the Company has financed its operations entirely with
operative cash flow.
Equity
Following Talvivaara Sotkamo's bankruptcy in 2014, the Company fully wrote off
its receivables from, and the shares held in, Talvivaara Sotkamo. As a result,
Talvivaara forfeited its equity, which was acknowledged by the Company's Board
and notified to the trade register. Talvivaara had already recognised the
weakening of its financial position 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 and decided to leave the provision on the balance sheet in the
2015 Financial Statements. As a result of the transactions concluded with
Terrafame Oy on 30 June 2016, the guarantee liability was finally settled and
confirmed terminated. Consequently, the provision of EUR 203.4 million was
reversed from the Company's balance sheet as of 30 June 2016.
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, the EUR
8.0 million 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 remaining
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 largely met its environmental bond requirement under the
environmental permit through guarantee insurance provided by Atradius Credit
Insurance NV ("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) would have taken 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 were
terminated on 21 January 2016 and that the beneficiaries, 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 has been removed from the Company's restructuring debts, and no
payment will be made on it under the authorised payment schedule.
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 30 June 2016, property, plant and
equipment totalled EUR 0.02 million (30 June 2015: EUR 5.0 million). Intangible
assets totalled EUR 0 (30 June 2015: EUR 0.5 million). Due to the applied non-
going concern reporting basis, the Company has written down the value of its
shares in Fennovoima.
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.
Following the asset deal concluded with Terrafame Oy on 30 June 2016, the
Company is currently focusing on fulfilling the remaining special conditions set
for the confirmation and entry into force of the draft restructuring programme.
Reporting basis
Talvivaara's Interim Report for the first six months of 2016 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 Administrator's final draft
restructuring programme of 10 April 2015.
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. On 16 May 2016 the Company was
informed that the consideration of charges had been completed and that the
prosecutor had decided to bring charges for security markets information offence
against CEO Pekka Perä, former CEO Harri Natunen and former CFO and Deputy CEO
Saila Miettinen-Lähde. The prosecutor also requests a corporate fine of 500 000
euros to be imposed on Talvivaara. Should any corporate fine be imposed on the
Company in the final and binding decision such fine would be considered
unsecured restructuring debt and cut and paid out in accordance with the
restructuring programme of the Company.
The Company has already in the past gone through the applied disclosure
practices extensively and in great detail with the Financial Supervisory
Authority and the Company's view is that no crime has been committed.
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
On 13 May 2016 the District Court of Kainuu ("the District Court") gave its
ruling on the case concerning the gypsum pond leakages of the Sotkamo mine in
November 2012 and April 2013 and the sodium, sulphate and manganese discharges
that exceeded the anticipated amounts stated in the original environmental
permit application of the Sotkamo mine. Originally the charges were brought
against four members of Talvivaara's management, including CEO Pekka Perä and
former CEO Harri Natunen. The charges concern aggravated impairment of the
environment. Harri Natunen has not been employed by the Company since the autumn
of 2015.
The case concerning the discharge of raffinate from the metals recovery plant
and dilute secondary heap solutions into the open pit during the period of 19
December 2013 - 31 January 2014 was handled together with the above mentioned
case. The charges were brought against CEO Pekka Perä for impairment of the
environment.
The District Court dismissed the charge concerning aggravated impairment of the
environment and moderated the type of the crime to impairment of the
environment. Penalties in the form of a fine were imposed on Pekka Perä, Harri
Natunen and the former chief operations officer of the mine, who acts as a
member of the Executive Committee of the Company. The prosecutor's demands
concerning a suspended prison sentence and compensation for the benefit obtained
from the crime were dismissed in relation to the private defendants. All charges
were dismissed in relation to the fourth defendant. The charges concerning the
discharge of raffinate from the metals recovery plant and dilute secondary heap
solutions into the open pit made against Pekka Perä were dismissed.
Talvivaara has not been a party to the court case.
The decision is not yet final and binding. The three defendants and the
prosecutor have appealed the case to the Court of Appeal.
Risk management and key risks
Talvivaara's near-term risk factors include particularly such risks that relate
to 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 completed 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 sale of the Company's
mining-related assets to Terrafame Oy and the simultaneous settlement and
discharge of the Company's guarantee liabilities under the Streaming Agreement
and the Streaming Holiday Agreement on 30 June 2016 materially facilitated
achieving such target, there is, as of the date of the Company's Interim Report
22 September 2016 no certainty as to whether the Company can fulfil the
remaining special conditions set under 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.
