Stock Exchange
Release
Talvivaara Mining
Company Plc
22 September
2016
Talvivaara Interim
Report for period January - June 2016
Key events for reporting period
Jan-Jun 2016
-
Talvivaara and Terrafame Oy agreed on the sale
of Talvivaara's assets related to the Sotkamo mining operations and
the settlement of Talvivaara's guarantee liabilities under the Loan
and Streaming Holiday Agreement, with the principal amount of
approximately EUR 14 million (including interest up until 30 June
2016), and the Zinc in Concentrate Purchase Agreement, amounting to
approximately EUR 203.4 million
-
A reversal of the provision of EUR 203.4 million
and the EUR 11 million capital gains resulting from the sale of the
assets boosted the Company's profit for the period to EUR 207.7
million
Key events following the end of
the reporting period Jan - Jun 2016
-
On 11 August 2016, Talvivaara's Extraordinary
General Meeting approved the sale of mining related assets to
Terrafame
-
On 20 September 2016, the Administrator
confirmed his view, according to which the special conditions (b) 2
and (c) set for the entry into force of the Company's draft
restructuring programme are still to be fulfilled at to date. The
Administrator's stated further that due compliance with all the
special conditions and the Restructuring Act will require that one
or more of the Company's new business opportunities is developed
sufficiently so as to provide more tangible prospects for future
viable business operations
-
To date, the Company continues assessing new
business opportunities, and focuses on fulfilling all the remaining
special conditions set for the entry into force of the draft
restructuring programme.
Enquiries:
Talvivaara Mining Company Plc
Tel. +358 20 712 9800
Pekka Perä, CEO
Pekka Erkinheimo, Deputy CEO
Key financial figures |
|
|
|
|
|
|
Six
months to
30 Jun 16 |
Unaudited
Six
months to
30 Jun 15 |
Twelve
months to
31 Dec 15 |
Other operating
income |
EUR '000 |
14,019 |
3,437 |
6,702 |
Operating
profit/loss |
EUR '000 |
215,870 |
(491) |
(180) |
Operating
profit/loss percentage |
|
1,539.8 % |
(14.3 %) |
(2.7 %) |
Profit/loss before
tax |
EUR '000 |
207,713 |
(14,978) |
(26,010) |
Profit/loss for
the period |
EUR '000 |
207,713 |
(14,978) |
(26,010) |
Return on
equity |
|
n/a |
n/a |
n/a |
Equity-to-assets
ratio |
|
(7,950.1 %) |
(7,392.8 %) |
(7,525.6 %) |
Net
interest-bearing debt |
EUR '000 |
460,849 |
499,523 |
473,183 |
Debt-to-equity
ratio |
|
(88.2 %) |
(67.1 %) |
(64.8 %) |
Return on
investment |
|
n/a |
n/a |
n/a |
Capital
expenditure |
EUR '000 |
- |
- |
284 |
Property, plant
and equipment |
EUR '000 |
22 |
5,000 |
4,693 |
Borrowings |
EUR '000 |
465,043 |
503,956 |
477,845 |
Cash and cash
equivalents |
EUR '000 |
4,194 |
4,433 |
4,663 |
FINANCIAL REVIEW
Introduction
Following the bankruptcy of Talvivaara Mining Company Plc's
("Talvivaara" or the "Company") operating subsidiary Talvivaara
Sotkamo Ltd ("Talvivaara Sotkamo") on 6 November 2014, trading of
Talvivaara's shares on the Helsinki Stock Exchange was suspended.
The suspension of trading continues on the date of the Company's
Interim Report 22 September 2016.
Talvivaara has been in corporate
reorganisation throughout the review period of 1 January 2016 - 30
June 2016. During the corporate reorganisation proceedings, all
major decisions and decisions outside the ordinary course of
business have required consent of the administrator of the
corporate reorganisation proceedings (the "Administrator").
Talvivaara's Interim Report has
not been prepared on a going concern basis. The chosen reporting
basis results from the existence of material uncertainties that
cast significant doubt upon the Company's ability to realise its
assets and discharge its liabilities in the normal course of
business and from the lack of visibility on the Company's
operational environment twelve months beyond the date of reporting.
Talvivaara's ability to revise its reporting basis and to regain
its status as a going concern is dependent on the successful
completion of the Company's corporate reorganisation proceedings,
which in turn requires that the Company is able to complete an
arrangement that secures the necessary cash flow for the Company to
discharge all of its liabilities and the continuance of the
Company's viable business. The arrangement concluded with Terrafame
Oy on 30 June 2016 will, in the view of the Company, materially
improve the possibility for the completion of Talvivaara's
corporate restructuring proceedings and facilitate the development
of Talvivaara's new business opportunities.
Review of
Operations
Talvivaara and the bankruptcy estate of Talvivaara Sotkamo entered
into the Administration and Laboratory Services Agreement and the
Agreement on Lease of Lime and Limestone Handling Plant and
Reception Station on 19 November 2014. The agreements detailed the
Company's personnel resources and equipment that are available and
critical for the environmentally and occupationally safe operations
at the Sotkamo mine and state the agreed pricing for the services
provided. The rights and obligations of the bankruptcy estate of
Talvivaara Sotkamo under the aforementioned agreements were
transferred to Terrafame Oy, a 100% subsidiary of the state-owned
company Terrafame Group Oy on 13 August 2015. The transfer of the
mining business from the bankruptcy estate of Talvivaara Sotkamo to
Terrafame Oy was completed on 14 August 2015.
On 27 January 2016, Talvivaara,
Terrafame Group Oy and its subsidiaries, Terrafame Oy and Winttal
Oy, signed a letter of intent ("Letter of Intent"), in which the
parties provisionally agreed on the essential terms and conditions
for the sale of Talvivaara's assets related to the Sotkamo mining
operations. Assets to be sold would have included, among others,
the lime plant needed in the Sotkamo operations, laboratory
business, as well as ownership of the geological and production
data associated with the mine.
The transactions under the Letter
of Intent would have consisted of two separate phases. In the first
phase, Terrafame Oy would have bought the laboratory business
required in the production process, and the geological and
production data associated with the Sotkamo mine. The laboratory
personnel would have been transferred to Terrafame Oy as old
employees. In addition, the parties would have agreed on the
possibility for Talvivaara's key personnel working at the mine to
transfer to Terrafame Oy's service. In the first phase of the
arrangement, Terrafame Oy would have paid a purchase price of EUR
3.8 million to Talvivaara. Upon completion of the second phase of
the arrangement, Terrafame Oy would have bought from Talvivaara the
lime plant required in the production process of the mine.
Terrafame Oy would have paid to Talvivaara a purchase price of EUR
12.5 million. Simultaneously, Talvivaara would have paid to Winttal
Oy EUR 3.8 million as a full and final settlement of Talvivaara's
debts and liabilities, which were transferred to Winttal Oy from
Nyrstar in November 2015. These debts and liabilities comprise of
Talvivaara's guarantee liability of approximately EUR 12.8 million
under the Streaming Holiday Agreement and a guarantee liability for
a termination sum of approximately EUR 203.4 million under the
Streaming Agreement, which thereby would have been considered fully
and finally settled upon completion of the arrangement.
In addition, as part of the
arrangements, Terrafame Group Oy would have acquired debts of
Talvivaara from certain commercial banks and Finnvera Plc. The
nominal value of these debts is approximately EUR 129.6 million in
aggregate. These debts are considered restructuring debts under
Talvivaara's draft restructuring programme, which will receive a
payment of EUR 7.5 million under the business mortgage claims,
whilst the unsecured part of the debts will be paid approximately
EUR 1.2 million. Upon completion of the second phase of the
arrangements, Talvivaara would have paid to Terrafame Group Oy for
the debts transferred by the commercial banks and Finnvera Plc a
total sum of EUR 8.7 million in accordance with the final
restructuring programme.
