Talvivaara Mining Company Plc: Proposed EUR 260 million Rights Issue

14 februari 2013 Stock Exchange Release Talvivaara Mining Company Plc 14 February 2013 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, HONG KONG, SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES OR SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION IN THE APPLICABLE PROSPECTUS WHICH, SUBJECT TO APPROVAL FROM THE FINNISH FINANCIAL SUPERVISORY AUTHORITY, IS EXPECTED TO BE PUBLISHED BY TALVIVAARA IN CONNECTION WITH THE RIGHTS ISSUE. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION AND DISTRIBUTION, BE AVAILABLE FROM TALVIVAARA'S REGISTERED OFFICE. Proposed EUR 260 million Rights Issue Talvivaara Mining Company Plc ("Talvivaara" or the "Company") today announces a proposal to raise gross proceeds of EUR 260 million through a rights issue. Highlights * The proposed rights issue aims to: * Secure liquidity for continued ramp-up of operations towards full capacity; * Provide an appropriate capital structure to enable refinancing or repayment of short-term and medium-term indebtedness, including the convertible bonds due in May 2013; and * Satisfy a condition subsequent under an amended revolving credit facility * Underwritten through a combination of irrevocable subscription commitments from Pekka Perä, Solidium and Varma, and standby underwriting commitments from J.P. Morgan Securities plc, Nordea Bank Finland Plc, BofA Merrill Lynch, BNP PARIBAS and Danske Bank A/S Helsinki Branch * Announcement of terms of the proposed rights issue expected to take place on 8 March 2013 * Amended revolving credit facility for EUR 100 million (of which EUR 70 million is drawn), which, among other things, amends the financial and production covenants in the previous credit facility to reflect Talvivaara's current business * Talvivaara is convening an Extraordinary General Meeting expected to take place on 8 March 2013 in order to obtain a resolution authorising the Board to issue up to 26 billion new shares in the rights issue * Interim financing arrangements agreed with Nyrstar and Cameco amounting to EUR 12 million and USD 10 million, respectively * Talvivaara's annual results review as well as the financial statements and the related review of the Board for the financial year ended 31 December 2012 has also been released today Tapani Järvinen, Chairman of Talvivaara, said: "While Talvivaara has encountered a number of significant challenges recently, reflected in the Company's current liquidity position and the necessity of the proposed capital raise, the Board is confident in Talvivaara's long-term potential, with its significant sulphide nickel resources and cost effective bioheapleaching process following ramp-up, and in the long-term fundamentals of the nickel industry. However, the production challenges suffered over the course of 2012 have underlined the need to focus on stabilising and improving Talvivaara's production processes in order to return to a sustainable ramp-up towards the targeted full capacity of 50,000 tonnes of nickel per year. Talvivaara is implementing a number of measures to resolve its near-term operational challenges, but the full effect of these actions will only materialise over time. Through the financing transactions announced today, we are putting in place a strong capital structure to allow Talvivaara to overcome its prevailing challenges and continue the successful ramp-up of its operations. Furthermore, the production shortfalls Talvivaara has experienced combined with a weak nickel price environment have resulted in a strained liquidity position, which the Board expects to be further exacerbated in 2013 due to the production impact caused by the prevailing water balance issues. The Board therefore believes that Talvivaara will need to strengthen its liquidity position to secure sufficient working capital and enable repayment or refinancing of short- term and medium-term indebtedness, including the convertible bonds due in May 2013. Notwithstanding prevailing operational challenges and the work required to overcome them, the Board remains confident of Talvivaara's future as a Finnish mining champion of international significance. The primary focus of the Board continues to be on preserving and enhancing value for all Talvivaara's shareholders. We are confident the proposed EUR 260 million rights issue is in the best interests of the Company's shareholders as a whole." Background and reasons for the rights issue Talvivaara has faced a number of operational challenges during the ramp-up of its operations. These challenges have resulted in Talvivaara not achieving its original production targets for 2010, 2011 and 2012. In particular, over the course of 2012, Talvivaara faced increasing challenges with the water balance of the mine, as rapid snow melting in the spring and historically heavy rainfall in the spring and summer materially increased the amount of excess water that had been accumulating at the mine site. The challenging water balance forced Talvivaara to temporarily cease the production of new ore as of September 2012, diluted metal grades in leach solution leading to reduced metals production and culminated in a leakage of the gypsum pond in November 2012. These issues have underlined the need to focus on stabilising and improving Talvivaara's production processes in order to return to a sustainable ramp-up path towards the targeted full capacity of 50,000 tonnes of nickel per year. Talvivaara's results of operations in 2012 were further negatively affected by the prevailing low nickel price environment. The Board believes that Talvivaara's strained liquidity position is likely to be exacerbated in 2013 by the production impact caused by the prevailing water balance issues as well as the maturity of the remaining EUR 76.9 million convertible bonds due in May 2013. Talvivaara is implementing a number of measures to overcome its near-term operational challenges, including: * Removing excess water from the