Talvivaaran Kaivososakeyhtiö Oyj : Talvivaara is implementing several development projects as a result of the gypsum pond leakage investigation conducted by VTT Stock Exchange Release Talvivaara Mining Company Plc 29 April 2013 Talvivaara is implementing several development projects as a result of the gypsum pond leakage investigation conducted by VTT VTT Technical Research Centre of Finland ("VTT") carried out an independent investigation, commissioned by the Board of Directors of Talvivaara Mining Company Plc ("Talvivaara" or the "Company"), on the reasons and circumstances which led to the gypsum pond leakage in November 2012. The investigation resulted in several recommendations for corrective and development actions. The Company had initiated the implementation of the majority of these recommendations immediately following the leakage in November 2012, and the Board has requested action plans from the Company's operative management regarding the remaining recommendations. Objectives of the investigation The objectives of VTT's investigation were to study the direct reasons of the incident and to analyze the root causes leading into the realization of the risks. Additionally, the investigation included a general risk assessment of other pond structures. VTT's investigation team consisted of experts on dam and pond structures, water management, safety culture and management, risk management and environmental legislation. The Company's Board commissioned the investigation in order to be able to ensure that similar risks are managed better in the future and safety at the Company develops to a level consistent with the standards of sustainable production. Results of the investigation VTT's experts state that the original design of gypsum pond section 1 was vulnerable. The insulating structure of the pond section was a 1.5 mm HDPE membrane and, based on the knowledge available and authority requirements at the time, the water conductivity or erosion stability of the soil below had not been paid sufficient attention to during the design and construction phases. The pond structure was designed on the presumption that the pond would predominantly contain relatively solid gypsum waste and any water accumulating in the pond in conjunction with effluent pumping would be pumped out, due to which the risk of a major leakage would not exist. However, contrary to original plans, water had to be stored in the gypsum ponds as the accumulation of water in the area was more than the Company's 1.3 Mm^3 annual quota for discharging purified waste waters into the environment. The investigation suggested that in the early years of operation the water management measures were not sufficiently holistic and systematic as many other development projects and challenges consumed resources. Even though the Company implemented several steps to improve the water balance, especially from late 2011 onwards, all ponds filled up during the 2012 spring melt and water from the gypsum pond was temporarily pumped into the open pit. A decision was made to raise the banks of gypsum pond 1 in order to create additional water storage volume. The elevation was completed at the end of September, and more than 1 Mm^3 of solution was pumped into the pond before the leakage in section 1 started on 4 November. VTT's experts state that small seeps always occur in HDPE membrane structures. Even small, seeping leakages can start eroding the soil beneath and result in fracturing of the insulating membrane if the structures beneath the membrane have not been designed in view of leakages. The likely mechanism resulting in the leakage in November was such a seeping leakage, which escalated as the hydraulic pressure increased due to filling up of the pond beyond earlier water levels. Earlier leakages in the same pond section have also very likely resulted in latent damages in the pond foundations as water flowed through the soil beneath the membrane in the pond dam and at the bottom of the pond. Supervised repairs of the pond had been carried out in 2008 and 2010. The November 2012 leakage started at the point where the 2010 repairs had ended. Due to potential similar latent damages, VTT's experts identified the wall between gypsum pond sections 1 and 2 as a high risk area. The April 2013 leakage occurred in section 2 in the immediate vicinity of this separating barrier. Following the leakages in the earlier years, the Company had proactively altered the structure of new gypsum pond sections (3-6) such that a bentonite liner had been placed beneath the HDPE membrane. The risk of an escalating fracture caused by a seep leakage is therefore highly unlikely in these pond sections and a seep as such does not constitute an environmental hazard. The investigation also found that after the elevation of the gypsum pond in the autumn of 2012, so called raffinate had been pumped into the pond from the metals recovery plant. Raffinate is process solution from which valuable metals have been precipitated and recovered, but which has not been purified at the post-neutralization phase at the metals plant. The water quality in the gypsum pond deteriorated as a result of this pumping arrangement. The water quality did not have any impact on the occurrence of the November leakage, but to the extent the leakage waters had to be discharged into the environment, raffinate may have had a more acidifying impact on the environment than the waters otherwise stored in the gypsum pond. In addition to recommendations pertaining to water management, pond usage and leakage risk management, VTT also gave recommendations on the long-term development of the Company's safety culture. Certain project-phase legacies remain in the Company's operational culture, due to which it is important for the Company's Board and operative management to work together to clarify management principles in order to align operational procedures with the requirements of the ongoing production phase. VTT recommends sustained actions to further improve the technical requirements of production and to continuously assess and improve the safety culture. In addition, VTT recommends that the Company further strengthens its internal resources, in particular as they pertain to safety and environmental matters. Measures taken by the Company on the basis of VTT's recommendations The Company's Board and operative management have familiarized themselves with VTT's report and recommendations. The Board is satisfied with VTT's investigation, which diligently studied the reasons of the incident and provides valuable input for the development of the Company's risk management and organization. Water management Since the