Talvivaara Mining Company Interim Report for January - September 2010

Wednesday, 10. November 2010 08:01
Stock Exchange Release
10 November 2010


Talvivaara Mining Company Interim Report for January - September 2010


Q3 2010 highlights
·         Nickel production 3,211t, up 18% from Q2 2010
·         Zinc production 7,557t, up 36% from Q2 2010
·         Significant improvement in net sales to EUR 45.1 million and in
operating profit to EUR 10.9 million
·         First net profit since production commenced: EUR 25.4 million

Q1-Q3 2010 highlights
·         Nickel and zinc production 6,550t and 16,092t, respectively
·         Net sales EUR 91.9 million, operating profit EUR 11.1 million
·         EUR 100 million corporate revolving credit facility signed in June;
EUR 40 million drawn
·         Zinc streaming agreement with Nyrstar NV for 1.25mt of zinc in
concentrate completed in February
·         Net debt significantly reduced through repayment of USD 320m project
loan facility in February using the USD 335m pre-payment received from Nyrstar
·         Permit application to extract uranium as a by-product lodged in April;
Environmental Impact Assessment relating to uranium recovery ongoing

Highlights after the reporting period
·         54% upgrade in total mineral resources to 1,550mt; 3.4mt contained
nickel and 7.6mt of contained zinc
·         Talvivaara assesses options for production capacity expansion

Production guidance
Talvivaara anticipates its full year 2010 nickel and zinc production to amount
to 11,000-13,000t and
28,000-30,000t, respectively. The Company continues to expect the annualized
production rate of nickel to reach 30,000t before the year end and the full
scale production target of 50,000t per annum to be achievable in 2012.

Key figures

---------------------------------+-----+------+----------+----------+----------
EUR million | Q3| Q3|Q1-Q3 2010|Q1-Q3 2009|Q1-Q4 2009
| 2010| 2009| | |
---------------------------------+-----+------+----------+----------+----------
Net sales | 45.1| 0.8| 91.9| 2.6| 7.6
---------------------------------+-----+------+----------+----------+----------
Operating profit (loss) | 10.9|(15.3)| 11.1| (23.2)| (54.8)
---------------------------------+-----+------+----------+----------+----------
Profit (loss) for the period | 25.4|(10.7)| (8.3)| (21.9)| (55.0)
---------------------------------+-----+------+----------+----------+----------
Earnings per share, EUR | 0.08|(0.04)| (0.04)| (0.08)| (0.19)
---------------------------------+-----+------+----------+----------+----------
Equity-to-assets ratio |39.9%| 47.8%| 39.9%| 47.8%| 43.5%
---------------------------------+-----+------+----------+----------+----------
Net interest bearing debt |263.4| 354.1| 263.4| 354.1| 426.2
---------------------------------+-----+------+----------+----------+----------
Debt-to-equity ratio |67.0%| 84.2%| 67.0%| 84.2%| 111.4%
---------------------------------+-----+------+----------+----------+----------
Capital expenditure | 36.9| 24.3| 92.2| 82.1| 118.5
---------------------------------+-----+------+----------+----------+----------
Cash and cash equivalents at the| 6.0| 68.6| 6.0| 68.6| 11.9
end of the period | | | | |
---------------------------------+-----+------+----------+----------+----------
Number of employees at the end | 370| 283| 370| 283| 308
of the period | | | | |
---------------------------------+-----+------+----------+----------+----------










CEO Pekka Perä:

"Our production ramp-up continued making progress during the third quarter
despite the technical challenges we encountered while commissioning the second
production line at the metals recovery plant. Looking to the fourth quarter
output, we are now glad to see all processes working well at the mine, and we
remain confident that we will achieve our targeted 30,000tpa annualised
production rate of nickel by the year end.

We are pleased to be reporting good Q3 financial results, not least our movement
into net profit, supported by stronger nickel prices. We expect nickel to remain
around its recent level for the remainder of the year, although some volatility
related to the US dollar and macro-economic drivers is likely to be seen.

Our recent 54% upgrade in resources at the mine confirms Talvivaara's tremendous
potential as a world class asset. With a longer term perspective we are
currently considering how to optimise Talvivaara's organic growth beyond the
50,000t annual nickel production target."



Webcast and conference call on 10 November 2010 at 11:00 am UK / 1:00 pm Finland

A combined webcast and conference call on the interim report for January-
September 2010 will be held at
11:00 am UK / 1:00 pm Finland on 10 November 2010. The webcast can be accessed
through the following link:

http://qsb.webcast.fi/t/talvivaara/talvivaara_2010_1110_q3/

Event title: Talvivaara Mining Company Plc Interim Report January - September
2010

Details for the conference call:
Conference ID:                                            880360
US participants:                    +1 334 323 6201
UK participants:                    +44 (0)20 7162 0025
Finnish participants:              +358 (0)9 2313 9201

Further details on the event can be found on the Talvivaara website,
www.talvivaara.com. The webcast will also be available for viewing afterwards on
the Talvivaara website and through the above link.




Enquiries:

Talvivaara Mining Company Plc               Tel. +358 20 712 9800
Pekka Perä, CEO
Saila Miettinen-Lähde, CFO

Merlin
Tel. +44 20 7726 8400
David Simonson
Anca Spiridon

Financial review

Q3 2010 (July-September)

Net sales and financial result

Talvivaara's net sales for nickel and cobalt deliveries to Norilsk Nickel and
for zinc deliveries to Nyrstar during the three months ended 30 September 2010
amounted to EUR 45.1 million (Q3 2009: EUR 0.8 million). The net sales increased
by 28% compared to Q2 2010.

Operating profit for Q3 2010 was EUR 10.9 million (Q3 2009: loss of EUR 15.3
million). Profit for the period amounted to EUR 25.4 million (Q3 2009: loss of
EUR 10.7 million).

Balance sheet and financing

Capital expenditure during the quarter totalled EUR 36.9 million (Q3 2009: EUR
24.3 million). The expenditure related primarily to earth works at the secondary
heap foundations, installation of the second production line at the metals
recovery plant, and to the secondary heap stacker and conveyors.