Talvivaara mine site; * Implementing steps to achieve a closed water circulation system; * Improving bioheapleaching performance; and * Further improving and maintaining the stability already achieved across Talvivaara's production processes. However, the full effect of these actions will only materialise over time, and Talvivaara currently expects material production ramp-up only from the second half of 2013. With prevailing nickel price uncertainty and expected short-term production volumes, Talvivaara believes that it will need to strengthen its liquidity position to secure sufficient working capital and enable repayment or refinancing of short-term and medium-term indebtedness, including the convertible bonds due 2013. Talvivaara has concluded that raising additional equity is the best approach to secure liquidity for continued ramp-up of operations towards full capacity and achieve an appropriate capital structure to enable refinancing or repayment of short-term and medium-term indebtedness. Receipt of the proceeds from the proposed rights issue will also satisfy a condition subsequent under the amended revolving credit facility as discussed below. Interim financing arrangements In order to ensure that it has liquidity until it receives the proceeds from the proposed rights issue, Talvivaara has entered into amendment agreements with Cameco and Nyrstar. Under the agreement with Cameco, the amount of the up-front investment that Cameco is to pay to Talvivaara for the construction of the uranium extraction facility was increased by USD 10 million to USD 70 million, and the duration of the amendment agreement extended to 31 December 2017 and commercial terms revised accordingly. Under the agreement with Nyrstar, Talvivaara receives an up-front payment of EUR 12 million in return for agreeing not to charge Nyrstar the EUR 350 per tonne extraction and processing fee on the next 38,000 tonnes of zinc in concentrate delivered to Nyrstar as was agreed in the original zinc in concentrate streaming agreement. Rights issue and the amended revolving credit facility On 13 February 2013, Talvivaara entered into the amended credit facility agreement, which, among other things, amends the financial and production covenants in the previous credit facility agreement to reflect Talvivaara's current business and, therefore, reduces Talvivaara's risk in relation to compliance with its covenants. The proposed rights issue is conditional upon the Board proposal on the rights issue being passed by shareholders at the Extraordinary General Meeting. Therefore, if such resolutions are not passed at the Extraordinary General Meeting, the proposed rights issue will not proceed. If Talvivaara does not receive net proceeds of at least EUR 240 million from the proposed rights issue by 30 April 2013, an event of default would immediately occur under the amended revolving credit facility agreement. An event of default could cause a significant portion of Talvivaara's borrowings to become repayable on demand. Furthermore, without securing additional funds through the proposed rights issue, Talvivaara will likely run out of cash and not be able to finance its planned operations or repay its debts, including the convertible bonds due in May 2013. Such events may require the sale of the Talvivaara mine, Talvivaara or Talvivaara's 84 per cent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the Company. Underwriting and subscription commitments The proposed rights issue is underwritten through a combination of irrevocable subscription commitments and standby underwriting. The Company has received irrevocable undertakings from its three largest shareholders, Mr Pekka Perä, Solidium and Varma Mutual Pension Insurance Company, to vote in favour of the resolutions in respect of 104,181,306 Shares in aggregate, representing approximately 38.3 per cent of the shares in issue on the date of this announcement. Mr Pekka Perä, representing approximately 20.7 per cent of the shares in issue on the date of this announcement, has irrevocably committed to subscribe for such number of new shares based on a total subscription price equal to (i) EUR 5 million plus (ii) 76 per cent of any net proceeds received by him from the sale of (A) any subscription rights during the subscription period of the proposed rights issue and (B) any shares at any time prior to the end of such subscription period as well as agreed to a lock-up undertaking with respect to his shares that will be in force for 90 days after the completion of the proposed rights issue. Mr Pekka Perä has agreed to use his reasonable best efforts to raise funds on terms that are reasonably acceptable to him, whether through borrowing, the sale of shares, the sale of subscription rights, or other means, in order to subscribe for new shares in excess of his commitment to subscribe new shares based on a total subscription price of EUR 5 million referred to above. Solidium, representing approximately 8.9 per cent of the shares in issue on the date of this announcement, has irrevocably committed to subscribe in full for new shares on the basis of the subscription rights allocated to it. In addition, Solidium has agreed to subscribe for any new shares not otherwise subscribed and paid for pursuant to subscription rights or in the secondary subscription up to an aggregate subscription price of EUR 30 million. Varma Mutual Pension Insurance Company, representing approximately 8.7 per cent of the shares in issue on the date of this announcement, has irrevocably committed to subscribe in full for new shares on the basis of the subscription rights allocated to it. J.P. Morgan Securities plc, Nordea Bank Finland Plc, BofA Merrill Lynch, BNP PARIBAS and Danske Bank A/S Helsinki Branch have entered into a standby underwriting letter with Talvivaara pursuant to which they have severally agreed, subject to certain terms and conditions, to underwrite the portion of the proposed rights issue that is not subject to such shareholder