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TALVIVAARA MINING COMPANY PLCAnnual Report 2010
Table of Contents
Graphic design, production and image editing: Briif fi Oy. Text production: Talvivaara and Miltton Oy.Photography: Neodes Oy / Esko Tuomisto, excluding cover image and images on spreads 6–7, 36–37 and 46–47 iStockphoto. Print: Finepress Oy
I TODAY AND TOMORROWTalvivaara in Summary ................................................................... 8
Year 2010 in Brief .............................................................................10
Chairman’s Statement .....................................................................12
CEO’s Statement ...............................................................................14
Strategy and Operating Environment .............................................16
Mining Industry Outlook ..................................................................20
II BUSINESS REVIEWManagement’s Review of 2010 .......................................................24
Mineral Resources ............................................................................30
Development of Technology ............................................................33
III SUSTAINABILITYSustainable Development ................................................................38
Safe Production Processes and Production Safety ...........................42
Environment .....................................................................................46
Human Resources, Health and Safety .............................................54
Occupational Health and Safety .....................................................56
Social and Economic Responsibility.................................................58
IV CORPORATE GOVERNANCECorporate Governance Statement ...................................................64
Risk Management and Principal Risks ............................................72
Board of Directors .............................................................................78
Executive Committee .......................................................................79
Remuneration Report .......................................................................80
Shares and Shareholder Information ...............................................85
3
I Today and Tomorrow
Today and Tomorrow
Raw Materials for the Growing Needs of the World
Like nickel, zinc is used in the manufacture of high-quality steels.
Zinc is one of the most frequently used metals in the metal industry.
The primary application of zinc is in the galvanisation of metals –
i.e., its use as an anti-corrosion agent. Galvanisation is used for
numerous products, ranging from nails to piping systems exposed
to seawater. Zinc extends the life of steel, which makes it a very
useful metal in the vehicle and construction industries, for example.
In addition, zinc is a micronutrient required by human beings and,
accordingly, is produced also for the food industry.
Nickel finds its most common and best known applications in
stainless and acid resistant steel. Nickel is also widely used in alloys
such as special steels. In modern society, this metal has numerous
applications, and nickel also has antibacterial properties, which is
why hospitals and catering kitchens favour nickel-plated surfaces.
In addition, nickel is used in car frames, batteries, and fuel cells. It
is also applied as a catalyst as well as in the plating of electronic
equipment and CDs.
NICKEL
Talvivaara Mining Company Plc 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. Our mine is located in Sotkamo, Eastern Finland, where we own one of the largest known sulphide nickel resources in Europe.
We aim to expand our production and exploit our world class mineral resources as effi-ciently as possible while minimising the environmental impact of our operations.
In modern society, our products have numerous applications, ranging from vehicles to computers and from piping systems to wind power plants. The rise in the standard of living in emerging economies further accelerates the demand for long-life metals that promote material efficiency.
Thanks to our state-of-the-art technology and our cost-effective and energy-efficient pro-duction process, we can promote the sustainable use of natural resources and produce significant quantities of metals for the growing needs of modern society.
In 2010, we continued our production ramp-up and our work on the project to extract ura-nium as a by-product in the metals recovery process.
Ni ZINCZn
Copper is used in the electrical and electronics industries, as
well as in construction, both for roofing products and in decora-
tive applications. Copper has excellent antibacterial properties. Its
most common applications are electrical wires and copper pipes.
Furthermore, zinc and copper can be used to produce brass, which
is used for brass instruments and applications such as screws and
valves.
The most significant user of cobalt is the steel industry. Cobalt is used
in batteries for mobile phones and laptop computers, permanent
magnets, and jet engines, for example. The glass industry uses
cobalt to impart a blue colour to glass.
COPPER COBALTCu Co
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
TalvivaaraSotkamo Ltd (80%)
London
Helsinki
Sotkamo
Mining Company Plc
TALVIVAARA IN SUMMARYCompany Overview
Internationally significant base metals producer with primary focus •
on nickel and zinc
Listed on London Stock Exchange Main Market and Nasdaq OMX Helsinki•
Included in FTSE 250 index in London Stock Exchange and in OMXH25 •
index in Nasdaq OMX Helsinki.
Targeted full scale production from 2012:•
- nickel 50,000 tonnes p.a. - zinc 90,000 tonnes p.a. - copper 15,000 tonnes p.a. - cobalt 1,800 tonnes p.a.
Personnel (December 2010): 389•
Anticipated personnel in full production: 450•
Finland and miningPolitically stable and favourable environment for mining•
Easy access to infrastructure•
Qualified workforce•
Geological databases available•
Advanced research and technology capabilities•
A Mine of vast dimensionsOperational surface area 61 km²•
Surface area of construction 20 km²•
Mine area roads 25 km•
Mine area pipelines 100 km•
Bioheapleaching irrigation and recycling pipelines 6,700 km•
Circulated solutions 30,000 m³/h•
Buildings over 900,000 m³•
Compa
ny in
corp
orated
Acquis
ition o
f con
cess
ions,
explo
ratio
n and
rese
arch d
ata
17,000 tonn
e on s
ite bi
ohea
pleac
hing t
rial
Submiss
ion EI
A repo
rt
€7m finan
cing
Applic
ation
for E
nviro
nmen
tal Pe
rmit
€33m finan
cing
Comple
te BFS
,
receiv
e Env
ironm
ental
Perm
it
€302m IPO
$320m committ
ed Te
rm
Lo
an fa
cility
Group structure
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Production processMining
Large scale open pit mining using traditional drill and blast methods•
Targeted mining rate 24 million tonnes of ore per annum.•
Anticipated waste to ore ratio over the life of mine approximately 1:1•
Materials handlingCrushing of ore in four stages to a particle size of 80% passing 8 mm•
Agglomeration of ore using sulphuric acid to glue finer particles on coarser ones•
Stacking of crushed and agglomerated ore on heaps for bioheapleaching•
BioheapleachingEnables economic nickel extraction from low grade ore•
Uses locally occurring, live bacteria•
Process comprises crushing, agglomeration and stacking of ore; irrigation of • heaps with leach solution, and aeration of heaps to provide oxygen for aerobic bacteria
Metals recoveryHydrogen sulphide precipitation of metal sulphides from solution• obtained from bioheapleaching
Produces solid metal sulphides for sale to refineries•
ResourcesKuusilampi and Kolmisoppi poly- •
metallic deposits in Sotkamo, Finland
Mineral resources 1,550 Mt with •
1,121 Mt (72%) in measured and indicated categories
Average metal content• (nickel cut-off 0.07%)
Easy and cost effective to mine • as large open pits
Minimal overburden•
Comple
te BFS
,
receiv
e Env
ironm
ental
Perm
it
$320m committ
ed Te
rm
Lo
an fa
cility
First
opera
tiona
l blas
t of o
re
€85m conv
ertibl
e iss
ued
Start o
f stac
king a
nd bi
ohea
pleac
hing
Commerc
ial gr
ade a
nd sc
ale pr
oduc
tion
€50m work
ing ca
pital
loan
€82m equit
y plac
ing
New ra
il link
opera
tiona
l
Start u
p: fir
st meta
l sulp
hide p
roduc
tion
Zinc i
n con
centr
ate ag
reemen
t with
Nyrs
tar N
V
Refina
ncing
of th
e Proj
ect T
erm Lo
an Fa
cility
Applic
ation
to ex
tract
uran
ium as
a by
-prod
uct
Succe
ssful
commiss
ioning
of th
e sec
ond p
roduc
tion l
ine
Certific
ation
of th
e Env
ironm
ental
Man
agem
ent S
ystem
Signific
ant in
creas
e in M
ineral
Res
ource
s
NICKEL 0.22%
ZINC 0.49%
COPPER 0.13%
COBALT 0.02%
JanuaryZinc in Concentrate Agreement with Nyrstar NV Talvivaara signed a long term Zinc in Con-centrate Streaming Agreement with the multi- metals company Nyrstar. Under the terms of the agreement, Talvivaara agreed to deliver all of its zinc in concentrate production to Nyrstar until a total of 1,250,000 metric tonnes has been delivered. Nyrstar agreed to pay an upfront payment of USD 335 million for the purchase of the zinc stream. In addition, Nyrstar will pay Talvivaara an extraction and processing fee per each tonne of zinc in concentrate delivered
FebruaryAnnouncement of Uranium Recovery PlansIn the beginning of February Talvivaara announced its plans to initiate the recovery and exploitation of uranium, obtained as a by-product of other metals, in the form of a ura-nium intermediate, yellowcake.
The preparations of necessary documentation for permit applications and continuing investigations relating to the utilisation of uranium were also announced.
Refinancing of the Project Term Loan FacilityAt the completion of the Nyrstar deal Talvivaara received an upfront payment for the zinc stream and repaid its USD 320 million Project Term Loan Facility and closed all commodity and foreign exchange risk hedging positions. The repayment of the Project Term Loan Facility afforded Talvivaara considerable financial and strategic flexibility.
OctoberSignificant Increase in Mineral ResourcesIn October Talvivaara announced a significant in-crease in its mineral resources. The total Mineral Resources increased by 54% to 1,550Mt from the total of 1,004Mt announced in December 2008. Following the upgrade in Mineral Resources the Company started evaluating options for growth through a further expansion of production capa-city at the mine.
DecemberEUR 225 million Convertible BondIn the beginning of December Talvivaara completed successfully the offering of a EUR 225 million Convertible Bond to international institutional investors. The convertible bonds are due in 2015 and are convertible into Talvivaara’s ordinary shares until ma-turity. The convertible bond increased the Company’s flexibility in developing the scope and structure of its operations.
Certification of the Environmental Management SystemTalvivaara’s environmental management system was audited and approved in December 2010. The company was awarded official certification for the environmental manage-ment system ISO 14001 on January 4, 2011 which marked the approval of the system. The certification covers all operations of the Company and the ISO 14001 environmental management system sets guidelines for its environmental practices in the future.
AprilApplication to Extract Uranium as a By-ProductOn April 20, 2010 Talvivaara lodged an application in accordance with the Nuclear Energy Act to the Ministry of Employment and Economy for the extraction of uranium as a by-product. Preparations for the environmental impact assessment relating to the uranium extraction process had already been commenced at the mine site.
JuneSuccessful Commissioning of the Second Production LineThe second production line at Talvivaara’s metals recovery plant was successfully com-missioned on June 9 with zinc sulphide precipitation, followed by nickel sulphide pre-cipitation on June 10. The commissioning of the second production line was a crucial milestone in the ramp up process and gave Talvivaara the much needed capacity to take the production volumes to the planned levels; app. 50,000 tons of nickel per annum.
EUR 100 million Corporate Revolving Credit FacilityAt the end of June Talvivaara signed a EUR 100 million three-year revolving multicurren-cy credit facility and announced that production ramp-up was progressing as expected. The facility, intended for general corporate purposes, marked the financial completion of the Talvivaara mine project and concluded its transformation from a project into an operating entity.
Net sales......................................................................................EUR 152.2mOperating profit..............................................................................EUR 25.5mLoss for the period........................................................................EUR 13.1mCapital expenditure.......................................................................EUR 115.7mNet interest bearing debt.................................................................EUR 315mCash and cash equivalents at year end.........................................EUR 165.6mNumber of employees at year end.............................................................389
Key Figures for 2010
I n the closing paragraph of my last year’s report to Shareholders I committed the Company’s future
focus towards the successful ramp up of the produc-tion process and the continued advancement to-wards our goal of becoming a world class base me-tal producer. With equal measures of both pleasure and pride I can report that during the year under review the Company achieved both objectives.
The beginning of the year saw the completion of a zinc in concentrate streaming agreement with Nyrstar under which the Company will deliver its entire zinc production up to a total of 1.25 mil-lion tonnese in exchange for an advance payment consideration of USD 335 million with a formulaic participation in rising LME zinc prices plus an ex-traction and processing fee of EUR 350 per tonne. The market at large and Nyrstar and Talvivaara Shareholders in particular were unanimous in showing their appreciation of this transaction.
Significantly some of the proceeds were used to retire the original project term facility which, for a variety of reasons, had become unattractive. In connection with the pre-payment of the project facility, the forward nickel positions entered into under the terms of the project loan were also profitably closed.
This was followed at the half year by the secure-ment of a EUR 100 million corporate revolving credit facility and towards the year end by an over-subscribed convertible bond due in 2015 which together with the greenshoe raised a total of EUR 225 million leaving the Company in a strong finan-cial position at year end.
A compilation of market research indicates that in 2010 there was a deficit in nickel supply
CHAIR MAN’S STATEMENT
12
in the order of 50,000 tonnes, the first since 2006. This was mainly due to a sharp increase in nickel demand from Chinese stainless steel production and resulted in nickel being the second best performer on the LME during the year.
It is our view that this rise in demand may slow a little during the coming year as the Chinese authorities seek to keep growth under control by monetary policies and property regulations. Market forecasts estimate nickel demand in 2011 to increase by around 6.5% to 1.56 mil-lion tonnes and supply to increase by 12% to 1.58 million tonnes although it is by no means certain that all of the additional supply forecast to come on stream during the year will in fact materialise. All in all therefore the mar-ket outlook for the coming year appears positive and we will take all the steps necessary to ensure that Talvivaara achieves its anticipated position in the lowest cost quar-tile as production ramps up.
The CEO’s report will deal with production in detail but I think it appropriate to say here that I was both happy and impressed with the way that all the problems which emerged during the ramp-up process were speedily identified and efficiently resolved with as little adverse effect on production as reasonably possible.
Particularly noteworthy was the successful commis-sioning of the second metals recovery line in June.
Two other developments during the year are worthy of note here, the first being the announcement in October of a 54% increase in the mineral resources, a consequence of the infill drilling campaign at the Kolmisoppi deposit. The second noteworthy development was our announcement to initiate the recovery of uranium as a by-product of the other metals in the form of an intermediate yellow cake. Applications were submitted to the Finnish Government for the appropriate permits.
As a result of the first we announced our intention to evaluate the possibility of expanding the annual nickel production target beyond the 50,000 tonnes level cur-rently contemplated and further announcements in this respect will follow.
On the second it should be noted that the uranium price has risen over 45% during the year as the Chinese Government announced its intention to generate 5% of its electricity by nuclear power by 2020 which, according to most forecasts, will have the effect of quadrupling its uranium consumption.
Annual production at Talvivaara is currently planned at 350 tonnes which would make Finland almost self sufficient in uranium consumption.
History has provided several examples of green field nickel projects large and small which have either failed, been seriously delayed or suffered major cost overruns. It is against this background I believe that Talvivaara stands out as one of the great mining successes of recent times and bears testimony to the quality and efficiency of the Finnish mining industry.