Talvivaara drew down EUR 40 million of the EUR 100 million three-year revolving
multicurrency credit facility signed in June 2010. The Company also drew down
the EUR 10 million investment and working capital loan signed with Finnvera Plc
in June.


Q1-Q3 2010 (January-September)

Net sales and financial result

Talvivaara's net sales during the nine months ended 30 September 2010 amounted
to EUR 91.9 million
(Q1-Q3 2009: EUR 2.6 million). 5,614 tonnes of nickel, 14,610 tonnes of zinc,
and approximately 47 tonnes of cobalt were sold during the period.

The Group's other operating income amounted to EUR 17.2 million (Q1-Q3 2009: EUR
37.2 million) and came mainly from fair value gains on biological assets (trees)
and realised gains on nickel and zinc forwards.

Employee benefit expenses including the value of employee expenses related to
the employee share option scheme of 2007 were EUR (14.4) million (Q1-Q3 2009:
EUR (11.6) million). The increase was attributable to the increased number of
personnel.

Other operating expenses amounted to EUR (30.2) million (Q1-Q3 2009: EUR (32.6)
million) and included realised losses of EUR (4.0) million on interest rate
swaps and USD forwards as well as energy and maintenance costs. Operating profit
amounted to EUR 11.1 million (Q1-Q3 2009: loss of EUR 23.2 million).

Finance income for the nine month period was EUR 6.9 million (Q1-Q3 2009: EUR
15.0 million) and consisted mainly of exchange rate gains of EUR 6.8 million.
Finance costs of EUR (29.0) million (Q1-Q3 2009: EUR (21.8) million) were caused
by exchange rate losses of EUR (16.3) million on the USD 320 million Project
Term Loan Facility and on the USD 335 million Nyrstar advance payment as well as
interests of EUR (12.3) million on borrowings.

The Company's loss for the period amounted to EUR (8.3) million (Q1-Q3 2009: EUR
(21.9) million). The total comprehensive income for the first nine months of
2010 was EUR (16.9) million (Q1-Q3 2009: EUR (85.8) million), including a
reduction in hedge reserves resulting from the occurrence of the hedged sales.

Balance sheet

Capital expenditure during the first nine months of 2010 totalled EUR 92.2
million (Q1-Q3 2009: EUR 82.1 million). The expenditure related primarily to the
construction of secondary heap foundations, installation of the second
production line at the metals recovery plant, and to the secondary heap stacker
and conveyors. On the consolidated statement of financial position as at 30
September 2010, property, plant and equipment totalled EUR 687.2 million (31
December 2009: EUR 644.4 million).

During 2008-2009, Talvivaara Infrastructure Oy constructed a new railway
connecting the mine site with the national railway grid. As of 30 June 2010, the
railway has been classified to assets held for sale. Property, plant and
equipment was reduced by EUR 39.4 million due to the reclassification.

In the Group's assets, inventories amounted to EUR 160.4 million on 30 September
2010 (31 December 2009: EUR 109.5 million). Trade receivables came to EUR 33.7
million (31 December 2009: EUR 3.9 million). Cash and cash equivalents totalled
EUR 6.0 million (31 December 2009: EUR 11.9 million).

In equity and liabilities, the total equity amounted to EUR 393.0 million on 30
September 2010 (31 December 2009: EUR 382.6 million), including approximately
EUR 25 million from a perpetual capital loan. A total of 140,000 new shares were
subscribed and paid for during the first nine months of 2010 under the company's
stock option rights 2007A and the entire subscription price of EUR 0.4 million
was recognized in equity.

Borrowings decreased from EUR 438.1 million on 31 December 2009 to EUR 269.4
million on 30 September 2010, reflecting the repayment of a USD 320 million
Project Term Loan Facility in February, and of a EUR 5 million convertible loan
from Outokumpu Mining Ltd in August 2010. Talvivaara received a total of EUR
263 million in advance payments during the period, comprising USD 335 million
for the Zinc in Concentrate Streaming Agreement with Nyrstar NV, and EUR 20
million paid by the Finnish State as an advance payment for the redemption of
the Talvivaara-Murtomäki railway. In short-term liabilities, accounts payable
amounted to EUR 31.4 million (31 December 2009: EUR 29.7 million) and other
payables amounted to EUR 21.9 million (31 December 2009: EUR 9.9 million). Other
payables included a factoring debt of EUR 13.7 million relating to nickel and
cobalt sales to Norilsk Nickel.

The nickel, zinc and USD forwards held by Talvivaara were closed in Q1 2010 and
as at 30 September 2010 the Company's derivative financial instruments consisted
of interest rate swaps, which were valued at EUR (2.4) million (derivative
financial assets on 31 December 2009: EUR 33.1 million).

Total equity and liabilities as at 30 September 2010 amounted to EUR 984.0
million (31 December 2009: EUR 879.0 million).

Financing

On 30 June 2010, Talvivaara signed a EUR 100 million three-year revolving
multicurrency credit facility with Nordea Bank, Handelsbanken and Sampo Bank.
The facility has a margin of 300 bps until 31 December 2010 and thereafter a
varying margin of 175-300 bps depending on the Company's leverage ratio. The
facility is intended for general corporate purposes. As at 30 September 2010,
Talvivaara had drawn down EUR 40 million of the facility.

In June, Talvivaara also signed a EUR 10 million investment and working capital
facility with Finnvera Plc with an eight-year maturity and a margin of 4.1%. As
at 30 September 2010, Talvivaara had fully drawn down the facility.

In June, the Finnish Government paid the first 50% instalment towards the EUR
40 million (0% VAT) reimbursement granted for the Talvivaara-Murtomäki railroad.
The instalment was used in its entirety to partially repay the EUR 41.0 million
loan facility drawn down by Talvivaara Infrastructure Oy to finance the
construction of the railroad.

