Quarterly Interim Results for the period ending 30 September 2009

Wednesday, 11. November 2009 08:02
Talvivaara Mining Company Plc
Stock Exchange Release 11 November 2009


Quarterly Interim Results for the period ending 30 September 2009


Talvivaara Mining Company Plc ("Talvivaara" or the "Company") today
announces its unaudited Interim Results for the three and nine month
periods ended 30 September 2009.


Third quarter highlights

* Successful installation and commissioning of the upgraded
crushing circuit to increase crushing capacity to approximately 22
million tonnes per annum

* Start-up of metals recovery plant in mid September in
anticipation of continuous production

* Placing of orders for critical long-lead items, notably
the second hydrogen plant and additional mining fleet, for capacity
expansion

* Permitting and commissioning of the Talvivaara-Murtomäki
railhead for regular transport from September

* Continued good safety record at the mine site with one
Lost Time Injury (LTI) to Talvivaara personnel during the third
quarter

* Closing of equity placing raising EUR 82.7 million in July
to provide sufficient liquidity to take production target to 50,000
tonnes of nickel per annum from 2012


Key figures


Q3 Q3 Q1-Q3 Q1-Q3
2009 2008 2009 2008 FY 2008

EUR
Turnover '000 826 - 2,604 - -
Operating profit EUR
(loss) '000 (15,303) (4,955) (23,208) (9,576) (4,296)
Profit (loss) before EUR
taxes '000 (15,314) (9,001) (30,003) (13,452) (8,033)
Earnings per share EUR (0.04) (0.03) (0.08) (0.05) 0.03
EUR
Capital expenditure '000 24,315 100,128 82,052 273,030 429,086
Net interest-bearing EUR
debt '000 354,130 100,131 354,130 100,131 285,467
Debt-to-equity ratio 84.2 % 28.3 % 84.2 % 28.3 % 67.3 %
Cash and cash
equivalents
at the end of the EUR
period '000 68,624 93,028 68,624 93,028 82,713
Derivative financial EUR
instruments '000 64,975 74,393 64,975 74,393 152,545
Number of employees
at the
end of the period 283 229 283 229 239


Pekka Perä, CEO of Talvivaara commented: "We are pleased that our
decision to proceed with the installation of an upgraded fine
crushing circuit has enabled us to overcome the most challenging
hurdles in the way of achieving full production. The end of the
quarter saw all processes at the mine operating as planned. After a
modification of the primary crusher at the end of October to allow
crushing rates at the level of 60,000 tonnes per day, we remain
confident that the ramp up towards production levels of approximately
30,000 tonnes of nickel per annum in 2010 remains on track."
."

Enquiries:

Talvivaara Mining Company Plc Tel. +358 20 712 9800
Pekka Perä, CEO
Saila Miettinen-Lähde, CFO
Merlin Tel. +44 207 726 8400
Tom Randell
Anca Spiridon

A conference call to discuss the Third Quarter 2009 Results will be
held at 12:00 UK time / 14:00 Finnish time on 11 November 2009.
Details to access the conference call are as follows:
UK Free Call: 0800 694 0257
UK Standard International: +44 (0) 1452 555 566
USA Free Call: 1866 966 9439
Finland Free Call: 0800 112 363
The conference ID is 40892036

A replay facility will be available on the following numbers until 17
November 2009:
Replay Access Number: 40892036#
International Dial in: +44 (0) 1452 55 0000
UK Free Call Dial In: 0800 953 1533
UK Local Dial In: 0845 245 5205
USA Free Call Dial In: 1866 247 4222

CEO Statement

Our operations during the third quarter progressed as expected, with
focus for much of the period on the installation and commissioning of
the upgraded crushing circuit. The installation took place, as
anticipated, during the latter half of August, followed by start-up
of the redesigned circuit in the beginning of September. The budgeted
levels of crushing at around 40,000 tonnes per day were first
achieved in October, and with all assembly work now complete we are
looking forward to progressing towards the planned full capacity of
60,000 tonnes per day during the remainder of the year.

We have made considerable progress in improving the materials
handling processes to a level that now allows the overall process to
achieve the planned volumes of production. I am pleased to report
that in early September we concluded that the amount of leach
solution was sufficient for continuous operation of the metals
recovery plant. The plant was subsequently re-started on 14
September, and the quality of the metal sulphide output since then
has again been better than before and is getting close to the final
targeted specifications. Production volumes during the fourth quarter
are anticipated to be commercially significant, although some
modifications at the plant will still be necessary to allow a further
increase in volumes in 2010.

The capacity expansion project is proceeding on target, and all major
orders for new equipment have been placed following the successful
EUR 82.7 million equity placing in July. These include the second
hydrogen plant and additional mining fleet to serve the increasing
mining capacity.

Health and safety continues to be one of our key focus areas and I am
proud to report that our safety record remains good with just one
Lost Time Injury to our own personnel since we launched our Work
Group Safety Challenge in February. We also remain committed to
responsible conduct in environmental matters and strive to maintain a
good record in terms of our operational impact on the surrounding
areas.