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 ultimately be 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 or cash reserves. 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 will 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.
Personnel
Headcount and remuneration
Talvivaara's personnel comprises an expert organisation, the core competences of
which include, for example, production processes, procurement, environmental
safety, risk management and communications. 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.
As a result of the sale of assets concluded on 30 June 2016, Talvivaara's
headcount decreased substantially and was 16 at the end of the review period on
30 June 2016 (1-6/2015: 51). 69 % (1-6/2015: 51 %) of Talvivaara's employees
were men and 31 % (1-6/2015: 49 %) were women. The average age of the Company's
employees was 44 years (1-6/2015: 41 years).
Resolutions of the Annual General Meeting
Talvivaara's Annual General Meeting was held on 15 June 2016 in Espoo, Finland.
All the resolutions proposed, as set out in the notice of the meeting, were duly
passed. The resolutions of the AGM included:
* that no dividend be paid for the financial year 2015;
* that the annual fee payable to the members of the Board for the term until
the close of the Annual General Meeting in 2017 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 four (4) and that Mr. Tapani Järvinen,
Mr. Pekka Perä, Mr. Stuart Murray and Ms. Solveig Törnroos-Huhtamäki were
re-elected;
* 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;
* that article 2§ of the Articles of Association of the Company concerning the
line of business be amended in accordance with the proposal by the Board of
Directors. The line of business was made more versatile to cover also the
development of new types of businesses. The amended article 2§ of the
Articles of Association concerning the line of business reads as follows:
"The line of business of the Company is to engage in ore exploration,
exploitation, excavation and other mining activities and in metals, machine,
chemical and construction industries and any business activities supporting
them. The Company may also engage in the business operations based on know-how
acquired in aforementioned sectors or related to or compatible with them. The
Company may operate either directly or through subsidiaries, associated
companies or joint ventures."
At its constituent meeting on 15 June 2016, the Board of Directors re-elected
Mr. Tapani Järvinen as the chairman of the Board.
Shares and shareholders
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%).
As at 30 June 2016 the shares held in treasury by the Company amounted to in
aggregate 192,883,000 (9.2% of the shares in the Company). The shares held in
treasury by the Company do not carry any voting rights.
Share based incentive plans
As at 30 June 2016, the Company has no share based incentive schemes in place.
Events after the review period
Approval by the EGM of the sale of assets
The extraordinary general meeting of shareholders of the Company held on 11
August 2016 approved the resolution proposed by the Board of Directors
concerning the sale by Talvivaara of its assets related to the Sotkamo mining
operations to Terrafame Oy. Whilst all the income generating assets of
Talvivaara were transferred to Terrafame, the Company believes that the
arrangement has materially improved the possibility for the successful
completion of Talvivaara's corporate restructuring proceedings, and facilitated
the development of Talvivaara's new business opportunities.
Corporate reorganisation proceedings
The Administrator of Talvivaara's corporate restructuring proceedings has on 20
September 2016 confirmed his view, according to which the following special
conditions set for the entry into force of the Company's draft restructuring
programme are still to be fulfilled at the date of these Interim Report 22
September 2016:
* Special condition (b) (2):
The general meeting of Talvivaara arranges or authorises the Company's board of
directors to arrange a financing arrangement (e.g. a share issue, bond or other
financial instrument) to raise the funds to make the investment necessary for
carrying out the arrangement referred to in special condition (a) (2) of the
final draft restructuring programme and/or to pay the claims of those creditors
who did not exercise their right to convert their restructuring debt claims into
shares in the Company in the manner provided for in the restructuring programme
and to cover other possible liabilities to the extent the Company's other funds
are not sufficient for this purpose; and
* Special condition (c):
The proceedings for converting the restructuring debts into shares in the
Company have been completed, and the new shares have been registered in the
Trade Register.
In addition, in the Administrator's view, due compliance with all the special
conditions and Restructuring Act will require that one or more of the Company's
new business opportunities is developed sufficiently so as to provide more
tangible prospects for future viable business operations.
Currently, the Company is focusing on fulfilling all the remaining special
conditions set for the entry into force of the draft restructuring programme.
The Company announced on 20 September 2016 that the Company has started
preparations for the share issue in accordance with the special condition (c) of
the restructuring programme. The Company also announced that it will continue
investigating and developing its new projects into concrete business
opportunities. The new business opportunities of the Company include projects,
amongst others, in the recycling and energy saving sectors.
