Talvivaara Mining Co. Ltd. said it’s “quite confident” shareholders will approve a rights offer to stave off default and bankruptcy at the Finnish nickel miner.
Talvivaara plans to raise 260 million euros ($347 million) through the fully underwritten sale of rights, according to Chief Financial Officer Saila Miettinen-Laehde. The Espoo-based company dropped as much as 11 percent in Helsinki, the biggest slide in three months, after announcing the proposal today.
The miner is raising funds to repay a 76.9 million-euro convertible bond that will mature on May 20 and to deal with excess water at its Sotkamo mine operation in northern Finland. It also has a revolving credit facility of 100 million euros.
“It was a better de-risking solution to go for equity and also the bank debt that we had previously signed,” Miettinen-Laehde said today in an interview by telephone. “We are quite confident that we should get it through. De-risking the balance sheet, getting this kind of financing and liquidity in place, creates breathing-room to improve the operations.”
Shareholders will vote on the plans on March 8, the company said in a statement. Talvivaara’s main owners, Chief Executive Officer Pekka Perae, the Finnish state holding company Solidium Oy and Varma Mutual Pension Insurance Co. with a combined 38.3 percent stake, have committed to participating in the offer.
“Without securing additional funds through the proposed rights issue, Talvivaara will likely run out of cash and not be able to finance its planned operations or repay its debts, including the convertible bonds,” it said. “Such events may require the sale of the Talvivaara mine, Talvivaara or Talvivaara’s 84 percent shareholding in Talvivaara Sotkamo, which owns the Talvivaara mine, and result in the insolvency and, ultimately, liquidation of the company.”
JPMorgan Chase & Co., Nordea Bank AB, BNP Paribas SA, Bank of America Corp. and Danske Bank A/S are also underwriters.
Talvivaara posted a net loss last quarter of 57.6 million euros after a profit of 1.9 million euros a year ago and set an output target of 18,000 metric tons of nickel for this year.
Talvivaara cut the forecast three times last year to about 13,000 tons on Nov. 28 from an initial estimate of as much as 30,000 tons. Output was 12,916 tons in the full year, compared with 16,087 tons in 2011. Its results were hurt by the excess water at its open-pit mine site, an 11-day leak of waste water that caused operations to be temporarily shut and low prices.
After falling to as low as $15,236 a ton on Aug. 2, nickel prices on the London Metal Exchange have risen to $18,388.
They may touch $19,000 to $20,000 next year and the longer term outlook is “positive,” Miettinen-Laehde said. “If, and hopefully when, we can reach our production target of 18,000 tons per year, then we do believe that the current prices are quite sufficient for us to make a reasonable margin.”
Talvivaara fell 3.6 percent to almost 1 euro by 1:24 p.m. in Helsinki, and slid 4.8 percent in London, its main listing, where volume was three times the three-month daily average.