Success on this scale is of course the result of team work at all levels and once again I offer my thanks and ap-preciation to Pekka Perä and his executive and manage-ment teams for all their hard work throughout the year; to my Board colleagues for their time and support always readily available, and to our Shareholders for their con-tinuing loyalty.
We now look forward to a year of solid production and sales at attractive commodity prices.
Edward HaslamChairman
CHAIR MAN’S STATEMENT
13
CEO’S STATEMENT
The year 2010 was once again exciting in the history of Talvivaara Mining Company. For the first time in the Company’s history we were able to generate profit from the operations. It took eight years from the incorporation to reach this important milestone, but it is a result of millions of working hours by thousands of committed people.
During the year the Sotkamo operation became fully commissioned and production levels started to increase steadily. Although we fell a bit short of our production target, we produced more than 10,000 tonnes of nickel and over 25,000 tonnes of zinc which are significant amounts even in the global perspective.
The nickel market improved over the year helping us achieve our financial targets. After two major market transactions, the USD 335m zinc-streaming deal with Nyrstar in February and the EUR 225m Convertible Bond, our technical and financial position to enter the future was better than ever before.
Another important announcement we were proud to make was the upgrade in our Mineral Resources. Maybe the biggest significance in the 500 Mt increase was the fact that almost all of it came from the Kolmisoppi deposit which we had not explored before. We still have a big potential to increase the resources even further even inside the existing mining concession.
We announced our intentions to produce uranium oxide, commonly known as yellow cake, in February after thorough and innovative test work. The permitting
process is anticipated to be completed during 2011, allowing the yellow cake production to start during 2012. Acknowledging the doubts the general public might have relating to everything that has to do with uranium we have invested a lot of effort in communicating the facts to local communities as well as to wider audience. Overall the public reaction has been very positive.
Although we made significant progress in our pro-duction during the year, the reporting period was by no means easy. We faced most of the challenges one can im-agine when ramping up a major operation: we had a dam failure, unexpectedly high levels of hydrogen sulphide gas in a processing stage, and a transformer failure which just does not happen, to name a few. All this required a lot of time and effort to solve, not to mention the costs and lost production involved. This put extra pressure on person-nel already heavily loaded with normal ramp up challeng-es. But once again the team proved its strength overcom-ing the difficulties.
The increasing production, the methodology changing from a project to a process, and the still growing organization required us to revisit our ways of thinking and operating. The development process still continues and the results of it should become visible during 2011 through more efficient use of reagents, equipment and contractors, and even in simple things like better housekeeping.
14
During 2010 metal markets were once again volatile ending up in relatively high levels. The first quarter of 2011 has seen the same volatility continue, affecting our top line development accordingly. However, with the plant now fully commissioned and all the key components doubled up, we are looking into 2011 very positively. This said, a lot of hard work is still required in order for us to achieve our goals.
Finally my sincere thanks go again to staff, advisers and our shareholders for their hard work and strong support during the challenging year of 2010.
Pekka PeräCEO
15
T alvivaara’s aim is to continue its growth as an internationally significant base metals producer
with its primary focus on nickel and zinc. Talvivaara’s polymetallic deposits in Sotkamo, Eastern Finland, comprise one of the largest known sulphide nickel resources in Europe. The company seeks to exploit these resources as cost-effectively as possible using a technology known as bioheapleaching.
Talvivaara’s main goals are continuous improvement of the production process and practices, the sustainable and economical use of natural resources and the minimisation of the environmental impact of its mining operations.
Strategy and Operating EnvironmentTalvivaara is an internationally significant nickel producer with an aim of growth through production expansion. World-class mineral resources, a cost-effective production process and a favourable operating environment provide Talvivaara with excellent conditions for growth.
TODAY AND TOMORROW
Nickel production constitutes the cornerstone of Talvivaara’s business, with nickel currently producing approximately 90% of the company’s revenues. In full production, nickel sales are expected to represent some 75% of the company’s net sales, while the remaining 25% is expected to be produced by zinc, cobalt and copper.
In line with its strategy to exploit its mineral resources as efficiently as possible, Talvivaara actively studies opportunities to recover other metals from the Talvivaara ore that could be commercially exploited, such as uranium leached in the process solution with the main products. In April 2010, the company submitted an application to
16
TODAY AND TOMORROW
the Finnish government for a permit to extract uranium as a by-product of other metals.
Main focus on ensuring production capacityFor the last three years, the primary focus of Talvivaara’s operations has been on the production ramp-up at the mine. The aim is to complete the ramp-up by the end of 2012. The bioheapleaching technology used has already proven itself, and in the near future, the company will focus on increasing its production capacity to the planned level and on improving the reliability of production operations.
In the long term, Talvivaara’s objective is to enhance the metals processing facility so as to allow processing of polymetallic concentrates from external sources using the company’s technology.
At present, Talvivaara produces metal intermediates – metal sulphides – which the company’s current custom-ers Nyrstar and Norilsk Nickel Harjavalta process further into metals. Large, long-term purchasers of metal in-termediates are very important partners for Talvivaara. However, the company also studies options for the in-troduction of new technology increasing the value added and to produce metallic nickel used by industry.
Growth potential in productionSince its establishment, the company has advanced through determined operations and by rapidly exploiting the available business opportunities. Despite the slower than expected growth of production, 2010 demonstrated that the agile Talvivaara is on the right path. The metal contents of its products have consistently been at the high level as originally planned, and the global nickel price has long remained at a good level, at which it is also expected to remain in the future.
Internationally, the level of Talvivaara’s annual nickel production is already high, but the company still seeks to add shareholder value by advancing the exploitation of its mineral resources.
At present, Talvivaara is estimated to be among the twelve largest nickel producers in the world, and once the planned production level of 50,000 tonnes has been reached, the Sotkamo mine will be one of the world’s six largest nickel mines. However, if it is possible to double the company’s production capacity within 5–8 years, in accordance with the preliminary plans prepared in the project to evaluate options for further expansion initiated in 2010, Talvivaara will climb to the top three of the world’s nickel producers, in terms of production volumes.
17
TODAY AND TOMORROW
Mineral resources and cost effecti-ve method are the main assetsTalvivaara’s mineral resources – which are significant even on a global scale – and low-cost technology provide the company with excellent conditions for profitable op-erations and growth into an even more important base metals producer.
In Talvivaara’s mineral deposits, the ore body consti-tutes a continuous formation near the soil surface, so it can be mined easily and cost-effectively. The ore is rela-tively low grade, but bioheapleaching enables economi-cally profitable nickel extraction from low grade ore.
Capital expenditure and operating expenses are lower in bioheapleaching than in conventional metal extraction processes as the process only requires air, water and microbes. The company’s production costs are among the industry’s lowest: on average 75% of the world’s nickel producers have higher metals recovery costs than Talvivaara. Bioheapleaching is also a significantly cleaner and more energy-efficient method than conventional production methods.
Operating environment encourages responsibilityTalvivaara’s operations are supported by all the services provided by modern society. Finland has offered the mining industry a favourable and politically very stable operating environment which has encouraged mining companies to act responsibly and predictably.
Finland’s good and well-functioning infrastructure contributes to successful mining. The road and rail network is comprehensive. In addition, the availability of energy and raw materials is excellent.
Thanks to advanced Finnish competence in research and technology and long traditions in mining, Talvivaara has been able to establish a network with other mining companies, experts and research institutes and thus develop its operations. The high level of education and support by the state for training expenses have guaranteed that Talvivaara has been able to train a qualified workforce to meet its needs.
Talvivaara’s operations are regulated by many laws, regulations and permit procedures, mainly based on EU legislation. In Finland, legislation is clearer and there is less bureaucracy than in many western countries. For example, Finnish mining legislation has so far safeguarded both the rights of landowners and local residents and the conditions for mining operations.
All in all, Finnish legislation defines a very high min-imum standard for the transparency of business opera-tions, occupational health and safety, environmental management, the respect of human rights and other areas of corporate responsibility that are important for Talvivaara.
Strategy Key Components
Ensure the position of the Talvivaara mine as a world-•
leading low-cost nickel producer- Achieve the planned annual output and cost level
Maintain a strong financial profile•
- Generate cash through production- Maintain operating and capital cost discipline
Growth through sustainable technology•
- New products such as uranium and manganese- Optimisation of all end-products- Added value through the minimisation of environmental impacts of operations
Growth through production expansion at the Talvivaara •
mine- Add shareholder value through efficient exploitation of world-class mineral resources
Focus on personnel development, performance and •
motivation
18
TODAY AND TOMORROW
Solution in one of the thickeners.
19
T he standard of living in our modern economies is largely based on the exploitation of minerals and
metals. For example, advanced infrastructure, modern production plants and information technology require the use of minerals and metals, and thus also an actively operating mining industry.
Talvivaara’s main products, nickel and zinc, also have numerous applications in modern society. Nickel finds its most common and best-known applications in stainless and acid-resistant steel. Zinc is mainly used in the galvanisation of metals, i.e., as an anti-corrosion agent, which is amoung others needed in the construction and vehicle industries.
In recent years, demand for minerals and metals has increased at an unforeseen rate. Population growth, accelerated urbanisation and the rise in the standard of
Mining Industry OutlookIn recent years, demand for mineral natural resources has increased at a record rate. Nickel and zinc demand is mainly driven by economic growth in the emerging markets and the material requirements of new technologies. At the same time, low-cost nickel resources are diminishing.
TODAY AND TOMORROW
living of the world’s emerging economies are the most important trends driving the structural demand for metals.
Consumption and expected economic growth The global nickel and zinc prices are guided by the raw material needs of industry and the expected economic growth in emerging economies in particular. In the commodity markets, the global nickel price is mostly determined by demand for stainless steel, whereas the price of zinc is affected customarily by the needs of the construction and vehicle industries.
Although the developed economies were hit hard by the financial crisis that began in 2008, their economic
20
TODAY AND TOMORROW
growth is expected to continue progressively. Emerging economies, however, were considerably less affected. Per capita consumption of steel in emerging economies is still lower than in developed economies, but the gap is gradually reducing as the standard of living rises in emerging economies. In 2010, the demand for stainless steel was already at a higher level than before the financial crisis.
Low-cost nickel resources are diminishingMany low-cost nickel deposits are diminishing. In order to replace them, several high-volume, but also high-cost, nickel projects are being planned around the world. In the medium term, their successful completion is the most important factor affecting the global nickel price, along with the demand maintained by developed and emerging economies, especially China.
In terms of nickel price development, it will be crucial how the new projects will be able to meet the expectations placed on them as regards project and ramp-up schedules and realised production costs and volumes. Return expectations relating to these projects are attenuated by the fact that the projects are usually based on a high-pressure acid leaching method, which is not only often expensive but also technically challenging. Moreover, the launch of the new nickel projects will take a long time, and there is no certainty at present that their anticipated production cost or production volume levels will be achieved.
In the long term, the average nickel price is likely to rise with the increase in average production costs.
Chinese demand leading the wayThe global nickel price is also significantly affected by the interest of Chinese producers in buying nickel in addition to their own nickel production. There are many small nickel producers in China that produce significant quantities of a low-quality ferro nickel product known as nickel pig iron (NPI), mainly from iron ore or nickel ore imported from other parts of Asia. At the same time, China buys large quantities of primary nickel for the manufacture of stainless steel from the international markets, as the production costs of NPI are high and its range of applications is more limited than that of high-quality primary nickel.
Even if the most challenging new nickel projects were completed successfully and nickel supply were to increase significantly, Talvivaara sees no high risk of oversupply. Strong demand for stainless steel is expected to continue, especially in the emerging markets, and in the long term, the decline in the supply of low-cost nickel will contribute to the global nickel price remaining at a good level. If the
price fell, some of the supply would diminish rapidly, and the operations of small NPI producers, for example, would become unprofitable.
Zinc oversupplyAlthough zinc is needed in many applications in mod-ern society, its global price outlook is shadowed by the structural oversupply of primary zinc, which began in 2006. Furthermore, no significant new zinc projects that would be economically viable at the current price level are known.
The situation is expected to improve temporarily in 2012–2013, when supply is forecasted to be equal to or slightly lower than demand. However, the situation of oversupply is expected to restart in 2014, but this and the extent of the imbalance will also be affected by the zinc price development.
It should be noted, however, that despite the continu-ing oversupply, zinc price has not fallen permanently to a level that would force zinc mines with the highest produc-tion costs to shut down their operations.
Talvivaara’s NiCo sulphide.
21
II Business re view22
Business re view23
Focus on productionOur organisation in Sotkamo worked intensely in 2010 to continue the ramp-up of production. As a result, our nickel production amounted to 10,382 tonnes and zinc produc-tion to 25,462 tonnes. The significant increase from last year’s 735 tonnes of nickel and 3,133 tonnes of zinc shows that all production processes work on a commercial scale. The 2010 production figures also indicate that the full-scale production target of some 50,000 tonnes of nickel and 90,000 tonnes of zinc per annum is feasible.
Management’s Review of 2010The ramp-up of Talvivaara’s Sotkamo mine was the focus of our operations in 2010. The Company’s business was developed further through important commercial agreements and increased investments in sustainable development. Our first full-year operating profit in 2010 proves that we are on the right track, and the Company’s strong financial position at year end provides a solid base for the further development of Talvivaara’s business in 2011.
BUSINESS REVIEW
Despite the promising progress of the ramp-up, there were some problems and the company did not reach its production target for 2010. The metals recovery plant in particular required extra attention, because 2010 was the first year of its operation at a commercial level of utilization rate. The plant experienced several operation-related and technical problems that are typical of the ramp-up phase, resulting in several short-term outages. There were also some more extensive stoppages, caused by, e.g., a hydrogen plant failure and a transformer failure. The
24
BUSINESS REVIEW
plant was also forced to restrict production levels at times as a result of odour nuisance related to hydrogen sulphide emissions. This problem was actively tackled from spring to early autumn, and the introduction of a new process chemical has improved the situation considerably.
With respect to other processes, most of the typical early-stage issues had already emerged and largely been solved. As a result, the mining department increased its production by 99% and material handling by 56% year on year. Bioheapleaching also progressed well, mostly thanks to successful process development. In particular, improved heap aeration produced good leaching results.
All in all, the growth trend in production was on a good track in 2010, and nickel production increased at a steady pace of almost 20% per quarter from the second quarter onwards. The Company aims to maintain this trend, and to boost the growth rate even further toward the end of 2011. However, successful ramp-up to full capacity still requires more work, as we need to optimise processes and eliminate technical bottlenecks.
Investments supporting the ramp-upSignificant investments in the mine area continued in 2010. Major investments included the second production
line at the metals recovery plant, the second hydrogen plant, construction of secondary heap foundations, and both primary heap reclaiming and secondary heap stacking equipment.