Short-term outlook
The operational outlook for Talvivaara is greatly dependent on the authorisation
and a successful completion of the Company's corporate reorganisation
proceedings within the prescribed time frame, and the materialisation and
further development of the Company's new income generating business
opportunities currently under contemplation. To facilitate this, a new line of
business of the Company was approved by the Annual General Meeting in June 2016
enabling the Company to develop new business opportunities also outside the
mining industry.
Whilst the Administrator's final draft restructuring programme gives the Company
reasonably ample time to complete the reorganization proceedings, there is no
certainty that the Company will be successful in developing its new business
opportunities and, ultimately, in completing the corporate reorganisation
proceedings through due payments.
Talvivaara Mining Company Plc
Board of Directors
BALANCE SHEET
Unaudited
As at As at As at
(All amounts in EUR) 30 Jun 2016 30 Jun 2015 31 Dec 2015
--------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment 21,592 4,999,546 4,692,782
Intangible assets - 497,088 94,547
Other receivables 26,822 30,926 27,640
--------------------------------------------------
Total non-current assets 48,414 5,527,559 4,814,970
Current assets
Trade receivables 898,184 63,678 37,850
Other receivables 1,432,458 46,599 188,138
Cash and cash equivalents 4,193,678 4,432,729 4,662,572
--------------------------------------------------
Total Current assets 6,524,320 4,543,006 4,888,559
TOTAL ASSETS 6,572,734 10,070,565 9,703,529
--------------------------------------------------
EQUITY AND LIABILITIES
Equity attributable to the
owners
Share capital 80,000 80,000 80,000
Share premium 8,085,842 8,085,842 8,085,842
Other reserves 797,348,200 771,648,199 797,348,200
Retained deficit (1,328,054,020) (1,524,313,624) (1,535,766,741)
--------------------------------------------------
Total equity (522,539,978) (744,499,583) (730,252,700)
Current liabilities
Provisions - 203,444,456 203,444,456
Borrowings 465,042,831 503,955,559 477,845,205
Trade payables 2,162,258 2,743,335 2,723,003
Other payables 61,907,624 44,426,799 55,943,564
--------------------------------------------------
Total liabilities 529,112,712 754,570,148 739,956,228
TOTAL EQUITY AND LIABILITIES 6,572,734 10,070,565 9,703,529
--------------------------------------------------
INCOME STATEMENT
Period ended Unaudited Period ended Year ended
(All amounts in EUR) 30 Jun 2016 30 Jun 2015 31 Dec 2015
---------------------------------------------------
Other operating income 14,019,322 3,436,664 6,702,480
Materials and services (174,762) (138,698) (257,536)
Personnel expenses (1,512,874) (2,132,041) (3,807,345)
Depreciation and amortisation (299,324) (342,470) (971,024)
Impairment charges on
intangible
assets (93,626) - -
Impairment charges on
investments - - 421,333
Other operating expenses 203,931,287 (1,314,824) (2,267,625)
Operating profit/loss 215,870,023 (491,368) (179,717)
Finance income 9,338 1,620 12,841
Finance cost (8,166,640) (14,488,035) (25,842,689)
---------------------------------------------------
Finance cost (net) (8,157,302) (14,486,415) (25,829,848)
Profit/Loss before income tax 207,712,721 (14,977,782) (26,009,565)
Income tax - - -
---------------------------------------------------
PROFIT/LOSS FOR THE FINANCIAL
PERIOD 207,712,721 (14,977,782) (26,009,565)
---------------------------------------------------
Profit/Loss attributable to
the
owners of the Company,
Period ended Period ended Year ended
(€/share) 30 Jun 16 30 Jun 2015 31 Dec 15
---------------------------------------------------
Diluted and undiluted 0,10 (0,01) (0,01)
STATEMENT OF CASHFLOWS
Unaudited
Period ended Period ended Year ended
(all amounts in EUR) 30 Jun 2016 30 Jun 2015 31 Dec 2015
----------------------------------------
Cash flows from operating activities
Profit/Loss for the period 207,712,721 (14,977,782) (26,009,565)
Adjustments for
Depreciation and amortisation 299,324 342,470 971,024
Other non-cash income and expenses (216,005,213) - 215,257
Impairment charges on investments - - (421,333)
Interest income (9,338) (1,620) (12,841)
Interest expenses 8,166,640 14,488,035 25,842,689
----------------------------------------
Cash flow before change in working
capital 257,760 (148,898) 585,230
Change in working capital
Decrease(+)/increase(-) in trade and
other receivables 203,656 211,314 98,898
Decrease(-)/increase(+) in trade and
