2017-09-14 09:32:23 CEST
2017-09-14 09:32:23 CEST
REGULATED INFORMATION
Talvivaaran Kaivososakeyhtiö Oyj - Half Year financial report
Talvivaara Mining Company Interim Report for January-June 2017
Stock Exchange Release
Talvivaara Mining Company Plc
14 September 2017
Talvivaara Mining Company Interim Report for January-June 2017
Talvivaara emerges from the corporate reorganisation proceedings - new business
projects under development
* In January, Talvivaara completed the debt-to-equity conversion issue, based
on which the unsecured creditors of the Company subscribed for a total of
2,081,653,010 new shares in the Company. Consequently, the Company's debt
was reduced by a total of EUR 238.1 million
* Talvivaara's Debt Restructuring Programme was confirmed by the Espoo
District Court. As a result, the corporate reorganization proceedings of
Talvivaara were completed, and the Company's restructuring debt and accrued
interest were cut to EUR 9.6 million, payable to the creditors by 2 June
2019. The ruling became final and binding in June 2017. Following the ruling
of the Espoo District Court, Talvivaara has been focusing on developing,
commercializing and financing its new business opportunities and managing
the remaining liabilities under the confirmed Debt Restructuring Programme
* The Group's result for the reporting period amounted to EUR 520.4 million,
reflecting the financial impact of the successful completion of the debt-to-
equity conversion issue and the confirmation of Talvivaara's Debt
Restructuring Programme
Enquiries:
Talvivaara Mining Company Plc Tel. +358 20 712 9800
Pekka Perä, CEO
Pekka Erkinheimo, Deputy CEO
Key financial figures Group, IFRS Parent Company, FAS
Six Twelve Six Six Twelve
months to months to months to months to months to
30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
----------------------------------------------------------
Other EUR 1 14,027 728 14,019 14,027
operating '000
income
Operating EUR (2,228) 213,767 (1,300) 215,870 213,770
profit/loss '000
Operating n/a 1,524.0 % (178.6 %) 1,539.8 % 1,524.0 %
profit/loss
percentage
Profit/loss EUR 520,405 198,526 284,603 207,713 198,529
before tax '000
Profit/loss EUR 520,405 198,526 284,603 207,713 198,529
for the period '000
Return on n/a n/a n/a n/a n/a
equity
Equity-to- (464.9 %) (12,996.7 %) (479.7 %) (7,950.1 %) (12,988.5 %)
assets ratio
Net interest- EUR 7,979 461,302 8,767 460,849 461,313
bearing debt '000
Debt-to-equity (89.2 %) (86.8 %) (97.6 %) (88.2 %) (86.8 %)
ratio
Return on n/a n/a n/a n/a n/a
investment
Capital EUR - - - - -
expenditure '000
Property, EUR 16 19 16 22 19
plant and '000
equipment
Borrowings EUR 9,568 465,078 9,568 465,043 465,078
'000
Cash and cash EUR 1,590 3,777 801 4,194 3,766
equivalents '000
FINANCIAL REVIEW
Introduction
Following the bankruptcy of Talvivaara Mining Company Plc's ("Talvivaara", the
"Company" or the "Parent 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 Talvivaara's Interim Report 14 September 2017.
Talvivaara's Interim Financial Statements for the reporting period 1 January -
30 June 2017 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 Company's ability to secure the
necessary cash flow for the Company to discharge all of its liabilities and the
continuance of the Company's viable business.
The confirmation by the District Court of Espoo of the Company's draft
restructuring programme on 2 June 2017 has materially facilitated Talvivaara's
funding efforts and the development of the Company's and its subsidiaries' (the
"Group") new business opportunities.
Review of Operations
On 4 January 2017, Talvivaara announced the final results of the debt-to-equity
share issue, according to which the unsecured creditors of the Company
subscribed for a total of 2,081,653,010 new shares in the Company. The
subscription price per new share was EUR 0.1144, which was paid in its entirety
by setting off the unsecured restructuring debt receivable of the creditor from
the Company against the subscription price of the new shares. Consequently, the
Company's debt was reduced by a total of EUR 238.1 million and the total number
of shares in the Company increased to 4,189,807,162 shares. The new shares were
registered in the trade register maintained by the Finnish Patent and
Registration Office and issued as book-entry securities in the book-entry system
maintained by Euroclear Finland by 5 January 2017. The new shares were listed on
the official list of the Helsinki Stock Exchange by 9 January 2017. The new
shares carry the shareholders' rights after the registration in the trade
register and the subscriber's book-entry account. The debt-to-equity share issue
was one of the special conditions for the entry into force of Talvivaara's Draft
Restructuring Programme.
On 31 Jaunuary 2017, Talvivaara's Board of Directors approved the closing of the
acquisition of the energy saving technology, which was based on an agreement
signed on 4 October 2016. The core of the technology acquired was a new
measurement and adjustment system that improves the alternating current electric
arc furnace steel making process by reducing energy consumption and stabilizing
melting and heating processes. The Company believes that the market potential of
its technology is significant. The object of sale consisted of the rights to the
system on which the technology is based and the existing equipment utilizing the
technology. The assets were acquired by a wholly-owned subsidiary of the
Company, FATB Ltd. The purchase price of the technology is five percent of the
EBIT generated by the technology in the future. However, the Company has the
right to terminate the EBIT based earn-out arrangement by paying a lump sum of
EUR 2 million to the seller of the technology. In addition, the Company has paid
compensation for the equipment reflecting its reasonable development and
manufacturing costs of EUR 160,000.