With these investments, the company can increase production to the targeted full-scale production. Some investments, particularly the second hydrogen plant and the second production line for the metals recovery plant, also increase the reliability of operations by introducing redundancy in critical process phases.
Most of the investments required by the mine have been made, but the work continues. The foundation of the secondary heap, covering almost four square kilometres, is still partly under construction even though its first sections have already been brought into use. The construction of a solvent extraction plant to produce uranium as yellow cake concentrate will be the company’s next investment project.
Well-balanced financesIncreased production supported the Company’s financial development. Net sales grew from EUR 8 million in 2009 to EUR 152 million in 2010, and the Company posted its first full-year operating profit of EUR 25 million. In addition to increased production, the company’s net sales
25
BUSINESS REVIEW
and profitability were boosted by the rising market price for nickel, especially toward the end of 2010.
Production costs remained more or less at the expected level. However, rising energy costs and cold weather created some additional costs near the end of the period. Consumption of chemicals, especially that of caustic soda used to control hydrogen sulphide emissions, exceeded forecasts. However, this cost item will not have as significant effect in the future, because caustic soda has mostly been replaced by hydrogen peroxide, which is less expensive. Investments in 2010 totalled EUR 116 million, as budgeted.
The Company’s financial position developed favourably in 2010. In February, Talvivaara repaid the USD 320 mil-lion Project Term Loan Facility that was drawn in 2008 to finance most of the investments related to the construc-tion of the mine. The advance payment received from Nyrstar for the Zinc in Concentrate Streaming Agreement was used to pay off the Project Term Loan Facility in full.
In June 2010, Talvivaara signed an agreement for a EUR 100 million three-year corporate revolving credit facility. In December 2010, Talvivaara completed an offering of EUR 225 million in convertible bonds, to mature in 2015. The proceeds from the convertible bonds were used to pay all credit facility items drawn so far, and the Company’s cash and cash equivalents at year end totalled EUR 166 million. The Company is in a good financial position, and its operational cash flow is expected to become positive in 2011.
Personnel as the keyTalvivaara had 389 employees at year end and expects to add some 60 persons to its workforce in 2011.
The rapid increase in personnel poses a considerable challenge, because skilled employees are critical to successful ramp-up and also for profitable operations after the ramp-up is complete. The personnel’s competence is
Nickel production 2010 (tonnes)
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0610
Q1–10
2 729
Q2–10
3 211
Q3–10
3 831
Q4–10
Zinc production 2010 (tonnes)
10 000
8 000
6 000
4 000
2 000
0
2 960
Q1–10
5 575
Q2–10
7 557
Q3–10
9 369
Q4–10
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BUSINESS REVIEW
developed and maintained via vocational training, which also promotes job rotation and ensures that professional skills supporting Talvivaara’s growth can always be found within the Company.
Further increase in mineral resourcesTalvivaara upgraded its mineral resources in October, reporting a 54% increase in total resources, which brings the total to 1,550 million tonnes. The upgrade stems from drilling campaigns at the Kuusilampi and Kolmisoppi deposits in 2009 and 2010. Most of the increase in resources comes from Kolmisoppi. The drillings continue, and there remains significant exploration potential between the deposits and to the north of the currently known Kolmisoppi deposit.
The increase in resources further strengthens Talvivaara’s potential to develop as an internationally significant base metals producer and has given rise to new plans to expand production further.
Growth potential from business development projectsA groundbreaking Zinc in Concentrate Streaming Agree-ment was signed with NyrstarIn January 2010, Talvivaara signed a Zinc in Concentrate Streaming Agreement with Nyrstar, the global leader in zinc production. Under the terms of the agreement, Talvivaara will deliver all of its zinc in concentrate production to Nyrstar until a total of 1,250,000 metric tonnes of zinc in concentrate have been delivered. Nyrstar paid a USD 335 million advance payment for the zinc stream, in addition to which Talvivaara will receive a processing fee for each tonne of zinc delivered. Talvivaara
is also entitled to pricing participation when the market price for zinc exceeds certain agreed limits.
The agreement is a global first for base metals and was well received in the market and among the shareholders of both Talvivaara and Nyrstar.
Recovery of uranium is plannedIn February 2010, Talvivaara announced its plan to recover uranium in the form of uranium oxide, or yellow cake, from the solution obtained from the bioheap leaching process. The solution does not contain much uranium, but a recently developed technology makes it commercially viable to extract even low levels of uranium as long as there is sufficient leach solution.
The permitting process, technical development, and commercial arrangements for the project progressed well in 2010. Talvivaara’s application to the Ministry of Employment and the Economy for a permit in accordance with the Nuclear Energy Act was filed in April, and the environmental impact assessment (EIA) was in progress for most of the year. Talvivaara held several information sessions with local residents and the media, to provide information and hear the public. The permit process is still ongoing as of March 2011, but the Company believes that the decision will be made in 2011.
The technical planning of the solvent extraction plant began in early 2010. During the autumn, the planning proceeded with a Canadian commercial partner, Cameco Corporation. A uranium off-take agreement was signed with Cameco in February 2011 and will be in effect until 2027. Talvivaara estimates that the sales of uranium will account for, at maximum, five per cent of net sales.
Expansion of production is the long-term targetWith the upgrade of mineral resources, Talvivaara is in a position to consider further expansion of its produc-
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PREGNANT LEACHSOLUTION POND
100 %
COPPER SULPHIDE
ZINC SULPHIDE
NICKEL-COBALTSULPHIDE
REACTOR
REACTOR
REACTOR
AGGLOMERATION WITH SULPHURICACID
PRIMARY CRUSHING
OPEN PIT MINING
SECONDARY HEAP
PRIMARY HEAP
HEAP AERATION
SECONDARY CRUSHING
TO INTERMEDIATE STORAGE
90 %
10 %
BACTERIA+ SULPHURICACID
STACKING
TERTIARY CRUSHINGAND SCREENING
QUATERNARY CRUSHINGAND SCREENING
RAFFINATE POND2400 M
TILTED 3°
800 M
INTERMEDIATE STORAGE
BUSINESS REVIEW
tion capacity. The Company may be able to even double its currently targeted production volume. A project group was established towards the end of 2010 to review the planned expansion project. This group will issue reports and plans concerning the technical design, permits, and possible final products during 2011. The initial target is to initiate the required permit processes in 2011, begin the necessary expansion investments in 2013–2014, and start expanding the production capacity in 2015 at the earliest. However, no investment decisions have yet been made, nor can they be made until the necessary evalua-tions of the feasibility of the project are available.
Focus on sustainable developmentIn 2010, the Company published its sustainability policy and introduced new environmental management tools. Responsible business operations address financial, environmental, and social responsibility and Talvivaara promotes sustainable development through products that improve eco-efficiency. Talvivaara’s overall target in relation to sustainable development is to be a forerunner in responsible mining operations.
The Company reached an important milestone in December 2010, when Talvivaara was awarded certifica-tion for its environmental management system, to the ISO 14001 standard. The system covers all of the Company’s operations. Under the ISO 14001 system, Talvivaara’s fu-ture goals include continuous improvement, sustainable and economical use of natural resources, and develop-ment of all processes so as to minimise the environmen-tal impact of the Company’s operations and of the mine.
The planned recovery of uranium is an example of sustainable and economical use of natural resources. If it commences, the recovery of uranium will help to utilise all valuable materials from the mined ore and reduce the levels remaining in waste materials.
The permit applications made in 2010 were related to the recovery of uranium in yellow cake concentrate form and to the update of the existing environmental per-mit. The EIA related to the recovery of uranium was per-
formed in 2010, and the environmental permit applica-tion will be submitted in the first quarter of 2011. The process for renewal of the current environmental permit for the mine too will begin during the first quarter. The updates required for the renewal application were almost complete by the end of 2010.
Valuing occupational health and safety, Talvivaara aims to provide a safe and healthy work environment. The Company continued to enhance its safety procedures in accordance with the zero accidents goal.
The targets related to the new chemical regulations REACH and CLP were reached in 2010. Nickel and zinc sulphide dossiers were submitted to the authorities, and the CLP data for all of Talvivaara’s substances were compiled.
Talvivaara was among the 26 Finnish companies that participated in the CDP carbon footprint project. Having collected information and compiled reports for the project, Talvivaara is now well equipped to optimise its greenhouse gas emissions in the future.
Implementation of the strategyTalvivaara implemented the strategy approved by the Board of Directors by focusing on the ramp-up of nickel production at the Sotkamo mine. The Company aims to secure a competitive position as a cost-efficient, low-cost base metal producer. With the ramp-up still ongoing, the Company has not fully reached this target yet, but it did take significant steps in the right direction in 2010.
Talvivaara’s long-term strategy is to grow and develop as an internationally significant base metals producer; also after the targeted production level has been reached at the Sotkamo mine. To support this aim, the Company is reviewing the possibility of expanding its production capacity further, to provide Talvivaara with highly competitive nickel capacity from the end of the decade onwards.
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PREGNANT LEACHSOLUTION POND
100 %
COPPER SULPHIDE
ZINC SULPHIDE
NICKEL-COBALTSULPHIDE
REACTOR
REACTOR
REACTOR
AGGLOMERATION WITH SULPHURICACID
PRIMARY CRUSHING
OPEN PIT MINING
SECONDARY HEAP
PRIMARY HEAP
HEAP AERATION
SECONDARY CRUSHING
TO INTERMEDIATE STORAGE
90 %
10 %
BACTERIA+ SULPHURICACID
STACKING
TERTIARY CRUSHINGAND SCREENING
QUATERNARY CRUSHINGAND SCREENING
RAFFINATE POND2400 M
TILTED 3°
800 M
INTERMEDIATE STORAGE
BUSINESS REVIEW
PRODUCTION PROCESS
29
Chief Geologist Jukka Pitkäjärvi is pleased with recent exploration results.
The DepositsThe Talvivaara deposits are located within the Proterozoic Kainuu Schist Belt, which consists mainly of quartzites, mica schists and black schists resting unconformably on the Archaean basement gneiss complex.
The Ni-Cu-Co-Zn mineralisations at Kuusilampi and Kolmisoppi are hosted almost entirely by high grade metamorphosed and intensively folded black schists. The main mineral assemblage in the black schists is quartz, biotite, graphite and sulphides. Sulphide content in the ore is typically from 15 to 25% and the main sulphides are pyrrhotite, pyrite, pentlandite, sphalerite and chalcopyrite. Roughly about 90 % of the ore is hosted by black schist and the rest 10% by metacarbonate rocks, phyllites, mica schists, quartzites, graywackes and quartz wackes.
Pentlandite contains between 75-88% of the contained nickel and pyrrhotite is the second most important mineral in terms of nickel content. Pyrite contains the main share (between 67-90%) of contained cobalt while chalcopyrite is carrying copper and sphalerite is carrying zinc.
Mineral ResourcesThe Paleoproterozoic black schists in Finland typically exhibit low concentrations of uranium. Also the black schist hosted ore at Talvivaara contains uranium in concentrations ranging from 0.0001% to 0.004% U. Uranium occurs as thucholite which is a mixture of hydrocarbons, uraninite and sulphides. Also curite type lead uranium hydroxide has been encountered.
Mineral ResourcesDuring the year exploration produced excellent results, culminating in significant resource increase from 1,004 million tonnes to 1,550 million tonnes. Mineral Resources have been reported and classified according to the definitions and guidelines of The 2004 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”) as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. The Competent Person as defined by the JORC Code is Chief Geologist Jukka Pitkäjärvi, MAusIMM.
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Exploration The main exploration target in 2010 was Kolmisoppi deposit where resource definition drilling programme was carried out between September 2009 and June 2010. 30 new diamond drill holes (13,653 meters) were completed and the campaign resulted in a 270% increase in total resources at Kolmisoppi from 178 Mt to 660 Mt. At the Kuusilampi deposit diamond drilling focused on improving the resource classification and resulted in a 56% increase in Measured and Indicated categories.
Talvivaara rig drilled 11,265 meters and a contractor 7,680 meters bringing the total meters for 2010 to 18,945 meters. A total of 591 diamond drill holes with total length of approximately 125,000 meters has been drilled at Talvivaara.
The exploration potential remains excellent in the Talvivaara area. There are strong geophysical anomalies between known deposits and they will be tested by diamond drilling. Furthermore, two and a half kilometres North from current Kolmisoppi resource boundary there are two old diamond drillholes intersecting mineralised black schist which can represent North extension of Kolmisoppi deposit. This possible extension will be tested in 2011.
Kuusilampi Cross-section 10 800 Kolmisoppi Cross-section 15 180
1000Z
0Z
709400N 709500N 709600N 709700N 709800N 709900N 710000N 710100N 710200N 710300N 710400N
-1000Z
Kuusilampi Kolmisoppi Kolmisoppi NorthPROFILES 12 000 & 13 000
Exploration Potential (Long Section Looking West)
2 500 m
Deposit Geology
Kolmisoppi
Kuusilampi
The Known Dimensions of the OrebodiesLength Width Depth
Kuusilampi 2800m 40–600m 800m
Kolmisoppi 2500m 30–350m 800m
Ni-Cu-Zn-Co Ore
Diabase
Black Schist
Mica Schist
Quartzite
Archaean Rocks
BS interlayers
Drillhole
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31
Open Pit
Secondary Heap
Metals Recovery
Primary Heap
Kuusilampi
Kolmisoppi
Definition of Mineral Resources(the JORC Code)A ‘Mineral Resource’ is a concentration or occurrence of material of int-
rinsic economic interest in or on the Earth’s crust in such form and quan-
tity that there are reasonable prospects for eventual economic extraction.
The location, quantity, grade, geological characteristics and continuity of
a Mineral Resource are known, estimated or interpreted from specific
geological evidence and knowledge. Mineral Resources are sub-divided,
in order of increasing geological confidence, into Inferred, Indicated and
Measured categories.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for
which tonnage, grade and mineral content can be estimated with a low
level of confidence. It is inferred from geological evidence and assumed
but not verified geological and/or grade continuity. It is based on infor-
mation gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes which may be limited
or of uncertain quality and reliability.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource
for which tonnage, densities, shape, physical characteristics, grade and
mineral content can be estimated with a reasonable level of confidence.