The commodities markets have remained surprisingly strong throughout
the third quarter and into the fourth despite the continued lack of
industrial demand particularly in the developed nations. We continue
to expect that commodities prices will retract somewhat from their
present levels in the short term. However, this may at least in part
be countered by the weakness of the US dollar. Our long term view
remains very positive with the developing economies and potential
supply-demand disparities as the key drivers.

All in all, our outlook remains positive for the remainder of the
year, with the most challenging production problems now behind us.
While sustained ramp-up of crushing according to plan continues to be
critical, we remain confident that our 2010 production target of
approximately 30,000 tonnes of nickel is achievable.


Pekka Perä
CEO

Financial review

Talvivaara's sales during the three and nine month periods ended 30
September 2009 amounted to EUR 0.8 million (Q3 2008: 0) and EUR 2.6
million (Q1-Q3 2008: 0), respectively. The sales volumes remained
below budgeted levels due to limited crushing capacity resulting from
technical design issues in the crushing circuit. The crushing circuit
was redesigned in the spring, and the upgraded system was installed
and commissioned during Q3 2009.

The Company's other operating income, amounting to EUR 11.6 million
in Q3 2009 (Q3 2008: EUR 3.4 million) and EUR 37.2 million for Q1-Q3
2009 (Q1-Q3 2008: EUR 12.6 million), consisted of realised (EUR 21.1
million) and unrealised (EUR 15.6 million) gains on nickel, zinc and
USD forwards. Other operating expenses, which in Q3 2009 amounted to
EUR (17.0) million (Q3 2008: EUR (4.3) million) and in Q1-Q3 2009 to
EUR (32.6) million (Q1-Q3 2008: EUR (12.3) million), included
unrealised fair value losses on biological assets (trees) and nickel
and zinc forwards held for trading.

Employee benefit expenses, including the value of employee expenses
related to the employee share option scheme of 2007, were EUR (3.6)
million in Q3 2009 (Q3 2008: EUR (3.2) million) and EUR (11.6)
million for the nine months from January to September (Q1-Q3 2008:
EUR (7.3) million). The increase was attributable to increased number
of personnel.

Operating loss for Q3 2009 amounted to EUR (15.3) million (Q3 2008:
EUR (5.0) million) and was EUR (23.2) million for the nine months
from January to September (Q1-Q3 2008: EUR (9.6) million).

Finance income in Q3 2009 of EUR 8.0 million (Q3 2008: EUR 0.5
million) and in Q1-Q3 2009 of EUR 15.0 million (Q1-Q3 2008: EUR 2.8
million) included exchange rate gains on the USD 320 million project
loan facility and on bank accounts. Finance costs of EUR (8.0)
million in Q3 2009 (Q3 2008: EUR (4.6) million) and EUR (21.8)
million in Q1-Q3 2009 (Q1-Q3 2008: EUR (6.7) million) related mostly
to the Company's borrowings, in particular to the project loan
facility and the EUR 85 million convertible loan, as well as exchange
rate losses.

Loss for the period in Q3 2009 amounted to EUR (10.7) million (Q3
2008: EUR (9.4) million) and totalled EUR (21.9) million for the nine
months from January to September (Q1-Q3 2008: EUR (15.3) million).

The Company's total comprehensive income in Q3 2009 was EUR (27.2)
million (Q3 2008: EUR 23.0 million) and in Q1-Q3 2009 EUR (85.8)
million (Q1-Q3 2008: EUR 26.8 million), reflecting primarily a
decrease in hedge reserves brought about by the increase in nickel
price during 2009.

On the consolidated statement of financial position as at 30
September 2009, property, plant and equipment totalled EUR 615.2
million (31 December 2008: EUR 552.5 million), with the increase
since the 2008 year end attributable to expenditure on and
capitalisation of mine related assets according to plan. Other
notable changes in the Company's assets include the substantial
decrease in the fair value of derivative financial instruments, in
particular nickel and zinc forward swaps. The change was caused by
increase in nickel and zinc prices during the reporting period as
well as the maturity of some of the forward contracts. As at 30
September 2009, the derivative financial instruments were valued at
EUR 65.0 million (31 December 2008: EUR 152.5 million).

Deferred tax assets were EUR 7.4 million (31 December 2008:
liabilities of EUR 23.1 million). The change was caused by the
decrease in fair value of derivative financial instruments during the
reporting period and the tax losses of 2009.

Inventories amounted to EUR 82.1 million (31 December 2008: EUR 31.7
million), with the increase relating mostly to ore on leach pads and
work in progress, both valued at cost. Cash and cash equivalents
totalled EUR 68.6 million (31 December 2008: EUR 82.7 million).
Talvivaara's cash position was improved from Q2 2009 as a result of
an equity placing with gross proceeds of EUR 82.7 million.

In equity and liabilities, the invested unrestricted equity increased
from EUR 320.6 million on 31 December 2008 to EUR 401.3 million on 30
September 2009 due to the equity placing in July. The hedge reserve
related to nickel cash flow hedges decreased from EUR 72.3 million on
31 December 2008 to EUR 21.3 million on 30 September 2009 due to the
increase in the market price of nickel. Borrowings increased from EUR
368.2 million to EUR 422.8 million, reflecting drawdown of the EUR 45
million investment and working capital loan from Finnvera Plc.