Based on the transactions
contemplated by the Letter of Intent, the difference between the
total purchase price and the sums payable by Talvivaara to
Terrafame entities on the basis of Talvivaara's debts would have
been EUR 3.8 million, which Terrafame Oy would have paid to
Talvivaara as a net purchase price for all assets transferred. The
arrangements remained conditional on the approval by Talvivaara's
General Meeting of Shareholders and on confirmation of Talvivaara's
restructuring programme with a targeted dead line of 30 April 2016.
The whole arrangement under the Letter of Intent was also
conditional on a favorable decision by the Vaasa Administrative
Court on the Nuasjärvi discharge pipe line, enabling the
continuation of Terrafame Oy's mining operations.
On 3 February 2016, the Company
announced that the parties have agreed to extend the deadline set
for the finalization and approval of the detailed agreements under
the Letter of Intent until the decision of the Administrative Court
has been received.
On 28 April 2016, the Vaasa
Administrative Court gave its ruling, among others, on the
Nuasjärvi discharge pipe line. The outcome of the ruling deviated
adversely from the one applied for by Terrafame Oy, in addition to
which the ruling changed the essential environmental permits of the
Sotkamo mining operations into temporary permits. The Company and
Terrafame started assessing the decision and its effects on the
contemplated arrangement under the Letter of Intent.
On 2 June 2016, the Terrafame
-entities informed the Company that they would no longer pursue the
contemplated arrangement under the Letter of Intent of 28 January
2016. Terrafame Oy also informed the Company that Winttal Ltd had
assigned to Terrafame Oy all its rights, title, benefit and
interest under the Streaming Agreement and the Streaming Holiday
Agreement and requested the Company to immediately pay the
receivable under the Streaming Holiday Agreement amounting in total
to approximately 12.8 million euros. The liability of the Company
under the Streaming Holiday Agreement was based on the guarantee
issued by the Company for the due payment of loans drawn by
Talvivaara Sotkamo from Nyrstar under the Streaming Holiday
Agreement. Furthermore, Terrafame Oy stated that, given lack of
immediate repayment, it would offset the above mentioned
receivables against the receivables of the Company from Terrafame
Oy under the service and lease agreements between the parties.
On 30 June 2016, Talvivaara and
Terrafame Oy signed agreements, in which the parties agreed on the
sale of Talvivaara's assets related to the Sotkamo mining
operations and settlement of Talvivaara's guarantee liabilities
under the Streaming Holiday Agreement, with the principal amount of
approximately EUR 14 million (including interest up until 30 June
2016), and the Streaming Agreement, amounting to approximately EUR
203.4 million. The assets sold include, among others, the lime
plant needed for the Sotkamo operations, laboratory, as well as
rights to the geological, laboratory and production related data
associated with the Sotkamo mine. The purchase price for the assets
sold consisted of two components: (i) a full and final settlement
of the guarantee liabilities of the Company under the Holiday
Agreement and the Streaming Agreement, and (ii) a cash component of
EUR 1.4 million payable by Terrafame Oy at closing. The agreement
had no effect on the identified restructuring debts of the Company,
including the receivables of certain commercial banks and Finnvera
Plc.
The parties had further agreed on
the transfer of the laboratory personnel to Terrafame as old
employees, as well as on the possibility for Terrafame to recruit
certain of Talvivaara's personnel currently providing services
related to operation of the mine. The parties agreed to terminate
the service agreement and the lime plant lease agreement of 19
November 2014, which were transferred to Terrafame Oy on 14 August
2015, with immediate effect as of 30 June 2016.
The agreements included a
cancellation clause whereby the transactions under the agreements
would become null and void in the event the extraordinary general
meeting of shareholders of Talvivaara did not approve the
transactions under the agreements. The extraordinary general
meeting of shareholders of Talvivaara approved the transactions at
its meeting held on 11 August 2016. For further information, please
refer to section 'Events after the review
period'.
Under the agreements, all main
assets of Talvivaara previously generating income for Talvivaara
were transferred to Terrafame Oy. Even though the concluded
agreements provided less beneficial terms than those contemplated
under the Letter of Intent, the arrangement materially improved the
possibility for the completion of Talvivaara's corporate
restructuring proceedings and facilitated the development of
Talvivaara's new business opportunities.
To date, the Company continues to
identify and assess new business opportunities and to develop its
business outside the Sotkamo mine. The Company is also focused on
fulfilling all the remaining special conditions set for the
confirmation and entry into force of the draft restructuring
programme.
Financial
review
Financial
result
The operating profit for the review period was EUR 215.9 million
(1-6/2015: EUR (0.5) million). Revenues of the Company consist of
income generated from equipment leases as well as laboratory and
consultancy services rendered to Terrafame, capital gains
crystallised from the sale of the Company's mining-related assets
to Terrafame (EUR 11 million), and of the reversal of the EUR 203.4
million provision, which is reported as an adjustment to the other
operating expenses. The costs are mainly personnel and other
operating expenses.
Finance income for the review
period was EUR 0.01 million (1-6/2015: EUR 0.002 million) and
consisted mainly of interest on deposits and receivables. Finance
costs of EUR (8.2) million (1-6/2015: EUR (14.5) million) resulted
mainly from accrued interest and related financing expenses accrued
on borrowings.
The profit for the review period
amounted to EUR 207.7 million (1-6/2015: EUR (15.0) million).
Earnings per share were EUR 0.10 (1-6/2015: EUR (0.01)).
Liquidity
As at 30 June 2016, the Company's cash and cash equivalents
amounted to EUR 4.2 million (EUR 4.4 million as at 30 June
2015).
To date, the Company finances its
day-to-day operations from its cash reserves.
Financing
During the review period, the Company has financed its operations
entirely with operative cash flow.
Equity
Following Talvivaara Sotkamo's bankruptcy in 2014, the Company
fully wrote off its receivables from, and the shares held in,
Talvivaara Sotkamo. As a result, Talvivaara forfeited its equity,
which was acknowledged by the Company's Board and notified to the
trade register. Talvivaara had already recognised the weakening of
its financial position in November 2013 and took measures to
mitigate this by applying for corporate reorganisation.
Provisions and
other items recognised based on restructuring
programme
In the Company's 2014 Financial Statements, Talvivaara recorded a
provision of EUR 203.4 million for the potential termination sum
guarantee towards Nyrstar. The guarantee concerns the consequences
of a premature termination of the Streaming Agreement between
Nyrstar and Talvivaara Sotkamo, which as of 1 April 2014 was
guaranteed by the Company. The Company provided the full amount as
a provision in 2014 and decided to leave the provision on the
balance sheet in the 2015 Financial Statements. As a result of the
transactions concluded with Terrafame Oy on 30 June 2016, the
guarantee liability was finally settled and confirmed terminated.
Consequently, the provision of EUR 203.4 million was reversed from
the Company's balance sheet as of 30 June 2016.