In February 2010, Talvivaara completed a Zinc in Concentrate Streaming Agreement
with Nyrstar NV. For the agreement, Nyrstar paid a USD 335 million advance
payment, the majority of which was used to completely pre-pay the USD 320
million Project Term Loan Facility.

In February 2010, Talvivaara also drew down a EUR 25 million perpetual capital
loan, which is recognized in equity according to IFRS. A convertible loan of EUR
5 million was drawn down from Outokumpu Mining Ltd in February and repaid in
full in August 2010.

Currency and commodity hedges and hedge accounting

In connection with the repayment of the USD 320 million Project Term Loan
Facility in February 2010, the Group closed all of its commodity and foreign
exchange risk hedging positions realising net proceeds of EUR 46.0 million. Cash
flows from operating activities were positive due to the closing of the hedges.

Commercial arrangements

In addition to its financing component, Talvivaara's agreement with Nyrstar also
formed a significant commercial arrangement between the parties. The key
commercial terms of the Nyrstar agreement included Talvivaara's obligation to
deliver all of its zinc in concentrate production to Nyrstar until a total of
1,250,000 metric tonnes has been delivered (equivalent to approximately 2
million tonnes of zinc concentrate at a grade of 65%). Based on Talvivaara's
production plans, the deliveries are expected to occur over a period of 10-15
years. Deliveries commenced in March 2010.


In addition to the USD 335 million advance payment, Nyrstar pays Talvivaara an
extraction and processing fee of EUR 350 per tonne of zinc in concentrate
delivered (with escalators in relation to prices of elemental sulphur and
propane). The Parties have also agreed the following price participation:
       ·         until the later of the seventh anniversary of the agreement or
delivery of 600,000 tonnes of zinc in concentrate, Nyrstar will pay to
Talvivaara 10% of the LME zinc price exceeding USD 2,500 per tonne (up to USD
3,000 per tonne), and 30% of the LME zinc price exceeding USD 3,000 per tonne;
and
       ·         thereafter, Nyrstar will pay to Talvivaara 30% of the excess of
the LME zinc price above the processing fee of EUR 350 per tonne of zinc in
concentrate.

Nyrstar has also agreed to supply to Talvivaara up to 150,000 tonnes of
sulphuric acid per annum for use in Talvivaara's leaching process during the
period of supply of the zinc in concentrate.

Production review

New quarterly production records were again set in the third quarter with
contained metal output amounting to 3,211t of nickel and 7,557t of zinc. These
figures were 18% and 36%, respectively, up from the previous quarter. In the
first nine months of the year, nickel production amounted to 6,550t (Q1-Q3
2009: 101t) and zinc production to 16,092t (Q1-Q3 2009: 820t).

The mining department increased its total output compared to all earlier
periods, but concentrated more on waste mining in order to provide sufficient
material for levelling the ground for the secondary heap foundations. The third
quarter ore mining amounted to 3.4 Mt (Q3 2009: 2.0 Mt) and waste mining to 5.8
Mt (Q3 2009: 1.0 Mt). For the nine months from January to September the
corresponding figures were 10.0 Mt of ore (Q1-Q3 2009: 7.3 Mt) and 12.3 Mt of
waste rock (Q1-Q3 2009: 2.9 Mt).

In materials handling, the amount of crushed and stacked ore in the third
quarter was 3.4 Mt (Q3 2009: 1.4 Mt). This is slightly less than the previous
quarter's output of 3.7 Mt, reflecting the emphasis on waste mining during the
summer months as well as a two-week maintenance stoppage at the primary crusher.
The amount of ore crushed and stacked during the first nine months of the year
was first 10.4 Mt (Q1-Q3 2009: 5.5 Mt).

Bioheapleaching progressed according to expectations during the third quarter.
Heap section 2 continued to provide most of the leach solution treated at the
metals recovery plant. Heap section 3 was completed in early June and taken into
production in July. Nickel grades in solution from this section improved rapidly
after the stacking had been completed, exceeding 2.6 g/l in September. Stacking
of heap section 4 commenced in June and continued throughout the third quarter,
with targeted completion in early Q4 2010. Leaching performance from the fourth
section has been very promising.

Construction of the secondary heap foundations continued throughout the third
quarter, but sections of the area were already completed during the summer. This
allowed secondary leaching to commence in small scale in August, when reclaiming
and re-stacking of ore from heap section 1 started using dump trucks. By the end
of September, early signs from secondary leaching had proven positive,
indicating that the back-precipitated metals from the first heap section are
leaching well.

A major milestone was achieved in metals recovery with the commissioning of the
second production line in June. With experience gained from operating the first
line, many of the technical issues that had affected the start-up of the first
line had been fixed for the second one, making its commissioning relatively
uneventful. However, the second hydrogen sulphide generator suffered from
installation faults, which during the early part of the third quarter resulted
in insufficient output and later in down time during repairs. By the end of Q3
2010, both production lines were operating at capacities planned for the
corresponding stage of ramp-up.

Installation of additional gas scrubbing capacity continued during the third
quarter in order to overcome any remaining issues with the hydrogen sulphide
odour. In particular, the aim was to build sufficient buffer into the system
such that also occasional higher discharge levels could be satisfactorily
handled.

Operating expenses during the nine months from January through September 2010
were materially in line with expectations.