commitments. Under the standby underwriting letter, the Company has agreed to a lock-up undertaking that will be in force for 180 days after the completion of the proposed rights issue. Principal terms of the rights issue The Board expects that the terms of the proposed rights issue will be announced on or around 8 March 2013, and the full details of the proposed rights issue, including the terms, pricing and expected net proceeds of the proposed rights issue, will be included in a prospectus to be published, subject to approval by the Finnish Financial Supervisory Authority, on or around 13 March 2013. Talvivaara expects that the proposed rights issue will seek to raise approximately EUR 260 million in gross proceeds. The subscription price is expected to be in euros and to be set with reference to a discount to the theoretical ex-rights price, which will be in line with similar rights issues undertaken in the UK and Finnish markets, and having regard to, amongst other things, investor feedback, Talvivaara's operational performance, market conditions, any relevant requirements of the Listing Rules and the market price of the shares over the five days preceding the determination of the subscription price. The number of new shares to be issued pursuant to the proposed rights issue will be determined on the date the Board resolves upon the proposed rights issue on the basis of the rights issue authorisation having been approved at the Extraordinary General Meeting and will depend on the subscription price determined at the same time by the Board. In order for Talvivaara to proceed with the proposed rights issue, a resolution authorising the Board to resolve to issue up to 26 billion new shares in the rights issue will be proposed by the Board at the Extraordinary General Meeting. Presentations for the media and investors: Finnish language press conference on 14 February 2013 at 10:00 GMT / 12:00 EET A Finnish language press conference on the annual results and financing arrangements will be held on 14 February 2013 at 10:00 GMT / 12:00 EET at G.W. Sundmans (auditorium), Helsinki, Finland. English language presentation and live webcast on 14 February 2013 at 11:30 GMT / 13:30 EET An English language combined presentation, conference call and live webcast on the annual results and financing arrangements will be held on 14 February 2013 at 11:30 GMT / 13:30 EET. The webcast can be accessed through the following link: http://qsb.webcast.fi/t/talvivaara/talvivaara_2013_0214_q4/ A conference call facility is available for participants joining via telephone and there will be a Q&A following the presentation. Listen via teleconference: Europe & U.K. Participants: +44 (0)20 7162 0077 US Participants: +1 334 323 6203 Finnish Participants: +358 (0)9 2313 9202 Conference ID: 928245 Further details on the event can be found on the Talvivaara website, www.talvivaara.com. The webcast will also be available for viewing on the Talvivaara website shortly after the event until the end of 2013. Enquiries Talvivaara Mining Company Plc Tel +358 20 7129 800 Pekka Perä, Chief Executive Officer Saila Miettinen-Lähde, Deputy CEO and CFO Talvivaara Mining Company Plc Talvivaara Mining Company is an internationally significant base metals producer with its primary focus on nickel and zinc using a technology known as bioheapleaching to extract metals out of ore. Bioheapleaching makes extraction of metals from low grade ore economically viable. The Talvivaara deposits comprise one of the largest known sulphide nickel resources in Europe. The ore body is estimated to support anticipated production for several decades. Talvivaara has secured a 10-year off-take agreement for 100 per cent of its main output of nickel and cobalt to Norilsk Nickel and entered into a long-term zinc streaming agreement with Nyrstar NV. Talvivaara is listed on the London Stock Exchange Main Market and NASDAQ OMX Helsinki. Further information can be found at www.talvivaara.com. DISCLAIMER This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any shares or securities referred to in this announcement except on the basis of information in the applicable prospectus which, subject to approval from the Finnish Financial Supervisory Authority, which are expected to be published by Talvivaara in connection with the proposed rights issue. Copies of the prospectus will, following publication and distribution, be available from Talvivaara's registered office. Nothing in this announcement should be interpreted as a term or condition of the proposed rights issue. The information contained herein is not for publication or distribution, directly or indirectly, in or into the United States, Canada, Australia, Hong Kong, South Africa or Japan. These written materials do not constitute an offer of securities for sale in the United States, nor may the securities be offered or sold in the United States absent registration or an exemption from registration as provided in the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. There is no intention to register any portion of the offering in the United States or to conduct a public offering of securities in the United States. The issue, exercise or sale of securities in the offering are subject to specific legal or regulatory restrictions in certain jurisdictions. Talvivaara assumes no responsibility in the event there is a violation by any person of such restrictions. The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction. Investors must neither accept any offer for, nor acquire, any securities to which this announcement refers, unless they do so on the basis of the information contained in the applicable prospectus published or distributed by Talvivaara. Talvivaara has not authorised any offer to the public of securities in any Member State of the European Economic Area other than Finland and the United Kingdom. With respect to each Member State of the European Economic Area other than Finland and the United Kingdom and which has implemented the Prospectus