In addition, the Company has
issued a floating charge security for the loans drawn from Finnvera
by Talvivaara Sotkamo, amounting in aggregate to EUR 58.7 million,
including accrued interest. The aggregate amount consists of two
parts: EUR 50.7 million the Company has guaranteed as its own debt,
and EUR 8.0 million the Company has secured with a floating charge
security issued as a third-party-security. In the Administrator's
final draft restructuring programme, the EUR 8.0 million liability
of the Company under the floating charge security to Finnvera has
been valued to EUR 3.4 million. This is a liability referred to in
section 3(3) of the Restructuring of Enterprises Act, and it is
subject to the same rules as the secured debt of the Company. As
Finnvera's EUR 8.0 million claim is not the Company's own debt, it
has not been taken into account as restructuring debt. However,
this liability has been taken into account in the calculation of
the amount of secured and business mortgage debt, and payments will
be made on it in the same manner as on the Company's debts secured
by collateral and business mortgages. However, due to the applied
non-going concern principle, the Company has also recognised the
full EUR 8.0 million as a liability on the balance sheet. Upon
completion of the restructuring proceedings, the part of the
Finnvera loans taken into account as secured debt (EUR 3.4 million)
would be finally and fully discharged, whilst the remaining balance
would be treated as unsecured debt in the Company's restructuring
programme and repaid according to the authorized payment
schedule.
Off-balance sheet
and contingent liabilities
Talvivaara Sotkamo largely met its environmental bond requirement
under the environmental permit through guarantee insurance provided
by Atradius Credit Insurance NV ("Atradius"). As at 31 December
2015, the coverage amounted to EUR 31.9 million. In the event
restoration of the mine's waste areas (gypsum ponds, heap areas)
would have taken place without Talvivaara Sotkamo carrying the
cost, the expenses would have initially been covered by Atradius
and eventually Atradius would have claimed the cost back from the
Company, which has given counter-indemnity for such costs to
Atradius. However, as a result of Terrafame Oy replacing the
guarantee insurance placed by Talvivaara Sotkamo with a new
environmental bond on 21 January 2016, Atradius notified the
Company that the original guarantee insurance and the corresponding
counter-indemnity were terminated on 21 January 2016 and that the
beneficiaries, Kainuun ELY-keskus or Atradius, have no claims
against Talvivaara Sotkamo or the Company on the basis of the
guarantee insurance or the counter-indemnity issued by the Company.
Therefore, the full amount of the liability under the
counter-indemnity given by the Company has been removed from the
Company's restructuring debts, and no payment will be made on it
under the authorised payment schedule.
Following the authorisation by the
Espoo District Court of the Company's corporate reorganization
proceedings in accordance with the Administrator's final draft
restructuring programme, the Company will pay one percent of the
aggregate amount of the Company's unsecured restructuring debts not
converted into equity, and a total of EUR 7.5 million for the debts
secured with the business mortgage issued by the Company. The exact
amount of the total payment on the unsecured restructuring debts
will depend on the extent to which such debts have been converted
into equity of the Company.
Assets
On the statement of financial position as at 30 June 2016,
property, plant and equipment totalled EUR 0.02 million (30 June
2015: EUR 5.0 million). Intangible assets totalled EUR 0 (30 June
2015: EUR 0.5 million). Due to the applied non-going concern
reporting basis, the Company has written down the value of its
shares in Fennovoima.
Corporate
reorganisation
The Company and Talvivaara Sotkamo applied for corporate
reorganisation on 15 November 2013 by filing related applications
with the District Court of Espoo, Finland. The District Court of
Espoo took the decision to commence a corporate reorganisation
process in respect of the Company on 29 November 2013 and in
respect of Talvivaara Sotkamo on 17 December 2013. The District
Court of Espoo appointed Mr. Pekka Jaatinen, Attorney-at-Law, from
Castrèn & Snellman Attorneys to act as the Administrator in
respect of the corporate reorganisation of both the Company and
Talvivaara Sotkamo. In reorganisation proceedings governed by the
Finnish Restructuring of Enterprises Act (47/1993, as amended),
both the business operations and the debts of a company may be
reorganised and restructured. As a result of such reorganisation, a
company can either continue its operations or, if the
reorganisation fails, initiate bankruptcy proceedings.
Following the asset deal concluded
with Terrafame Oy on 30 June 2016, the Company is currently
focusing on fulfilling the remaining special conditions set for the
confirmation and entry into force of the draft restructuring
programme.
Reporting
basis
Talvivaara's Interim Report for the first six months of 2016 have
not been prepared on a going concern basis. The basis for
preparation is that the operations of the Company may end in near
future. This results from material uncertainties that cast
significant doubt upon the Company's ability to realise its assets
and discharge its liabilities in the normal course of business.
There is also lack of visibility on the Company's operational
environment twelve months beyond the date of reporting.
Talvivaara's ability to revise its
reporting basis and to regain its status as a going concern is to a
paramount extent dependent on the successful completion of the
Company's corporate reorganisation proceedings, which requires
that:
-
Talvivaara succeeds in completing an arrangement
that will secure the necessary cash flow for the Company to
discharge all of its liabilities and the continuance of the
Company's viable business, and
-
the District Court of Espoo authorizes the
execution of the Company's debt restructuring in accordance with
the Administrator's final draft restructuring programme of 10 April
2015.
Business
development projects
Talvivaara acquired in 2011-2012 an approximately 60MW capacity
share in the Fennovoima nuclear project in Finland. Due to the
Company's ongoing corporate reorganisation proceedings, Talvivaara
is currently not in a position to make further investments into the
project and has therefore not been able to commit to further
funding of the project.
Legal
proceedings
Investigation on
Talvivaara's disclosure practices
In April 2015, Talvivaara confirmed that a number of current and
former members of Talvivaara's management have been heard in
connection with an investigation relating to the Company's
disclosure practices. On 16 May 2016 the Company was informed that
the consideration of charges had been completed and that the
prosecutor had decided to bring charges for security markets
information offence against CEO Pekka Perä, former CEO Harri
Natunen and former CFO and Deputy CEO Saila Miettinen-Lähde. The
prosecutor also requests a corporate fine of 500 000 euros to be
imposed on Talvivaara. Should any corporate fine be imposed on the
Company in the final and binding decision such fine would be
considered unsecured restructuring debt and cut and paid out in
accordance with the restructuring programme of the Company.
The Company has already in the
past gone through the applied disclosure practices extensively and
in great detail with the Financial Supervisory Authority and the
Company's view is that no crime has been committed.
Alleged misuse of
insider information
The Company was notified on 20 October 2015 that charges have been
brought against a member of its Executive Committee in the Helsinki
District Court on a case concerning alleged misuse of insider
information. The Company is not a party to the case. In the
Company's view, the charges have no impact on the Company, its
financial position or on the employment of the member of the
Executive Committee in the Company
Gypsum pond
leakages and discharges into water ways
On 13 May 2016 the District Court of Kainuu ("the District Court")
gave its ruling on the case concerning the gypsum pond leakages of
the Sotkamo mine in November 2012 and April 2013 and the sodium,
sulphate and manganese discharges that exceeded the anticipated
amounts stated in the original environmental permit application of
the Sotkamo mine. Originally the charges were brought against four
members of Talvivaara's management, including CEO Pekka Perä and
former CEO Harri Natunen. The charges concern aggravated impairment
of the environment. Harri Natunen has not been employed by the
Company since the autumn of 2015.
The case concerning the discharge
of raffinate from the metals recovery plant and dilute secondary
heap solutions into the open pit during the period of 19 December
2013 - 31 January 2014 was handled together with the above
mentioned case. The charges were brought against CEO Pekka Perä for
impairment of the environment.
The District Court dismissed the
charge concerning aggravated impairment of the environment and
moderated the type of the crime to impairment of the environment.
Penalties in the form of a fine were imposed on Pekka Perä, Harri
Natunen and the former chief operations officer of the mine, who
acts as a member of the Executive Committee of the Company. The
prosecutor's demands concerning a suspended prison sentence and
compensation for the benefit obtained from the crime were dismissed
in relation to the private defendants. All charges were dismissed
in relation to the fourth defendant. The charges concerning the
discharge of raffinate from the metals recovery plant and dilute
secondary heap solutions into the open pit made against Pekka Perä
were dismissed.