Production key figures

--------------------------+------+-----+----+----------+----------+----------
  |  | Q3| Q3|Q1-Q3 2010|Q1-Q3 2009|Q1-Q4 2009
| | 2010|2009| | |
--------------------------+------+-----+----+----------+----------+----------
Mining |  |  |  |  |  |
--------------------------+------+-----+----+----------+----------+----------
     Blasted ore |Mt | 3.4| 2.0| 10.0| 7.3| 10.8
--------------------------+------+-----+----+----------+----------+----------
     Excavated waste |Mt | 5.8| 1.0| 12.3| 2.9| 4.3
--------------------------+------+-----+----+----------+----------+----------
Materials handling |  |  |  |  |  |
--------------------------+------+-----+----+----------+----------+----------
     Stacked ore |Mt | 3.4| 1.4| 10.4| 5.5| 8.5
--------------------------+------+-----+----+----------+----------+----------
Bioheapleaching |  |  |  |  |  |
--------------------------+------+-----+----+----------+----------+----------
     Ore in primary heap |Mt | 21.4| 8.0| 21.4| 8.0| 11.0
--------------------------+------+-----+----+----------+----------+----------
Metals recovery |  |  |  |  |  |
--------------------------+------+-----+----+----------+----------+----------
     Nickel metal content|tonnes|3,211| 101| 6,550| 325| 735
--------------------------+------+-----+----+----------+----------+----------
     Zinc metal content |tonnes|7,557| 114| 16,092| 820| 3,133
--------------------------+------+-----+----+----------+----------+----------



Permitting and planning processes ongoing for the extraction of uranium as a by-
product

In February, Talvivaara announced its intention to initiate the recovery and
exploitation of uranium as a by-product. The Company plans to recover uranium in
the form of a uranium intermediate, yellow cake, from its main leaching process
by using a safe and technically simple solvent extraction process which is
widely applied to metals recovery.

On 20 April 2010, Talvivaara Sotkamo Ltd lodged an application in accordance
with the Nuclear Energy Act to the Ministry of Employment and Economy for the
extraction of uranium as a by-product. The Environmental Impact Assessment
relating to the uranium extraction process also commenced at the mine site
during the second quarter.

The detailed design of the solvent extraction plant needed for uranium recovery
progressed during the third quarter. As a result of some alterations made to the
process and the planned location of the extraction unit, the estimated capital
expenditure relating to the project has risen to EUR 40-50 million. Annual
production costs are estimated at approximately EUR 2 million and the annual
production volume at approximately 350 tonnes.

Commercial negotiations relating to potential cooperation for the uranium
production and sales continued during the third quarter with leading companies
in the industry. The financing and operating model for the uranium business will
be determined based on agreement with the eventual partner.




Environment, health and safety

Safety among the Talvivaara personnel remained good during the third quarter
with only one relatively minor Lost Time Injury (LTI) suffered. The number of
LTI's during the first nine months of the year was five. The LTI frequency at
the end of September was 11.5 accidents per million hours worked year to date
and 12.5 during the last 12 months.

Planning and implementation of the ISO 14001 Environmental Management System
continued during the third quarter with the target of having the system audited
by the end of 2010.

Talvivaara commenced research work relating to the Global Reporting Initiative,
GRI, as part of its quest to improve its sustainability reporting. The Company
also participated in the Carbon Disclosure Project.

Personnel

The number of personnel on 30 September 2010 was 370 (Q3 2009: 283), up by 62
from 308 at the end of 2009, but down by 12 from 382 on 30 June 2010. The recent
reduction in the number of employees reflected the termination of over 30 summer
trainee contracts towards the end of the third quarter, indicating that the
underlying number of permanent workforce continued to increase. The average
number of employees during the first nine months of 2010 was 356 (Q1-Q3
2009: 266).

Wages and salaries paid during the first nine months of the year totalled EUR
12.2 million (Q1-Q3 2009: EUR 9.9 million).

Eeva Ruokonen, MSc(Mining), Lic.Tech.(Mineral Processing) was appointed Chief
Sustainability Officer and member of the Company's Executive Committee from the
beginning of February 2010.

Annual General Meeting

Talvivaara held its Annual General Meeting on 15 April 2010. The resolutions of
the AGM included:
       ·         that the number of Board members be changed to eight and that
Mr. Gordon Edward Haslam, Mr. D. Graham Titcombe, Ms. Eileen Carr, Mr. Eero
Niiva, Ms. Saila Miettinen-Lähde, and Mr. Pekka Perä be re-appointed as
directors of the Company, and that Mr. Roland Junck and Mr. Tapani Järvinen be
appointed as new directors of the Company;
       ·         that article 5 of the Company's articles of association be
amended to provide for a retirement of all the members of the Board of Directors
at each Annual General Meeting of Shareholders;
       ·         that article 12 of the Company's articles of association be
amended so that the shareholders are convened to the Annual or Extraordinary
Shareholders' Meeting by a notice sent at the earliest three (3) months and at
the latest twenty-one (21) days before the meeting, however, at the minimum nine
(9) days before the record date of the Shareholder's' Meeting. Further, to be
allowed to take part in a Shareholders' Meeting a shareholder must register with
the Company at the latest by the date mentioned in the notice convening the
meeting and which date may not be earlier than ten (10) days before the
Shareholders' Meeting; and
       ·         that the Board of Directors be authorised to decide on
repurchasing a maximum of 10,000,000 of the Company's own shares through public
trading, and to decide on conveying a maximum of 10,000,000 of the Company's own
shares, each in deviation of the pre-emptive rights of shareholders.

Risks and uncertainties

In line with current corporate governance guidelines on risk management,
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.

Talvivaara's operations are affected by various risks common to the mining
industry, such as risks relating to the development of Talvivaara's mineral
deposits, estimates of reserves and resources, infrastructure risks, and
volatility of commodity prices. There are also risks related to currency
exchange ratios, management and control systems, historical losses and
uncertainties about the future profitability of Talvivaara, dependence on key
personnel, effect of laws, governmental regulations and related costs,
environmental hazards, and risks related to Talvivaara's mining concessions and
permits.

In the short term, Talvivaara's key operational risks relate to the ongoing
ramp-up of operations. While the Company has demonstrated that all of its
production processes work and can be operated on an industrial scale, the rate
of ramp-up is still subject to risk factors, including various technical and
operational risks, that may currently be unknown or are beyond the Company's
control. In order to better mitigate operational risks going forward, Talvivaara
has commenced a production dependability programme, which targets at reducing
downtime and risk of accidents through detailed evaluation of all equipment and
processes and subsequent improvement of operating procedures and maintenance.

