Talvivaaran Kaivososakeyhtiö Oyj : Talvivaara Mining Company Operational Update

   Talvivaaran Kaivososakeyhtiö Oyj : Talvivaara Mining Company Operational
                                    Update

Stock Exchange Release
Talvivaara Mining Company Plc
16 January 2013

                        Talvivaara Operational Update

          Metals production stabilized after the gypsum pond leakage
    Water balance situation being resolved but continues to be challenging

Highlights

  oNickel production of 2,317t in Q4 2012 and 12,916t for FY 2012
  oProduction impacted by gypsum pond leakage in November and continuing
    challenging water balance situation throughout the fourth quarter
  oMetals plant operations stabilized; current flow rates at 1,500 m^3/h
  oSustainable solutions to water balance issues being evaluated by a special
    task force;
    initial measures being implemented
  oFollowing Pekka Perä's return as CEO in November 2012, further management
    changes taking effect on 16 January
  oCo-operation consultations that may lead to temporary lay-off of a maximum
    of 230 employees for up to 90 days to start on 17 January

Production guidance

The achieved full year 2012 nickel production of 12,916t was in line with  the 
Company's most  recent guidance  of approximately  13,000t, as  updated on  28 
November 2012 following the gypsum pond leakage.

Talvivaara intends to announce its production guidance for 2013 on 14 February
2013 in conjunction  with its FY  2012 results. In  the meantime, the  Company 
continues to evaluate the impact of the key drivers for the production  level, 
including the  near term  development  in the  water  balance, the  timing  of 
re-start of  ore  production  and the  effectiveness  of  the  bioheapleaching 
process following the measures  being taken to reverse  the recent effects  of 
excess water and insufficient aeration.  Talvivaara continues to believe  that 
the greater  than 50,000t  of nickel  currently in  the heaps  will provide  a 
sufficient inventory for a  reasonable increase in  metals production in  2013 
despite the temporary suspension of ore production, in effect since  September 
2012 and anticipated to continue through June 2013.

Production update

Metals recovery

Talvivaara's metals recovery plant was temporarily suspended between 4 and  21 
November 2012 as a precautionary measure due to the gypsum pond leakage. Since
the successful re-start on 21 November, plant performance has in general  been 
satisfactory. However, some short term disturbances in the automation  systems 
impacted production in  December and  are being investigated  to avoid  future 
re-occurrence. 

Solution flow rates at the plant varied  from around 900 m^3/h to 1,400  m^3/h 
in December and have reached 1,500  m^3/h in early January. Ramp-up to  around 
1,600 m^3/h is anticipated in the near future.



Bioheapleaching

Bioheapleaching has continued to suffer  from the excess water in  circulation 
that has affected  the process  since the spring  of 2012.  The water  balance 
issues were further  aggravated in  November by  the gypsum  pond leak,  which 
forced the Company to pump additional  excess water into the heap  circulation 
in order  to minimize  the environmental  effects of  the leak.  As a  result, 
nickel grades in solution  pumped to metals recovery  continued to decline  in 
December and reached a level of around  1.3 g/l at year-end, down from  around 
2.0 g/l in early 2012.  In January 2013, a  positive trend in solution  grades 
has again emerged, but the Company  estimates it will take some months  before 
substantial improvement  in  the grades  can  be expected.  Nickel  grades  in 
solution well in excess of 3.0  g/l have already been previously reached,  and 
the Company believes that such grades  will again be achievable in the  longer 
term.

Measures to improve  the leaching  performance are  being taken  based on  the 
findings from extensive operational bioheapleaching studies carried out during
the autumn of 2012. Multiple changes are being implemented to ensure  constant 
and balanced  distribution of  air within  the primary  heaps, and  additional 
aeration  into  the  secondary  heaps  is  being  introduced.  Reclaiming  and 
re-stacking of the existing  primary heaps also continues  in order to  enable 
efficient recovery of the existing nickel inventory under leaching.

Ore production

As previously announced, Talvivaara's ore production has been suspended  since 
September 2012  due to  the prevailing  water balance  situation. The  Company 
anticipates re-commencing mining of new ore by  the end of June 2013 once  the 
main part of  the Kuusilampi open  pit has been  de-watered. In the  meantime, 
some waste mining will  continue, which the Company  believes will reduce  any 
risk of production problems  upon re-start. Part of  the mining fleet is  also 
being used in reclaiming ore from the primary heaps. 