Talvivaara has not been a party to
the court case.
The decision is not yet final and
binding. The three defendants and the prosecutor have appealed the
case to the Court of Appeal.
Risk management
and key risks
Talvivaara's near-term risk factors include particularly such risks
that relate to the corporate reorganisation proceedings, financing
and sufficiency of funds to meet its actual and potential
liabilities:
If an adequate overall financial solution for the
continuance of Talvivaara's business operations is not found,
Talvivaara's restructuring programme may not be completed and
stakeholders could lose their entire investment in the
Company
The authorisation of the proposed
restructuring programme of Talvivaara is conditional, among other
things, on Talvivaara succeeding in completing an arrangement that
will secure the necessary cash flow for the Company to discharge
all of its liabilities and restructuring debts and the continuance
of the Company's viable business. Although completion of the sale
of the Company's mining-related assets to Terrafame Oy and the
simultaneous settlement and discharge of the Company's guarantee
liabilities under the Streaming Agreement and the Streaming Holiday
Agreement on 30 June 2016 materially facilitated achieving such
target, there is, as of the date of the Company's Interim Report 22
September 2016 no certainty as to whether the Company can fulfil
the remaining special conditions set under the restructuring
programme within the given time frame. If the restructuring
programme is not authorised, the Company may have to file for
bankruptcy and, as a result, the shareholders and creditors of the
Company could lose their entire investment in the Company.
If the corporate reorganisation proceedings of Talvivaara
are not successful, stakeholders could lose their entire investment
in the Company
Although the Board of Directors
believes that a corporate reorganisation is a viable option for
Talvivaara, there can be no assurance that the proposed
restructuring programme of the Company will ultimately be
successful. The corporate reorganisation process can fail for a
number of reasons, including due to an insufficiency of funds to
implement or complete the restructuring programme, changes in
circumstances affecting the financial viability of Talvivaara, or
insufficient income or cash reserves. If the corporate
reorganisation fails for these or any other reasons, it could
result in the bankruptcy of the Company. As a result, shareholders
and creditors could lose their entire investment in the
Company.
The right of conversion of debt into equity included in the
restructuring programme of Talvivaara and/or the issuance of new
equity instruments will lead to a significant dilution of the
existing shareholding of the Company
The right of conversion of debt
into equity included in the restructuring programme of Talvivaara
and/or the issuance of new equity instruments may lead to a
significant dilution of the existing shareholding of the Company.
The extent of dilution will eventually be determined by the
aggregate amount of the restructuring debts to be converted into
shares at the determined conversion rate of EUR 0.1144 per share as
well as by the subscription price of the newly issued shares
offered and the amount of funds raised in the potential equity
financing.
Personnel
Headcount and remuneration
Talvivaara's personnel comprises
an expert organisation, the core competences of which include, for
example, production processes, procurement, environmental safety,
risk management and communications. The salaries of Talvivaara's
personnel are based on industry-wide collective agreements. The
total compensation of the key individuals has traditionally
consisted of a base salary and short and long term incentive
schemes based on annual bonuses, stock options and other
share-based incentive schemes. However, due to exceptional
circumstances surrounding the Company there are currently no short
term or long term incentive schemes in place.
As a result of the sale of assets
concluded on 30 June 2016, Talvivaara's headcount decreased
substantially and was 16 at the end of the review period on 30 June
2016 (1-6/2015: 51). 69 % (1-6/2015: 51 %) of Talvivaara's
employees were men and 31 % (1-6/2015: 49 %) were women. The
average age of the Company's employees was 44 years (1-6/2015: 41
years).
Resolutions of
the Annual General Meeting
Talvivaara's Annual General Meeting was held on 15 June 2016 in
Espoo, Finland. All the resolutions proposed, as set out in the
notice of the meeting, were duly passed. The resolutions of the AGM
included:
-
that no dividend be paid for the financial year
2015;
-
that the annual fee payable to the members of
the Board for the term until the close of the Annual General
Meeting in 2017 be as follows: Chairman of the Board of Directors
EUR 84,000/year and other Non-executive Directors: EUR 48,000/year.
No separate meeting fees are paid for the Board or the Committee
work. The remuneration of the Executive Directors is included in
their base salary, and it is not paid out separately;
-
that the number of Board members be four (4) and
that Mr. Tapani Järvinen, Mr. Pekka Perä, Mr. Stuart Murray and Ms.
Solveig Törnroos-Huhtamäki were re-elected;
-
that the auditor be reimbursed according to the
approved auditor's invoice and authorised public accountants
PricewaterhouseCoopers Oy be elected as the Company's
auditor;
- that article 2§ of the Articles
of Association of the Company concerning the line of business be
amended in accordance with the proposal by the Board of Directors.
The line of business was made more versatile to cover also the
development of new types of businesses. The amended article 2§ of
the Articles of Association concerning the line of business reads
as follows:
"The line of business of the
Company is to engage in ore exploration, exploitation, excavation
and other mining activities and in metals, machine, chemical and
construction industries and any business activities supporting
them. The Company may also engage in the business operations based
on know-how acquired in aforementioned sectors or related to or
compatible with them. The Company may operate either directly or
through subsidiaries, associated companies or joint ventures."
At its constituent meeting on 15
June 2016, the Board of Directors re-elected Mr. Tapani Järvinen as
the chairman of the Board.
Shares and
shareholders
By the end of 2015 Talvivaara received conversion notices pursuant
to which the bonds amounting in aggregate to EUR 21,100,000 were to
be converted to a total of 9,336,276 new Talvivaara shares. These
new Talvivaara shares were registered in the Trade Register on 14
January 2016.
The number of shares issued and
outstanding and registered on the Euroclear Shareholder Register as
of 31 December 2015 was 2,098,817,876. Including the effect of the
EUR 225 million convertible bond of 16 December 2010, the
authorized full number of shares of the Company amounted to
2,195,543,540.
As at 31 December 2015, the
shareholders who held more than 5% of the shares and votes of
Talvivaara were Solidium Oy (15.2%) and Mr. Pekka Perä (5.9%).
As at 30 June 2016 the shares held
in treasury by the Company amounted to in aggregate 192,883,000
(9.2% of the shares in the Company). The shares held in treasury by
the Company do not carry any voting rights.
Share based
incentive plans
As at 30 June 2016, the Company has no share based incentive
schemes in place.
Events after the
review period
Approval by the
EGM of the sale of assets
The extraordinary general meeting of shareholders of the Company
held on 11 August 2016 approved the resolution proposed by the
Board of Directors concerning the sale by Talvivaara of its assets
related to the Sotkamo mining operations to Terrafame Oy. Whilst
all the income generating assets of Talvivaara were transferred to
Terrafame, the Company believes that the arrangement has materially
improved the possibility for the successful completion of
Talvivaara's corporate restructuring proceedings, and facilitated
the development of Talvivaara's new business opportunities.
Corporate
reorganisation proceedings
The Administrator of Talvivaara's corporate restructuring
proceedings has on 20 September 2016 confirmed his view, according
to which the following special conditions set for the entry into
force of the Company's draft restructuring programme are still to
be fulfilled at the date of these Interim Report 22 September
2016:
The general meeting of Talvivaara
arranges or authorises the Company's board of directors to arrange
a financing arrangement (e.g. a share issue, bond or other
financial instrument) to raise the funds to make the investment
necessary for carrying out the arrangement referred to in special
condition (a) (2) of the final draft restructuring programme and/or
to pay the claims of those creditors who did not exercise their
right to convert their restructuring debt claims into shares in the
Company in the manner provided for in the restructuring programme
and to cover other possible liabilities to the extent the Company's
other funds are not sufficient for this purpose; and
The
proceedings for converting the restructuring debts into shares in
the Company have been completed, and the new shares have been
registered in the Trade Register.
