Talvivaara Seeks Reorganization Amid Threat of Bankruptcy

Talvivaara Mining Co. (TALV), the Finnish nickel miner struggling to avoid bankruptcy, will attempt to reorganize after failing to raise funds from investors to continue operations. Its stock slumped to an all-time low.

Talvivaara yesterday asked a group of investors to provide additional funding of 40 million euros ($53.8 million) to finance a voluntary restructuring, the Espoo-based company said in a statement. “However, such stakeholders informed Talvivaara late yesterday that, due to timing and other constraints, they were currently not in a position to make any decisions in respect of funding commitments.”

Some of those approached separately informed Talvivaara that they can’t make a final decision about the funding “unless and until Talvivaara and Talvivaara Sotkamo Ltd. had filed for a corporate reorganization,” it said. Talvivaara Sotkamo is the operating unit, according to the statement.

Talvivaara, which has suffered from weakening nickel prices and a slow production ramp-up at its mine in northern Finland, has tried to raise additional cash to fund continued operations. It reported a net loss of 29.9 million euros in the third quarter.

Bankruptcy would lead to the loss of 1,600 direct jobs, Chief Executive Officer Pekka Pera told reporters at a press conference in Helsinki today. The company has “no exact plans” on the number of job cuts needed in the restructuring. He declined to comment on whether Talvivaara received or sought any acquisition approaches.

Critical Situation

“The situation is critical, our cash flow has fallen very low. Operationally our situation is probably better than ever,” Pera said. Holders of the company’s secured notes support the reorganization, he said.

Talvivaara sank as much as 56 percent to 2.70 pence in London trading, the lowest level since the company’s U.K. listing in 2007. It was at 3.49 pence at 11:37 a.m. The volume of shares traded exceeded the three-month daily average by more than five times.

The company will file for bankruptcy if it fails to complete the reorganization, it said in the statement.

“The corporate reorganization process can fail for a number of reasons,” including an inability to raise funds and operational or environmental issues hampering production, it said. Bankruptcy “would have a material value destructing effect and, therefore, would not be in the best interests of Talvivaara and its stakeholders.”

The company, which had cash of about 46.5 million euros at the end of September, is reducing operations at the mine to save funds, Pera said at the briefing.

Water Treatment

“Stopping ore production will save us a great deal of money,” Pera said. “Water treatment and handling will continue during this process,” he said. There’s still “quite a lot of water, including clean water” at the mine site, the CEO said.

Nickel for three-month delivery has dropped 20 percent this year on the London Metal Exchange, after sliding 8.8 percent in 2012. In April, Talvivaara completed a 261 million-euro underwritten rights offer to stave off default and bankruptcy.

Talvivaara withdrew a 2013 output forecast of 18,000 metric tons in July after producing 4,508 tons of nickel in the first half. It produced 2,595 tons of the metal and 5,645 tons of zinc in the third quarter. At current nickel prices, Talvivaara needs to produce 30,000 tons of nickel a year to be profitable, Pera said.

To contact the reporters on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net; Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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