Directive (each, a "Relevant Member State"), no action has been undertaken or will be undertaken to make an offer to the public of securities requiring publication of a prospectus in any Relevant Member State. As a result, the securities may only be offered in Relevant Member States (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; or (b) in any other circumstances falling within Article 3(2) of the Prospectus Directive. For the purposes of this paragraph, the expression an "offer of securities to the public" means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to exercise, purchase or subscribe the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU. This communication includes forward-looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this communication, including, without limitation, those regarding Talvivaara's strategy, plans, objectives, goals and targets. By their nature, forward looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. Talvivaara cautions you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that its actual results of operations, including its financial condition and liquidity, may differ materially from (and be significantly more negative than) those made in, or suggested by, the forward-looking statements contained in this communication. In particular, this communication includes forward-looking statements relating to Talvivaara's plans to address the recent operational challenges faced by Talvivaara. Such estimates are based on a number of assumptions that are, in turn, based on currently available information and judgments based on such information. However, these assumptions are inherently uncertain and subject to a wide variety of significant operational and regulatory risks and uncertainties that could cause the actual outcome of Talvivaara's actions to materially differ from those anticipated. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per share for the current or future financial years would necessarily match or exceed the historical published earnings per share. Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser. J.P. Morgan Securities plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as sole sponsor for Talvivaara and no one else in connection with the proposed rights issue and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the proposed rights issue and will not be responsible to anyone other than Talvivaara for providing the protections afforded to its clients or for giving advice in connection with the proposed rights issue, the contents of this announcement and the accompanying documents or any other transaction, arrangement or matter referred to herein or therein. Each of Nordea Bank Finland Plc, Merrill Lynch International, BNP PARIBAS and Danske Bank A/S Helsinki Branch is acting exclusively for Talvivaara and for no one else in connection with the proposed rights issue and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the proposed rights issue and will not be responsible to anyone other than Talvivaara for providing the protections afforded to their respective clients or for providing advice in connection with the proposed rights issue or any other transaction, arrangement or matter referred to herein. This announcement should not be considered a recommendation by any of J.P. Morgan Securities plc, Nordea Bank Finland Plc, Merrill Lynch International, BNP PARIBAS or Danske Bank A/S Helsinki Branch or any of their respective directors, officers, employees, advisers or any of their respective affiliates in relation to any purchase of or subscription for securities. No representation or warranty, express or implied, is given by or on behalf of any of J.P. Morgan Securities plc, Nordea Bank Finland Plc, Merrill Lynch International, BNP PARIBAS or Danske Bank A/S Helsinki Branch or any of their respective directors, officers, employees, advisers or any of their respective affiliates or any other person as to the accuracy, fairness, sufficiency or completeness of the information or the opinions or the beliefs contained in this announcement (or any part hereof). None of the information contained in this announcement has been independently verified or approved by any of J.P. Morgan Securities plc, Nordea Bank Finland Plc, Merrill Lynch International, BNP PARIBAS or Danske Bank A/S Helsinki Branch or any of their respective directors, officers, employees, advisers or any of their respective affiliates. Save in the case of fraud, no liability is accepted by any of J.P. Morgan Securities plc, Nordea Bank Finland Plc, Merrill Lynch International, BNP PARIBAS or Danske Bank A/S Helsinki Branch or any of their respective directors, officers, employees, advisers or any of their respective affiliates for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this announcement or its contents or otherwise in connection with this announcement. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by Talvivaara, any of J.P. Morgan Securities plc, Nordea Bank Finland Plc, Merrill Lynch International, BNP PARIBAS or Danske Bank A/S Helsinki Branch or any other person. Subject to applicable rules and regulations, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of Talvivaara and its group since the date of this announcement or that the information in it is correct as at any subsequent date. This communication is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as "relevant persons"). Any investment activity to which this communication relates will only be available to and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this announcement or any of its contents. Neither the content of Talvivaara's website (or any other website) nor the content of any website accessible from hyperlinks on Talvivaara's website (or any other website) is incorporated into, or forms part of, this announcement. Talvivaara Proposed EUR 260 million Rights Issue: http://hugin.info/136227/R/1678142/547598.pdf This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE [HUG#1678142]