other payables (864,554) (891,319) (1,287,347)
----------------------------------------
Change in working capital (660,898) (680,005) (1,188,449)
Net cash used in operating activities
before financing activities and taxes (403,139) (828,903) (603,219)
Interest and other finance cost paid (65,785) (84,749) (91,801)
Interest and other finance income 30 - 11,211
----------------------------------------
Net cash generated (used) in operating
activities (468,894) (913,652) (683,809)
Cash flows from investing activities
----------------------------------------
Net cash generated (used) in investing
activities 0 0 0
Cash flows from financing activities
----------------------------------------
Net cash generated from financing
activities 0 0 0
Net (decrease)/increase in cash
and bank overdrafts (468,894) (913,652) (683,809)
Cash and bank overdrafts at beginning of
the year 4,662,572 5,346,381 5,346,381
Cash and bank overdrafts at end of the
period 4,193,678 4,432,729 4,662,572
STATEMENT OF CHANGES IN EQUITY
Share Share Share Other Retained
EUR capital issue premium reserves deficit Total
------------------------------------------------------------------
31 Dec 2014 80,000 - 8,085,842 771,648,200 (1,509,757,176) (729,943,134)
------------------------------------------------------------------
Absorption of
subsidiaries - - - - 421,333 421,333
Profit (loss)
for the period - - - - (14,977,782) (14,977,782)
------------------------------------------------------------------
30 Jun 2015 80,000 - 8,085,842 771,648,200 (1,524,313,625) (744,499,583)
------------------------------------------------------------------
Conversion of
convertible
bonds - - - 25,700,000 - 25,700,000
Reversal of
absorption of
subsidiaries
to income
statement - - - - (421,333) (421,333)
Profit (loss)
for the period - - - - (11,031,783) (11,031,783)
------------------------------------------------------------------
31 Dec 2015 80,000 - 8,085,842 797,348,200 (1,535,766,741) (730,252,700)
------------------------------------------------------------------
Profit (loss)
for the period - - - - 207,712,721 207,712,721
------------------------------------------------------------------
30 Jun 2016 80,000 - 8,085,842 797,348,200 (1,328,054,020) (522,539,978)
------------------------------------------------------------------
Financials for the period ended on 30 June 2016 and for the financial year ended
on 31 December 2015 are audited. Financials for the period ended on 30 June
2015 are unaudited.
NOTES
1. Basis of presentation and non-going concern
This Interim Report has been 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 Interim Report for the period ended 30 June 2016
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. The requisite adjustments resulting from the chosen reporting
basis have, where applicable, been made in the 2016 Interim Report 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.
The Administrator of Talvivaara's corporate restructuring proceedings has
confirmed his view, according to which the following special conditions set for
the entry into force of the Company's draft restructuring programme are still to
be fulfilled at the date of the Interim Report 22 September 2016:
* Special condition (b) (2):
The general meeting of Talvivaara arranges or authorises the Company's board of
directors to arrange a financing arrangement (e.g. a share issue, bond or other
financial instrument) to raise the funds to make the investment necessary for
carrying out the arrangement referred to in special condition (a) (2) of the
final draft restructuring programme and/or to pay the claims of those creditors
who did not exercise their right to convert their restructuring debt claims into
shares in the Company in the manner provided for in the restructuring programme
and to cover other possible liabilities to the extent the Company's other funds
are not sufficient for this purpose; and
* Special condition (c):
The proceedings for converting the restructuring debts into shares in the
Company have been completed, and the new shares have been registered in the
Trade Register.
In addition, in the Administrator's view, due compliance with all the special
conditions and Restructuring Act will require that one or more of the Company's
new business opportunities is developed sufficiently so as to provide more
tangible prospects for future viable business operations.
Currently, the Company is focusing on fulfilling all the remaining special
conditions set for the entry into force of the draft restructuring programme.