Cost effects

By year-end 2012,  Talvivaara estimates having  achieved approximately EUR  20 
million in  operating cost  savings due  to the  temporary suspension  of  ore 
production since September.  Further savings of  at least EUR  30 million  are 
expected to be realized  assuming the suspension  of ore production  continues 
through June 2013.

In the fourth quarter,  the Company incurred approximately  EUR 13 million  in 
non-recurring costs  from stemming  the gypsum  pond leak  and minimizing  its 
environmental effects.

Talvivaara considers systematic cost savings to  be one of its key targets  in 
the near term.

Water balance management

Talvivaara's special task force  on water management,  Operation Otter led  by 
Jari Voutilainen reporting directly to CEO Pekka Perä, focuses on the planning
and execution of necessary  water storage and  pumping arrangements and  waste 
water neutralization measures  to secure  a sustainable water  balance at  the 
mine site.

At the  metals recovery  plant, iron  precipitation and  final  neutralization 
capacities of process waters are being  improved in order to further  increase 
recycling of process waters  and to ensure that  any discharged waters are  of 
sufficiently good quality. Similarly, the  utilization of the reverse  osmosis 
based water treatment plant is being optimized and additional capacity will be
installed  during  the  spring.   Furthermore,  Talvivaara  is  investing   in 
additional  lime  slaking  and   milk  of  lime   capacity  to  increase   its 
neutralization capacity for the treatment of mine and process waters.

Following the  gypsum pond  leakage, Talvivaara  continues to  neutralize  the 
waters currently stored in the safety dams  and in the Kuusilampi pit, and  is 
constructing additional neutralization facilities at  the Southern end of  the 
mine area close to the  Kortelampi dam as well as  close to the open pit.  The 
Kortelampi safety dam,  which was  initially built  to contain  the leak,  was 
elevated to its final height during  December and early January. In  addition, 
several additional dam structures both in the Southern and Northern directions
from the mine are planned and will be constructed as part of Operation  Otter, 
thereby further preparing the  mine area for the  forthcoming spring melt  and 
mitigating the risk of  environmental impacts from  any potential future  leak 
situation.

The soil contaminated during the leak by neutralization precipitates is  being 
removed and treated. The approximately four hectares of marsh area around  the 
Southern edge of the  mine concession area that  contains the precipitates  is 
uninhabited and was recently acquired by Talvivaara.

In order to reach a sustainable water balance situation, Talvivaara will  have 
to treat and  release into the  environment approximately 3.8  million m^3  of 
water, out of  which a substantial  proportion is rain  and natural  catchment 
water accumulated at the mine site  over time. The discharge water quality  is 
targeted to be  in line with  the specifications applied  for in  Talvivaara's 
upcoming environmental permit update, which is expected to be received in  the 
spring. The environmental impact  of the release is  anticipated to be  mainly 
caused by its sulphate content, whereas  the Company expects any metal  burden 
to the environment to remain limited. The effects of the sulphate discharge on
the downstream waters will be simulated over the coming weeks.

At present Talvivaara  anticipates the  capital expenditure  required for  the 
water management  improvements  to amount  to  approximately EUR  17  million, 
largely incurred in 2013.  However, evaluation and  planning of the  necessary 
measures continues and may still have  some impact on the expenditure. In  the 
medium term,  Talvivaara continues  to target  a nearly  closed circuit  water 
circulation system,  reducing the  risk of  weather conditions  impacting  the 
Company's operations or environmental  safety. As a  result of existing  water 
management capacity, the  investments described  above and  release of  excess 
waters currently at the  minesite, Talvivaara expects to  be in a position  to 
achieve this target.

Environmental update following the gypsum pond leakage

As  in  November,  shortly   after  the  gypsum   pond  leakage,  only   local 
environmental impact within the immediate vicinity  of the mine area has  been 
detected to  date.  The  Company  and  authorities  continue  to  monitor  the 
situation and expect to be able to  determine the eventual impact of the  leak 
during the coming summer.