The market price of nickel is, together with production volumes, the main
determinant of Talvivaara's revenues. The volatility of nickel price has
historically been high and it is in the Company's view likely that the
volatility will continue also in the future. Talvivaara is, since February
2010, unhedged against variations in metal prices, which means that nickel price
volatility will have a substantial effect on the Company's revenues and result.
Full or substantially full exposure to nickel prices is in line with
Talvivaara's strategy and supported by the Company's view that it can operate
the Talvivaara mine profitably also during the lows of commodity price cycles.

Talvivaara's revenues are determined mostly 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. As at 30 September 2010, Talvivaara was
unhedged against the currency exchange risk relating to the US dollar.

Shares and shareholders

The number of shares issued and outstanding and registered on the Euroclear
Shareholder Register as of 30 September 2010 was 245,316,718. Including the
effect of the convertible bond of 14 May 2008 and the Option Scheme of 2007, the
authorised full number of shares of the Company amounted to 263,669,291 at the
end of the period.

The share subscription period for stock options 2007A commenced on 1 April 2010
and ends on 31 March 2012. By 30 September 2010 a total of 140,000 Talvivaara
Mining Company Plc's new shares had been subscribed and paid for under the stock
option rights 2007A. The entire subscription price of EUR 363,832 was entered
into the invested unrestricted equity reserve. A total of 2,193,100 stock option
rights 2007A remain unexercised.

As at 30 September 2010, the shareholders who held more than 5% of the shares
and votes of Talvivaara were Pekka Perä (23.3 %), Varma Mutual Pension Insurance
Company (8.6%), and BlackRock Investment Management Ltd (6.2%).

Events after the review period

Significant increase in Talvivaara mineral resources
On 27 October 2010, Talvivaara announced a 54% upgrade to 1,550t in the mineral
resources in the Kuusilampi and Kolmisoppi orebodies in Sotkamo, Finland.
Measured and indicated resources, as defined by the JORC code, increased by 75%
to 1,121mt. The new resources contain 3.4mt of nickel and 7.6mt of zinc.

Following the substantial upgrade in mineral resources, Talvivaara is currently
evaluating options for growth through a further expansion of production capacity
at the mine. The Company anticipates providing further information on the
results and conclusions of the evaluation over the coming months.

Commissioning of the secondary stacking system
Commissioning of the secondary stacker that piles ore to the secondary heap
started in October, as planned. Trial runs with ore have been successfully
completed and production with the system is anticipated to commence during the
week of 8 November 2010.


Commissioning of the second hydrogen plant
The second hydrogen plant, which allows the metals recovery plant to be operated
at full capacity, was connected during the first week of November. The hydrogen
plant is expected be reach full operational status during the current month.

Short-term outlook

Talvivaara anticipates its production ramp-up to continue during the fourth
quarter and the full year production to reach 11,000-13,000t of nickel and
28,000-30,000t zinc.

The average daily nickel production currently exceeds 50t and further uplifts in
production are expected in the coming weeks as a result of section four of the
primary heap coming on stream and the second hydrogen plant being commissioned.
It is also anticipated that some metals can be recovered from secondary leaching
in December. The Company therefore continues to anticipate its annualised
production rate of nickel to reach 30,000t and its cash flow to turn positive by
the year end.

The market outlook for nickel remains mixed in the short term, affected by US
dollar movements and macroeconomic drivers. The recent US dollar weakness has
supported the nickel price and the Company expects this trend to continue into
2011. Negative price pressure may however result from growing LME nickel stocks
and sales of nickel out of China, indicating lagging demand. Whilst the signals
are mixed and surprises in either direction are possible, Talvivaara anticipates
nickel to remain around its recent trading range of 20,000-25,000 USD/t in the
near future.


Espoo 10 November 2010


Talvivaara Mining Company Plc
Board of Directors


CONSOLIDATED INCOME STATEMENT



Unaudited Unaudited Unaudited Unaudited Audited
three three nine nine twelve
months to months to months to months to months to
  30 Sep 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
---------------------------------------------------------
(all amounts in EUR
'000)

Net sales 45,091 826 91,945 2,604 7,571



Other operating income 532 11,599 17,243 37,152 43,118

Changes in inventories
of finished goods and
work in progress 20,938 15,100 53,097 47,177 75,587

Materials and services (26,915) (12,763) (68,284) (40,267) (65,156)

Personnel expenses (4,590) (3,566) (14,446) (11,631) (17,695)

Depreciation,
amortization,
depletion and
impairment charges (13,159) (9,458) (38,191) (25,677) (37,061)

Other operating
expenses (10,966) (17,041) (30,234) (32,566) (61,140)


---------------------------------------------------------
Operating profit (loss) 10,931 (15,303) 11,130 (23,208) (54,776)



Finance income 29,365 8,026 6,892 15,039 11,526

Finance cost (6,065) (8,037) (29,044) (21,834) (31,835)
---------------------------------------------------------
Finance cost (net) 23,300 (11) (22,152) (6,795) (20,309)



Profit (loss) before
income tax 34,231 (15,314) (11,022) (30,003) (75,085)



Income tax expense (8,874) 4,565 2,679 8,056 20,127


---------------------------------------------------------
Profit (loss) for
the period 25,357 (10,749) (8,343) (21,947) (54,958)



Attributable to:

Equity holders of
the Company 19,802 (9,310) (9,084) (18,415) (45,267)

Minority interest 5,555 (1,439) 741 (3,532) (9,691)
---------------------------------------------------------
  25,357 (10,749) (8,343) (21,947) (54,958)





Earnings per share for profit (loss) attributable to the
equity
holders of the Company (expressed in € per share)

Basic and diluted 0.08 (0.04) (0.04) (0.08) (0.19)




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
--------------------------------------------------


Profit (loss) for the period 25,357 (10,749) (8,343) (21,947) (54,958)



Other comprehensive income,

items net of tax

Cash flow hedges (2,696) (16,461) (8,572) (63,828) (69,705)


--------------------------------------------------
Other comprehensive
income, net of tax (2,696) (16,461) (8,572) (63,828) (69,705)