Total equity and liabilities as at 30 September 2009 amounted to EUR
879.9 million (31 December 2008: EUR 874.0 million).

Currency and commodity hedges and hedge accounting

As at 30 September 2009, the Company had 13,547 tonnes of nickel and
33,579 tonnes of zinc forward swaps remaining of its commodity hedge
programme executed in 2007 and 2008 and extending through 2011. The
volume weighted average prices of the outstanding positions are USD
23,452 per tonne for nickel and USD 1,949 per tonne for zinc.
Talvivaara applies hedge accounting to nickel hedges maturing in Q1
2010 - Q4 2011.

The Company has entered into a currency hedging programme comprising
USD forwards for seven quarters from Q2 2009 through Q4 2010. The
hedged amount is EUR 175 million in total, with EUR 25 million
maturing each quarter. The forwards were executed in April 2009 at
EUR/USD rates ranging from 1.26 to 1.28. The realized gain from these
hedges was EUR 4.4 million during the reporting period.

In addition, the company has outstanding currency option contracts
amounting to USD 64 million. The EUR/USD rate of the option contracts
is 1.60. The options will mature during Q4 2009.

Financing

In July, the Company successfully closed an equity placing of
22,280,000 shares, representing approximately 10 per cent of the
number of the existing shares, to institutional investors. The
placing was conducted through an accelerated book-building process
and priced at EUR 3.70 (GBP 3.20) per share, raising gross proceeds
of EUR 82.7 million (GBP 71.3 million). The share issue was approved
by the shareholders of the Company in the Extraordinary General
Meeting on 6 July 2009.

In August, Talvivaara entered into an agreement with a Finnish
financial institution for the factoring of sales receivables from the
Company's nickel and cobalt products.

During Q2, Talvivaara drew down EUR 45 million of a EUR 50 million
investment and working capital loan granted by Finnvera Plc. The
remaining EUR 5 million of the total commitment is used for
capitalisation of interest. The loan carries an interest of EURIBOR 6
months + 3.00% and is due to be repaid over a five-year period of
2013 to 2018.

In June, the Company received a EUR 5 million reimbursement from the
Finnish Government for infrastructure investments relating to power
supply and electrification. The subsidy was part of the overall
decision by the Finnish Parliament in 2007 to grant EUR 52 million to
support the construction of necessary infrastructure for the
Talvivaara mine.

Production summary

The key task in production during the third quarter was the
installation and commissioning of the upgraded crushing circuit to
enable a significant increase in production volumes going forward.
While corrective measures to alleviate the crushing problems were
being taken, all other processes continued to perform well.

The mining department blasted 2.0 million tonnes of ore and excavated
1.0 million tonnes of waste during the third quarter, while the
corresponding figures for the first nine months were 7.3 million
tonnes and 2.9 million tonnes. The period was uneventful for the
mining department and optimisation of the operating procedures
continued. Running of the operations at full capacity remained
untested due to the bottleneck in crushing. Ore hauling capacity also
continued to limit the throughput for the time being, but Talvivaara
is confident the upgraded target for the mining volumes can be
achieved following the commissioning of additional mobile gear
towards the end of 2009 and early 2010.
The third quarter performance in materials handling reflected firstly
the limited capacity of the old crushing circuit in July and early
August and secondly the production stoppage for the installation of
the upgraded system from 12 August until the end of the month. The
redesigned circuit started operation, as planned, in the beginning of
September, after which production volumes have been gradually
increased. The volume of ore crushed and stacked in Q3 2009 amounted
to 1.4 million tonnes, while the corresponding figure for the first
nine months of the year was 5.5 million tonnes.
The Company's primary crusher also continued to experience technical
problems and performed at less than budgeted capacity during the
third quarter. Further modifications to improve the crusher's
performance were agreed with the supplier, but delivery and
installation of new components could only be arranged for October.
Problems in primary crushing are not a rate-limiting factor for
overall production, as contractor capacity is readily available and
was used to complement Talvivaara's own capacity throughout the
reporting period.

In bioheapleaching, heat generation throughout the summer months was
high. In such circumstances, some of the nickel precipitated back
into the heap. However, the re-precipitated nickel in the heap is in
readily soluble form and can be returned to circulation by flushing
the heap with water. It has also been seen that despite continuous
bleeding of more than 15% of the circulating solution to metals
recovery and/or storage ponds since mid September, nickel grades in
the solution have continued to increase. As the long term planned
bleeding rate, as based on earlier experience from the pilot heap, is
only 10%, this indicates promising development in the leaching
process. Some further increase in leach solution metal grades is
still expected and will be important in order to reach the targeted
full scale production levels in mid 2011 and beyond, but until then
the existing reactor capacity is sufficient to treat even lower grade
solutions.

The metals recovery process was re-started in mid September, once the
volume of leach solution was estimated to be sufficient to support
continuous production. Due to the short operating time in the third
quarter, the production volumes remained limited, at 101 tonnes of
contained nickel and 114 tonnes of contained zinc in sulphide
concentrate. The quality of the products was again good and
approached target specifications set for steady state operation.