The Company also announced that it has initiated a commercialization project,
based on its chemical engineering expertise, focused on developing more
efficient use of nutrients and energy production from renewable raw materials
related to livestock farming. The Company's studies show that a rational and
efficient disposal of manure from livestock farming is challenging given
geographical balance of livestock density and land availability for manure
spreading in many areas in Finland and particularly in Central Europe.
On 2 February 2017, an Extraordinary General Meeting of Talvivaara resolved to
authorise the Board of Directors to resolve on a share issue for consideration
pursuant to the shareholders' pre-emptive subscription right to raise the funds
needed to pay the remaining restructuring debts of the Company and/or to finance
the development of the Company's new business opportunities. Based on the
authorization, the number of shares which can be issued through one or several
share issues shall not exceed 40,000,000,000 shares in aggregate. The Board of
Directors may decide to issue new shares and/or the Company's own shares held in
treasury by the Company. The Board of Directors has the right to decide upon the
offering to parties determined by the Board of Directors of any shares that may
remain unsubscribed for pursuant to the shareholders' pre-emptive subscription
right. Should the total number of the shares in the Company afterwards decrease
as a result of a reverse share split, the maximum number of the shares to be
issued based on the authorisation shall decrease pro rata. The Board of
Directors is authorised to determine the subscription price for the new shares
and the other terms and conditions of the share issue. The authorisation of the
Board of Directors to issue shares is valid until 30 June 2018. The
authorization for a share issue was one of the special conditions for the entry
into force of Talvivaara's Draft Restructuring Programme.
On 6 March 2017, the Company announced that the Administrator of the Company's
corporate reorganization proceedings has filed a request for confirmation of the
Restructuring Programme of Talvivaara to the District Court of Espoo. According
to the Administrator's request, all the special conditions set for the
confirmation and entry into force of the Restructuring Programme have been
fulfilled. Based on the final Draft Restructuring Programme filed with the
District Court of Espoo on 10 April 2015, the Administrator was to notify the
District Court of the fulfillment of the special conditions and to request the
confirmation of the Restructuring Programme by 10 April 2017.
On 23 March 2017, Talvivaara was informed by the Administrator that the District
Court of Espoo has requested the Company to give a response in the matter
concerning the confirmation request filed to the District Court by the
Administrator on 6 March 2017. Concurrently, the Company was notified that
Finnvera Plc, Nordea Bank AB (Publ.), Finnish branch, Danske Bank Plc, OP
Corporate Bank Plc and Svenska Handelsbanken AB, Finnish branch have given a
response to the District Court where they have objected the confirmation of the
restructuring programme, requesting the cessation of the corporate
reorganization proceedings and placing the Company in bankruptcy.
On 29 March, the Company announced that Finnvera Plc, Nordea Bank AB (Publ.),
Finnish branch, Danske Bank Plc, OP Corporate Bank Plc and Svenska Handelsbanken
AB, Finnish branch have requested the cancellation of the bankruptcy matter
initiated at the District Court of Espoo on 22 March 2017. The cancellation
request had no effect on the banks' requests for the cessation of the
reorganization proceedings or on their objection to the confirmation of the
restructuring programme. The proceedings regarding the confirmation request
filed by the Administrator on 6 March 2017 continue at the District Court of
Espoo.
On 17 May 2017, Talvivaara announced that it will adjust its business operations
with the aim of securing sufficient cash reserves for initiating its new
businesses and for obtaining the funding required in connection therewith. The
need for the adjustment was brought about by the delays in having Talvivaara's
Debt Restructuring Programme confirmed due to reasons outside the Company's
control. The delay had materially impeded the Company's ability to acquire,
develop or finance its new businesses. As part of the adjustment actions, the
Company laid off temporarily, on economical and production-related grounds, some
of its personnel wholly or partly as of the beginning of June. In addition, the
Company had agreed with some of the members of the management who will remain
outside the scope of the lay-offs on a voluntary arrangement whereby such
employees will accept a portion of their compensation from the Company as debt,
which shall be repaid to the employees once the new financing required for the
Company's new business operations has been obtained. Furthermore, the CEO and
the members of the Board of Directors of Talvivaara had notified the Company
that they will accept 75 % of the fees payable to them from the Company in the
form of debt, which will likewise be repaid once the new financing required for
the Company's new business operations has been obtained. Despite the adjustment
actions, the Company will continue the development of its new businesses and its
projects in the circular economy sector, as well as the energy saving business.
With the adjustment actions, the Company targeted monthly savings of some 50% in
its monthly personnel costs, which will help to facilitate the securing of
sufficient cash reserves for developing the Company's new businesses in
accordance with its plans, despite the delays in having the Company's Debt
Restructuring Programme confirmed.