It is based on exploration, sampling and testing information gathered
through appropriate techniques from locations such as outcrops, tren-
ches, pits, workings and drill holes. The locations are too widely or inap-
propriately spaced to confirm geological and/or grade continuity but are
spaced closely enough for continuity to be assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource
for which tonnage, densities, shape, physical characteristics, grade and
mineral content can be estimated with a high level of confidence. It is
based on detailed and reliable exploration, sampling and testing infor-
mation gathered through appropriate techniques from locations such
JORC Classification of Talvivaara Resources
Mineral Resources Class
Mil-lion t Ni% Zn% Co% Cu% U%
KuusilampiMeasured 331 0.23 0.50 0.02 0.13 0.0016
Indicated 457 0.23 0.50 0.02 0.13 0.0017
Sub total 789 0.23 0.50 0.02 0.13 0.0017Inferred 101 0.14 0.44 0.01 0.09 0.0018
Total 890 0.22 0.49 0.02 0.13 0.0017KolmisoppiMeasured 101 0.24 0.51 0.02 0.14 0.0019
Indicated 232 0.24 0.50 0.02 0.14 0.0019
Sub total 333 0.24 0.50 0.02 0.14 0.0019Inferred 328 0.22 0.48 0.02 0.13 0.0017
Total 660 0.23 0.49 0.02 0.13 0.0018Grand TotalMeasured 432 0.23 0.50 0.02 0.13 0.0017
Indicated 689 0.23 0.50 0.02 0.13 0.0018
Sub total 1121 0.23 0.50 0.02 0.13 0.0018Inferred 429 0.20 0.47 0.02 0.12 0.0017
Total 1550 0.22 0.49 0.02 0.13 0.0017
Cut-off 0.07% Ni
as outcrops, trenches, pits, workings and drill holes. The locations
are spaced closely enough to confirm geological and/or grade
continuity.
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32
Development of TechnologyTalvivaara pursues an active research and development strategy, the primary objective of which is to develop the production process and minimise its environmental impact. In 2010, opportunities to recover uranium were studied and technical solutions were examined to control odour emissions from the mine.
T alvivaara’s research and development strategy is closely linked with the company’s operations. At
present, the company’s R&D activities mainly serve the ongoing production ramp-up and the development of bioheapleaching. During the ramp-up phase, the primary objective of the development work is to increase production capacity, upgrade metals recovery and reduce environmental impact.
Talvivaara has a small R&D department and a research laboratory. The production departments also participate in development work, playing a key role in the enhancement of the production process, in particular.
In 2010, the efficiency of bioheapleaching was improved by developing the aeration system of the heap and by testing various heap shapes and heights. Talvivaara also developed the permeability of crushed ore to increase the rate of leaching in nickel production. The heaps are monitored intensively. This has provided a better understanding of the behaviour of the heaps under different conditions.
BUSINESS REVIEW
Manager Bioleaching Pauliina Nurmi by the primary heap, taking samples of the pregnant leach solution.
3333
Continuous development of the quality and composition of products is also an important part of R&D work. The structure of the ore obtained from the mine is regularly analysed on the basis of drilling samples, and the acidity, temperature and metal concentrations of the solutions of the bioheapleaching process are monitored almost daily at the company’s laboratory. Solutions from the metals recovery process are also analysed daily, or even on an hourly basis, if necessary. In addition, Talvivaara monitors the quality of raw materials and performs commercial analysis of product precipitates.
In addition to analysis relating to products and the production process, the use of nearby bodies of water is monitored. For this work Talvivaara has qualified sampling personnel whose expertise has been certified. Environmental samples are analysed on a daily basis at both Talvivaara’s own laboratory and external laboratories. Analytical methods are continuously developed in line with analysis requirements.
Good results through networkingIn addition to independent research work, Talvivaara cooperates with external partners, such as customers, technology and equipment suppliers, research institutes and several Finnish universities. In its R&D work, the company also takes advantage of its extensive
international network of technology companies and other mining companies.
We believe that an operating model based on networking will produce the best results. Talvivaara can bring its own expertise to the R&D projects and provide its partners with an excellent research environment and opportunities to apply their technologies. For example, equipment and raw material suppliers can test their products at Talvivaara.
Talvivaara participates in several research projects supported by Tekes, the Finnish Funding Agency for Technology and Innovation. These include the ELEMET (Energy & Lifecycle Efficient Metal Processes) programme administered by FIMECC Oy (Finnish Metals and Engineering Competence Cluster). The programme studies, among other things, ion-exchange technologies which would enable the recovery of certain trace elements from Talvivaara’s solutions.
Talvivaara also takes part in an innovation environ-ment project of the mining and mineral industry coor-dinated by the University of Oulu. The objective of this project is to train experts in the mining and mineral in-dustry and develop research in the field by creating a lead-ing national network for the industry. The project also includes construction of a test enrichment plant on the premises of the University of Oulu to be used by compa-nies and research institutes in the industry.
BUSINESS REVIEW
Manager Metals Recovery Ville Heikkinen in the reactor hall.
34
Recovery of new metals and utilisation of by-productsIn addition to nickel, zinc, copper and cobalt, Talvivaara ore also contains some other soluble metals, such as manganese and uranium, and several trace elements, which could be utilised in commercial products. In 2010, Talvivaara carried out studies relating to the recovery of uranium. At the moment, uranium present in the solution of the metals recovery process is deposited in the gypsum pond, but Talvivaara plans to construct a uranium extraction circuit based on solvent extraction technology.
Energy and metallurgical industries produce various by-products, such as waste slags and ashes, which Talvivaara could use for solution purification. Talvivaara has launched several projects to utilise these resources.
Improving the quality of zinc precipitate In 2010, Talvivaara started a project to improve the quality of zinc precipitate. The related development work was carried out in collaboration with Talvivaara’s zinc customer, Nyrstar NV. At present, the zinc content and purity levels of the product are good, but solutions are still being sought to reduce the moisture content so as to be able to shift from container transportation to less expensive bulk transport modes.
Lower production costs through biological iron removalWith the objective of saving on production costs, Talvivaara continuously develops new methods, such as biological iron removal, which reduces the consumption of limestone used in solution purification. The efficiency of the biological iron removal method has already been proven, and next the project will focus on process and equipment development on a larger scale, probably in collaboration with an external partner.
By upgrading metals recovery and improving the efficiency of raw material use, Talvivaara also promotes sustainable development and pursues its environmental goals.
Odours Under ControlWith a view to controlling odours caused by hydrogen sulphide
emissions from the mine, several technical solutions were
studied throughout the year. Talvivaara began development
work on existing gas scrubbers and replaced one scrubber
with a double scrubber installation. The efficiency and
reliability of the equipment were improved, for example, by
increasing the pressure of the scrubbers and using lye in the
wash solution.
In addition, an oxidation technique using hydrogen perox-
ide was introduced in metals recovery. The suppliers of hy-
drogen peroxide participated in the development of hydrogen
peroxide dosing by providing tanks and pumps and assisting
in the installation of test equipment. Thanks to smooth co-op-
eration, the process could be commissioned rapidly.
With the help of hydrogen peroxide, the sulphur present
in the process solution can be oxidised and made complete-
ly odourless. However, the technique still requires fine tuning
so that the entire production process can be balanced. Odour
emissions have already reduced, but the development work
continues due to side effects on production.
There are numerous techniques for controlling odour
emissions. Talvivaara will continue development work by test-
ing scrubbers and studying biological scrubbing methods.
Tests to Recover Uranium Talvivaara has applied for a permit to extract natural uranium
from ore. At present, most of the soluble uranium from the
leach is deposited in the gypsum pond with the gypsum
produced in the metals precipitation process, and a small part
of the uranium ends up in Norilsk Nickel’s refining processes
with the nickel precipitate produced. Therefore, uranium could
be recovered profitably from the process solution before nickel
recovery and the subsequent solution purification phases.
Process planning and final tests for the uranium extrac-
tion circuit have been completed. The uranium product pro-
duced in the process tests was of good quality. The positive
results demonstrated that Talvivaara has the technical pre-
requisites to proceed to the implementation stage of the re-
covery project.
BUSINESS REVIEW
35
36
37
T alvivaara’s responsible business operations incorpo rate three dimensions of corporate social responsibility:
economic, environmental, and social aspects. Through its responsible business operations, the company seeks to meet the challenges of sustainable development and ensure the conditions necessary for Talvivaara’s solid operation far into the future. Talvivaara continues to develop the monitoring of its activities and is extending the scope of its reporting on the various responsibilities in the Annual Report.
Talvivaara bears its economic responsibility appropri-ately by ensuring its profitability and developing its com-petitiveness. The primary objective of the company’s en-
SUSTAINABILITY
vironmental management is to ensure the sustainable and economical use of natural resources and to minimise the adverse effects on the environment caused by its min-ing operations. Talvivaara is strongly committed to the development of its personnel’s well-being and profes-sional skills. In addition, the company fulfils its social re-sponsibility by providing information on its operations as openly as possible and by actively developing stakeholder engagement.
The Talvivaara mine is in the municipality of Sotkamo, in Eastern Finland’s Kainuu region. Talvivaara promotes regional development and creates prosperity for the region by offering employment and by co-operating closely
Sustainable DevelopmentTalvivaara promotes sustainable development through its responsible business ope-rations and products that improve eco-efficiency. In 2010, the company published its sustainability policy and introduced new environmental management tools. The goal is clear: Talvivaara aims to grow into a pioneer of responsible mining.
38
with local educational institutions and service providers. Locally, Talvivaara’s activities have a very extensive impact. Therefore, it is important for the company to develop open dialogue with the local community and the surrounding areas.
Aiming to be a pioneerIn all of its activities, Talvivaara aims to be a pioneer in the mining industry. Throughout its operations, the company seeks to act more responsibly and report more fully, to meet the increasing expectations of the legislation and stakeholders. The aim is to perform much better in all areas of responsibility than the minimum required by standards. For example, with respect to social responsibility, Talvivaara already exceeds the minimum legal requirements by a large margin.
As a young company, Talvivaara has had the opportunity to develop responsible best practices from the very start and to introduce environmentally efficient technology. Thanks to an eco-efficient metals recovery process that is more efficient than conventional production methods, as well as the best new technology, an advanced operating environment, and a high level of expertise, Talvivaara is in an excellent position to grow into a true pioneer in responsible mining.
Products promoting sustainable developmentTalvivaara also promotes sustainable development through its products that reduce environmental load. The company processes ore into intermediary products, which are further processed by its customers into metals and chemicals used by industry, producing mainly nickel and zinc.
Most of the world’s nickel and zinc production is destined for the manufacture of high-quality steel products. Nickel is used in stainless and acid-resistant steel, the applications of which include pots and pans as well as kitchen and hygienic surfaces. Zinc is used to protect steel against corrosion and thus extend the life of steel products. Zinc finds application in the construction and vehicle industries, among other fields. Nickel and zinc are also used in many other products in modern society, such as batteries for mobile phones and laptop computers, household appliances, wind power plants, turbines, rotors, and piping systems.
Metals can be recycled endlessly without losing their good characteristics. Therefore, the use of high-quality and long-life metals promotes sustainable development by extending the lifetime of the products and improving their eco-efficiency. It is essential that metals are recycled as efficiently as possible. Recycling can be supported through responsible design of end products and by education of end users.
SUSTAINABILITY
New environmental and quality management toolsIn 2010, Talvivaara introduced new environmental and quality management tools to guide responsible business operations. These new management tools and more clearly set targets provide a solid foundation for Talvivaara’s efforts to promote corporate social responsibility and enhance its practical measures.
Sustainability policyIn 2010, Talvivaara published its sustainability policy, approved by the Board of Directors, committing itself to operations that follow the principles of sustainable devel-opment. The sustainability policy and the related envi-ronmental management principles and policies regarding occupational health and safety now define Talvivaara’s goals in the area of corporate social responsibility even more clearly.
ISO 14001 environmental management certificateAt the end of the year, Talvivaara was awarded internation-al certification for its environmental management system, to the ISO 14001 standard. The system can be used for monitoring the mine’s operations and ensuring that they and their effects comply with the company’s sustainability policy. The certificate requires that the effects and environ-mental aspects of the company’s operations be charted as comprehensively as possible. In addition, targets must be set for continuous improvement of operations.
ISO 14001 systems are among the best known environmental management tools in the world, and
Talvivaara’s Sustainablity Policy
The financial success of our operations goes hand in hand •
with our operations’ efficiency, social responsibility, and en-vironmental performance.
We believe that by developing our operations in accord-•
ance with the principles of sustainable development, we can attract the most suitable and qualified professionals, operate efficiently and safely, and thereby improve our competitiveness.
In all of our activities, we aim to be a pioneer in the mining •
industry. We actively develop new products, processes, and methods to improve the efficiency of the use of natural re-sources, materials, and energy and to reduce the environ-mental impact of our operations.
We produce high-quality raw materials that improve our •
customers’ energy efficiency and eco-efficiency.
39
This dam by the settlement pond of Lumelantie was built in a record time after the leakage in the Gypsum pond.
Talvivaara is very proud of receiving the certificate at such an early stage.
5S methodIn 2010, Talvivaara also introduced the 5S management tool, for organising workstations and harmonising work methods so as to improve the work’s quality, safety, and efficiency. The implementation of the 5S tool has already produced ex-cellent results, in, for example, bringing the company more straightforward safety practices and tidier work spaces.
2010 and the near future In 2010, Talvivaara worked to improve the utilisation of ore through the uranium recovery project. The environ-mental impact assessment for this project was carried out with strong engagement by stakeholders, and radiologi-cal baseline studies were initiated. Talvivaara improved its water balance management by constructing new dams and solution ponds. The monitoring of Talvivaara’s im-pact was developed through participation in internation-al carbon footprint reporting and starting of wind power measurements in the mine area. Occupational safety at the mine was developed with improved traffic safety and clarification of simple but effective safety instructions.
However, some regrettable environmental problems nonetheless were experienced in the course of the year, such as leakage from the gypsum pond, the occasional spread of hydrogen sulphide odours to nearby communi-ties, and dust emissions at the mine. Talvivaara learned from the problems and worked hard to solve them. The leak in the gypsum pond was repaired, and its effects were found to be local only, remaining within the mine area. The best technical solution for controlling odour emissions is still being sought.
In 2011, Talvivaara aims to improve its water balance management and material efficiency, develop its waste management further, and progress from the planning phase to the testing of pilot structures in the implementation of restoration. Efforts to reduce levels of harmful impurities in the atmosphere at the workplace will continue, mainte-nance in the mine area will be improved both indoors and outdoors, and safe models of operation will be developed – to decrease the lost time injury frequency rate.
SUSTAINABILITY
Environmental Management Principles Where environmental performance is concerned, Talvivaara’s
goal is to be among the world’s top companies in the industry.
Our environmental management is guided by the following
principles:
We operate in compliance with all requirements set by the •
competent authorities.
We respect both our environment and stakeholders’ ex-•
pectations, and we provide information on the environ-mental impact of our operations openly.
We commit ourselves to the continuous improvement of •
our environmental performance, the management of risks related to our operations, and the reduction of environ-mental impact.
We expect our partners and suppliers to comply with the •
same principles of operation we follow.