Until 30 June 2016 the Company financed its day-to-day operations by providing
administrative and technical services and the lease of machinery and equipment
critical to Terrafame. These contractual arrangements helped the Company to
discharge all of its new liabilities as and when they fell due. After the
agreement made with Terrafame on 30June 2016, the Company continues identifying
and assessing new business opportunities and developing its business outside the
Sotkamo mine.
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 10 April 2015.
As of the date of the Company's Interim Report 22 September 2016, there is no
certainty as to whether the Company can fulfill all the set requirements within
the given time frame.
For more information on the effects of the draft restructuring programme, please
refer to Note 2.
2. Illustrative calculation of the Company equity, if the restructuring
programme is confirmed
According to the draft restructuring programme, the creditors of the unsecured
restructuring debt may convert their receivables to new shares of the Company.
The unsecured restructuring debt of those creditors who decide not to exercise
their conversion right would be cut by 99%. The remaining 1% of the unsecured
restructuring debt would be paid in one instalment. The amount of unsecured
restructuring debt to be paid can only be determined after it is known how many
creditors would exercise their right to convert unsecured restructuring debt
into Company shares.
The following table illustrates the Company's capital structure based on actual
book values as at 30 June 2016, adjusted with the assumed conversion of all non-
preferred restructuring loans (totaling EUR 453.6 million) to new shares of the
Company as if the conversion would have taken place as at 30 June 2016. In
addition, the adjusted capital structure assumes elimination of the accumulated
accrued interest since the beginning of the restructuring proceedings amounting
to EUR 67.2 million as the obligation to pay such interest will cease upon
either the assumed approval of the draft restructuring programme or the
conversion of the non-preferred restructuring debt.
EUR 30 June 2016
1) Conversion 2) Elimination
of unsecured of the accrued
restructuring interest
Actual debt expenses Adjusted
-------------------------------------------------------
Cash and cash equivalents 4,193,678 0 0 4 193 678
Equity (522,539,820) 453,578,423 67,154,776 (1,806 622)
Borrowings and trade and
other payables, of which:
Secured restructuring 7,500,000 0 0 7,500,000
debt
and other liabilities to
be taken into account
Unsecured restructuring 453,578,423 (453,578,423) 0 0
debt
Accumulated interest 67,154,776 0 (67,154,776) 0
since the beginning of
the
restructuring proceedings
Other payables 879,514 0 0 879,514
during procedure
-------------------------------------------------------
Total liabilities 529,112,712 (453,578,423) (67,154,776) 8,379,514
The calculation is based on the assumption that all unsecured restructuring debt
(totaling EUR 453.6 million) will be converted into new shares of the Company
with a subscription price of EUR 0.1144 per share. Following the conversion of
all unsecured restructuring debt, the equity will increase by the amount of the
unsecured restructuring debt of EUR 453.6 million.
The Company has accrued interest expenses of EUR 67.2 million to the balance
sheet since the beginning of the restructuring proceedings, despite the fact
that the payment obligation on unsecured restructuring debt ceased when the
reorganisation proceedings were started.
The calculation does not take into account the interest payable on the secured
loans of in total EUR 7.5 million accrued during the restructuring proceedings,
which according to the final draft restructuring programme would be 12-month
EURIBOR added with 2 percent units. The interest expense on the secured debt
accrued from the beginning of the restructuring proceedings 29 November 2013
until 30 June 2016 amounted to approximately EUR 0.4 million. The Company and
the secured creditors may agree to adjust this interest liability in terms of
the repayable amount and/or the repayment schedule. The secured restructuring
loans of EUR 7.5 will remain as liabilities on the balance sheet.
If no unsecured restructuring debts were converted into new shares of the
Company and the draft restructuring programme was authorised, the amount of the
unsecured debts would be reduced by 99 percent based on the restructuring plan.
The remaining amount of unsecured restructuring loans of EUR 4.5 million would
remain as short-term debt on the balance sheet. Following the reduction of the
unsecured restructuring debt, the Company's equity would increase by the amount
of the reduction of the unsecured restructuring debt, EUR 449.0 million.
In the event that the restructuring programme was completed, the accumulated
interest since the beginning of the restructuring proceedings accrued in the
Interim Report would be derecognized, since the fulfillment of the restructuring
plan will verify that the accumulation of interests ceased at the time the
restructuring proceedings were started.