Similarly to the first half of 2009, the operating cost of materials
handling relative to metals recovery continued to be
disproportionately high during the third quarter. Hence, the unit
cost of production during the period was not representative of the
estimated production costs in steady state operation.

Production key figures 2008 - Q3 2009


Q3 2009 Q1-Q3 2009 2008-2009
Mining
Blasted ore million tonnes 2.0 7.3 10.3
Excavated waste million tonnes 1.0 2.9 4.2
Materials handling
Stacked ore million tonnes 1.4 5.5 8.0
Bioheapleaching
Ore in primary heap
at end of period million tonnes 8.0 8.0 8.0
Metals recovery
Nickel sulphide dry metric
production tonnes 208 668 668
Nickel metal content tonnes 101 325 325
dry metric
Zinc sulphide production tonnes 190 1,444 1,444
Zinc metal content tonnes 114 820 820



Research and development

Talvivaara continued active studies relating to manganese recovery
from the leach solution. Other ongoing research and development
projects related to optimisation of the bioheapleaching technology,
and chemical and biological iron removal from leach solution.

Environment, health and safety

The Company continued its environmental management and monitoring
programme in accordance with the requirements set out in its
Environmental Permit. Some temporarily decreased pH levels and
increases in suspended solids and metal contents in downstream waters
have been detected and such deviations have been reported to the
environmental authorities. Any deviations have been followed by
increased level of monitoring until all parameters have returned to
permitted levels.

Dust emissions from the mining area have also occasionally exceeded
permitted levels. Since the discontinuation of contractor fine
crushing at the end of March the dust emissions have substantially
decreased, but the Company continues to focus on decreasing the dust
levels.

Talvivaara is preparing its environmental processes to meet the ISO
14001 environmental standard. Audit of the environmental system is
targeted for Q4 2010.

No environmental compensation was paid during the reporting period.
The environmental security placed for future rehabilitation of the
area amounted to EUR 13.8 million on 30 September 2009. Of the total,
EUR 9 million was covered by bank guarantees and guarantee insurance,
and EUR 4.8 million was deposited in escrow accounts.

Occupational safety is one of Talvivaara's key focus areas. The
safety record remained good during the reporting period with three
relatively minor Lost Time Injuries (LTI's) reported among the
Company's personnel in January and one in September. The overall
safety rating at the end of the period was 11 LTI's per million man
hours.

Legal and permitting matters

Talvivaara Infrastructure Oy, a wholly-owned subsidiary of the
Company constructing the new railhead connecting the mine site with
the national railway grid, received the operating permits from the
Finnish Rail Agency on 15 September 2009. Regular train traffic
started on 16 September with limestone deliveries from the Kokkola
port located in the west coast of Finland.

Personnel

Talvivaara employed an average of 266 employees during the first nine
months of 2009 (Q1-Q3 2008: 158). At the end of September 2009 the
number of employees was 283, while the corresponding number was 239
at the end of 2008 and 229 at the end of September 2008. Wages and
salaries paid during the period totalled EUR 9.9 million (Q1-Q3 2008:
EUR 6.2 million).

Shares and shareholders

The issued share capital of the Company on 30 September 2009 was
245,176,718 and (assuming share issues in relation to the convertible
bond of May 2008 and option scheme of 2007) the fully diluted issued
share capital of the Company was 263,669,291.

As at 30 September 2009, the shareholders who held more than 5% of
the shares and votes of the Company were Pekka Perä (23.3%), Varma
Mutual Pension Insurance Company (8.6%) and Capital Research and
Management (5.0%).


Risks and uncertainties

Talvivaara carries out an ongoing process endorsed by the Board of
Directors to identify risks, measure their impact against certain
assumptions and implement the necessary proactive steps to manage
these risks. The Company's operations are affected by various risks
common to the mining industry, such as risks relating to the
development of Talvivaara's mineral deposits, and volatility of
commodities prices and currency exchange ratios.

In the short term, Talvivaara's operational risks relate to the
ongoing ramp-up of operations. Because of uncertainties relating to
the materials handling processes, Talvivaara has previously withdrawn
its production targets for the current year and continues to take
measures to secure 2010 production at the targeted level of
approximately 30,000 tonnes of nickel.

The market price of nickel has remained relatively stable at USD
17,000-19,000 per tonne since early August. In light of the
relatively modest industrial demand of nickel in the Western
economies for the time being, there may in the Company's view still
be downward pressure on the prices in the short term. Talvivaara has
executed significant hedges against low nickel and zinc prices in the
short to medium term. In the long term, Talvivaara believes its
operations to also be profitable at substantially lower nickel prices
than the present market prices.

Talvivaara's revenues are almost entirely in US dollars, whilst the
majority of the Company's costs are incurred in Euro. Potential
strengthening of the Euro against the US dollar could thus have a
material adverse effect on the business and financial condition of
the Company. Talvivaara's existing currency hedges have been executed
to partly mitigate this through the end of 2010 and the Company
anticipates hedging against currency exchange volatility also going
forward.