In addition, in the
Administrator's view, due compliance with all the special
conditions and Restructuring Act will require that one or more of
the Company's new business opportunities is developed sufficiently
so as to provide more tangible prospects for future viable business
operations.
Currently, the Company is focusing
on fulfilling all the remaining special conditions set for the
entry into force of the draft restructuring programme.
The Company announced on 20
September 2016 that the Company has started preparations for the
share issue in accordance with the special condition (c) of the
restructuring programme. The Company also announced that it will
continue investigating and developing its new projects into
concrete business opportunities. The new business opportunities of
the Company include projects, amongst others, in the recycling and
energy saving sectors.
Short-term
outlook
The operational outlook for Talvivaara is greatly dependent on the
authorisation and a successful completion of the Company's
corporate reorganisation proceedings within the prescribed time
frame, and the materialisation and further development of the
Company's new income generating business opportunities currently
under contemplation. To facilitate this, a new line of business of
the Company was approved by the Annual General Meeting in June 2016
enabling the Company to develop new business opportunities also
outside the mining industry.
Whilst the Administrator's final
draft restructuring programme gives the Company reasonably ample
time to complete the reorganization proceedings, there is no
certainty that the Company will be successful in developing its new
business opportunities and, ultimately, in completing the corporate
reorganisation proceedings through due payments.
Talvivaara Mining Company
Plc
Board of Directors
BALANCE SHEET
(All amounts in
EUR) |
|
As at
30 Jun 2016 |
Unaudited
As at
30 Jun 2015 |
As at
31 Dec 2015 |
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant
and equipment |
|
21,592 |
4,999,546 |
4,692,782 |
Intangible
assets |
|
- |
497,088 |
94,547 |
Other
receivables |
|
26,822 |
30,926 |
27,640 |
Total non-current assets |
|
48,414 |
5,527,559 |
4,814,970 |
|
|
|
|
|
Current assets |
|
|
|
|
Trade
receivables |
|
898,184 |
63,678 |
37,850 |
Other
receivables |
|
1,432,458 |
46,599 |
188,138 |
Cash and cash
equivalents |
|
4,193,678 |
4,432,729 |
4,662,572 |
Total Current assets |
|
6,524,320 |
4,543,006 |
4,888,559 |
|
|
|
|
|
TOTAL ASSETS |
|
6,572,734 |
10,070,565 |
9,703,529 |
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
Equity attributable to the owners |
|
|
|
|
|
|
|
|
|
Share
capital |
|
80,000 |
80,000 |
80,000 |
Share
premium |
|
8,085,842 |
8,085,842 |
8,085,842 |
Other
reserves |
|
797,348,200 |
771,648,199 |
797,348,200 |
Retained
deficit |
|
(1,328,054,020) |
(1,524,313,624) |
(1,535,766,741) |
Total equity |
|
(522,539,978) |
(744,499,583) |
(730,252,700) |
|
|
|
|
|
Current liabilities |
|
|
|
|
Provisions |
|
- |
203,444,456 |
203,444,456 |
Borrowings |
|
465,042,831 |
503,955,559 |
477,845,205 |
Trade
payables |
|
2,162,258 |
2,743,335 |
2,723,003 |
Other
payables |
|
61,907,624 |
44,426,799 |
55,943,564 |
Total liabilities |
|
529,112,712 |
754,570,148 |
739,956,228 |
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES |
|
6,572,734 |
10,070,565 |
9,703,529 |
INCOME STATEMENT
(All amounts in
EUR) |
|
Period ended
30 Jun 2016 |
Unaudited Period ended
30 Jun 2015 |
Year ended
31 Dec 2015 |
Other operating income |
|
14,019,322 |
3,436,664 |
6,702,480 |
|
|
|
|
|
Materials and
services |
|
(174,762) |
(138,698) |
(257,536) |
Personnel
expenses |
|
(1,512,874) |
(2,132,041) |
(3,807,345) |
Depreciation
and amortisation |
|
(299,324) |
(342,470) |
(971,024) |
Impairment
charges on intangible
assets |
|
(93,626) |
- |
- |
Impairment
charges on investments |
|
- |
- |
421,333 |
Other operating
expenses |
|
203,931,287 |
(1,314,824) |
(2,267,625) |
|
|
|
|
|
Operating profit/loss |
|
215,870,023 |
(491,368) |
(179,717) |
|
|
|
|
|
Finance
income |
|
9,338 |
1,620 |
12,841 |
Finance
cost |
|
(8,166,640) |
(14,488,035) |
(25,842,689) |
Finance cost (net) |
|
(8,157,302) |
(14,486,415) |
(25,829,848) |
Profit/Loss before income tax |
|
207,712,721 |
(14,977,782) |
(26,009,565) |
Income tax |
|
- |
- |
- |
|
|
|
|
|
PROFIT/LOSS FOR THE FINANCIAL PERIOD |
|
207,712,721 |
(14,977,782) |
(26,009,565) |
|
|
|
|
|
Profit/Loss attributable to the
owners of the Company, |
|
|
|
|
(€/share) |
|
Period ended
30 Jun 16 |
Period ended
30 Jun 2015 |
Year ended
31 Dec 15 |
|
|
|
|
|
Diluted and
undiluted |
|
0,10 |
(0,01) |
(0,01) |
STATEMENT OF CASHFLOWS
(all amounts in EUR) |
Period ended
30 Jun 2016 |
Unaudited
Period ended
30 Jun 2015 |
Year ended
31 Dec 2015 |
Cash flows from
operating activities |
|
|
|
Profit/Loss for the period |
207,712,721 |
(14,977,782) |
(26,009,565) |
Adjustments for |
|
|
|
Depreciation and
amortisation |
299,324 |
342,470 |
971,024 |
Other non-cash income and
expenses |
(216,005,213) |
- |
215,257 |
Impairment charges on
investments |
- |
- |
(421,333) |
Interest income |
(9,338) |
(1,620) |
(12,841) |
Interest expenses |
8,166,640 |
14,488,035 |
25,842,689 |
Cash flow before
change in working capital |
257,760 |
(148,898) |
585,230 |
|
|
|
|
Change in working capital |
|
|
|
Decrease(+)/increase(-) in trade
and
other receivables |
203,656 |
211,314 |
98,898 |
Decrease(-)/increase(+) in trade
and
other payables |
(864,554) |
(891,319) |
(1,287,347) |
Change in working capital |
(660,898) |
(680,005) |
(1,188,449) |
|
|
|
|
Net cash used in
operating activities
before financing activities and taxes |
(403,139) |
(828,903) |
(603,219) |
|
|
|
|
Interest and other finance cost
paid |
(65,785) |
(84,749) |
(91,801) |
Interest and other finance
income |
30 |
- |
11,211 |
Net cash
generated (used) in operating activities |
(468,894) |
(913,652) |
(683,809) |
Cash flows from
investing activities |
|
|
|
|
|
|
|
Net cash
generated (used) in investing activities |
0 |
0 |
0 |
Cash flows from
financing activities |
|
|
|
|
|
|
|
Net cash
generated from financing activities |
0 |
0 |
0 |
|
|
|
|
Net
(decrease)/increase in cash
and bank overdrafts |
(468,894) |
(913,652) |
(683,809) |
|
|
|
|
Cash and bank overdrafts at
beginning of the year |
4,662,572 |
5,346,381 |
5,346,381 |
Cash and bank
overdrafts at end of the period |
4,193,678 |
4,432,729 |
4,662,572 |
STATEMENT OF CHANGES IN EQUITY
EUR |
Share
capital |
Share
issue |
Share
premium |
Other
reserves |
Retained
deficit |
Total |
31 Dec 2014 |
80,000 |
- |
8,085,842 |
771,648,200 |
(1,509,757,176) |
(729,943,134) |
Absorption of
subsidiaries |
- |
- |
- |
- |
421,333 |
421,333 |
Profit (loss) for
the period |
- |
- |
- |
- |
(14,977,782) |
(14,977,782) |
30 Jun 2015 |
80,000 |
- |
8,085,842 |
771,648,200 |
(1,524,313,625) |
(744,499,583) |
Conversion of
convertible
bonds |
- |
- |
- |
25,700,000 |
- |
25,700,000 |
Reversal of
absorption of
subsidiaries to income
statement |
- |
- |
- |
- |
(421,333) |
(421,333) |
Profit (loss) for
the period |
- |
- |
- |
- |
(11,031,783) |
(11,031,783) |
31 Dec 2015 |
80,000 |
- |
8,085,842 |
797,348,200 |
(1,535,766,741) |
(730,252,700) |
Profit (loss) for
the period |
- |
- |
- |
- |
207,712,721 |
207,712,721 |
30 Jun 2016 |
80,000 |
- |
8,085,842 |
797,348,200 |
(1,328,054,020) |
(522,539,978) |
Financials for the period ended on 30 June 2016
and for the financial year ended on 31 December 2015 are audited.