Principles for Occupational Health and SafetyWith respect to occupational health and safety, our goal is a
healthy and safe work environment. Our safety work is guided
by the following principles:
We consider all aspects of safety carefully during the plan-•
ning phase, well in advance of the work.
We look after our own safety and that of our colleagues.•
We address any unsafe practices immediately.•
We investigate the root causes of all accidents, incidents, •
and ‘near-misses’ thoroughly and continuously develop best practices in safety.
40
Management Milestones in 2010 Major projects in 2011
Building a management system ISO 14001 certification of the environmental manage-ment system.
Development of the management system
Harmonisation and streamlining of processes
Continuous risk management relating to hazards
Audit of the comprehensiveness and up-to-dateness of risk assessments.
Risk assessments relating to safety will be updated (environment, oc-cupational safety, catastrophes, chemicals)
Good housekeeping Implementation of the 5S philosophy began at Talvivaara. Implementation of 5S continues
Environment Milestones in 2010 Major projects in 2011
Reduction of H2S emissions New gas scrubbers were developed, neutralisation sys-
tem for hydrogen sulphide in thickeners was completed.Control of fugitive emissions continues
Reduction of dust emissions All crushing operations indoors and/or enclosed proc-esses. More efficient watering of roads.
Control of dust emissions continues
EIA and baseline study relating to the recovery of uranium
EIA has been completed and a radiological baseline study has been initiated.
The radiological baseline study continues
Improvement of water balance management
New infrastructure, dams and solution ponds were con-structed. Capacity to manage rain and melt water was increased.
Development of water circulation continues
Continuous implementation of restoration
Continuous implementation of restoration
Improvement of material efficiency Improvement of material efficiency
Energy and climate change Milestones in 2010 Major projects in 2011
Reduction of emissions from electricity production
Wind power measurements were started. Wind power measurements continues
We became a shareholder of Fennovoima to secure our future electricity supply.
Monitoring of carbon footprint We participated in international carbon footprint reporting.
Monitoring of carbon footprint continues
Occupational health and safety Milestones in 2010 Major projects in 2011
Reductions in the number of employ-ees exposed to occupational health hazards
Air quality at workstations was improved by improving ventilation and enclosing processes.
Reduction of exposure continues
PPE matrices were drawn up for each work site and training was provided in the correct use of PPE and oc-cupational hygiene.
Improvement of occupational hygiene continues
Improvement of traffic safety in the mine area
New traffic arrangements were made in the mine area, the area was equipped with traffic signs, and guidelines for moving around in the area were issued.
Continuous training of personnel Systematic training in the use of hoisting apparatus was organised: forklifts, work platforms, bridge cranes.
Continues with new subject areas
Community Milestones in 2010 Major projects in 2011
Development of interaction and com-munity involvement
An open door day was organised. Extensive participa-tion by stakeholders in the EIA steering and monitoring groups relating to uranium. Local residents participated in environmental sampling. A survey was conducted among residents and tourism entrepreneurs.
Continues with new subject areas
Increased communication Annual report and web pages on sustainable development. Safety in-formation for nearby residents.
SUSTAINABILITY
41
SUSTAINABILITY
Safe Production Processes and Product SafetyTalvivaara ensures that its operations do not cause any risk to people or the envi-ronment. In 2010, Talvivaara focused on the development of product safety by re-gistering its products in accordance with the EU’s REACH regulation and preparing new safety data sheets for its customers.
T alvivaara’s operations involve the handling and stor-age of dangerous substances covered by the Seveso
II directive. For this reason, Talvivaara’s production processes are planned so as to minimise the possibility of unexpected emissions and accident hazards. In addi-tion, the company prepares for accident hazards through continuous risk assessment and development of safety procedures.
Regulations and lawsTalvivaara’s safety management is guided by Finnish legislation, international regulations, and the company’s
own safety culture. With respect to chemical safety, Talvivaara’s operations are regulated by the EU’s Seveso II directive, the REACH regulation, and the CLP product information requirements.
Talvivaara’s operations are supervised by several authorities, which conduct inspections at the mine regularly. The most important supervising authorities include environmental authorities, state health and safety officials, the Finnish Safety and Chemicals Agency (Tukes), dam safety authorities, and the inspector of mines.
Talvivaara has the necessary permits for its current operations. In the ramp-up phase, the company has also applications pending for permits.
42
SUSTAINABILITY
Risk managementRisks Our Approach
Occupational health and safety risks
Operation and work instructions
Co-operation in the workplace
Certified ISO 14001 environmental management system
Safety report
Internal rescue plans
Hot work operation plans and ATEX documents
The site’s fire brigade
Environmental risks
Fire and accident risks
Natural forces
In 2011, Talvivaara will submit an application to update its environmental permit and an environmental permit application for the planned uranium extraction circuit. In addition, all risk assessments related to safety, environment, and internal rescue plans will be updated. The plan for later in the year involves initiating an environmental impact assessment for the increase in production capacity.
Continuous assessment of risksAt Talvivaara, risk management related to safety means systematic preventive measures to identify hazards, assess risks, and reduce the risk level. As a new mine, Talvivaara uses the best modern technology available, which contributes to the safety of operations.
The continuous risk management is based on good basic design of the production processes. Systematic risk assessments and hazard and operability (HAZOP) studies have been conducted for the processes and new production phases.
In addition, a safety report as required by the Seveso II directive has been prepared for Talvivaara, and the related risk assessments have been performed. These demonstrate that the mine has introduced a rescue plan and a safety management system as well as policies for the prevention of major accidents. The safety report and the rescue plan are updated regularly.
A top-notch safety infrastructure and cultureAt Talvivaara, a modern safety infrastructure of high standard contributes to occupational and chemical safety. The company has prepared for incidents and emergencies by means of structural solutions. Talvivaara’s production process is closed, and secondary containment as required by legislation has been provided for chemicals. In addition, the heaps have tight foundations, preventing leakage of metals into the soil and water bodies. Risks are also assessed on a continuous basis, and active measures are taken to reduce the risk level.
In emergency situations, the production process is handled by a safety interlock system (SIS), which prevents overflows and enables controlled shutdown of the process.
In addition to the safety infrastructure and automation, skilled employees play a key role in the prevention of accident hazards and the control of incidents. Talvivaara’s personnel are continuously trained for promotion of safety, and emergency drills are organised annually. Talvivaara also monitors employee conduct in order to discourage unsafe and risky behaviour.
The Talvivaara mine has its own fire brigade, consisting of personnel from the various production departments. The fire brigade are ready to respond quickly in any situations of emergency or accident and to provide a first response in rescue operations before the units of the municipal rescue department arrive at the site.
Transportation safetyRaw materials and products are transported to and from the Talvivaara mine area either by road or by train. The rail connection to Talvivaara was completed in 2009, and the majority of transport in the mine area and of cargo traffic has already shifted to the rails.
The Circulation of Chemicals Talvivaara’s production process uses various chemicals. The
most important of these is sulphuric acid, which is used in
large amounts to adjust the acidity of the solution used for
irrigation of the bioheap.
In bioheap leaching, metals are extracted through stacking
of metal-containing crushed ore on a leach pad. In the metals
recovery phase, nickel, zinc, or another saleable metal is pre-
cipitated and filtered from the circulating solution collected
from the bottom of the heap, which contains metals dissolved
from the heap.
After the solution has been collected, it is either circula-
ted again through the heap or passed to the metals recovery
process. After this recovery, impurities are removed from the
solution by means of burnt lime, and the solution is returned
to the leaching circulation.
During the process, the chemicals are consumed, and the
resulting end product is a precipitate containing gypsum and
iron, which is deposited in tight gypsum ponds. For examp-
le, the sulphuric acid added is consumed during the leaching
process, and almost all of the sulphur it contains ends up as
gypsum in the gypsum pond.
43
The track, starting in the yard area, takes the products directly to the customers, in containers designed for this purpose. Fewer accidents occur in rail traffic than in road traffic, so damage during transportation can be minimised by using rail transport.
In 2010, all transport of propane was shifted to the rails. Part of the chemicals used in the production process, caustic soda and hydrogen peroxide are still delivered to the mine by truck. Also some elemental sulphur is delivered by road, but its deliveries will be shifted to the rails in 2011.
Dam safetyTalvivaara uses various types of dam structures to restrict and guide waters and to protect the environment. These are used for the storage and regulation of waters, the treatment of process waters, and the storage of gypsum. Dam safety at Talvivaara is regulated by the Dam Safety
Act and the Dam Safety Decree, which include provisions on dam design, maintenance, and use, for example. Talvivaara’s dam safety officer is responsible for dam safety at Talvivaara.
In 2010, two new dams for solutions and a precautionary dam were constructed at the mine.
Product safety Talvivaara’s products have properties that must be taken into account in their packing, transportation, and further processing. Talvivaara has assessed health and safety risks pertaining to the products and ensures that the products are produced, packed, and transported as safely as possible.
For example, nickel sulphide, which is categorised as a carcinogen, is produced in a closed process that mini-mises employees’ exposure to the product. The product is directly packed into containers, which then are trans-
Permits obtained and pending permits in 2010Permit/ provision Processor of
applicationsMain content
Building permits Municipal building supervision authority, Sotkamo
In 2010, eight building permits were applied for and obtained (for a total area of some 2,100 m2).
Environmental permit (pending)
Regional State Administrative Agency for Northern Finland
An application for the reception of carbonate precipitate from Norilsk Nickel for the mine area was submitted in December. A permit to utilise the precipitate is expected for 2011.
Application has been made for amendment of provision 7 of the permit. Process wastewater is to be led directly through a bypass manifold to the after-treatment units and not through the gypsum pond.
A report on the compensation for lost use of hydropower in the Oulujoki river basin has been prepared in connection with provision 99 of the permit.
Environmental permit (decision issued)
Regional State Administrative Agency for Northern Finland
A resolution has been made on the expiry of the test production permit for bioheap leaching, with the permit decision issued on 30 April 2010.
Amendment was made to provision 33 of Talvivaara’s environmental and water ma-nagement permit, through a permit decision on 11 May 2010.
A report was made on the Jormasjärvi submerged dam, with the permit decision is-sued on 31 May 2010.
Centre for Economic Development, Transport and the Environment for Kainuu
Application has been made for extension to the exemption period related to the destruction and deterioration of breeding sites and resting places of flying squir-rels granted by the Environmental Centre of Kainuu, with the decision issued on 17 November 2010.
A monitoring plan was prepared for hydraulic construction projects, with monitoring of the regulation of Kolmisoppijärvi (decision on 1 October 2010).
The Supreme Administrative Court
Concerning provision 101 of the permit, on guarantee, a decision was made on 28 December 2010.
Environmental impact assessment
Centre for Economic Development, Transport and the Environment for Kainuu
Notice of the environmental impact assessment programme for the uranium project was given in spring, and the assessment report was submitted to the authorities for a statement in December. The EIA process ends in Q1/2011, when the authority is-sues a statement on the EIA.
Decision in accordance with the Nuclear Energy Act
Ministry of Employment and the Economy
Application for a permit to extract uranium was submitted in April 2010 to the Finnish government. The decision is expected to be made in 2011.
Euratom permits Euratom An application for a permit to sell uranium was submitted in late 2010 in accordance with Article 41 of the Euratom Treaty.
44
Timo Ikäheimonen, responsible for operation control of liquid gas, is checking the pressure of a gas container.
ported to the customer by rail. In addition, Talvivaara provides its customers with instructions for the safe fur-ther processing of the products.
REACH and CLPAs regards product information, Talvivaara complies with the EU’s REACH and CLP regulations. The REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) regulation requires that manufacturers and importers of chemicals assess any risks caused by the use of the chemicals and provide instructions for their safe use. The CLP (Classification, Labelling and Packaging of Substances and Mixtures) regulation includes guidelines on how chemicals classified as dangerous are to be labelled and packed so as to ensure their safe use.
In 2010, Talvivaara’s products were registered in accordance with the REACH regulation. Nickel and zinc sulphide dossiers were submitted to the authorities for registration, and the CLP data for all of Talvivaara’s substances were compiled.
In the case of nickel sulphide, Talvivaara acted as the lead registrant in the REACH process. The registration was carried out by gathering new information on prod-ucts as comprehensively as possible and by conducting risk analyses related to the products, along with assess-ments of the health and safety effects related to the in-dustrial processing of the products.
On the basis of the REACH analyses, Talvivaara prepared new safety data sheets in accordance with the CLP regula-tion and delivered them to the customers. In addition, su-pervisors of external partners responsible for the trans-portation of Talvivaara’s products were provided with additional information for the guidance of their drivers.
Development of product safetyTalvivaara’s employees are trained in the safe handling of products as required by the REACH classifications of the products. Following the new CLP requirements, Talvivaara also continues to establish new safety practices at the mine. For example, all danger symbols and warning signs pertaining to chemicals in the plant area will be replaced with new ones.
45
Environment
M ining operations always affect the environment. As a responsible company, Talvivaara plans and
implements its operations so as to ensure that the emis-sions from the mine are as low as possible and any per-manent effects as minor as possible, and that natural re-sources are used efficiently.
For Talvivaara, environmental responsibility and per-formance mean the sustainable and economical use of natural resources and the minimisation of the adverse effects on the environment caused by its mining opera-tions. At Talvivaara, improving environmental perform-ance is a continuous process to which the company is strongly committed.
In 2010, Talvivaara fulfilled its environmental responsibility through the uranium recovery project,
which will improve material efficiency, and by initiating wind power measurements in the mine area.
Over the course of the year, Talvivaara identified new opportunities for improving its environmental performance, for example, through new solutions that were discovered for controlling hydrogen sulphide odours. The company also improved its water balance management by constructing a secondary settling pond after leakage from the gypsum pond in the spring.
Environmental management based on continuous improvementWhere environmental performance is concerned, Tal-vivaara’s goal is to be among the world’s top companies in
SUSTAINABILITY
Talvivaara has identified all environmental aspects of its operations and is actively monitoring the environmental impact of its operations. In 2010, the company deve-loped its environmental management and identified new opportunities for impro-ving its eco-efficiency.
46
the mining industry. In 2010, Talvivaara developed its en-vironmental management by publishing its sustainability policy, approved by the Board of Directors. It also includes the company’s environmental principles and principles re-garding occupational health and safety.
At the end of the year, Talvivaara was awarded certifica-tion for its environmental management system, at the ISO 14001 standard. The system is used for guiding environ-mental management and setting targets for its continuous improvement. The certified environmental management system covers all operations of the company.