Events after the reporting period

Commissioning of the upgraded crushing circuit
The redesigned and upgraded crushing circuit has been in operation
since the beginning of September, and its overall production rate on
a weekly basis has reached an average of over 40,000 tonnes per day
in October. Volumes in excess of 50,000 tonnes per day have been
reached on individual days. The achieved volumes have recently
exceeded the budgeted volumes so that the year-to-date actual vs.
budgeted ratio of 47% following the production stoppage in August has
increased to 53% by early November. While further optimisation and
capacity testing of the process remains to be done, the production
volumes achieved so far indicate the circuit to be capable of the
targeted production rate of 60,000 tonnes per day, corresponding to
22 million tonnes per annum.

Technical modification of the primary crusher
In late October, the Company's primary crusher was fitted with a new
mantle reducing the crusher's nib angle from 23° to 19°. Current
performance of the primary crusher is satisfactory with rates of
approximately 60,000 tonnes per day being achieved. This has allowed
discontinuation of contractor crushing. However, formal capacity
tests are yet to be carried out.

Production stoppage for relining of reactors at the metals recovery
plant
Mechanical failure in certain parts of the metals plant reactors was
detected in mid October and the plant was subsequently turned off
while the reactors were relined and the plant equipment was inspected
to rule out any other potential damage. The failure appears to have
been caused by human error during commissioning and is not believed
to be an inherent problem in the process or the reactor linings.
Production at the plant has since resumed and it is not anticipated
that the Company will incur any material loss from the incident,
which was covered by insurance.
Short-term outlook

Following the commissioning of the expanded crushing circuit and
restart of the metals precipitation processes in September,
Talvivaara expects to continue its production ramp-up targeted at
eventually achieving up to 50,000 tonnes in annual nickel production
in 2012. Since the re-start, stepwise increases in metals
precipitation volumes have already commenced in line with the
increasing size of the heap and the trend is anticipated to continue
during the remainder of the year and into 2010. While sustained
ramp-up of crushing according to plan also continues to be a critical
prerequisite for next year's production, the Company remains
confident that its 2010 production target of approximately 30,000
tonnes of nickel is achievable.

The Company does not anticipate its production plans to be affected
by commodity prices. Following the successful closing of its equity
placing in July, Talvivaara believes it has sufficient liquidity to
cover the cost of capacity expansion, expected to be incurred mostly
in 2009 and 2010.

CONSOLIDATED INCOME STATEMENT


Unaudited Unaudited Unaudited Unaudited Audited
three three nine nine twelve
months to months to months to months to months to
(all amounts in EUR
'000) 30 Sep 09 30 Sep 08 30 Sep 09 30 Sep 08 31 Dec 08

Turnover 826 - 2,604 - -

Other operating
income 11,599 3,402 37,152 12,568 29,810
Changes in
inventories of
finished goods and
work in progress 15,100 3,773 47,177 3,773 24,006
Materials and
services (12,763) (4,389) (40,267) (5,910) (20,407)
Employee benefit
expenses (3,566) (3,159) (11,631) (7,286) (8,910)
Depreciation,
amortization,
depletion and
impairment charges (9,458) (265) (25,677) (462) (5,756)
Other operating
expenses (17,041) (4,317) (32,566) (12,259) (23,039)

Operating profit
(loss) (15,303) (4,955) (23,208) (9,576) (4,296)

Finance income 8,026 514 15,039 2,799 9,219
Finance cost (8,037) (4,560) (21,834) (6,675) (12,956)
Finance cost (net) (11) (4,046) (6,795) (3,876) (3,737)

Loss before income
tax (15,314) (9,001) (30,003) (13,452) (8,033)

Income tax expense 4,565 (363) 8,056 (1,895) 13,865

Profit (loss) for
the period (10,749) (9,364) (21,947) (15,347) 5,832

Attributable to:
Equity holders of
the Company (9,310) (7,013) (18,415) (10,975) 7,042
Minority interest (1,439) (2,351) (3,532) (4,372) (1,210)
(10,749) (9,364) (21,947) (15,347) 5,832


Earnings per share
for profit (loss)
attributable to the
equity holders of
the Company
(expressed in ¤ per
share)
Basic and diluted (0.04) (0.03) (0.08) 0.05) 0.03



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


Unaudited Unaudited Unaudited Unaudited Audited
three three nine nine twelve
months
months to months to months to months to to
(all amounts in EUR 31 Dec
'000) 30 Sep 09 30 Sep 08 30 Sep 09 30 Sep 08 08

Profit (loss) for the
period (10,749) (9,364) (21,947) (15,347) 5,832

Other comprehensive
income,
items net of tax
Available-for-sale
financial assets - - - (451) (451)
Cash flow hedges (16,461) 32,331 (63,828) 42,637 90,414

Other comprehensive
income, net of tax (16,461) 32,331 (63,828) 42,186 89,963

Total comprehensive
income (27,210) 22,967 (85,775) 26,839 95,795

Attributable to:
Equity holders of the
Company (22,479) 18,853 (69,478) 22,685 78,922
Minority interest (4,731) 4,114 (16,297) 4,154 16,873
(27,210) 22,967 (85,775) 26,839 95,795