3. Property, Plant & Equipment
Machinery
and
(All amounts in EUR) Buildings equipment Total
---------------------------------------
Gross carrying amount at 1 Jan 2015 11,899,045 19,837,595 31,736,640
Additions - 266,843 266,843
---------------------------------------
Gross carrying amount at 30 Jun 2015 11,899,045 20,104,438 32,003,483
---------------------------------------
Accumulated depreciation and
impairment losses at 1 Jan 2015 11,899,045 14,826,837 26,725,882
Depreciation for the period - 278,055 278,055
Accumulated depreciation and
impairment losses at 30 Jun 2015 11,899,045 15,104,892 27,003,937
---------------------------------------
Carrying amount at 1 Jan 2015 0 5,010,758 5,010,758
---------------------------------------
Carrying amount at 30 Jun 2015 0 4,999,546 4,999,546
---------------------------------------
Deductions - (3,463) (3,463)
---------------------------------------
Gross carrying amount at 31 Dec 2015 11,899,045 20,100,975 32,000,020
---------------------------------------
Accumulated depreciation and
impairment losses at 30 Jun 2015 11,899,045 15,104,892 27,003,937
Depreciation for the period - 303,301 303,301
Accumulated depreciation and
impairment losses at 31 Dec 2015 11,899,045 15,408,193 27,307,238
---------------------------------------
Carrying amount at 30 Jun 2015 - 4,999,546 4,999,546
---------------------------------------
Carrying amount at 31 Dec 2015 (0) 4,692,782 4,692,782
---------------------------------------
Gross carrying amount at 1 Jan 2016 11,899,045 20,100,975 32,000,020
Deductions (11,899,045) (20,060,775) (31,959,820)
---------------------------------------
Gross carrying amount at 30 Jun 2016 - 40,200 40,200
---------------------------------------
Accumulated depreciation and
impairment losses at 1 Jan 2016 11,899,045 15,408,193 27,307,238
Depreciation for the year - 298,403 298,403
Deductions (11,899,045) (15,687,988) (27,587,032)
---------------------------------------
Accumulated depreciation and
impairment losses at 30 Jun 2016 0 18,608 18,608
---------------------------------------
Carrying amount at 1 Jan 2016 (0) 4,692,782 4,692,782
---------------------------------------
Carrying amount at 30 Jun 2016 - 21,592 21,592
---------------------------------------
Upon liquidation of Talvivaara Exploration Ltd in 2015, all its assets, rights
and liabilities transferred to the Company. On 30 June 2016. Talvivaara and
Terrafame Oy signed agreements, in which the parties agreed on the sale of
Talvivaara's assets related to the Sotkamo mining operations and settlement of
Talvivaara's guarantee liabilities under the Streaming Holiday Agreement, with
the principal amount of approximately EUR 14 million (including interest up
until 30 June 2016). The assets sold include, among others, the lime plant
needed for the Sotkamo operations and the laboratory.
4. Borrowings
Unaudited
As at As at As at
EUR 30 Jun 2016 30 Jun 2015 31 Dec 2015
------------------------------------
Restructuring loan capital 427,500,000 453,200,000 427,500,000
Restructuring loan interest 16,510,880 18,567,844 16,510,880
Accrued interest on restructuring loans
after commencement of restructuring
proceedings 12,822,068 11,078,282 12,822,068
Other borrowings during procedure 8,209,883 21,109,433 21,012,257
------------------------------------
465,042,831 503,955,559 477,845,205
------------------------------------
Following table specifies borrowings of the Company as at 30 June 2016 in
accordance with the draft restructuring programme:
EUR As at
30 Jun 2016
------------
Secured restructuring debt and other liabilities to be taken into 7,448,870
account
Unsecured restructuring debt 444,563,991
Accumulated interest since the beginning of the restructuring 13,029 971
proceedings
------------
Total borrowings 465,042,831
Due to the corporate restructuring proceedings, the Company has reclassified all
of its borrowings as current and any unamortised transaction costs have been
expensed to the income statement in previous periods in connection with the
reclassification accreting the loan carrying amounts to the nominal value. The
fair value of the restructuring debt cannot be assessed due to the Company's
corporate restructuring proceedings, as the Company does not currently have a
credit rating or proper access to debt financing.
Restructuring debt capital
The restructuring debt capital includes the Revolving Credit Facility (EUR 70.0
million), the guarantee liability granted to Finnvera (EUR 50.7 million), the
senior unsecured bonds due in 2017 (EUR 110.0 million) and the senior
convertible bonds due in 2015 (EUR 197.5 million). Of the restructuring loan
capital EUR 7,4 million is secured in accordance with the draft restructuring
programme and EUR 428.7 million is unsecured. The details related to these debts
can be found later in this section.