Environmental costs and investmentsIn 2010, Talvivaara’s environmental investments amount-ed to approximately EUR 28.5 million (2009: EUR 50.2 million). The most important investments were:
Reduction of dust emissions: EUR 50,000•
Base structures in the bioheapleaching area: •EUR 27,000,000
Reduction of H• 2S emissions: EUR 630,000
Damming: EUR 800,000•
Environmental operating costs totalled EUR 25.9 million (2009: EUR 8.1 million), of which the control of hydrogen sulphide odours accounted for EUR 8.5 million. At the end of 2010, provisions related to environmental management amounted to EUR 3.8 million and collateral to EUR 27 million. Talvivaara has never had a fine or penalty imposed for environmental issues.
Environmental aspects and activities in 2010Environmental incidentsIn 2010, there were, in total, three incidents of discharge into surface water bodies classified as exceptional. In March, a leak from the bottom of the gypsum pond was detected. Corrective actions to patch the leaking pond and pump the leaking water back to the basins were started immediately. As a safety measure, a dam was con-structed downstream at the road Lumelantie, leading to Martikanvaara. The dam was heightened, broadened, and lengthened in the following weeks into a fully sealed dam constituting a secondary settlement pond with a volume of approximately 400,000 m3. Monitoring showed that the leak had no impact on the water body downstream of the mine. Local residents were concerned about the leak increasing concentrations of uranium in the water bod-
SUSTAINABILITY
47
Use of Chemicals (as % of total use) ies, but the surveys performed indicate that the uranium concentration in nearby water bodies did not increase af-ter the leak.
Two other incidents of discharge into surface water bodies occurred, in the area of the secondary heap under construction. As a consequence of short-term exception-ally heavy rains, metal containing run-off water was dis-charged into the river Kalliojoki.
The incidents mentioned above were reported to the supervising authority, which conducted an inspection after each. In addition, the company extended its monitoring activities by taking extra samples from the water bodies until the concentrations were below the limit of determination.
Emissions into the airTalvivaara’s most significant emissions into the air are dust and hydrogen sulphide emissions. In addition the use of lime, machinery, the use of explosives, the produc-tion of energy and the hydrogen production plant produce carbon dioxide, nitrogen and sulphur oxide emissions at Talvivaara. Indirect greenhouse gas emissions are gener-ated, for example, by the use of energy and the produc-tion of burnt lime, commuting and waste management.
In 2010, Talvivaara developed the monitoring of its carbon footprint through participation in international carbon footprint reporting.
Hydrogen sulphide emissions The smell of hydrogen sulphide has occasionally spread into the neighbouring communities from the metals recovery plant. These emissions do not cause any environmental or health risk, but due to the low odour threshold, they have nevertheless caused nuisance to local residents.
In 2010, Talvivaara actively sought solutions for elim-inating the odour nuisance and reducing the emissions to meet the limits set in the permit. Most part of the scrubber system in the metals recovery plant was recon-structed, and the efficiency and reliability of the equip-ment were improved. Hydrogen sulphide emissions were also reduced by introducing a technique using hydrogen peroxide to oxidise the hydrogen sulphide present in the process solution, making it completely odourless.
Odour emissions have already reduced, but the identification of the best solution has taken time as there are several emission sources. According to the current view, it will not be possible to make the operations of the mine completely odourless in the near future, but the aim is to limit the odour emissions to the vicinity of the plant area.
Dust emissionsTalvivaara’s materials handling plant causes point source pollution as it releases stack discharges into the air. At the plant, dusting is controlled through the use of a filter system. In 2010, the dust emissions exceeded the limits
Use of Energy (as % of total use)
Use of Water (as % of total use)
39
31
15
54 3 3
50
24
14
12
68,2
31,4
0,4
SUSTAINABILITY
Sources of Greenhouse Gases (%)
50
28
107
5
Limestone and chalk
Propane
Light fuel oil
Heavy fuel oil
Electricity
Limestone CaCO3 (232 400 t)
Sulphuric acid H2SO4 (183 600 t)
Lye NaOH (86 200 t)
Burnt lime CaO (30 500 t)
Sulphur (23 300 t)
Chalk (18 500 t)
Other (17 100 t, including explosives 9 900 t)
Electricity (840 TJ)
Light Fuel Oil (400 TJ)
Propane (240 TJ)
Heavy Fuel Oil (190 TJ)
Kolmisoppi lake (3 149 000 m3)
Drainage Water from the Open Pit (1 450 000 m3)
Domestic Water (17 000 m3)
48
SUSTAINABILITY
Our Environmental ResponsibilityMining operations always effect the environment. As a responsible company, Talvivaara plans and implements its operations so as to ensu-re that the emissions from the mine are as low as possible and any permanent effects as minor as possible. Talvivaara mine is built using the latest technology and on the other hand the environmental legislation sets high standards for our operations.
DustFugitive emissions from internal traffic and blasting, particles from point sources.
Dust is carried in the vicinity of the mining concession, causing nuisance.
We continuously develop our production processes to minimise dust emissions.
Hydrogen sulphide H2S emissions from the metals recovery plant.
MINE
O
ur res
ponsib
ility
Effe
ct
Aspec
t
Aspec
t
Effe
ct
Our res
ponsib
ility
Dischargesinto watersTreated process waters are led from the post-treatment ponds to surface waters.
Hydrogen sulphide spreads into the local communities and causes odour nuisance due to its low odour threshold.
We continuously develop our production processes to minimise odour emissions.
The results of statutory monitoring have not revealed any significant changes or the effects are temporary.
We are continuously monitoring the effects to ensure the natural quality and recreational use of surface waters.
Use of energyElectrical energy and fuel oils are used at the mine..
Use of natural resources and climate change.
Use of materialsThe production process uses ore, chemicals and water. Use of natural
resources. We seek to optimise the use of chemicals and water and to utilise the oreefficiently.
Process wasteGypsum andwaste rock from the open pit.
VibrationVibration caused by blasting at the open pit.
Vibration spreads into the environment via the rock and/or as blast waves in the air.
We plan and implement all blasting operations so as to ensure that the vibration values are below the limits defined fot the risk of damage.
Gypsum is deposited in a tight pond and waste rock is used in construction in the mine area.
Efficient use of the ore and waste rock decreases the amound of waste produced.
The operations cause low background noise and occasional noise peaks.
We plan and implement our operations so as to ensure that noise emissions remain below the guideline values.
NoiseNoise caused by production and construction operations.
Our responsibility
Effect
Aspect
Aspect
Effect
Our responsibility
We seek to optimise our energy use and acquire energy-efficient equipment.
49
set in the permit in individual places, and the mine took measures to reduce dust emissions. The ore crushing facility was equipped with doors and its smoke vents were closed, which reduced fugitive emissions into the outside air significantly. The spraying of a fine water mist into the air was also introduced to capture airborne dust particles at the facility. Planning work for extensive reforms on the crushing line was initiated to reduce the number of points where dust is formed and to simplify the production process to make maintenance easier.
In addition, fugitive dust emissions are produced by internal traffic at the mine and by blasting in open pit mining. Blasting generates a dark and soot-like cloud of graphite dust, which sometimes spreads into the neighbouring communities and causes nuisance to local residents. However, graphite dust does not constitute a health or environmental risk.
In 2010, fugitive dust emissions were reduced by watering roads during dry periods and improving dust prevention in mining and materials handling. Dust emissions caused by blasting will decrease as blasting operations at the open pit move deeper and deeper below ground. Fugitive emissions from traffic will be reduced by continuing the watering of roads and developing the working methods of mining.
Talvivaara’s dust emissions are quantitatively low, but the company continuously works to reduce them even further. Talvivaara also monitors the quantity and quality of dust at 31 measuring points around the plant area.
Materials needed for production Talvivaara’s production process uses ore, chemicals, water and energy. Talvivaara seeks to optimise the use of chemicals, water and energy and to exploit the ore as efficiently as possible.
All waste, except process-based waste, generated at Talvivaara, such as hazardous, mixed, and other municipal waste; metal scrap and energy waste, is delivered to waste treatment facilities for recycling and recovery. Of the total amount of waste, 53% is recovered as material and 26% as energy. Only 21% of the waste produced is landfilled. Talvivaara’s waste management partners are well-known and reliable national operators.
Material efficiencyEfficient use of natural resources and continuous im-provement of material efficiency are very important goals for Talvivaara in view of both reducing its environmen-tal impact and improving its competitiveness. Talvivaara enhances material efficiency through the use of waste rock produced in mining and efficient water circulation in metals processing, as well as by developing the recovery of metals and trace elements contained in ore.
In 2010, Talvivaara continued work on the uranium recovery project and conducted test runs in the recovery of other metals. Uranium is present in Talvivaara ore as an impurity. Therefore, its recovery from the main process solution will improve both the company’s material efficiency and the quality of the company’s products.
In 2010, an environmental impact assessment (EIA) of the uranium recovery project was conducted. The environ-mental impact of the project was evaluated to be minor. The intention is to extract uranium in a closed process indoors. Once the extraction of uranium has begun, only a very small part of the uranium contained in Talvivaara ore will end up in the gypsum pond or with effluent into water bodies. However, this would not mean any signifi-cant change compared with the present situation, as the concentrations of uranium in the area are already at the same level as natural concentrations in brook waters and within the range of normal background radiation.
SUSTAINABILITY
Material Balance
ENERGYDirect 841 TJInderect 840 TJ
CHEMICALS591 685 T
EMISSIONS IN THE AIR
PRODuCTS
WATER4 616 940 M3
WASTE
PRIMARY HEAP
SECONDARY HEAP
ORE
LEACH SOLuTION
GYPSuM PRECIPITATE495 000 t
DISCHARGE Of WATER (Treated process waters)1 300 000 m3
WATER
Non hazardous waste: 2059,9 tHazardous waste:221,2 t
Nickel:10 382 tZinc:25 462 t
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Taking samples for the radiological ground state survey conducted by STUK.
Process-based waste The most important waste produced by Talvivaara’s mining operations is a precipitate containing gypsum and iron, which is deposited in tight gypsum ponds.
The operations of the mine also produce waste rock, which is separated at the open pit from the actual ore suitable for processing. By using the waste rock efficiently, the company can reduce the amount of waste produced and avoid the construction of designated waste dumps.
In 2010, all waste rock extracted at Talvivaara was used in the construction of the base structures in the secondary heap area. This meant a saving of some 16.7 million tonnes of rock material that the company would otherwise have had to acquire from other sources.
Use of energyTalvivaara’s production process requires a large amount of electrical energy and fuels. Most of the electricity consumed by the company is used for crushing and the bioheapleaching of ore as well as by the pumps and fans at the metals recovery plant. Light fuel oil is mainly used by the machinery at the mine, while heavy fuel oil is required in the production of process steam and heating of buildings.
Talvivaara seeks to optimise its energy use. The conditions are good as the company utilises state-of-the-art technology, which is energy-efficient. In addition, Talvivaara aims to improve its energy-efficiency, for example, by studying opportunities to introduce new forms of energy.
In 2010, Talvivaara started wind power measurements with the view of reducing emissions from electricity production. Talvivaara also became a shareholder of the nuclear power company Fennovoima to secure its future electricity supply.
SUSTAINABILITY
Water Balance
RAIN
OPEN PIT
EvAPORATION
BIOLEACHING HEAP
COLLECTED WATER TO THE HEAP
RAW WATER fROM LAkE kOLMISOPPI
GYPSuM PRECIPITATE
WATER BACk TO THE HEAP
TREATED PROCESS WATER TO THE WATER SYSTEM
METALS RECOvERY
Products
GYPSuM POND
51
Talvivaara can also promote its customers’ energy-efficiency through its products, which have higher nickel and zinc contents than the products of corresponding mines.
Noise and vibrationTalvivaara’s production and construction operations cause low background noise and occasional noise peaks. Blasting at the open pit causes vibration, which spreads into the environment via the rock or as blast waves in the air. However, all blasting operations are planned and implemented so as to ensure that the vibration values are below the limits defined for the risk of damage. Vibration is measured in the surrounding areas using continuous measuring equipment.
Sustainable use of waterThe mine’s primary source of raw water is the lake Kolmisoppijärvi, which in its entirety is located within the mining concession. The lake, covering some 200 hectares, is a typical Finnish, slightly eutrophic minor water body with acidic, brown water – one of many thousands found in Finland. The lake is not significant where rare or protected species are concerned, and the water intake by Talvivaara does not pose any threat to the biodiversity of the aquatic environment in the area.
The need to take water from the lake is reduced by the use of rain and melt water collected from the ditches and paved areas in the mine area and of drainage water from the pit as raw water.
The mine is not in a groundwater area suitable for water supply, and its operations do not use groundwater. Because of the mineral deposits found in the area, the water in the soil is naturally poor in quality and partly unfit for use. The water resources currently available for the mine are sufficient, and it will be possible to use them in an environmentally sustainable manner.
Talvivaara seeks to recycle water as efficiently as possible. For example, rain and run-off water from the
waste dump and plant areas is collected into basins and pumped to the irrigation of the heaps. Any water accumulating at the bottom of the open pit is pumped through a collecting basin into the irrigation water circulation of the bioleaching process.
As Talvivaara’s production process is still at the ramp-up stage, the mine’s current water use per produced product tonne is greater than the planned volume during full-scale production. In the ramp-up of its operations, Talvivaara has had to lead some of the extra water accumulated in production back into the water body after treatment, mainly during spring and autumn because of melt waters and heavy rains. Talvivaara has a permit for water leading granted by the authorities, as well as an obligation to monitor the discharges and the water body so as to ensure that no adverse effects are caused to the water body.
Maintaining the natural quality and recreational use of surface waters is an important objective for Talvivaara. A significant amount of resources has been allocated to monitoring, and more than 10,000 surface water samples were collected and analysed in 2010. The studies performed revealed no significant or harmful effects on the water bodies.
The natural environment and the landscapeTalvivaara carries out its mining operations in the forested landscape of the Kainuu region, in a sparsely populated area, which was previously in its natural state. In the areas used for mining operations, vegetation has been removed, and the area’s water bodies are used as sources of raw water; some of the extra water accumulated in production is led into the water bodies. Preserving biodiversity and conserving the landscape in the areas surrounding the mine is a key objective for Talvivaara. In accordance with the environmental permit, the impact of Talvivaara’s mining operations on the area and its wildlife is included in the scope of regular monitoring. For example, the
Disposal Methods of Non-Hazardous Waste 2010 (as % of total)37 28
Disposal at the external Landfill (560 t)
13
Utilization as Material (760 t)
22
Utilization as Energy (450 t) Composting (260 t)
Disposal Methods of Hazardous Waste 2010 (as % of total)49
Utilization as Material (109 t)
51
Utilization as Energy (112 t)
Energy Consumption by Source 2010 (as % of total)64
Nuclear Power (240 TJ)
21
Fossil (1080 TJ)
15
Renewable (360 TJ)
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occurrence of protected flying squirrels and bats and also their habitats is monitored in the area. The mining operations have not caused any significant changes in the living conditions of these species outside the areas designated for mining operations. In addition, effects on the natural environment are followed via monitoring of metal concentrations in ants and mushrooms.