CONSOLIDATED STATEMENT OF FINANCIAL POSITION


Unaudited Audited Unaudited
(all amounts in EUR '000) 30 Sep 09 31 Dec 08 30 Sep 08

ASSETS

Non-current assets
Property, plant and equipment 615,195 552,459 401,794
Biological assets 6,368 8,152 8,249
Intangible assets 7,609 7,774 7,164
Deferred tax assets 7,412 -
Derivative financial instruments 39,391 116,004 61,355
Other receivables 11,227 9,635 10,119
687,202 694,024 488,681

Current assets
Inventories 82,080 31,691 4,803
Trade receivables 981 - -
Other receivables 10,609 24,721 19,500
Derivative financial instruments 30,413 40,805 13,700
Cash and cash equivalent 68,624 82,713 93,028
192,707 179,930 131,031

Total assets 879,909 873,954 619,712

EQUITY AND LIABILITIES

Equity attributable to equity holders
of the parent
Share capital 80 80 80
Share premium 8,086 8,086 8,086
Other reserves 416,554 334,019 333,533
Hedge reserve 21,269 72,332 34,111
Retained earnings (44,516) (26,101) (44,119)
401,473 388,416 331,691
Minority interest in equity 19,119 35,470 22,745
Total equity 420,592 423,886 354,436

Non-current liabilities
Borrowings 412,852 367,955 193,135
Derivative financial instruments 3,487 1,985 662
Deferred tax liabilities - 23,070 22,044
Provisions 1,018 944 423
417,357 393,954 216,264
Current liabilities
Borrowings 9,912 224 25
Trade payables 19,401 45,283 41,819
Other payables 11,305 8,294 7,134
Derivative financial instruments 1,342 2,279 -
Provisions - 34 34
41,960 56,114 49,012
Total liabilities 459,317 450,068 265,276

Total equity and liabilities 879,909 873,954 619,712




CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Unaudited Unaudited Audited
three three nine nine twelve
months to months to months to months to months to
(all amounts in EUR 30 Sep 09 30 Sep 08 30 Sep 09 30 Sep 08 31 Dec 08
'000)

Cash flows from
operating activities

Profit (loss) for the
period (10,749) (9,364) (21,947) (15,347) 5,832
Adjustments for
Tax (4,565) 363 (8,056) 1,895 (13,865)
Depreciation and
amortization 9,458 265 25,677 462 5,756
Other non-cash
income and
expenses 603 922 3,327 2,430 4,780
Interest income (8,026) (514) (15,039) (2,799) (9,219)
Fair value gains
on financial
assets at fair
value through
profit or loss 10,996 (3,003) 2,806 (7,604) (24,796)
Interest expense 8,037 4,560 21,834 6,675 12,956
5,754 (6,771) 8,602 (14,288) (18,556)
Change in working
capital
Decrease(+)/increase(-)
in other receivables 2,533 9,239 9,314 12,537 4,552
Decrease (+)/increase
(-) in inventories (16,404) (4,803) (51,122) (4,803) (30,661)
Decrease(-)/increase(+)
in trade and other
payables 1,783 2,154 (24,072) 18,670 23,773
Change in working
capital (12,088) 6,590 (65,880) 26,404 (2,336)

(6,334) (181) (57,278) 12,116 (20,892)

Interest and other
finance cost paid (4,578) (1,169) (16,132) (4,855) (7,468)
Interest income 52 501 3,430 956 9,581

Net cash used in
operating activities (10,860) (849) (69,980) 8,217 (18,779)

Cash flows from
investing activities

Acquisition of
subsidiary, net of cash
acquired (54) - (54) - -
Purchases of property,
plant and equipment (24,182) (100,045) (81,842) (271,802) (427,187)
Purchases of biological
assets - - (35) (26) (26)
Purchases of intangible
assets (133) (83) (175) (1,202) (1,873)
Proceeds from sale of
property, plant and
equipment - - 9 - -
Proceeds from sale of
intangible assets - - 49 - -
Proceeds from sale of
biological assets 104 124 104 251 707
Proceeds from
government grant
related to tangible
assets - - 5,000 - -
Proceeds from
government grant
related to intangible
assets - 204 13 204 203
Proceeds from sale of
available for sale
financial assets - - - 26,356 26,356
Purchases of derivative
financial instruments - - (1,371) (1,371)
Proceeds from sale of
derivative financial
instruments - - - - -
Proceeds from sale of
financial assets at
fair value through
profit or loss - - - 1,440 1,440
Net cash used in
investing activities (24,265) (99,800) (76,931) (246,150) (401,751)

Cash flows from
financing activities
Proceeds from share
issue net of
transaction costs 80,644 - 80,644 - -
Proceeds from
interest-bearing
liabilities - 119,560 53,357 204,460 396,734
Payment of
interest-bearing
liabilities (1,154) - (1,179) - (20,000)
Capital investment by
minority shareholders - - - - 8

Net cash generated in
financing activities 79,490 119,560 132,822 204,460 376,742

Net (decrease)/increase
in cash and bank
overdrafts 44,365 18,911 (14,089) (33,473) (43,788)