According to the draft restructuring programme, the secured debt is entitled to
cover an amount corresponding to 50 percent of the assets of the debtor valued
at the beginning of the restructuring proceedings. The capital amount of the
debt secured with mortgage on the Company's assets will not be cut in the
restructuring proceedings and the holder of such debt is not entitled to convert
the capital amount of the secured debt into new shares of the Company.
Pursuant to the draft restructuring programme, the holders of unsecured debt are
entitled to convert their receivable to new shares in the Company at the
conversion rate of EUR 0.1144 per share. To the extent the unsecured creditors
do not use their conversion right, the remaining unsecured debt will be cut by
99 percent whilst 1 percent of the capital of the loan will be repaid to the
creditor.
Restructuring loan interest
Restructuring loan interests are unsecured debts and payable to the holders of
the restructuring debt in accordance with the draft restructuring programme.
Interest accumulated since the beginning of the restructuring proceedings
In addition to the Company's restructuring debts and other liabilities to be
considered, the Company's borrowings include EUR 13.0 million and trade and
other payables include EUR 54 million of accumulated interest, which will fall
due only in case the draft restructuring programme is not approved. The Company
has accrued the interest on the balance sheet for all restructuring debt based
on the original loan terms described below despite the fact that the
accumulation of interest payment obligation on unsecured restructuring debt
ceased when the restructuring proceedings were started. In case the
restructuring plan is approved the interest accrued will not be paid, since the
fulfillment of the restructuring programme will verify that the accumulation of
interests ceased at the time the restructuring proceedings were started.
Other short-term borrowings
Other borrowings as at 31 December 2015 included the guarantee liability to
Winttal Oy which was settled in connection with the asset deal concluded with
Terrafame Oy on 30 June 2016. Currently, the other short-term borrowings consist
mainly of the third-party security granted to Finnvera (EUR 8.2 million
including accrued interest).
Detailed information on debts under draft restructuring programme based on their
original terms
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.
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.
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. As at 30 June 2016 and 2015, the outstanding loan amount
was EUR 70 million.
Guarantee liabilities
Guarantee liabilities include Finnvera loan of EUR 50.7 million (including
interest) recognised as unsecured restructuring debt under the draft
restructuring programme due to the guarantee given on behalf of the debtor
Talvivaara Sotkamo and a third-party security granted to Finnvera in the amount
of EUR 8.2 million (including accrued interest).
All amounts of reorganisation debts remain subject to change at the time of the
Interim Report and may only be finalised following the confirmation of the draft
restructuring programme.
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
Unaudited
EUR 30 Jun 2016 30 Jun 2015 31 Dec 2015
-----------------------------------------------------
Counter indemnity given as
a guarantee - 31,940,000 31,940,000
-----------------------------------------------------
0 31,940,000 31,940,000
-----------------------------------------------------
Talvivaara Sotkamo largely met its environmental bond requirement under the
environmental permit through guarantee insurance provided by Atradius Credit
Insurance NV ("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) would have taken 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
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 terminated
on 21 January 2016 and that the beneficiaries, 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 has been removed from the Company's restructuring debts, and no payment
will be made on it under the authorised payment schedule.
As at 31 December 2015, the coverage amounted to EUR 31.9 million. As a result
of Terrafame 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 terminated on 21
January 2016.
The future aggregate minimum lease payments under non-cancellable operating
leases
Unaudited
EUR 30 Jun 2016 30 Jun 2015 31 Dec 2015
---------------------------------------
No later than 1 year 65,454 78,178 93,497
Later than 1 year and not later than 5
years 20,436 144 41,000
85,890 78,322 134,497
---------------------------------------
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.
Share-related key figures Unaudited
30 Jun 2016 30 Jun 2015 31 Dec 2015
------------------------------------
Earnings per share EUR 0.10 (0.01) (0.01)
Equity per share EUR (0.25) (0.36) (0.35)
Employee-related key figures
Unaudited
30Jun 2016 30 Jun 2015 31 Dec 2015
Salaries EUR '000 1,283 1,775 3,206
Average number of employees 16 51 50
Number of employees at the end of
the period 16 51 39
Key financial figures of the Group
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
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Adjusted average number of shares
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