--------------------------------------------------
Total comprehensive income 22,661 (27,210) (16,915) (85,775) (124,663)



Attributable to:

Equity holders of the Company 17,645 (22,479) (15,942) (69,478) (101,031)

Minority interest 5,016 (4,731) (973) (16,297) (23,632)
--------------------------------------------------
  22,661 (27,210) (16,915) (85,775) (124,663)





CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited Audited Unaudited
(all amounts in EUR '000) 30 Sep 10 31 Dec 09 30 Sep 09

ASSETS

Non-current assets

Property, plant and equipment 687,226 644,356 615,195

Biological assets 8,474 6,614 6,368

Intangible assets 7,758 7,846 7,609

Deferred tax assets 27,272 21,548 7,412

Derivative financial instruments - - 39,391

Other receivables 7 616 7,582 11,227

  738,346 687,946 687,202



Current assets

Inventories 160,389 109,512 82,080

Trade receivables 33,716 3,913 981

Other receivables 6,189 15,477 10,609

Derivative financial instruments - 50,244 30,413

Cash and cash equivalent 5,976 11,877 68,624

  206,270 191,023 192,707



Assets held for sale 39,391 - -



Total assets 984,007 878,969 879,909



EQUITY AND LIABILITIES



Equity attributable to equity
holders of the parent

Share capital 80 80 80

Share premium 8,086 8,086 8,086

Hedge reserve 9,709 16,567 21,269

Other reserves 439,784 417,448 416,554

Retained earnings (80,452) (71,368) (44,516)

  377,207 370,813 401,473

Minority interest in equity 15,793 11,784 19,119

Total equity 393,000 382,597 420,592



Non-current liabilities

Borrowings 239,769 384,301 412,852

Advance payments 230,235 - -

Trade payables 29 - -

Derivative financial instruments 1,553 3,110 3,487

Provisions 2,987 1,594 1,018

  474,573 389,005 417,357

Current liabilities

Borrowings 29,601 53,810 9,912

Advance payments 32,764 - 19,401

Trade payables 31,361 29,669 11,305

Other payables 21,880 9,875 -

Derivative financial instruments 828 14,013 1,342

  116,434 107,367 41,960

Total liabilities 591,007 496,372 459,317



Total equity and liabilities 984,007 878,969 879,909



CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

A. Share capital
B. Share premium
C. Invested unrestricted equity
D. Hedge reserve
E. Other reserves
F. Retained earnings
G. Total
H. Minority interest
I. Total equity


(all amounts in EUR '000)

  A B C D E F G H I

1 Jan 09
--------------------------------------------------------------------
423,
  80 8,086 320,607 72,332 13,412 (26,101) 388,416 35,470 886

Profit
(loss)
for the (21,
period - - - - - (18,415) (18,415) (3,532) 947)

Cash flow (63,
hedges - - - (51,063) - - (51,063) (12,765) 828)
--------------------------------------------------------------------
Total
compre-
hensive
income for (85,
the period - - - (51,063) - (18,415) (69,478) (16,297) 775)

Share issue 82,
- - 82,691 - - - 82,691 - 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
--------------------------------------------------------------------
30 Sep 09 420,
80 8,086 401,251 21,269 15,303 (44,516) 401,473 19,119 592



382,
31 Dec 09 80 8,086 401,248 16,567 16,200 (71,368) 370,813 11,784 597



1 Jan 10 382,
80 8,086 401,248 16,567 16,200 (71,368) 370,813 11,784 597

Profit
(loss)
for the
period - - - - - (9,084) (9,084) 741 (8,343)

Cash flow
hedges - - - (6,858) - - (6,858) (1,714) (8,572)
--------------------------------------------------------------------
Total
compre-
hensive
income for (16,
the period - - - (6,858) - (9,084) (15,942) (973) 915)

Realized
stock
options - - 364 - - - 364 - 364

Perpetual 24,
capital loan - - - - 19,925 - 19,925 4,982 907

Employee
share option
scheme

- value of
employee
services - - - - 2,047 - 2,047 - 2,047
--------------------------------------------------------------------
30 Sep 10 393,
80 8,086 401,612 9,709 38,172 (80,452) 377,207 15,793 000





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 '000) 30 Sep 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
--------------------------------------------------
Cash flows from
operating activities

Profit (loss) for the period 25,357 (10,749) (8,343) (21,947) (54,958)

Adjustments for Tax 8,874 (4,565) (2,679) (8,056) (20,127)

Depreciation and amortization 13,159 9,458 38,191 25,677 37,061

Other non-cash income
and expenses (2,060) 603 (4,364) 3,327 845

Interest income (29,365) (8,026) (6,892) (15,039) (11,526)

Fair value gains on financial
assets at fair value through
profit or loss (3,638) 10,996 (20,280) 2,806 27,507

Interest expense 6,065 8,037 29,044 21,834 31,834
--------------------------------------------------
  18,392 5,754 24,677 8,602 10,636

Change in working capital

Decrease(+)/increase(-)
in other receivables (10,030) 2,533 (19,774) 9,314 2,055

Decrease (+)/increase (-)
in inventories (23,566) (16,404) (50,878) (51,122) (77,820)

Decrease(-)/increase(+)
in trade and other payables (20,040) 1,783 14,253 (24,072) (16,421)
--------------------------------------------------
Change in working capital (53,636) (12,088) (56,399) (65,880) (92,186)
--------------------------------------------------
  (35,244) (6,334) (31,722) (57,278) (81,550)



Interest and other
finance cost paid (3,154) (4,578) (16,364) (16,132) (22,318)

Interest income 2,002 52 52,820 3,430 3,821

Net cash generated (used)
in operating activities (36,396) (10,860) 4,734 (69,980) (100,047)



Cash flows from
investing activities

Acquisition of subsidiary,
net of cash acquired - (54) - (54) (54)

Purchases of property,
plant and equipment (36,721) (24,182) (91,899) (81,842) (117,738)

Purchases of biological assets - - (7) (35) (35)

