Talvivaara Mining Co., a Finnish nickel miner, sank to a record low in London trading after saying it’s assessing all options for additional funding to offset low prices and output.
The shares sank 20 percent to 6.86 pence at the close, the biggest drop since March 18 and the lowest since they began trading in 2007. The company is seeking funds after liquidity deteriorated more than expected, it said in a statement today.
Talvivaara withdrew a 2013 output estimate of 18,000 metric tons in July after producing 4,508 tons of nickel in the first half because of a slow restart to metal extraction caused by flooding and waste-water problems at its operations. In April, it completed a 261 million-euro ($340 million) underwritten rights offer to stave off default and bankruptcy.
“Looks like another financing call on the cards,” Numis Securities Ltd. said in a note. “One we continue to avoid.”
Talvivaara needs about 150 million euros of new funds by the end of 2015, excluding 380 million euros of maturing loans, Riikka Tuominen, a credit analyst at Nordea Bank AB in Helsinki, said in a note today. “Thus, total liquidity shortfall will be close to 530 million euros.”
Talvivaara plans to refinance its bonds maturing in 2015 and 2017 once it has ramped up nickel output, Chief Financial Officer Saila Miettinen-Laehde said today in a phone interview.
“We will have been able to prove that our operations and ramp-up have continued successfully after we have dealt with this water issue, that we have increased production and reduced unit costs,” she said. “If we succeed at that, refinancing the existing facilities will be possible.”
The company produced 2,595 tons of nickel and 5,645 tons of zinc in the third quarter, it said in the statement. It expects the second half output of nickel will rise “substantially” from the first half.
“Another set of weak production results,” Ben Davis, an analyst at Liberum Capital Ltd., said in a note. “Unclear what the financing will be. The last rights issue was heavily dilutive for major shareholder and CEO.”
Talvivaara’s biggest owner, Finnish equity investment manager Solidium Oy, said it was concerned about the situation and would wait and see about participating in a share issue. “Talvivaara only has a single mine, which makes it more vulnerable than international mining giants,” Investment Director Hanna Masala said by phone.
The shares have declined 75 percent this year.
Talvivaara’s liquidity position has weakened as a result of lower metal prices and output, it said in the statement. “The company is undertaking an assessment of all available funding options to secure its financial flexibility and a sufficient level of liquidity.”
Average nickel prices for three-month delivery at the London Metal Exchange declined 20 percent this year to $13,725 a ton.
“In the short term, we can unfortunately not expect to see material improvements in commodity prices and will therefore have to keep concentrating on our efficiency and productivity program to conserve cash and improve productivity,” Chief Executive Officer Pekka Pera said in the statement.
Pera holds 6.5 percent of the company’s shares while Solidium holds 16.7 percent, according to data compiled by Bloomberg.