The impact of raw water intake on the hydrology and ecology of Kolmisoppijärvi was assessed in conjunction with the environmental impact assessment for the mine. In addition to effects on water quality, the monitoring of receiving waters covers any biological effects – i.e., any impact of the water management on aquatic organisms such as fish, bottom fauna, and aquatic plants.
Talvivaara’s mining operations have affected the water bodies closest to the discharge points: their water quality and ecological status have worsened. No impact has been observed further from the mine. Once the mine’s opera-tions have reached a steady state, the need to lead extra water accumulated in production into water bodies will cease or at least decline substantially. Then the receiving waters will also recover.
The Radiation and Nuclear Safety Authority Finland (STUK) is carrying out a radiological baseline study related to the uranium project, providing at the same time a valuable basis for future monitoring of the effects of the uranium extraction circuit.
Land use and environmental restoration of the mine areaThe mining concession covers 6,000 hectares, of which an area of 1,000 hectares has been designated for mining operations.
Talvivaara is responsible for the restoration of the mine area after the closure of the mining operations. The company has prepared a rehabilitation plan for the mine, and restoration measures are continuously implemented as the ramp-up progresses. After the closure of operations, the Kuusilampi and Kolmisoppi open pits will be allowed to fill up with water and the areas will be landscaped by planting vegetation. The gypsum ponds will be equipped with subsoil drainage, covered and landscaped. Talvivaara collects and stores soil removed from the top layer before mining operations are commenced. It will be used for bottom structures during landscaping after the closure of the mining operations.
Land Use 2008–2010
Total amount of land newly disturbed during the year.
Total amount of land disturbed and not yet rehalibilated at the pre-vious year (*before and during year 2008)
Ha
1200
1000
800
600
400
200
0
total 493 ha
493
2008*
493
265
total 758 ha
2009
758
270
total1028 ha
2010
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Human Resources, Health and Safety
Skilled and motivated employees secure Talvivaara’s growth and success. The company must ensure the recruitment of qualified and motivated personnel.
The number of Talvivaara’s employees grew rapidly in 2010. The total number of employees increased by 21 per cent to 389 at year end. In addition to permanent employees, the company employed 23 temporary em-ployees during the summer holiday season. Jobseekers were very interested in the company, and several hun-dreds of applications for vacant positions were received throughout the year.
Personnel turnover declined significantly in 2010 on the previous year. Turnover mainly affected new produc-tion employees, while turnover among other personnel groups and employees who have worked for the company longer was lower. Turnover was 9.2 per cent.
Balancing gender distributionIn addition to the drive to employ as skilled members of staff as possible, Talvivaara also aims to ensure fair treat-ment and offer equal opportunities in recruitment and employment. Talvivaara seeks to balance the personnel’s age and gender distribution, wherever possible.
In 2010, the average age of personnel was 38 years and 6 months, with men accounting for 87.9 per cent of the company’s personnel. In production, the low number of applications from women limits the possibilities to balance the gender distribution. Special efforts are made to increase the number of female applicants. Nonetheless, several women have been successfully employed as drivers of large dump trucks used at the mine, for example.
Vocational training supports Talvivaara’s growthThe professional skills of personnel and their systematic development are an integral part of Talvivaara’s opera-tions. The competence of personnel is developed and maintained through vocational training, which also pro-motes the rotation of jobs and ensures that professional
skills supporting Talvivaara’s growth can always be found within the company.
Talvivaara prepares an annual training plan together with management and personnel. In addition, employees’ personal training needs and targets are determined in annual development discussions. Talvivaara also supports its personnel’s self-motivated training by paying part of the costs if necessary.
In 2010, the professional skills of personnel were developed by organising training in automation systems for maintenance personnel in collaboration with the Centre for Economic Development, Transport and the Environment for Kainuu. Training in matters relating to employment relationships was provided for salaried supervisory employees in cooperation with the Federation of Finnish Technology Industries.
Compliance with terms of employment at a high levelThe terms of remuneration and employment of Talvivaara’s personnel are determined by Finnish labour legislation, national collective agreements and individual negotiations. With respect to remuneration and terms of employment, Talvivaara meets and exceeds the national minimum requirements set for the sector.
Finnish labour legislation prohibits all discrimination during recruitment and employment. No suspected cases of discrimination or other violations of labour legislation have been observed at Talvivaara, and no proceedings relating to employment disputes have been initiated against the company.
In 2010, a pay increase concerning all personnel groups was implemented, representing a 1.5% general increase and a 0.5% company-specific increase. In addition to this, the salaries of salaried employees were increased by 0.5% due to the delay in their collective agreement in the previous year.
At Talvivaara, the remuneration for regular working hours is supplemented by short- and long-term incentive schemes, such as production bonuses and options. All per-manent Talvivaara employees are covered by the company’s
Talvivaara has set high standards for fair treatment of personnel and occupational safety, compliance with which are constantly monitored. The company aims to exceed the minimum requirements set by Finnish legislation as regards both terms of employment and occupational safety. In terms of international comparison, the working conditions at Talvivaara are top class in the mining industry.
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Lorem ipsum dolor site amet.option scheme. The company also provides all employees with employment pension cover, comprising earnings-re-lated old-age, disability and survivors’ pensions.
Job grades are reviewed regularly, by management and personnel together. Throughout the year, negotiations were carried out with both production and salaried staff to review their job grades as required by the collective agreements. With respect to both groups, adjustments were made as regards jobs where work tasks had proved more demanding during the production ramp-up than ex-pected. The parties were unanimous on the adjustments.
Organisation of employees encouragedTalvivaara’s labour relations with personnel are good. The company is a member of the Federation of Finnish Technology Industries and participates in its activities both locally and nationally.
Talvivaara’s employees can exercise their right of association freely, and most are members of trade unions. Production employees usually belong to the Finnish Metalworkers’ Union, salaried employees to the Union of Salaried Employees (‘Pro’ as of 1 January 2011) and upper salaried employees to the Federation of Professional and Managerial Staff (YTN).
All personnel groups have elected their shop steward from among themselves, who represents their respective personnel group in the company. As shop stewards, these people benefit from special employment protection to ensure their independence.
Talvivaara’s senior management meet with the repre-sentatives of personnel regularly at the meetings of the Cooperation Committee, which addresses the company’s production and financial outlooks and any issues affect-ing the position of employees. In addition to the CEO, the Chief Administrative Officer and the Chief Operations Officer, the Cooperation Committee comprises the repre-sentatives elected by all personnel groups.
Together with company management, the representa-tives of personnel groups also participate in the activities of the Health and Safety Committee and the Suggestion Committee. During the year under review, employees made a total of 183 suggestions to develop or improve operations, of which 15 per cent were rewarded.
In 2010, the capacity of personnel representatives to participate in cooperation was developed through courses organised for shop stewards by trade unions, in which the employees could take part at the employer’s expense.
Easily accessible occupational health care servicesTalvivaara provides occupational health care services for its entire personnel, free of charge to the user. At the mine, nursing services are available every day, excluding week-
ends, and a medical doctor is available for consultation once a week. Outside these periods, occupational health care services are available at the local health care centres.
The occupational health care personnel working at the mine also participate in the activities of the Safety Committee and monitor working conditions at the mine, for example, by visiting work sites.
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Personnel 2010 (%)
Management (11 persons)
Upper salaried (72 persons)
Salaried (53 persons)
Blue-collar (253 persons)
18
14
65
3
Age and Gender Structure (%)
Women under 30 y
Women 30-50 y
Women over 50 y
Men under 30 y
Men 30-50 y
Men over 50 y
3 72
27
43
18
Personnel by Place of Domicile (%)
Kajaani (166)
Sotkamo (96)
Rest of Kainuu (37)
Rest of Finland (60)
Espoo (15)
Helsinki (15)
44
9
25
43
15
In 2010 all Talvivaara employees worked full time and only 3.1
per cent were employed temporarily. The number of employee
training days for 2010 was 1.8.
55
In terms of occupational health and safety, Talvivaara’s most important challenges lie in the large-scale use of chemicals, the coordination of work in a common workplace, large machinery and exposure to dust. The company’s goal is to create a healthy and safe working environment where zero accidents have become a part of everyday life.
Occupational Health and Safety
T alvivaara’s management has manifested its commit-ment to the continuous development of safety. Safety
management is based on the safety policies approved by the company management, instructions and guidelines supporting safe working methods and good supervision. Everybody must always comply with the safety rules and regulations.
Safety management is an integral part of Talvivaara’s day-to-day operations. The line organisation is responsible for safety and safety results. An extensive network of safety experts develops Talvivaara’s safety management and supports the line organisation in safety work. The network of experts includes, among others, the company’s safety manager, the manager of rescue operations and Appointed Supervisor of chemicals, as well as representatives from the fire brigade and occupational health care services. All Talvivaara employees are trained in first aid.
In order to develop safety in the workplace, Talvivaara has established a safety committee, consisting of repre-sentatives of personnel, occupational health care services
and the employer. The committee prepares an annual ac-tion plan aimed at improving occupational safety. It in-cludes plans relating to the updating of risk assessments, biological monitoring programmes and air quality studies in the workplace. The committee also monitors the results of the activities on a quarterly basis.
Avoiding accidents through proactive safety workTalvivaara seeks to consider all aspects of safety carefully in advance before commencing work. New employees are briefed on safe working methods and rules and policies relating to working at the mine, and all employees are required to always comply with the safety rules and regulations.
Unsafe practices are addressed immediately, and all accidents, incidents and near-misses are investigated thoroughly. With the help of careful reporting and monitoring, Talvivaara continuously develops best safety practices.
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the basis of which any measures to be taken to improve air quality are planned.
A biological monitoring programme was initiated to detect employees’ exposure to nickel. The programme monitors concentrations of nickel in the body. If the nickel concentration measured exceeds the recommendations issued by the Scientific Committee on Occupational Exposure Limits (SCOEL), the employee is instructed to modify his or her working methods to improve safety.
Avoiding accidents through daily choices Talvivaara’s goal is zero accidents. Talvivaara is working constantly to achieve this goal, for example, by making the right choices every day. Safety work is based on continuous monitoring of incidents and their thorough investigation. The basic principle is that every Talvivaara employee takes care of his or her own safety and that of his or her colleagues every day.
In 2010, the LTI frequency rate of Talvivaara employees remained on a level with the previous year, at 10.7 lost time injuries per one million hours worked (2009:11). If contractors are included, the corresponding figure is 29.2. No cases of occupational diseases have been detected and no fatal accidents have occurred at the mine.
Safety instructions revisedIn 2010, Talvivaara focused on developing its internal safety instructions. They were simplified and edited to make compliance with the instructions an even more natural part of the company’s everyday activities. The safety instructions are now more practical.
Personal protective equipment (PPE) matrices were drawn up for each workstation, defining which piece of equipment should be worn at each work phase. In addition, information was provided on the correct use of PPE and the importance of hygiene in the minimisation of exposure to risk.
Personnel training in safety continued, with a focus on the use of PPE, occupational hygiene and the use of material handling equipments. Traffic safety in the mine area was developed through traffic signs and traffic arrangements, as well as through the development of new rules on moving around in the area.
All contractor personnel working at the mine are also briefed on occupational health and safety practices. In 2010, cooperation with contractors was developed by clarifying safety responsibilities and organising specific safety walks for parties participating in the construction of the mine.
Monitoring of air quality and exposure to nickelParticles in the atmosphere of the workplace may pose a health risk if inhaled. Air quality was improved by making technical modifications, for example, by increasing local ventilation and by keeping workstations cleaner and tidier. The HTP values, i.e. the concentrations of impurities in the atmosphere of the workplace known to be harmful are still exceeded at some workstations. Talvivaara carries out continuous air quality studies, on
Occupational health and safetyUnit 2008 2009 2010Absences due to illness days/ employee NA 5.8 7
Absences due to illness % NA NA 2.8
LTI frequency rate LTIs/one million hours worked 16 11 10.7
LTI = an accident resulting in an absence of more than one day from work, excluding accidents on the way to or from workNA = not available
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T alvivaara aims to grow into a pioneer of responsible mining that has a strong financial position and shows
respect for its personnel, stakeholders, the environment and the community. Profitable and competitive business operations provide a basis for Talvivaara’s social respon-sibility and environmental performance. In practice, the company bears its responsibility by enhancing its busi-ness operations and building open stakeholder engage-ment, as well as by developing best practices in the field and the professional skills of its personnel.
Competitive business operations promote sustainable developmentTalvivaara seeks to secure its future operating conditions through good housekeeping and continuous development of its business operations. This ensures that Talvivaara will continue to be a profitable and competitive company, a good employer and an active tax payer both now and in the future.
At Talvivaara, the enhancement of business operations and the minimisation of environmental impact are closely linked and support each other. Process development, the pursuit of reliable production, as efficient and versatile
Social and Economic ResponsibilityTalvivaara secures its long-term operating conditions through responsible business operations and open stakeholder engagement. Talvivaara’s business development and sustainable operating model guarantee that the company can grow into a pio-neer in the mining industry and be a good employer in the Kainuu region.
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58
utilisation of the ore as possible and the improvement of material and energy efficiency all support Talvivaara’s profitability and environmental performance.
Talvivaara’s business operations are transparent, and the company has adopted a strictly negative attitude to corruption. We believe that good financial performance requires that the minimum requirements set for the terms of employment and employees’ well-being by legislation – although high – be exceeded. Talvivaara rejects all manner of exploitation of workers. Naturally, the company also has a zero tolerance policy towards child labour.
Responsible suppliersTalvivaara ensures that the company’s subcontractors op-erate responsibly and discharge their statutory obligations as contracting parties and employers. Talvivaara complies with the Finnish Act on the Contractor’s Obligations and Liability when Work is Contracted Out, the objective of which is to promote equal competition and to ensure ob-servance of the terms of employment. As a contractor, Tal-vivaara is responsible for the fact that subcontractors and providers of temporary agency workers meet the require-ments set in the said Act. The company monitors material deliveries and the progress of the work of subcontractors through regular meetings and inspections, for example.
Open dialogue with the local community and stakeholders We believe that our operational conditions can also be developed through active cooperation with various stakeholders. Talvivaara aims to take the initiative to provide information on its operations as openly as possible and maintain positive engagement with the local community, authorities and nature conservation organisations, among others.
The company monitors the expectations of the various stakeholders in many ways, for example, by discussing with the authorities during their regular site visits, by moni-toring the reasons for the contacts made by people living nearby and by maintaining a dialogue with those living in the communities near the mine through open discussion events and hearings relating to permit procedures.
Talvivaara has good relations with the authorities. Thanks to open engagement, authorities have participated in the preparation of a research plan to study qualitative changes in surface waters, for example.