On 2 June 2017, the District Court of Espoo gave its ruling and confirmed
Talvivaara's Debt Restructuring Programme. The Court also accepted entry into
force of the Programme despite the possible appeal process. As a result of the
ruling, the corporate reorganization proceedings of Talvivaara were completed,
and the Company's restructuring debt and accrued interest were cut down to EUR
9.6 million, payable to the creditors by 2 June 2019. The ruling became final
and binding in June 2017. For more information, please refer to Notes 11 and 23
of the Interim Financial Statements.
Following the ruling, Talvivaara has been focusing on developing,
commercializing and financing its new business opportunities and managing the
EUR 9.6 million liabilities set in the confirmed Debt Restructuring Programme.
Financial review
Financial result
The operating loss for the reporting period was EUR (2.2) million (1-6/2016: EUR
215.9 million). The Group did not have any material revenues during the
reporting period. The costs are mainly personnel costs, legal fees and other
operating expenses.
Finance income for the review period was EUR 525.3 million (1-6/2016: EUR 0.01
million) and consisted mainly of the profit resulting from the completion of the
debt-to-equity conversion issue in January 2017, and of income generated due to
the confirmation of the Company's draft restructuring progamme in June 2017, as
a result of which the accrued interest on the Company's restructuring debt was
reversed entirely, and the Company's unsecured restructuring debt was cut by 99
per cent, whilst the secured restructuring debt was cut down to EUR 7.5 million
in aggregate. The balance of the finance income was interest on deposits and
receivables. Finance costs of EUR (2.6) million (1-6/2016: EUR (8.2) million)
resulted mainly from booking the accrued interest on the bonds until their
maturity date 4 April 2017, and on the Revolving Credit Facility until the
confirmation of the draft restructuring programme on 2 June 2017 in accordance
with their original terms, as well as from booking the interest accrued on the
secured restructuring debt during the corporate reorganization proceedings as
stipulated in the Debt Restructuring Programme. This interest is customarily
subject to voluntary restructuring agreed by the secured creditors and the
debtor. For more information, please refer to section 'Provisions and other
items recognised based on Debt Restructuring Programme'. The balance of the
finance costs were other related financing expenses accrued on borrowings.
The profit for the reporting period amounted to EUR 520.4 million (1-6/2016: EUR
207.7 million). Earnings per share were EUR 0.13 (1-6/2016: EUR 0.10). Based on
the Finnish Accounting Standards applied to the Parent Company, the profit of
the Parent Company for the reporting period amounted to EUR 284.6 million, since
the conversion issue has been recorded in the reserve for invested unrestricted
equity without impacting the P/L account.
Liquidity
As at 30 June 2017, the Company's cash and cash equivalents amounted to EUR 1.6
million (EUR 3.8 million as at 31 December 2016).
Financing
During the review period, the Company has financed its operations entirely from
its cash reserves.
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 Debt Restructuring Programme
Based on the provisions of the confirmed Debt Restructuring Programme, interest
equal to 12-month EURIBOR added with 2 percent units p.a. shall accrue on the
secured loans of in total EUR 7.5 million for the duration of the corporate
reorganisation proceedings. The interest expense on the secured debt accrued
from the beginning of the restructuring proceedings 29 November 2013 until its
completion on 2 June 2017 amounts to EUR 0.6 million. It is customary that the
debtor and the secured creditors agree to adjust such interest liability in
terms of the repayable amount and/or the repayment schedule. Pending such
potential agreement by and between the Company and the secured creditors, the
Company has booked the entire amount as a provision.
Assets
On the statement of financial position as at 30 June 2017, property, plant and
equipment totalled EUR 0.02 million (31 December 2016: EUR 0.02 million).
Intangible assets totalled EUR 0 (31 December 2016: EUR 0). Due to the applied
non-going concern reporting basis, the Company has written down the value of its
shares in Fennovoima as well as the equity investments made into FATB Oy for
covering the development and manufacturing costs of the energy saving
technology.
Corporate reorganisation
Pursuant to the ruling by the District Court of Espoo of 2 June 2017, Mr. Pekka
Jaatinen, who had been acting as the Administrator of the Company's corporate
reorganisation proceedings, was appointed the Supervisor under the confirmed
Debt Restructuring Programme. The main task of the Supervisor is to monitor that
the payment schedule is complied with and that payments are made to the
creditors when the Supervisor deems that this can be done without jeopardizing
the operations of the Company.
Reporting basis
Talvivaara's interim financial statements for the first six months of 2017 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 Talvivaara's success in
securing the necessary funding and/or cash flow for the Company to discharge all
of its liabilities and the continuance of the Group's viable business.
Business development projects
Talvivaara's strategic aim is to establish a sustainable business or businesses
that match the expertise inherent in the Company as well as to provide the
prospect of early cash flow. The new business opportunities investigated by the
Company include, among others, projects in the recycling, energy-saving and
energy production sectors. Talvivaara is also studying and further developing a
number of other opportunities within the so-called "circular economy" in areas
related to metallurgy, chemical processing and construction that could meet its
investment requirements in the short term.