Cash and bank
overdrafts at beginning
of the period 24,259 74,117 82,713 126,501 126,501
Cash and bank
overdrafts at end of
the period 68,624 93,028 68,624 93,028 82,713


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

A. Share Capital
B. Share Premium
C. Invested unrestricted equity
D. Other Reserves
E. Hedge Reserves
F. Retained Earnings
G. Total
H. Minority interest
I. Total Equity



A B C D E F G H I
Balance at 1
January 2008 16 8,086 320,671 1,106 - (33,423) 296,456 18,591 315,047


Total
comprehensive
income for
1-9/2008 - - - (451) 34,111 (10,975) 22,685 4,154 26,839

Transfers
within
equity,
change of the
corporate
form 64 - (64) - - - - - -
Employee
share option
scheme
- value of
employee
services - - - 1,377 - - 1,377 - 1,377
Convertible
bond,
equity
component - - - 10,894 - - 10,894 - 10,894
Restatement
to capital
expenditure,
which
relates to
previous year - - - - - 278 278 - 278
Minority
interest
arising
from
subsidiary - - - - - 1 1 - 1
Balance at 30
September
2008 80 8,086 320,607 12,926 34,111 (44,119) 331,691 22,745 354,436

Balance at 31
December 2008 80 8,086 320,607 13,412 72,332 (26,101) 388,416 35,470 423,886

Balance at 1
January 2009 80 8,086 320,607 13,412 72,332 (26,101) 388,416 35,470 423,886

Total
comprehensive
income for (51 (69 (16 (85
1-9/2009 - - - - 063) (18 415) 478) 297) 775)
Share issue,
net of
transaction
costs - - 82,691 - - - 82,691 - 82,691
External
costs
directly
attributable
to
The issue of
new shares - - (2,047) - - - (2,047) - (2,047)
Acquisition
of
subsidiary,
Hyena
Holding AB - - - - - - - (54) (54)
Employee
share
option scheme
- value of
employee
services - - - 1,891 - - 1,891 - 1,891
Balance at 30
September
2009 80 8,086 401,251 15,303 21,269 (44,516) 401,473 19,119 420,592



NOTES


Inventories

(all amounts in EUR '000) Unaudited Audited
30 September 31 December
2009 2008
Raw materials and consumables 8 819 6 655
Ore on leach pads 43 911 22 965
Work in progress 26 225 1 041
Finished products 1 047 -
Advance payments 2 078 1 030
Inventories total 82 080 31 691




Derivative financial instruments

Fair values of the derivative
financial instruments

(all amounts in EUR '000) Unaudited Audited
30 September 31 December
2009 2008
Assets Liabilities Assets Liabilities

Nickel forwards - cash
flow hedges 46,418 - 135,355 -
Nickel forwards - held for
trading 7,621 - 3,301 -
Zinc forwards - held for
trading 122 940 18,153 -
Interest rate swaps - held
for trading - 3,100 - 2,279
Currency forwards - held
for trading 15,643 - - -
Currency options - held
for trading - 789 - 1,985
Total 69,804 4,829 156,809 4,264
Unaudited Audited
30 September 31 December
2009 2008
Assets Liabilities Assets Liabilities

Derivative financial
instruments 69,804 4,829 156,809 4,264
Total 69,804 4,829 156,809 4,264

Less non-current portion
Nickel forwards - cash
flow hedges 29,860 - 101,797 -
Nickel forwards - held for
trading - - - -
Zinc forwards - held for
trading 9 387 14,207 -
Interest rate swaps - held
for trading - 3,100 - 1,985
Currency forwards - held
for trading 9,522 - - -
Current portion 30,413 1,342 40,805 2,279




Quantities of the derivative
financial instruments

Unaudited Audited
30 Sep 2009 Total 31 Dec 2008 Total
Current Non-current Current Non-current

Nickel
forwards -
cash flow
hedges, in
tonnes 2,971 8,813 11,784 3,429 12,128 15,557
Nickel
forwards -
held for
trading, in
tonnes 1,763 - 1,763 404 - 404
Zinc
forwards -
held for
trading, in
tonnes 13,652 19,927, 33,579 7,458 30,559 38,017
Interest
rate swaps
- held for
trading, in
EUR'000 - 36,636 36,636 - 36,636 36,636
Currency
forwards -
held for
trading, in
USD '000 127,625 32,062 159,687 - - -
Currency
options -
held for
trading, in
USD'000 64,000 - 64,000 209,800 - 209,800


Borrowings

(all
amounts in
EUR '000) Carrying amount Fair value
Unaudited Audited Unaudited Audited
30 Sep 31 Dec 30 Sep 31 Dec
Non-current 2009 2008 2009 2008
Capital
loans 1,405 1,405 1,405 1,405
Project
Term Loan
Facility 209,656 229,935 209,656 229,935
Senior
Unsecured
Convertible
Bonds 74,813 72,842 74,813 72,842
Railway
Term Loan
Facility 30,347 25,461 30,347 25,461
Working
capital
loan 44,403 - 44,403 -
Finance
lease
liabilities 13,734 1,694 13,734 1,694
Interest
Subsidy
Loans 4,186 4,182 4,186 4,182
Other 34,308 32,436 34,308 32,436
412,852 367,955 412,852 367,955