Financials for the period ended on 30 June 2015 are unaudited.
NOTES
1. Basis of presentation and
non-going concern
This Interim Report has been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union taking into
account the corporate reorganisation proceedings that commenced in
respect of the Company on 29 November 2013. In addition, the
Company has taken into account IAS 1.25 and IAS 1.26 requirements
regarding the disclosure under the non-going concern basis.
Talvivaara's Interim Report for the period ended 30 June 2016 have
not been prepared on a going concern basis. The basis of
preparation is that operations may end in near future.
The chosen reporting basis results
from the existence of material uncertainty that casts significant
doubt upon the Company's ability to realise its assets and
discharge its liabilities in the normal course of business and from
the lack of visibility on the Company's operational environment
twelve months beyond the date of reporting. The requisite
adjustments resulting from the chosen reporting basis have, where
applicable, been made in the 2016 Interim Report to the carrying
amounts of the Company's assets and liabilities, but no reserve has
been made in the Company's balance sheet for the costs relating to
winding down of the operations.
The Administrator of Talvivaara's
corporate restructuring proceedings has confirmed his view,
according to which the following special conditions set for the
entry into force of the Company's draft restructuring programme are
still to be fulfilled at the date of the Interim Report 22
September 2016:
The general meeting of Talvivaara
arranges or authorises the Company's board of directors to arrange
a financing arrangement (e.g. a share issue, bond or other
financial instrument) to raise the funds to make the investment
necessary for carrying out the arrangement referred to in special
condition (a) (2) of the final draft restructuring programme and/or
to pay the claims of those creditors who did not exercise their
right to convert their restructuring debt claims into shares in the
Company in the manner provided for in the restructuring programme
and to cover other possible liabilities to the extent the Company's
other funds are not sufficient for this purpose; and
The proceedings for converting the
restructuring debts into shares in the Company have been completed,
and the new shares have been registered in the Trade Register.
In addition, in the
Administrator's view, due compliance with all the special
conditions and Restructuring Act will require that one or more of
the Company's new business opportunities is developed sufficiently
so as to provide more tangible prospects for future viable business
operations.
Currently, the Company is focusing
on fulfilling all the remaining special conditions set for the
entry into force of the draft restructuring programme.
Until 30 June 2016 the Company
financed its day-to-day operations by providing administrative and
technical services and the lease of machinery and equipment
critical to Terrafame. These contractual arrangements helped the
Company to discharge all of its new liabilities as and when they
fell due. After the agreement made with Terrafame on 30June 2016,
the Company continues identifying and assessing new business
opportunities and developing its business outside the Sotkamo
mine.
Talvivaara's ability to revise its
reporting basis and to regain its status as a going concern is
dependent, among other things, on the successful completion of the
Company's corporate reorganisation proceedings, which requires
that:
-
Talvivaara succeeds in completing an arrangement
that will secure the necessary cash flow for the Company to
discharge all of its liabilities and the continuance of the
Company's viable business, and
-
the District Court of Espoo authorizes the
execution of the Company's debt restructuring in accordance with
the Administrator's final draft restructuring programme of 10 April
2015.
As of the date of the Company's
Interim Report 22 September 2016, there is no certainty as to
whether the Company can fulfill all the set requirements within the
given time frame.
For more information on the
effects of the draft restructuring programme, please refer to Note
2.
2. Illustrative calculation of
the Company equity, if the restructuring programme is
confirmed
According to the draft restructuring programme,
the creditors of the unsecured restructuring debt may convert their
receivables to new shares of the Company. The unsecured
restructuring debt of those creditors who decide not to exercise
their conversion right would be cut by 99%. The remaining 1% of the
unsecured restructuring debt would be paid in one instalment. The
amount of unsecured restructuring debt to be paid can only be
determined after it is known how many creditors would exercise
their right to convert unsecured restructuring debt into Company
shares.
The following table illustrates the Company's
capital structure based on actual book values as at 30 June 2016,
adjusted with the assumed conversion of all non-preferred
restructuring loans (totaling EUR 453.6 million) to new shares of
the Company as if the conversion would have taken place as at 30
June 2016. In addition, the adjusted capital structure assumes
elimination of the accumulated accrued interest since the beginning
of the restructuring proceedings amounting to EUR 67.2 million as
the obligation to pay such interest will cease upon either the
assumed approval of the draft restructuring programme or the
conversion of the non-preferred restructuring debt.
EUR |
30 June 2016 |
|
Actual |
1) Conversion
of unsecured
restructuring
debt |
2) Elimination
of the accrued
interest
expenses |
Adjusted |
|
|
|
|
|
Cash and cash equivalents |
4,193,678 |
0 |
0 |
4 193 678 |
|
|
|
|
|
Equity |
(522,539,820) |
453,578,423 |
67,154,776 |
(1,806 622) |
Borrowings and trade and
other payables, of which: |
|
|
|
|
Secured restructuring debt
and other liabilities to
be taken into account |
7,500,000 |
0 |
0 |
7,500,000 |
Unsecured restructuring debt |
453,578,423 |
(453,578,423) |
0 |
0 |
Accumulated interest
since the beginning of the
restructuring proceedings |
67,154,776 |
0 |
(67,154,776) |
0 |
Other payables
during procedure |
879,514 |
0 |
0 |
879,514 |
Total
liabilities |
529,112,712 |
(453,578,423) |
(67,154,776) |
8,379,514 |
The calculation is based on the assumption that
all unsecured restructuring debt (totaling EUR 453.6 million) will
be converted into new shares of the Company with a subscription
price of EUR 0.1144 per share. Following the conversion of all
unsecured restructuring debt, the equity will increase by the
amount of the unsecured restructuring debt of EUR 453.6
million.
The Company has accrued interest expenses of EUR
67.2 million to the balance sheet since the beginning of the
restructuring proceedings, despite the fact that the payment
obligation on unsecured restructuring debt ceased when the
reorganisation proceedings were started.