Purchases of intangible assets (153) (133) (277) (175) (741)

Proceeds from sale of
property,
plant and equipment - - - 9 9

Proceeds from sale of
biological assets - 104 76 104 273

Proceeds from sale of
intangible assets - - - 49 49

Proceeds from government
grant related to tangible
assets - - - 5,000 5,000

Proceeds from government
grant related to intangible
assets - - - 13 228
--------------------------------------------------
Net cash generated (used)
in investing activities (36,874) (24,265) (92,107) (76,931) (113,009)



Cash flows from
financing activities

Proceeds from share issue
net of transaction costs - 80,644 - 80,644 80,641

Realized stock options 13 - 364 - -

Proceeds from
interest-bearing liabilities 50,000 - 56,539 53,357 63,924

Proceeds from
perpetual capital loan - - 24,875 - -

Proceeds from advance payments - - 263,419 - -

Payment of
interest-bearing liabilities (6,198) (1,154) (263,725) (1,179) (2,345)


--------------------------------------------------
Net cash generated (used)
in financing activities 43,815 79,490 81,472 132,822 142,220



Net (decrease)/increase in
cash and bank overdrafts (29,455) 44,365 (5,901) (14,089) (70,836)



Cash and bank overdrafts
at beginning of the period 35,431 24,259 11,877 82,713 82,713
--------------------------------------------------
Cash and bank overdrafts
at end of the period 5,976 68,624 5,976 68,624 1,877





NOTES

1. Basis of preparation

This interim report has been prepared in compliance with IAS 34.

The interim financial information set out herein has been prepared on the same
basis and using the same accounting policies as were applied in drawing up the
Group's statutory financial statements for the year ended 31 December 2009,
added with the following changes.

Revenue recognition

When Talvivaara enters into long-term supply contracts with customers and
receives advance payments for product to be delivered in future periods, the
advance payments are recognised in long-term liabilities. A portion of the
advance payments are recognized as short-term liabilities based on the expected
production during the following 12 months. The advance payments are gradually
recognized as revenues over the term of the contracts as shipments are made and
title and risk of loss pass to the customer according to the terms of the
relevant supply agreement.


2. Property, plant and equipment



Machinery Construction Land Other
and in and tangible
(all amounts in EUR '000) equipment progress buildings assets Total
---------------------------------------------------


Gross carrying amount at
1 Jan 10 209,907 51,671 223,036 202,791 687,405

Additions 28,598 91,458 152 29 120,237



Transfer to assets held
for sale - - - (40,629) (40,629)

Disposals - - (149) - (149)

Transfers 56,161 (86,228) 15,211 14,856 -
---------------------------------------------------
Gross carrying amount at
30 Sep 10 294,666 56,901 238,250 177,047 766,864
---------------------------------------------------


Accumulated depreciation
and impairment losses

at 1 January 2010 16,949 - 10,230 15,870 43,049



Transfer to assets
held for sale - - - (1,238) (1,238)

Depreciation for the year 16,923 - 7,703 13,201 37,827
----------------------------------------------------------------------------

---------------------------------------------------
Accumulated depreciation
and impairment losses at
30 Sep 10 33,872 - 17,933 27,833 79,638
---------------------------------------------------


Carrying amount at
1 Jan 10 192,958 51,671 212,806 186,921 644,356
---------------------------------------------------
Carrying amount at
30 Sep 10 260,794 56,901 220,317 149,214 687,226




3. Trade receivables

  30 Sep 10 31 Dec 09
--------------------
Nickel-Cobalt sulphide 32,855 3,096

Zinc sulphide 861 817
--------------------
  33,716 3,913



4. Inventories

  30 Sep 10 31 Dec 09
--------------------
Raw materials and consumables 7,699 9,919

Ore on leach pads 80,154 57,726

Work in progress 64,212 39,403

Finished products 8,324 2,464
--------------------
Inventories total 160,389 109,512





5. Assets held for sale

During 2008-2009, Talvivaara Infrastructure Oy constructed a new railhead
connecting the mine site with the national railway grid. The Finnish State has
committed to reimburse the construction expenses to Talvivaara Infrastructure Oy
up to an amount of EUR 40.0 million (VAT 0%) in two instalments in 2010-2011,
provided that agreed criteria for minimum transportation volumes on the railroad
have been fulfilled. The first agreed transportation milestone was reached in
May 2010 and subsequently the Finnish State paid the first EUR 20 million
instalment in June 2010. The remaining minimum transportation volumes are
anticipated to be achieved within the next 12 months. The railway has been
classified to assets held for sale from 30 June 2010.

Assets held for sale 30 Sep 10 31 Dec 09
--------------------
Railway 39,391 -



6. Borrowings

(all amounts in EUR '000)



Non-current 30 Sep 10 31 Dec 09
--------------------
Capital loans 1,405 1,405

Investment and Working
Capital loan 56,332 45,417

Project Term Loan Facility(1) - 189,505

Senior Unsecured
Convertible Bonds 77,450 75,477

Revolving credit facility 39,292 -

Railway Term Loan Facility - 19,861

Finance lease liabilities 35,718 15,306

Interest Subsidy Loans - 4,187

Other 29,572 33,143
--------------------
  239,769 384,301
--------------------


Current

Project Term Loan Facility(1) - 32,625

Railway Term Loan Facility 18,474 19,898

Finance lease liabilities 6,934 1,287

Interest Subsidy Loans 4,193 -
--------------------
  29,601 53,810
--------------------

--------------------
Total borrowings 269,370 438,111


(1)) The Project Term Loan has been reclassified to long-term borrowings in
comparative information for 2009, because the decision to repay the Project Term
Loan was made after the financial year ended.