Talvivaara has, through its subsidiary FATB Ltd, continued the development of
the energy saving technology business. Energy consumption is one of the largest
components of operational expenditure for electric arc furnaces used in the
steel making process, and reducing energy costs by just a few percent can
materially improve profitability of a steel mill utilising electric arc
furnaces. The Company also expects the technology to stabilize the melting
process and even increase the capacity of an electric arc furnace. Talvivaara
has continued the development and testing of the technology to refine the
technology and to ready it for deployment in an industrial environment. Test
runs of the technology will start at the selected prospective clients during the
autumn of 2017. The aim is to commercialize the technology by the end of the
year 2017.
In addition, the Company has initiated a commercialization project, based on its
chemical engineering expertise, focused on developing more efficient use of
nutrients and energy production from renewable raw materials related to
livestock farming. Talvivaara is studying possibilities to create processing
units to enable the economic extraction of valuable content as commercial
products from manure streams while at the same time facilitating the management
of the nutrient streams in a way that benefits the livestock farmers. The
Company's target is to convert manure to energy fraction and high quality
fertilizers and to purify the liquid fraction to a level that allows safe
discharge into the environment, and to recover the nutrients as useful
fertilizers.
Talvivaara acquired in 2011-2012 an approximately 60MW capacity share in the
Fennovoima nuclear project in Finland. 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 requested a corporate fine of EUR
0.5 million to be imposed on Talvivaara. 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.
The Helsinki District Court gave its ruling on 2 June 2017, giving a suspended
sentence to CEO Pekka Perä for disclosure offenses during 2012-2013. Of the ten
charges concerning Mr. Perä, seven were dismissed in their entirety and one
partially. The other defendants, former CEO of the Company Harri Natunen and the
Company's former CFO / Deputy CEO Ms. Saila Miettinen-Lähde were given fines.
The Court ordered the Company to EUR 50,000 corporate fines, which is however
considered restructuring debt of last priority, which would not receive any
payment under the Company's authorized payment schedule. The Company and the
defendants have appealed the decision to the Helsinki Court of Appeals. In the
Company's view, the decision of the Helsinki District Court has no impact on the
Company, its financial position or on the position of the CEO.
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 was not a
party to the case, but has been notified that the insider dealing charges
concerned the same time period as the disclosure case. In its ruling of 2 June
2017, the Helsinki District Court gave also a decision on the misuse of inside
information, giving a suspended sentence to the Executive Committee member. The
decision has been appealed to the Helsinki Court of Appeals. In the Company's
view, the decision of the Helsinki District Court has no impact on the Company,
its financial position or on the employment of the member of the Executive
Committee in the Company.
Insider dealing charges brought against a member of Talvivaara's Executive
Committee
On 9 March 2017, Talvivaara announced that charges have been brought against a
member of its Executive Committee on a case concerning alleged misuse of insider
information. The Company is not a party to the case, but to the Company's
understanding the charges concern the same time period of 2012-2013 as the
disclosure case. The Company's view is that the brought charges have no impact
on the Company or its financial position nor do they give any reason to reassess
the composition of the Company's Executive Committee.
Gypsum pond leakages and discharges into water ways
On 13 May 2016 the District Court of Kainuu 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 Rovaniemi Court of Appeals, and the
main hearing at the Court of Appeals is expected to take place in the autumn of
2017.
Risk management and key risks
Talvivaara's near-term risk factors include particularly such risks that relate
to the financing and sufficiency of funds to meet its actual and potential
liabilities:
If the Group is not able to create cash flow generating business or receive
other funding to finance its operations, stakeholders could lose their entire
investment in the Company
The Talvivaara Group does not currently have any income-generating business, and
is therefore financing its operations entirely from its cash reserves. Even
though the Company has already taken actions to minimize the current cost basis
by temporarily laying off a part of its personnel and has kept its firm focus on
a timely development of its business projects, maintaining and developing the
current business opportunites and operations will require additional funding in
the foreseeable future. Failure by the Company to obtain such financing while
the business operations still yield insufficient cash flow could result in the
bankruptcy of the Company. As a result, shareholders and creditors could lose
their entire investment in the Company.
If Talvivaara is not able to make the payments under the authorized payment
schedule, 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 Company will
eventually be able to make the payments in accordance with the authorized
payment schedule due to insufficiency of funds, 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 issuance of new equity instruments will lead to a significant dilution of
the existing shareholding of Talvivaara
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 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.
Due to the unexpected delays in having the Company's Debt Restructuring
Programme confirmed, Talvivaara laid off temporarily approximately 50 % of its
personnel wholly or partly as of the beginning of June. In addition, the Company
agreed with those members of the management who will remain outside the scope of
the lay-offs on a voluntary arrangement whereby such employees will accept a
portion of their compensation from the Company as debt, which shall be repaid to
the employees once the new financing required for the Company's new business
operations has been obtained.
Talvivaara's headcount was 20 at the end of the reporting period on 30 June
2017 (1-6/2016: 16). 75 % (1-6/2016: 69 %) of Talvivaara's employees were men
and 25 % (1-6/2016: 31 %) were women. The average age of the Company's employees
was 47 years (1-6/2016: 44 years).
Resolutions of the Annual General Meeting
Talvivaara's Annual General Meeting was held on 15 June 2017 in Espoo, Finland.