November 2012 leakage, a key area of development for the Company has been the mitigation of risks related to water management and the achievement of a sustainable water balance. In order to achieve these goals, Talvivaara has established a separate organization focusing on water management, which is responsible for the overall water balance management and the design and implementation of necessary short-term and long-term water management measures. Talvivaara commenced immediate actions following the November 2012 gypsum pond leakage to reduce the water volume in all bioheapleaching safety ponds, gypsum ponds and safety dams such that the safe treatment of spring melt waters could be ensured and sufficient safety capacity in view of potential new leakages could be created. As the gypsum pond section 2 had been identified as a high risk area, but it was not possible to empty the pond section into other ponds in the mining area due to the prevailing water balance situation, immediate measures were in particular aimed at ensuring sufficient volume in safety dams for the water contained in this pond section. This approach was successful, and all waters from the 7 April 2013 leakage in section 2 were contained in the safety dams located in the Southern part of the mining area. The leakage waters will be purified and discharged into the environment within the schedule allowed by discharge quotas and neutralization capacity. Water purification capacity has during the early part of 2013 been increased materially above the 1.3 Mm^3 annual discharge quota allowed by Talvivaara's environmental permit. Further purification capacity will be constructed such that by the end of 2013 the total treatment capacity exceeds 6 Mm^3 per annum. This capacity is expected to be sufficient for water purification requirements even during intense flooding and other exceptional circumstances. At present Talvivaara is purifying and discharging into the environment excess waters stored in the mining area within the 1.8 Mm^3 additional discharge quota granted in February 2013 by the Kainuu Centre for Economic Development, Transport and the Environment. However, the Company considers this discharge quota insufficient for lowering risks related to water balance management to an acceptable level, and therefore the Company has applied to the Northern Finland Regional State Administrative Agency ("AVI") for an increase of the additional discharge quota. In its report, VTT also states that attaining a safe operational level requires a material increase in the quota for discharging waters. In addition to the temporary discharge quotas, the Company has applied to AVI for a permanent removal of the annual water discharge quota from the Company's environmental permit in order to sustainably manage the overall water balance. No changes have been applied for the discharge limits of environmentally harmful substances, and therefore no additional environmental burden is expected. Talvivaara is currently preparing a holistic long-term water management plan, which is expected to be completed by the end of June 2013. Central elements of the plan comprise a nearly closed process water circuit, and separation and separate treatment of natural run-off waters and waters accumulating in the open pit. The technical prerequisites for a closed process water circuit are already largely in place due to investments in reverse osmosis technology and other process alterations. Significant progress has also been made in water separation in early 2013, and the water catchment area at the mine has been materially reduced as a result of new dam structures. These structures largely prevent run-off waters from mixing with metal-containing waters. Pond usage The gypsum ponds are to be returned to their original planned usage as soon possible, such that the excess water volume in the ponds is low at all times and water quality is monitored on an ongoing basis. Bioheapleaching safety ponds should also normally be empty. Both targets require the purification and discharge of excess waters from the mine site in the near term and maintenance of a sustainable water balance in the long term. Safety culture In the future Talvivaara will pay increasing attention on risk management and active development of the Company's safety culture with the help of its internal organization and, as required, external consultants. In order to ensure this development the Company's sustainability organization will be strengthened by 1-3 people during the current year and a person responsible for safety will be nominated for each production department. Required safety training will be arranged for all levels of the organization in order to permanently establish best industry practices as part of Talvivaara's day-to-day operations. The Company's Board further states that the purpose of this announcement is to publish the central observations and recommendations of VTT's investigation and the measures taken by the Company on the basis of VTT's recommendations. There are ongoing investigations by the police and the Safety Investigation Authority relating to the gypsum pond leakage that include questions relating to environmental permitting mechanics and judicial processes. The Company's Board does not comment on such questions at this stage. Enquiries Talvivaara Mining Company Plc Tel +358 20 7129 800 Tapani Järvinen, Chairman of the Board of Directors Kirsi Sormunen, Member of the Board of Directors Talvivaara Mining Company Plc Talvivaara Mining Company is an internationally significant base metals producer with its primary focus on nickel and zinc using a technology known as bioheapleaching to extract metals out of ore. Bioheapleaching makes extraction of metals from low grade ore economically viable. The Talvivaara deposits comprise one of the largest known sulphide nickel resources in Europe. The ore body is estimated to support anticipated production for several decades. Talvivaara has secured a 10-year off-take agreement for 100 per cent of its main output of nickel and cobalt to Norilsk Nickel and entered into a long-term zinc streaming agreement with Nyrstar NV. Talvivaara is listed on the London Stock Exchange Main Market and NASDAQ OMX Helsinki. Further information can be found at www.talvivaara.com. Talvivaara implementing projects as a result of VTT investigation ------------------------------------------------------------------------------ This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE HUG#1697340
Talvivaaran Kaivososakeyhtiö Oyj : Talvivaara is implementing several development projects as a result of the gypsum pond
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