7. Advance payments

(all amounts in EUR '000)



Non-current 30 Sep 10 31 Dec 09
--------------------


Deferred zinc sales revenue 230,235 -
--------------------
  230,235 -
--------------------


Current

Deferred zinc sales revenue 12,764 -

Advance payment on railway 20,000 -
--------------------
  32,764 -
--------------------

--------------------
Total 262,999 -



During the first quarter of 2010, Talvivaara received an advance payment of USD
335 million from Nyrstar NV relating to a long-term zinc supply agreement
between the companies. During the term of the agreement, Talvivaara is to
deliver 1.25 million tonnes of zinc in concentrate to Nyrstar NV.  The
deliveries commenced in March 2010 and by 30 September 2010 Talvivaara had
delivered 12,519 tonnes of zinc to Nyrstar. Accordingly, the advance payment had
decreased by approximately USD 3.4 million based on the delivered zinc.

Talvivaara Mining Company Plc

Key financial figures of the
Group

Three Three Nine Nine Twelve
months to months to months to months to months to
    30 Sep 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
---------------------------------------------------


Net sales EUR '000 45,091 826 91,945 2,604 7,571

Operating profit
(loss) EUR '000 10,931 (15,303) 11,130 (23,208) (54,776)



Operating profit
(loss)percentage   24.2 % (1852.7 %) 12.1 % (891.2 %) (723.5 %)

Profit (loss) before
tax EUR '000 34,231 (15,314) (11,022) (30,003) (75,085)



Profit (loss) for
the period EUR '000 25,357 (10,749) (8,343) (21,947) (54,958)



Return on equity   6.6 % (2.7 %) (2.2 %) (5.2 %) (13.6 %)



Equity-to-assets
ratio   39.9 % 47.8 % 39.9 % 47.8 % 43.5 %



Net interest-bearing
debt EUR '000 263,394 354,130 263,394 354,130 426,234



Debt-to-equity ratio   67.0 % 84.2 % 67.0 % 84.2 % 111.4 %



Capital expenditure EUR '000 36,874 24,315 92,183 82,052 118,514



Research &
development
expenditure EUR '000 - - 63 - 261



Property, plant and
equipment EUR '000 687,226 615,194 687,226 615,194 644,356



Derivative financial
instruments EUR '000 2,381 64,975 2,381 64,975 33,121



Borrowings EUR '000 269,370 422,764 269,370 422,764 438,111



Cash and cash
equivalents
at the end of the
period EUR '000 5,976 68,624 5,976 68,624 11,877




Share-related key figures

Three Three Nine Nine Twelve
months to months to months to months to months to
    30 Sep 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
--------------------------------------------------
Earnings per share EUR 0.08 (0.04) (0.04) (0.08) (0.19)

Equity per share EUR 1.54 1.75 1.54 1.75 1.51



Development of share
price
at London Stock
Exchange

Average trading
price(1) EUR 4.98 4.27 4.59 3.39 3.57

  GBP 4.15 3.72 3.94 3.00 3.18

Lowest trading price(1) EUR 4.32 3.70 3.99 1.45 1.45

    GBP 3.60 3.23 3.42 1.29 1.29

Highest trading
price(1) EUR 5.90 4.78 5.74 4.71 4.68

    GBP 4.92 4.17 4.92 4.17 4.17



Trading price at the
end of the period(2) EUR 5.72 4.18 5.72 4.18 4.35

    GBP 4.92 3.80 4.92 3.80 3.86



Change during the
period   34.7 % 11.7 % 27.3 % 219.1 % 224.6 %



Market capitalization
at the EUR
end of the period(3) '000 1,402,951 1,023,794 1,402,951 1,023,794 1,066,454

GBP
  '000 1,206,468 930,936 1,206,468 930,936 947,118



Development in
trading volume

1000
Trading volume shares 11,247 35,736 77,074 119,239 153,421

In relation to weighted
average number of
shares   4.6 % 15.5 % 31.4 % 51.9 % 65.6 %



Development of share
price at OMX Helsinki

Average trading
price(1) EUR 5.09 4.38 4.66 4.19 4.21

Lowest trading price(1) EUR 4.35 3.75 3.99 3.05 3.05

Highest trading
price(1) EUR 5.72 4.86 5.72 4.86 4.86



Trading price at the
end
of the period(2) EUR 5.68 4.18 5.68 4.18 4.33

Change during the
period   27.6 % 3.2 % 31.2 % 33.5 % 38.3 %



Market capitalization
at the EUR
end of the period(3) '000 1,392,829 931,708 1,392,829 931,708 1,061,615



Development in trading
volume

1000
Trading volume shares 21,058 45,054 97,450 86,452 113,077

In relation to weighted
average number of
shares   8.6 % 19.6 % 39.7 % 37.6 % 48.4 %



Adjusted average 245,216, 229,915, 245,216, 229,915, 233,762,
number of shares   366 326 366 326 033



Number of shares at the 245,316, 245,176, 245,316, 245,176, 245,176,
end of 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
   (4)         )
Other figures

Three Three Nine Nine Twelve
months to months to months to months to months to
  30 Sep 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
--------------------------------------------------


Share options outstanding
at the end of the period 5,065 100 4,334 500 5,065,100 4,334,500 5,352,500



Number of shares to
be issued against the
outstanding share options 5,065 100 4,334 500 5,065,100 4,334,500 5,352,500



Rights to vote of shares to
be issued against the
outstanding share options 2.0 % 1.7 % 2.0 % 1.7 % 2.1 %




Employee-related key
figures

Three Three Nine Nine Twelve
months to months to months to months to months to
    30 Sep 10 30 Sep 09 30 Sep 10 30 Sep 09 31 Dec 09
--------------------------------------------------


Wages and salaries EUR '000 3,828 3,062 12,209 9,912 14,876

Average number of
employees   379 277 356 266 272

Number of employees
at the end of the
period   370 283 370 283 308




Talvivaara Mining Company Plc

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 holders
Earnings per share of the Company/
----------------------------------------------
  Adjusted average number of shares



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



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






[HUG#1460810]





Talvivaara Mining Company Plc Q3 10 11 2010:
http://hugin.info/136227/R/1460810/399906.pdf




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(i) the releases contained herein are protected by copyright and
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.

Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
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Author:
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