The resolutions of the AGM included:
* that no dividend be paid for the financial year 2016;
* 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 75,000/year, Chairman of the Audit Committee EUR
48,000/year and other Non-executive Directors: EUR 43,000/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 three (3) and that Mr. Tapani Järvinen,
Mr. Stuart Murray and Ms. Solveig Törnroos-Huhtamäki were re-elected; and
* 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.
At its constituent meeting on 15 June 2017, the Board of Directors re-elected
Mr. Tapani Järvinen as the chairman of the Board.
Shares and shareholders
The number of shares issued, outstanding and registered on the Euroclear
Shareholder Register as of 30 June 2017 was 4,189,807,162.
As at 30 June 2017, the only shareholder holding more than 5% of the shares and
votes of Talvivaara was Solidium Oy (7.6%).
As at 30 June 2017 the shares held in treasury by the Company amounted to in
aggregate 192,883,000 (4.6% 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 2017, the Company has no share based incentive schemes in place.
Events after the review period
As at the date of this Interim Report 14 September 2017, the Group's cash and
cash equivalents amount to approximately EUR 1 million.
The Group has continued the development of its business projects and has focused
on finding a funding solution for the near and medium term.
Short-term outlook
The operational outlook for Talvivaara is greatly dependent on the
materialisation and further development of the Group's new income generating
business opportunities and/or obtaining funding therefor.
Whilst the final Debt Restructuring Programme gives the Company reasonably ample
time to discharge all of its liabilities under the restructuring programme,
there is no certainty that the Company will be successfull in developing its new
business opportunities and, ultimately, in making the due payments in accordance
with the authorised payment schedule.
Talvivaara Mining Company Plc
Board of Directors
BALANCE SHEET Group, IFRS Parent Company, FAS
(All amounts As at As at As at As at As at
in EUR) Note 30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
---------------------------------------------------------------
ASSETS
Non-current
assets
Property, plant 16, 18, 16, 21, 18,
and equipment 6 262 899 262 592 899
Intangible assets 7 - - - - -
27, 26, 27, 26, 26,
Other receivables 482 822 482 822 822
Investments in 13, 13,
group companies 8 - - 500 - 500
----------------------------------------------------------
Total non-current 43, 45, 57, 48, 59,
assets 743 721 243 414 221
Current assets
902, 898,
Trade receivables 9 - - 069 184 -
289, 268, 111, 1,432, 268,
Other receivables 9 756 890 145 458 756
Cash and cash 1,589, 3,776, 801, 4,193, 3,765,
equivalents 623 623 398 678 827
----------------------------------------------------------
Total Current 1,879, 4,045, 1,814, 6,524, 4,034,
assets 378 513 611 320 583
1,923, 4,091, 1,871, 6,572, 4,093,
TOTAL ASSETS 122 234 855 734 804
----------------------------------------------------------
EQUITY AND
LIABILITIES
Equity
attributable
to the owners
80, 80, 80, 80,
Share capital 10 000 000 000 80,000 000
8,085, 8,085, 8,085, 8,085, 8,085,
Share premium 10 842 842 842 842 842
799,729, 797,348, 1,036,109, 797,968, 797,968,
Other reserves 10 611 200 774 638 638
(816,835, (1,337,240, (1,053,254, (1,328,674, (1,337,858,
Retained deficit 10 314) 512) 986) 458) 380
----------------------------------------------------------
(8,939, (531,726, (8,979, (522,539, (531,723,
Total equity 10 861) 470) 370) 978) 900)
Current
liabilities
9,568, 465,078, 9,568, 465,042, 465,078,
Borrowings 11 434 396 434 831 396
137, 2,219, 125, 2,162, 2,219,
Trade payables 12 500 681 742 258 681
1,157, 68,519, 1,157, 61,907, 68,519,
Other payables 12 048 627 048 624 627
----------------------------------------------------------
10,862, 535,817, 10,851, 529,112, 535,817,
982 704 225 712 704
----------------------------------------------------------
10,862, 535,817, 10,851, 529,112, 535,817,
Total liabilities 982 704 225 712 704
TOTAL EQUITY 1,923, 4,091, 6,572, 4,093,
AND LIABILITIES 122 234 1,871,855 734 804
----------------------------------------------------------
INCOME Group, IFRS Parent Company, FAS
STATEMENT
Period Period Period
(All amounts ended Year ended ended ended Year ended
in EUR) Note 30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
-------------------------------------------------------------------
Other
operating
income 13 657 14,026,894 728,132 14,019,322 14,026,894
Materials and
services 14 - (180,219) - (174,762) (180,219)
Personnel
expenses 15 (1,113,205) (2,435,356) (1,113,205) (1,512,874) (2,435,356)
Depreciation
and
amortisation 16 (2,637) (302,017) (2,637) (299,324) (302,017)
Impairment
charges on
intangible
assets 17 - (121,272) - (93,626) (121,272)
Other
operating
expenses 18 (1,113,080) 202,779,457 (912,575) 203,931,287 202,782,027
Operating
profit/loss (2,228,266) 213,767,487 (1,300,285) 215,870,023 213,770,057
Finance
income 19 525,275,096 17,069 289,515,306 9,338 17,069
Finance cost 20 (2,641,632) (15,258,326) (3,611,627) (8,166,640) (15,258,326)
--------------------------------------------------------------
Finance cost