The calculation does not take into account the
interest payable on the secured loans of in total EUR 7.5 million
accrued during the restructuring proceedings, which according to
the final draft restructuring programme would be 12-month EURIBOR
added with 2 percent units. The interest expense on the secured
debt accrued from the beginning of the restructuring proceedings 29
November 2013 until 30 June 2016 amounted to approximately EUR 0.4
million. The Company and the secured creditors may agree to adjust
this interest liability in terms of the repayable amount and/or the
repayment schedule. The secured restructuring loans of EUR 7.5 will
remain as liabilities on the balance sheet.
If no unsecured restructuring debts were converted
into new shares of the Company and the draft restructuring
programme was authorised, the amount of the unsecured debts would
be reduced by 99 percent based on the restructuring plan. The
remaining amount of unsecured restructuring loans of EUR 4.5
million would remain as short-term debt on the balance sheet.
Following the reduction of the unsecured restructuring debt, the
Company's equity would increase by the amount of the reduction of
the unsecured restructuring debt, EUR 449.0 million.
In the event that the restructuring programme was
completed, the accumulated interest since the beginning of the
restructuring proceedings accrued in the Interim Report would be
derecognized, since the fulfillment of the restructuring plan will
verify that the accumulation of interests ceased at the time the
restructuring proceedings were started.
3. Property, Plant &
Equipment
(All amounts in
EUR) |
Buildings |
Machinery
and
equipment |
Total |
Gross carrying
amount at 1 Jan 2015 |
11,899,045 |
19,837,595 |
31,736,640 |
Additions |
- |
266,843 |
266,843 |
Gross carrying
amount at 30 Jun 2015 |
11,899,045 |
20,104,438 |
32,003,483 |
Accumulated
depreciation and
impairment losses at 1 Jan 2015 |
11,899,045 |
14,826,837 |
26,725,882 |
Depreciation
for the period |
- |
278,055 |
278,055 |
Accumulated
depreciation and
impairment losses at 30 Jun 2015 |
11,899,045 |
15,104,892 |
27,003,937 |
Carrying amount
at 1 Jan 2015 |
0 |
5,010,758 |
5,010,758 |
Carrying amount
at 30 Jun 2015 |
0 |
4,999,546 |
4,999,546 |
Deductions |
- |
(3,463) |
(3,463) |
Gross carrying
amount at 31 Dec 2015 |
11,899,045 |
20,100,975 |
32,000,020 |
|
|
|
|
Accumulated
depreciation and
impairment losses at 30 Jun 2015 |
11,899,045 |
15,104,892 |
27,003,937 |
Depreciation
for the period |
- |
303,301 |
303,301 |
Accumulated
depreciation and
impairment losses at 31 Dec 2015 |
11,899,045 |
15,408,193 |
27,307,238 |
|
|
|
|
Carrying amount
at 30 Jun 2015 |
- |
4,999,546 |
4,999,546 |
Carrying amount
at 31 Dec 2015 |
(0) |
4,692,782 |
4,692,782 |
Gross carrying
amount at 1 Jan 2016 |
11,899,045 |
20,100,975 |
32,000,020 |
Deductions |
(11,899,045) |
(20,060,775) |
(31,959,820) |
Gross carrying
amount at 30 Jun 2016 |
- |
40,200 |
40,200 |
|
|
|
|
Accumulated
depreciation and
impairment losses at 1 Jan 2016 |
11,899,045 |
15,408,193 |
27,307,238 |
Depreciation
for the year |
- |
298,403 |
298,403 |
Deductions |
(11,899,045) |
(15,687,988) |
(27,587,032) |
Accumulated
depreciation and
impairment losses at 30 Jun 2016 |
0 |
18,608 |
18,608 |
Carrying amount
at 1 Jan 2016 |
(0) |
4,692,782 |
4,692,782 |
Carrying amount
at 30 Jun 2016 |
- |
21,592 |
21,592 |
Upon liquidation of Talvivaara
Exploration Ltd in 2015, all its assets, rights and liabilities
transferred to the Company. On 30 June 2016. Talvivaara and
Terrafame Oy signed agreements, in which the parties agreed on the
sale of Talvivaara's assets related to the Sotkamo mining
operations and settlement of Talvivaara's guarantee liabilities
under the Streaming Holiday Agreement, with the principal amount of
approximately EUR 14 million (including interest up until 30 June
2016). The assets sold include, among others, the lime plant needed
for the Sotkamo operations and the laboratory.
4. Borrowings
EUR |
As at
30 Jun 2016 |
Unaudited
As at
30 Jun 2015 |
As at
31 Dec 2015 |
Restructuring
loan capital |
427,500,000 |
453,200,000 |
427,500,000 |
Restructuring
loan interest |
16,510,880 |
18,567,844 |
16,510,880 |
Accrued
interest on restructuring loans after commencement of restructuring
proceedings |
12,822,068 |
11,078,282 |
12,822,068 |
Other
borrowings during procedure |
8,209,883 |
21,109,433 |
21,012,257 |
|
465,042,831 |
503,955,559 |
477,845,205 |
Following table specifies
borrowings of the Company as at 30 June 2016 in accordance with the
draft restructuring programme:
EUR |
As at
30 Jun 2016 |
Secured restructuring debt and other
liabilities to be taken into account |
7,448,870 |
Unsecured restructuring debt |
444,563,991 |
Accumulated interest since the
beginning of the restructuring proceedings |
13,029 971 |
Total
borrowings |
465,042,831 |
Due to the corporate restructuring
proceedings, the Company has reclassified all of its borrowings as
current and any unamortised transaction costs have been expensed to
the income statement in previous periods in connection with the
reclassification accreting the loan carrying amounts to the nominal
value. The fair value of the restructuring debt cannot be assessed
due to the Company's corporate restructuring proceedings, as the
Company does not currently have a credit rating or proper access to
debt financing.
Restructuring
debt capital
The restructuring debt capital
includes the Revolving Credit Facility (EUR 70.0 million), the
guarantee liability granted to Finnvera (EUR 50.7 million), the
senior unsecured bonds due in 2017 (EUR 110.0 million) and the
senior convertible bonds due in 2015 (EUR 197.5 million). Of the
restructuring loan capital EUR 7,4 million is secured in accordance
with the draft restructuring programme and EUR 428.7 million is
unsecured. The details related to these debts can be found later in
this section.
According to the draft
restructuring programme, the secured debt is entitled to cover an
amount corresponding to 50 percent of the assets of the debtor
valued at the beginning of the restructuring proceedings. The
capital amount of the debt secured with mortgage on the Company's
assets will not be cut in the restructuring proceedings and the
holder of such debt is not entitled to convert the capital amount
of the secured debt into new shares of the Company.
Pursuant to the draft
restructuring programme, the holders of unsecured debt are entitled
to convert their receivable to new shares in the Company at the
conversion rate of EUR 0.1144 per share. To the extent the
unsecured creditors do not use their conversion right, the
remaining unsecured debt will be cut by 99 percent whilst 1 percent
of the capital of the loan will be repaid to the creditor.
Restructuring
loan interest
Restructuring loan interests are
unsecured debts and payable to the holders of the restructuring
debt in accordance with the draft restructuring programme.
Interest
accumulated since the beginning of the restructuring
proceedings
In addition to the Company's
restructuring debts and other liabilities to be considered, the
Company's borrowings include EUR 13.0 million and trade and other
payables include EUR 54 million of accumulated interest, which will
fall due only in case the draft restructuring programme is not
approved. The Company has accrued the interest on the balance sheet
for all restructuring debt based on the original loan terms
described below despite the fact that the accumulation of interest
payment obligation on unsecured restructuring debt ceased when the
restructuring proceedings were started. In case the restructuring
plan is approved the interest accrued will not be paid, since the
fulfillment of the restructuring programme will verify that the
accumulation of interests ceased at the time the restructuring
proceedings were started.