Current
Finance
lease
liabilities 1,034 199 1,034 199
Project
Term Loan
Facility 8,878 - 8,878 -
Other - 25 - 25
9,912 224 9,912 224

Total
borrowings 422,764 368,179 422,764 368,179




Three Nine Nine Twelve
Employee-related key Three months months months months
figures months to to to to to
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2009 2008 2009 2008 2008

Wages and
salaries EUR '000 3,062 2,722 9,912 6,247 5,756
Average number
of
employees 277 210 266 158 178
Number of
employees
at the end of
the
period 283 229 283 229 239





Three Three Nine Nine Twelve
months to months to months to months to months to
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
Other figures 2009 2008 2009 2008 2008

Share options
outstanding at the
end
of the period 4,334,500 2,285,000 4,334,500 2,285,000 4,442,500
Number of shares to
be issued against
the outstanding
share
options 4,334,500 2,285,000 4,334,500 2,285,000 4,442,500
Rights to vote of
shares to be issued
against
the outstanding
share
options 1.7% 1.0% 1.7% 1.0% 2.0%



KEY FIGURES

Three Three Nine Nine Twelve
months months months months months
to to to to to
30 Sep 30 Sep
30 Sep 09 08 30 Sep 09 08 31 Dec 08

Operating
profit EUR
(loss) '000 (15,303) (4,955) (23,208) (9,576) (4,296)

Return on
equity (2.7%) (2.7%) (5.2%) (4.6%) 1.6%

Equity-to
assets ratio 48% 57.2% 48% 57.2% 48.5%

Net interest EUR
bearing debt '000 354,130 100,131 354,130 100,131 285,467

Debt-to
equity
ratio 84.2% 28.3% 84.2% 28.3% 67.3%

Capital EUR
expenditure '000 24,315 100,128 82,052 273,030 429,086

Research &
development EUR
expenditure '000 - - - - 181

Property,
plant and EUR
equipment '000 615,194 401,794 615,194 401,794 552,458

Derivative
financial EUR
instruments '000 64,975 74,393 64,975 74,393 152,545

EUR
Borrowings '000 422,764 193,160 422,764 193,160 368,179

Cash and
cash
equivalents
at the end EUR
of the period '000 68,624 93,028 68,624 93,028 82,713


Three Three Nine Nine Twelve
months months months months months
to to to to to
Share-
related 30 Sep 30 Sep
key figures 30 Sep 09 09 30 Sep 09 08 31 Dec 08

Earnings per
share EUR (0.04) (0.03) (0.08) (0.05) 0.03

Equity per
share EUR 1.75 1.49 1.75 1.49 1.74

Development
of share
price at
London
Stock
Exchange
Average
trading
price1 EUR 4.27 3.60 3.39 4.27 3.64
GBP 3.72 2.86 3.00 3.34 2.90

Lowest
trading
price1 EUR 3.70 2.96 1.45 3.01 1.22
GBP 3.23 2.35 1.29 2.35 0.98

Highest
trading
price1 EUR 4.78 4.45 4.71 5.74 5.64
GBP 4.17 3.54 4.17 4.49 4.49

Trading
price at
the end of
the period2 EUR 4.18 2.97 4.18 2.97 1.25
GBP 3.80 2.35 3.80 2.35 1.19

Change
during the
period 11.7% (36.4%) 219.1% (21.7%) (60.3%)

Market
capitalization
at the end
of the EUR
period3 '000 1,023,794 662,796 1,023,794 662,796 278,475
GBP
'000 930,936 523,807 930,936 523,807 265,247

Development
in trading
volume
Trading 1000
volume shares 35,736 24,694 119,239 63,463 84,780
In relation to
weighted
average
number of
shares 15.5% 11.1% 51.9% 28.5% 38.0%

Development
of share
price at OMX
Helsinki
Average
trading price EUR 4.38 4.19

Lowest
trading price EUR 3.75 3.05

Highest
trading price EUR 4.86 4.86

Trading price
at the
end of the
period EUR 4.18 4.18

Change
during
the period 3.2% 33.5%

Market
capitalization
at the end of EUR
the period '000 931,708 931,708

Development
in trading
volume
Trading 1000
volume shares 45,054 86.452
In relation to
weighted
average
number of
shares 19.6% 37.6%

Adjusted
average
number of 222 896 222 896 222 896 222 896 222 896
shares 718 718 718 718 718

Number of
shares at
the end of 222 896 222 896 222 896 222 896 222 896
the period 718 718 718 718 718



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


Key financial figures of the Group



Return on equity Profit (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






Interest-bearing debt - Cash and cash
Net interest-bearing debt equivalent

Debt-to-equity ratio Net interest-bearing debt/
Total equity


Share-related key figures

Profit (loss) attributable to equity
Earnings per share holders of the Company/
Adjusted average number of shares

Equity attributable to equity holders of
Equity per share the Company/
Adjusted average number of shares

Number of shares at the end of the
Market capitalization at the period * trading price
end of the period at the end of the period


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Author:
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