(net) 522,633,463 (15,241,257) 285,903,679 (8,157,302) (15,241,257)
Profit/Loss
before taxes 520,405,198 198,526,229 284,603,393 207,712,721 198,528,799
Income tax 21 - - - - -
--------------------------------------------------------------
PROFIT/LOSS
FOR THE
FINANCIAL
PERIOD 520,405,198 198,526,229 284,603,393 207,712,721 198,528,799
--------------------------------------------------------------
Profit/Loss
attributable
to the owners
of the
Company,
Period Period Period
ended Year ended ended ended Year ended
(€/share) 30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
--------------------------------------------------------------
Diluted and
undiluted 10 0.13 0.09 0.07 0.10 0.09
STATEMENT OF CASH FLOWS
Group, IFRS Parent Company, FAS
Period Period Year
Period ended Year ended ended ended ended
(all amounts in EUR) 30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
----------------------------------------------------------
Cash flows from
operating activities
Profit/Loss for the 284,603, 207,712, 198,528,
period 520,405,198 198,526,229 393 721 799
Adjustments for
Depreciation and 2, 299, 302,
amortisation 2,637 302,017 637 324 017
Other non-cash (289,754, (216,005, (216,948,
income and expenses (525,781,196) (216,944,740) 323) 213) 106)
Impairment charges 93, 121,
on intangible assets - 121,272 - 626 272
538, (9, (17,
Interest income 538,665 (17,069) 729 338) 069)
2,609, 8,166, 15,258,
Interest expenses 2,609,068 15,258,326 063 640 326
----------------------------------------------------------
Cash flow before
change in working (2,000, 257, (2,754,
capital (2,225,628) (2,753,965) 499) 760 761)
Change in working
capital
Decrease(+)/increase(-
) in
trade and other 30, 203, (42,
receivables 30,344 (42,084) 344 656 084)
Decrease(-
)/increase(+) in
trade and other 13, (864, 614,
payables 13,453 614,521 453 554) 521
----------------------------------------------------------
Change in working 43, (660, 572,
capital 43,797 572,436 797 898) 436
Net cash used in
operating
activities before
financing (1,956, (403, (2,182,
activities and taxes (2,181,832) (2,181,528) 703) 139) 324)
Interest and other
finance (5, (65, (119,
cost paid (5,597) (119,489) 592) 785) 489)
Interest and other 17,
finance income 429 17,069 429 30 069
----------------------------------------------------------
Net cash generated
(used)
in operating (1,961, (468, (2,284,
activities (2,187,000) (2,283,949) 866) 894) 745)
Cash flows from
investing activities
Acquisition of
subsidiary, (970, (12,
net of cash acquired - (2,000) 000) - 000)
Proceeds from sale of
property, plant and 1,400,
equipment - 1,400,000 - - 000
Investments in (32,
associated companies - - 564) - -
----------------------------------------------------------
Net cash generated
(used)
in investing (1,002, 1,388,
activities 0 1,398,000 564) 0 000
Cash flows from
financing activities
----------------------------------------------------------
Net cash generated
from
financing activities 0 0 0 0 0
Net
(decrease)/increase in
cash and bank (2,964, (468, (896,
overdrafts (2,187,000) (885,949) 430) 894) 745)
Cash and bank
overdrafts
at beginning of the 3,765, 4,662, 4,662,
year 3,776,623 4,662,572 827 572 572
Cash and bank
overdrafts 801, 4,193, 3,765,
at end of the period 1,589,623 3,776,623 398 678 827
STAEMENT OF CHANGES IN EQUITY
Group, IFRS
Share Share Other Retained
EUR capital premium reserves deficit Total
------------------------------------------------------------
1 January 2017 80,000 8,085,842 797,348,200 (1,337,240,512) (531,726,470)
------------------------------------------------------------
Conversion of
restructuring loans - - 2,381,411 - 2,381,411
Profit (loss) for
the period - - - 520,405,198 520,405,198
------------------------------------------------------------
30 June 2017 80,000 8,085,842 799,729,611 (816,835,314) (8,939,861)
------------------------------------------------------------
1 % of the subscription price of new shares has been entered to the reserve for
invested unrestricted equity of the Group (IFRIC 19).
Parent Company, FAS
Share Share Other Retained
EUR capital premium reserves deficit Total
--------------------------------------------------------------
1 January 2016 80,000 8,085,842 797,968,638 (1,536,387,179) (730,252,700)
--------------------------------------------------------------
Profit (loss) for
the period - - - 207,712,721 207,712,721
--------------------------------------------------------------
30 June 2016 80,000 8,085,842 797,968,638 (1,328,674,458) (522,539,978)
--------------------------------------------------------------
Profit (loss) for
the period - - - (9,183,922) (9,183,922)
--------------------------------------------------------------
31 December 2016 80,000 8,085,842 797,968,638 (1,337,858,380) (531,723,900)
--------------------------------------------------------------
Conversion of
restructuring
loans - - 238,141,137 - 238,141,137
Profit (loss) for
the period - - - 284,603,394 284,603,394
--------------------------------------------------------------
30 June 2017 80,000 8,085,842 1,036,109,774 (1,053,254,986) (8,979,370)
--------------------------------------------------------------
The subscription price of new shares has been entered to the reserve for
invested unrestricted equity of the Parent Company outright.