Other short-term
borrowings
Other borrowings as at 31 December 2015 included the guarantee
liability to Winttal Oy which was settled in connection with the
asset deal concluded with Terrafame Oy on 30 June 2016. Currently,
the other short-term borrowings consist mainly of the third-party
security granted to Finnvera (EUR 8.2 million including accrued
interest).
Detailed information on debts
under draft restructuring programme based on their original
terms
Senior unsecured convertible
bonds due 2015
In December 2010 the Company completed an offering of EUR 225.0
million of senior unsecured convertible bonds due 2015. The bonds
are convertible into 98,617,935 million fully paid ordinary shares
of the Company. The interest rate applied to the convertible bond
is 4.00% and the yield to maturity 6.50%, reflecting a redemption
price of 114.5% at maturity. The bonds are convertible into
Talvivaara's ordinary shares following the resolution by the
Extraordinary General Meeting of the Company's shareholders in
January 2011 to issue special rights in relation to the Bonds. To
the extent the bonds have not been converted into shares by 10
December 2015, Talvivaara shall repay the debt in one instalment on
maturity date 16 December 2015.
Senior unsecured bonds due
2017
In March 2012, Talvivaara issued a EUR 110 million senior unsecured
bond. The 5-year bond has an issue price of 100%, pays a coupon of
9.75% and is callable after 3 years. The bond issue was sold to
both Finnish and international institutional and selected private
investors. The bond was settled and the notes were listed on NASDAQ
OMX Helsinki in April 2012.
Revolving Credit
Facility
On 30 September 2013, Talvivaara had an outstanding revolving
credit facility of EUR 100 million with a carrying amount of EUR 70
million (the "Revolving Credit Facility"). With a waiver and
amendment letter dated 30 October 2013, the terms of the facility
were amended such that the maximum margin was increased to 4.50%
from the previous range of 1.75-3.00%, the undrawn amount of EUR 30
million was cancelled, and the liquidity covenant levels were
adjusted to levels relevant at the time. As at 30 June 2016 and
2015, the outstanding loan amount was EUR 70 million.
Guarantee
liabilities
Guarantee liabilities include Finnvera loan of EUR 50.7 million
(including interest) recognised as unsecured restructuring debt
under the draft restructuring programme due to the guarantee given
on behalf of the debtor Talvivaara Sotkamo and a third-party
security granted to Finnvera in the amount of EUR 8.2 million
(including accrued interest).
All amounts of reorganisation
debts remain subject to change at the time of the Interim Report
and may only be finalised following the confirmation of the draft
restructuring programme.
5. Contingencies and
commitments
Counter indemnity given as a guarantee for the guarantee insurance
provided by Atradius Credit Insurance N.V to Kainuu ELY Centre |
EUR |
30 Jun 2016 |
Unaudited
30 Jun 2015 |
31 Dec 2015 |
Counter
indemnity given as a guarantee |
- |
31,940,000 |
31,940,000 |
|
0 |
31,940,000 |
31,940,000 |
Talvivaara Sotkamo largely met its
environmental bond requirement under the environmental permit
through guarantee insurance provided by Atradius Credit Insurance
NV ("Atradius"). As at 31 December 2015, the coverage amounted to
EUR 31.9 million. In the event restoration of the mine's waste
areas (gypsum ponds, heap areas) would have taken place without
Talvivaara Sotkamo carrying the cost, the expenses would have
initially been covered by Atradius and eventually Atradius would
have claimed the cost back from the Company, which has given
counter-indemnity for such costs to Atradius. However, as a result
of Terrafame replacing the guarantee insurance placed by Talvivaara
Sotkamo with a new environmental bond on 21 January 2016, Atradius
notified the Company that the original guarantee insurance and the
corresponding counter-indemnity terminated on 21 January 2016 and
that the beneficiaries, Kainuun ELY-keskus or Atradius, have no
claims against Talvivaara Sotkamo or the Company on the basis of
the guarantee insurance or the counter-indemnity issued by the
Company. Therefore, the full amount of the liability under the
counter-indemnity given by the Company has been removed from the
Company's restructuring debts, and no payment will be made on it
under the authorised payment schedule.
As at 31 December 2015, the coverage amounted to EUR 31.9 million.
As a result of Terrafame replacing the guarantee insurance placed
by Talvivaara Sotkamo with a new environmental bond, Atradius
notified the Company that the original guarantee insurance and the
corresponding counter-indemnity terminated on 21 January 2016.
The
future aggregate minimum lease payments under non-cancellable
operating leases |
EUR |
30 Jun 2016 |
Unaudited
30 Jun 2015 |
31 Dec 2015 |
No later than 1
year |
65,454 |
78,178 |
93,497 |
Later than 1
year and not later than 5 years |
20,436 |
144 |
41,000 |
|
85,890 |
78,322 |
134,497 |
The Company has not terminated lease agreements on
the basis of section 27 of the Restructuring of Enterprises
Act.
Securities given by the Company
under the Multicurrency Revolving Facility Agreement and the
Finnvera Financing Agreements
The securities given under the Multicurrency
Revolving Facility Agreement (EUR 70 million) and the Finnvera
Financing Agreements (EUR 50 million and EUR 10 million)
include:
-
Pledge of all shares owned by the Company in
Talvivaara Sotkamo
-
Pledge of floating charge notes registered over
assets of the Company in the amount of EUR 300 million
-
Pledge of intra-group receivables of the Company
from Talvivaara Sotkamo
-
Pledge of insurance receivables
In addition, the Company has guaranteed the
obligations of Talvivaara Sotkamo under the Finnvera Promissary
Note in the amount of EUR 60 million by a specific Surety
Obligation.
Share-related key
figures |
|
30 Jun 2016 |
Unaudited
30 Jun 2015 |
31 Dec 2015 |
Earnings per
share |
EUR |
0.10 |
(0.01) |
(0.01) |
Equity per
share |
EUR |
(0.25) |
(0.36) |
(0.35) |
Employee-related key figures |
|
|
|
|
30Jun 2016 |
Unaudited
30 Jun 2015 |
31 Dec 2015 |
Salaries |
EUR '000 |
1,283 |
1,775 |
3,206 |
Average number of
employees |
|
16 |
51 |
50 |
Number of employees at the end
of the period |
|
16 |
51 |
39 |
Key financial figures of the Group |
|
|
Return on
equity |
Loss for the period |
|
(Total equity at
the beginning of period + Total equity at the end of period)/2 |
|
|
Equity-to-assets
ratio |
Total equity |
|
Total assets |
|
|
Net
interest-bearing debt |
Interest-bearing
debt - Cash and cash equivalent |
|
|
Debt-to-equity
ratio |
Net interest-bearing debt |
|
Total equity |
|
|
Return on
investment |
Loss for the period + Finance cost |
|
(Total equity at
the beginning of period + Total equity at the end of period)/2
+
(Borrowings at the beginning of period + Borrowings at the end of
period)/2 |
Share-related key figures |
|
Earnings per
share |
Loss attributable to equity holders of the Company |
|
Adjusted average
number of shares |
|
|
Equity per
share |
Equity attributable to equity holders of the Company |
|
Adjusted average
number of shares |
Talvivaara Interim Report for
period Jan Jun 2016 on 22 Sep 16
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Talvivaaran Kaivososakeyhtiö Oyj via
Globenewswire
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