Management changes

Talvivaara will re-organize its management,  effective as of 16 January  2013, 
as follows:

  oPertti Pekkala, formerly General Manager, Research and Development, is
    appointed
    Chief Production Officer (Metals Recovery)
  oKari Vyhtinen, formerly Chief Investment Officer, is appointed Chief
    Mining Officer
  oMikko Korteniemi, formerly Chief Production Officer (Metals Recovery), is
    appointed Chief Maintenance Officer with responsibility for maintenance,
    procurement and warehousing
  oJari Voutilainen, formerly Chief Mining Officer, is appointed General
    Manager,
    Water Management with full-time responsibility for water management

All four  appointees  are members  of  the Executive  Committee,  with  Pertti 
Pekkala a  new  addition  to  it. Pertti  Pekkala,  Kari  Vyhtinen  and  Mikko 
Korteniemi will report to COO Harri Natunen, and Jari Voutilainen will  report 
to CEO Pekka Perä.

With  the  re-organisation  and  formation  of  a  central  maintenance   unit 
comprising procurement, warehousing and all maintenance activities, Talvivaara
aims  to  optimize  its  maintenance  operations  and  increasingly  focus  on 
preventive maintenance for increased operational and cost efficiency.

Co-operation consultations for temporary lay-offs

To support the Company's cost savings initiatives and overall efficiency,  and 
to adjust the level of personnel to the temporarily suspended ore  production, 
Talvivaara is considering temporary lay-offs.  The Company estimates that  the 
maximum number of  employees impacted is  230 and that  the estimated  maximum 
duration of the  lay-offs would be  90 days  between 18 February  and 30  June 
2013. All three corporate entities: Talvivaara Mining Company Plc,  Talvivaara 
Sotkamo Ltd  and  Talvivaara Exploration  Ltd  are  within the  scope  of  the 
consultations. Talvivaara has invited employee representatives to co-operation
consultations in accordance with the applicable law.

Financing

As previously  announced in  connection  with the  Company's Q3  2012  interim 
report, Talvivaara is undertaking an assessment of a range of funding options,
including debt, convertible  bonds, royalty  streams and equity,  in order  to 
secure its financial flexibility and a sufficient level of liquidity.

Pekka Perä,  CEO  of  Talvivaara,  commented: "Our  team  has  mobilized  very 
effectively and has worked extremely hard to mitigate the impact of the gypsum
pond leak on our operations and the  environment as much as possible. Some  of 
the results of  this hard  work are  beginning to  show in  the stability  and 
availability of  the metals  plant, which  has been  operating to  encouraging 
levels over  the  past  few  weeks.  We  are  putting  a  lot  effort  on  the 
comprehensive water balance management measures and enhancing  bioheapleaching 
performance. This work has progressed well, but it will take some time for the
full benefits to be realized.



Challenges remain over the next  few months. Due to  the water balance we  may 
temporarily have to lay off a number of our employees whilst mining activities
remain suspended during the first half of the year. Every effort is being made
to provide full support to all our employees and minimize the negative  impact 
of these potential measures. To achieve this, we are working very closely with
employee representatives as part of  a comprehensive consultation process.  We 
have every confidence  that the measures  we are taking  to preserve the  long 
term financial stability of the Company will be of short duration and that  we 
will be able  to return to  a sustainable ramp-up  path towards full  capacity 
during the second half of this year."

Enquiries
Talvivaara Mining Company Plc Tel +358 20 7129 800
Pekka Perä, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO

Talvivaara Mining Company Plc
Talvivaara Mining  Company  is  an  internationally  significant  base  metals 
producer with its primary focus on nickel and zinc using a technology known as
bioheapleaching to extract metals out of ore. Bioheapleaching makes extraction
of metals  from low  grade ore  economically viable.  The Talvivaara  deposits 
comprise one of the largest known sulphide nickel resources in Europe. The ore
body is  estimated  to support  anticipated  production for  several  decades. 
Talvivaara has secured a  10-year off-take agreement for  100 per cent of  its 
main output  of  nickel  and cobalt  to  Norilsk  Nickel and  entered  into  a 
long-term zinc streaming agreement  with Nyrstar NV.  Talvivaara is listed  on 
the London Stock Exchange Main Market and NASDAQ OMX Helsinki and is  included 
in the FTSE 250 Index. Further information can be found at www.talvivaara.com.

Talvivaara Operational Update 16.1.2013

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Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE
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