NOTES
1. Basis of presentation and non-going concern
These consolidated Interim Financial Statements of Talvivaara 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 and was completed
on 2 June 2017. In addition, the Group has taken into account IAS 1.25 and IAS
1.26 requirements regarding the disclosure under the non-going concern basis.
Talvivaara's Interim Financial Statements for the period ended 30 June 2017 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 Group's ability to realise its assets and
discharge its liabilities in the normal course of business and from the lack of
visibility on the Group'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 2017 Interim 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 Talvivaara's success in
securing the necessary funding and/or cash flow for the Company to discharge all
of its liabilities and the continuance of the Group's viable business.
As of the date of the this Interim Report 14 September 2017, there is no
certainty as to whether the Company can fulfill all the set requirements within
the given time frame.
2. Property, Plant & Equipment
Group, IFRS
Machinery
and
(All amounts in EUR) Buildings equipment Total
---------------------------
Gross carrying amount at 1 January 2017 0 40,200 40,200
Deductions - - 0
---------------------------
Gross carrying amount at 30 June 2017 0 40,200 40,200
---------------------------
Accumulated depreciation and impairment losses
at 1 January 2017 0 21,301 21,301
Depreciation for the period - 2,637 2,637
Deductions 0 0 0
---------------------------
Accumulated depreciation and impairment losses
at 30 June 2017 0 23,938 23,938
---------------------------
Carrying amount at 1 January 2017 0 18,899 18,899
---------------------------
Carrying amount at 30 June 2017 0 16,262 16,262
---------------------------
Parent Company FAS
Machinery
and
(All amounts in EUR) Buildings equipment Total
---------------------------------------
Gross carrying amount at 1 January 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 June 2016 0 40,200 40,200
---------------------------------------
Accumulated depreciation and impairment
losses
at 1 January 2016 11,899,045 15,408,193 27,307,238
Depreciation for the period - 298,403 298,403
Deductions (11,899,045) (15,687,988) (27,587,033)
Accumulated depreciation and impairment
losses
at 30 June 2016 0 18,608 18,608
---------------------------------------
Carrying amount at 1 January 2016 0 4,692,782 4,692,782
---------------------------------------
Carrying amount at 30 June 2016 0 21,592 21,592
---------------------------------------
Deductions - - 0
---------------------------------------
Gross carrying amount at 31 December 2016 0 40,200 40,200
---------------------------------------
Accumulated depreciation and impairment
losses
at 30 June 2016 0 18,608 18,608
Depreciation for the period - 2,693 2,693
Accumulated depreciation and impairment
losses
at 31 December 2016 0 21,301 21,301
---------------------------------------
Carrying amount at 30 June 2016 0 21,592 21,592
---------------------------------------
Carrying amount at 31 Dec 2016 0 18,899 18,899
---------------------------------------
Gross carrying amount at 1 January 2017 0 40,200 40,200
Deductions - - 0
---------------------------------------
Gross carrying amount at 30 June 2017 0 40,200 40,200
---------------------------------------
Accumulated depreciation and impairment
losses
at 1 January 2017 0 21,301 21,301
Depreciation for the period - 2,637 2,637
Deductions 0 0 0
---------------------------------------
Accumulated depreciation and impairment
losses
at 30 June 2017 0 23,938 23,938
---------------------------------------
Carrying amount at 1 January 2017 0 18,899 18,899
---------------------------------------
Carrying amount at 30 June 2017 0 16,262 16,262
---------------------------------------
3. Borrowings
Group, IFRS Parent Company, FAS
As at As at As at As at As at
EUR 30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
--------------------------------------------------------
Restructuring loan
capital 6,130,578 427,500,000 6,130,578 427,500,000 427,500,000
Restructuring loan
interest 40,259 16,510,880 40,259 16,510,880 16,510,880
Accrued interest on
restructuring loans
after commencement of
restructuring
proceedings - 12,822,068 - 12,822,068 12,822,068
Other borrowings during
procedure 3,397,597 8,245,447 3,397,597 8,209,883 8,245,447
--------------------------------------------------------
9,568,434 465,078,395 9,568,434 465,042,831 465,078,395
--------------------------------------------------------
The Parent 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
can not be assessed, as the Parent Company does not currently have a credit
rating or proper access to debt financing.
Restructuring loan capital
The restructuring loan capital includes the remaining indebtedness of the Parent
Company, as adjusted in accordance with the Parent Company's debt restructuring
programme confirmed on 2 June 2017, and consists of: Revolving Credit Facility
(EUR 4.8 million), the guarantee liability granted to Finnvera (EUR 0.5
million), the senior unsecured convertible bonds due in 2015 (EUR 0.5 million)
and the senior unsecured bonds due in 2017 (EUR 0.35 million). Of the
restructuring loan capital, EUR 4.1 million is secured in accordance with the
draft restructuring programme and EUR 2.0 million is unsecured. The
restructuring loan capital shall fall due for payment on 2 June 2019, at the
latest. In case the Parent Company is unable to repay its restructuring debts by
the due date of 2 June 2019, this may result in bankruptcy of the Parent
Company, in which case its liabilities related to the restructuring loan capital
shall be determined in accordance with section 66 of the Finnish Restructuring
of Enterprises Act (47/1993, as amended).
