Talvivaara Slides Most in Three Years as Outlook, CEO Fall

Talvivaara Mining Co., the owner of a Finnish nickel mine, declined by the most since 2008 in London trading after cutting its output estimate, warning of a strike and saying Chief Executive Officer Pekka Pera will quit.

Talvivaara slid 19 percent to 205 pence by the 4:30 p.m. close in London, the biggest decline since Dec. 1, 2008. The company cut its 2011 output forecast to 16,000 metric tons from an April estimate of 22,000 to 28,000 tons. Workers in Finland threatened to strike Oct. 21 to Nov. 7, it said in a statement.

The company’s performance has been hampered by a plant stoppage in April and May, and falling prices for its output. Nickel for three-month delivery on the London Metal Exchange has declined 29 percent in the past six months as slowing economic growth erodes demand for the metal used in stainless steel.

Talvivaara produced 3,153 tons in the third quarter and 11,319 tons in the first nine months, the Espoo-based company said today. Third-quarter zinc output was 7,286 tons.

“There is no sugar-coating a dire third quarter,” said Dominic O’Kane, an analyst in London at Liberum Capital Ltd.

Numis Securities Ltd. cut Talvivaara to a “hold” from a “buy” and lowered its price estimate to 180 pence from 440 pence, analyst Andy Davidson wrote in a note to investors.

“Production suffered from problems in hydrogen sulfide generators during the latter half of the period,” Talvivaara said. It uses a so-called bioheapleaching process to extract metal from ore or rock and dissolve it into solution.

Pera on Board

The company is seeking a replacement for CEO Pera who will retire in coming months, according to a separate statement. Pera won’t sell his 23 percent stake and will remain on the board.

“As a 23 percent stakeholder, I would sack myself,” he told a conference call. “In that sense, at least 23 percent of the shareholders are happy about this.” Pera has been CEO for eight years, while Talvivaara posted a net loss in the past two.

“Whilst the timing comes as a shock, we feel Pera’s reasoning is not surprising and is probably justified by another weak quarter,” O’Kane wrote. “He has overseen the design, financing and construction of Talvivaara’s key mine, but ramp-up has been beset by delivery disappointments.”

The Talvivaara mine in Sotkamo, eastern Finland, is one of the largest known nickel sulfide deposits in Europe, according to the company’s website. The nickel producer had forecast annual production of 30,000 tons to 35,000 tons before April, when it brought forward and extended planned maintenance.

“We’ll make sure that next time when we promise something we’d rather die than come back to market and tell them once again we failed,” Pera said.

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