Pursuant to the debt restructuring programme, the holders of unsecured debt were
given the right to convert their receivable to new shares in the Parent Company
at the conversion rate of EUR 0.1144 per share. To the extent the unsecured
creditors did not use their conversion right, the remaining unsecured debt was
cut by 99 percent.
Restructuring loan interest
Restructuring loan interests are unsecured debts and payable to the holders of
the restructuring debt in accordance with the Parent Company's debt
restructuring programme. The restructuring loan interest shall fall due for
payment on 2 June 2019, at the latest.
In case the Parent Company is unable to repay its restructuring debts by the due
date of 2 June 2019, this may result in bankruptcy of the Parent Company, in
which case its liabilities related to the restructuring loan interest shall be
determined in accordance with section 66 of the Finnish Restructuring of
Enterprises Act.
Interest accumulated since the beginning of the restructuring proceedings
In addition to the Parent Company's restructuring debts and other liabilities to
be considered, the Parent Company's borrowings included EUR 13.0 million and
trade and other payables included EUR 61 million of accumulated interest, which
would have falled due only in case the draft restructuring programme was not
confirmed. The Parent Company accrued the interest on the balance sheet for all
restructuring debt based on the original loan terms, despite the fact that the
accumulation of interest payment obligation on unsecured restructuring debt
ceased when the restructuring proceedings were started. Upon the confirmation of
the Parent Company's debt restructuring programme on 2 June 2017, it was
verified that the accumulation of interest ceased at the time the restructuring
proceedings were started, and a corresponding reversal was booked in the Parent
Company's finance income.
In case the Parent Company is unable to repay its restructuring debts by the due
date of 2 June 2019, this may result in bankruptcy of the Parent Company, in
which case its liabilities related to the reversed interest liability shall be
determined in accordance with section 66 of the Finnish Restructuring of
Enterprises Act.
Other short-term borrowings
The other short-term borrowings consist entirely of the third-party security
granted to Finnvera, as adjusted in accordance with the Parent Company's debt
restructuring programme confirmed on 2 June 2017 (EUR 3.4 million). The amount
is part of the Parent Company's secured debts.
In case the Parent Company is unable to repay its restructuring debts by the due
date of 2 June 2019, this may result in bankruptcy of the Parent Company, in
which case its liabilities related to the third-party security granted to
Finnvera shall be determined in accordance with section 66 of the Finnish
Restructuring of Enterprises Act.
4. Contingencies and commitments
The future aggregate minimum lease payments under non-cancellable operating
leases
EUR As at As at As at
30 Jun 17 30 Jun 16 31 Dec 16
------------------------------
No later than 1 year 148,444 - 75,590
Later than 1 year and not later than 5 years 238,197 - 24,908
------------------------------
386,641 0 100,498
------------------------------
Parent Company
EUR As at As at As at
30 Jun 17 30 Jun 16 31 Dec 16
------------------------------
No later than 1 year 144,540 65,454 75,590
Later than 1 year and not later than 5 years 234,773 20,436 24,908
------------------------------
379,313 85,890 100,498
------------------------------
Securities given by the Parent Company under the Multicurrency Revolving
Facility Agreement and the Finnvera Financing Agreements
The securities given under the Multicurrency Revolving Facility Agreement
(secured part EUR 4.1 million) and the Finnvera Financing Agreements (liability
related to a third-party security of EUR 3.4 million) include:
* Pledge of all shares owned by the Parent Company in Talvivaara Sotkamo
* Pledge of floating charge notes registered over assets of the Parent Company
in the amount of EUR 300 million
* Pledge of intra-group receivables of the Parent Company from Talvivaara
Sotkamo
* Pledge of insurance receivables
In addition, the Parent Company has guaranteed the obligations of Talvivaara
Sotkamo under the Finnvera Promissary Note in the adjusted amount of EUR 0.5
million by a specific Surety Obligation.
Share-related key figures
Six Twelve Six Six Twelve
Share-related key figures months to months to months to months to months to
30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
--------------------------------------------------
Earnings per share EUR 0.13 0.09 0.07 0.10 0.09
Equity per share EUR (0.00) (0.25) (0.00) (0.25) (0.25)
Weighted average numbers 4,155, 2,107, 4,155, 2,107, 2,107,
of ordinary shares in 304 821, 304 487, 821,
issue 626 627 626 275 627
Employee-related
key figures Group, IFRS Parent Company, FAS
Period ended Year ended Period ended Period ended Year ended
EUR 30 Jun 17 31 Dec 16 30 Jun 17 30 Jun 16 31 Dec 16
---------------------------------------------------------------
Salaries (937,654) (2,080,382) (937,654) (1,283,800) (2,080,382)
2017 2016 2017 2016 2016
---------------------------------------------------------------
Average number of
employees 20 25 20 34 25
---------------------------------------------------------------
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
-----------------------------------------------------
Adjusted average number of shares
[]
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