In autumn 2010, Talvivaara organised an open door day for those living near the mine, providing visitors with an opportunity to learn about the mine’s operations in practice and ask questions. Over the two-day event, a total of 2,300 people visited the mine, with bus trans-portation from Sotkamo and Kajaani organised by the company.
Two open discussion events were organised for the resi-dents of nearby Tuhkakylä and Lahnasjärvi. Talvivaara’s representatives presented the company’s operations, while the villagers discussed any nuisance they had experienced due to the mining operations, such as noise and odour emissions caused by hydrogen sulphide. Some criticism was also received, and participants were provided with in-formation on what had been done and would be done to solve the problems they had experienced. For example, some improvements have already been implemented to solve the odour nuisance, and this work still continues.
The progress of Talvivaara’s planned project to recover uranium was actively communicated via the electronic mailing list, and local residents and interest groups were included in the social impact assessment carried out in conjunction with the environmental impact assessment of the project. The social impact assessment was considerably more extensive than that required by law.
Bringing prosperity to KainuuTalvivaara creates prosperity for the Kainuu region as an employer, tax payer and developer of professional skills. Talvivaara is the most significant industrial employer in Kainuu. At the end of 2010, the company employed 389 permanent employees, of whom 77 per cent came from the Kainuu region. The number of employees is constantly growing.
Talvivaara also has a major indirect impact on employ-ment in Kainuu. In 2010, the company’s subcontractors carried out more working hours than Talvivaara’s perma-nent employees. Most subcontractors came from outside the Kainuu region and used many services provided by the region.
The employment situation in Kainuu is poorer than in other parts of Finland. Therefore, Talvivaara has been of great importance to the development of new employment and business opportunities in the region.
In the municipality of Sotkamo, where the Talvivaara mine is located, tourism is another important source of livelihood. At present, Talvivaara already employs more people in Sotkamo than tourism does according to official statistics. Through its activities, Talvivaara has strengthened Sotkamo’s tax base and service sector and
SUSTAINABILITY
Procurement from Kainuu
2008
2009
2010
7,1
% 20 4 6 8 10
9,3
9,4
Total procurement from Kainuu was EUR 19.6 million in 2010.
59
has helped make Kainuu better known in other parts of Finland and in the world.
Talvivaara cooperates closely with educational institu-tions in the region in recruitment and vocational train-ing. In 2010, the company organised numerous training courses and events as well as practical training opportu-nities in collaboration with local educational institutions. Talvivaara has also provided teachers of vocational edu-cational institutions with an opportunity to experience practical training at the mine.
In 2010, the company organised two production driller courses for unemployed jobseekers in cooperation with the Centre for Economic Development, Transport and the Environment for Kainuu and the North Karelia College. The theoretical part of the course was organised at the college, while practical training was provided in the mine area. After the course, 88 per cent of the participants who completed the course were hired to work in the mining department.
Sustainable development projects and studies Talvivaara is a member of an extensive network of univer-sities and research institutes. The company participates in several national and international projects and stud-
ies relating to sustainable development, the results of which can be utilised both by Talvivaara and in the min-ing industry in general. Talvivaara also develops its envi-ronmental monitoring and reporting with external and independent partners.
Social impact of mining operationsThe University of Eastern Finland launched a research project, “The Finnish Mining Communities under the Global Transition: Capacities of Local Responses”. The objective of the project is to study the relationship of local communities to mining activities in the area and the attitudes and expectations of these communities within the framework of changing conditions of the globalised mining industry. The Talvivaara mine is one of the three mines studied in the project.
Risk assessmentTalvivaara participates in a research project of the Geological Survey of Finland (GTK) that seeks to develop competence in the environmental risk assessment of metal mines. The project systematically describes the hazards and any related risks caused by the different processes of mining operations. It aims to develop a comprehensive risk model for mines and procedures to apply the model at different sites. Talvivaara participates in the funding of the project
In 2010, Talvivaara commissioned an environmental impact assessment
(EIA) of the planned uranium recovery project as required by law.
In conjunction with the environmental impact assessment, a very
extensive social impact assessment was carried out, in which the
views of stakeholders and representatives of the local community
played a central role. The assessment also took account of the wide
public debate on the project.
Regular communication
Since Talvivaara announced its plans to recover uranium, the progress
of the uranium recovery project has been communicated regularly by
issuing press releases and organising information meetings for the
public. Right at the beginning of the environmental impact assessment
process, all those interested in the project were offered an opportunity
to register to the project’s mailing list, which provided information on
the project on a regular basis. In addition, Talvivaara sent a brochure
on the project to some 24,000 households.
Information meetings for the public
In the context of the environmental impact assessment, the company
sought to reach as many residents, land owners and other interest
groups affected by the plan as possible. During the procedure, infor-
mation meetings were organised twice for the public in Kajaani and
Sotkamo. All those interested in the project were welcome at the mee-
tings. In addition to the presentation of the plans, the meetings aimed
to establish concrete issues that the local residents and users of the
neighbouring areas wished to be considered in the environmental im-
pact assessment and any future decision making.
Surveys among residents and tourism entrepreneurs
Talvivaara conducted a survey among residents covering 325 households
and organised a social impact workshop to chart any fears and concerns
relating to the uranium project that the local residents might have.
Tourism is a major employer in the municipality of Sotkamo. Over
the course of the year, the effects of the uranium project on the bu-
siness operations of local tourism entrepreneurs were largely discus-
sed in the media. This is why Talvivaara decided to conduct a survey
for tourism entrepreneurs operating in the Vuokatti area to study their
views of any perceived effects of the project on tourism. A total of 22
companies responded to the survey.
Stakeholders Included in the Impact Assessment of the Uranium Project
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and supplements the research contribution of the research institutes involved in the project with its expertise.
Best Environmental Practices (BEP)A project coordinated by the Centre for Economic Develop-ment, Transport and the Environment for Kainuu aims to determine the best environmental safety practices for metal mines, in which Talvivaara has extensive experience. Tal-vivaara participates in the project as a member of the Associa-tion of the Finnish Extractive Resources Industry (FinnMin).
GHG Emission and Climate Change CDPFor the second consecutive year, Talvivaara took part in an international survey organised by the Carbon Disclosure Project (CDP) that assesses the carbon footprint and environ-mental strategy of the world’s largest companies. Talvivaara was one of the 300 companies in the Nordic countries that reported on their performance. www.cdproject.net
Bloomberg sustainability index Talvivaara participated in a sustainable development survey conducted by Bloomberg, a renowned provider of financial and business news. Thanks to the data collected in the survey, it is now easier to compare the sustainability of Talvivaara’s operations with the other metals and mining companies that took part in the survey.
Stakeholders Included in the Impact Assessment of the Uranium Project Steering and monitoring groups
Specific steering and monitoring groups were established for the
impact assessment relating to the the uranium extraction process.
These included representatives of local residents, local organisations,
authorities and other stakeholders. The task of the steering group
was to guide the EIA process and comment on the adequacy and
appropriateness of the assessment.
The purpose of the monitoring group was to ensure that citizens
and other parties affected by the project had an opportunity to parti-
cipate in the EIA procedure. The monitoring group played a significant
role as regards the quality of the environmental impact assessment:
the group meetings provided a wealth of useful information on the
views, perspectives and fears of local residents.
Local residents assist in environmental sampling
The Radiation and Nuclear Safety Authority Finland (STUK) is carrying
out a radiological baseline study for Talvivaara, for which the company
has asked local residents and land owners to assist in sampling. They
have brought STUK mushrooms, berries, root crops, fish and elk meat
from Talvivaara for analysis, for example.
Results of the assessment
On the basis of the social impact assessment, the uranium recovery
project is opposed by the local community. According to the
surveys conducted, both residents and tourism entrepreneurs were
concerned about the effects on the image of the area and thereby
on the destination choices made by tourists. Nevertheless, tourism
entrepreneurs believed that the uranium extraction process would
not have any significant negative impact on their own business
operations or on carrying out business operations dependent on the
natural environment.
All in all, the environmental impact of the project is expected to be
minor. However, on the basis of the social impact assessment, uranium
and its processing cause many fears and concerns. Talvivaara seeks
to mitigate any concerns and uncertainty relating to the project among
local residents and entrepreneurs by continuing open communication
and dialogue.
Talvivaara’s stakeholdersInternal Personnel
Partners Service providers and material suppliers
Research institutes (R&D)
Educational institutions
Business organisations (Confederation of Finnish Industries EK, Nickel Institute)
Employee organisations
Community Land owners and residents in the surrounding areas
Local communities
National and international organisations
Potential employees
Media
Politicians and decision-makers
Authorities (Centre for Economic Development, Transport and the Environment (ELY), Regional State Administrative Agency (AVI), Finnish Safety and Chemicals Agency (Tukes), Ministry of Employment and the Economy (MEE), Radiation and Nuclear Safety Authority Finland (STUK))
Financial Investors
Analysts
Owners
Customers
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Governance62
Governance63
Corporate Governance Statement
GOVERNANCE
GeneralThis corporate governance statement has been prepared in accordance with recommendation 54 of the Finnish Corporate Governance Code 2010. The statement has been issued as a separate report and it is also available on the Company’s web pages at www.talvivaara.com.
Talvivaara’s Audit Committee has reviewed this corpo-rate governance statement and the Company’s external auditor, PricewaterhouseCoopers Oy, has confirmed that this statement has been issued and that the description of the main features of the internal control and risk manage-ment systems pertaining to the financial reporting process is consistent with the Company’s financial statements.
Regulatory frameworkTalvivaara complies with the Finnish Corporate Governance Code 2010 for listed companies (the
“Finnish Code”), the Insider Guidelines issued by NASDAQ OMX Helsinki and the UK Combined Code on Corporate Governance dated July 2008 (the “UK Combined Code”). The UK Corporate Governance Code dated June 2010 will be followed from the beginning of the financial year 2011.
This statement has been prepared under the Finnish Code. In addition, sections have been included to reflect the guidance set out in the UK Combined Code. This statement also describes how the Main Principles of the UK Combined Code have been applied.
The Finnish Code is available on the Securities Market Association’s website at http://www.cgfinland.fi and the UK Combined Code on the Financial Reporting Council’s website at www.frc.org.uk.
The Company has departed from the following rec-ommendations under the Finnish Code and the UK Combined Code:
64
GOVERNANCE
Recommendation 43 and UK Combined Code provisions B.1.3 and A.3.1: Participation of the members of the Board of Directors in a share-related remuneration scheme
The Company granted options to the Non-Executive members of the Board as a part of the 2007 Option Scheme. The options were granted in 2007 prior to the listing of the Company’s shares on the London Stock Exchange (“LSE”). The options granted were disclosed in the pathfinder and the final prospectus and published in connection with the listing of the Company’s shares on the LSE Main Market. More details about the options can be found from the remuneration section of the Company’s annual report or from the Company’s annual accounts. Thereafter, no options have been granted to Non-Executive Directors, nor has the Company any intention to grant such options to Non-Executive Directors in the foreseeable future. Consequently, the Company also determines Mr. Haslam, Ms. Carr, Mr. Niiva and Mr. Titcombe as independent of the Company notwithstanding the options granted.
UK Combined Code provision A.4.4: The terms and conditions of appointment of non-executive directors:
All the members of the Board of Directors are appoint-ed by the General Meeting of Shareholders. The term of the Directors shall end with the conclusion of the Annual General Meeting following the appointment of the Director. The annual remuneration payable for Board and
Committee work and the basis for its determination are solely decided by the General Meeting of Shareholders. There are no contracts on notice periods, remuneration or any other terms of appointment relating to a person’s status as a member of the Board.
UK Combined Code provisions A.4.1, B.2.1 and C.3.3: The terms of reference of the Board Committees
The Nomination Committee, the Remuneration Committee and the Audit Committee each have a written charter. Instead of the full texts, the essential contents of the charters have been disclosed according to the Finnish Code Recommendation 20 on the Company’s website. This way of presenting has been considered a clear and effective way to make the essential information available to the shareholders.
UK Combined Code provision D.1.1: The Senior Independ-ent Director should attend sufficient meetings with a range of major shareholders to listen to their views in or-der to help develop a balanced understanding of the issues and concerns of major shareholders.
In 2010 the Board considered that it would not be necessarily either practical or efficient for the Senior Independent Director to attend meetings with major shareholders unless such discussions were requested by shareholders. The methods by which the dialogue with
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institutional investors and major shareholders is main-tained are described below in section Dialogue with insti-tutional and major shareholders.
Administrative, management and supervisory bodiesGeneralAs a limited liability company incorporated in Finland, Talvivaara is governed under the provisions of the Finnish Companies Act and its Articles of Association. Responsi-bility for the control and management of the Company is divided between the General Meeting of Shareholders, the Board of Directors and the Chief Executive Officer. The shareholders participate in the control and manage-ment of Talvivaara through actions taken at the General Meetings of Shareholders. Typically, General Meetings of Shareholders are convened upon notice given by the Board of Directors. In addition, General Meetings of Shareholders are held when requested in writing by an auditor of the Company or by shareholders representing at least one-tenth of the total number of issued and out-standing shares.
General Meetings of ShareholdersUnder the Finnish Companies Act, General Meetings of Shareholders must be held at the domicile of the compa-ny, unless the Articles of Association allow the meeting to be held in another designated location. General Meetings of Shareholders may be held at some other location only if there is an exceptional reason for this. According to the Company’s Articles of Association, the General Meetings of Shareholders shall be held either at the domicile of the Company in Sotkamo, Helsinki or Espoo, Finland.
In order to have the right to attend and vote at a General Meeting of Shareholders, a shareholder must be registered no later than eight business days prior to the relevant General Meeting of Shareholders in the Register of share-holders maintained by Euroclear Finland Ltd (“Euroclear”). An owner whose shares have been registered under a nom-inee account wishing to attend and vote at the General Meeting of Shareholders should seek a temporary reg-istration in the Register of Shareholders maintained by Euroclear. More detailed instructions for shareholders whose shares have been registered under a nominee account wishing to attend and vote at a General Meeting are given or referred to in the relevant notice convening the General Meeting. There are no quorum requirements for General Meetings of Shareholders in the Finnish Companies Act or in the Company’s Articles of Association.
A shareholder may attend and vote at a General Meeting of Shareholders in person or through author-ized representatives. Resolutions generally require the approval of a majority of the votes cast. However, certain
resolutions, such as a resolution to amend the Articles of Association and, in certain cases such as a resolution re-garding a merger or liquidation of the Company, require a majority of two-thirds of the votes cast and of the shares represented at the meeting. In addition, certain resolu-tions, such as amendments to the Articles of Association which change the respective rights of shareholders hold-ing the same class of shares or which increase the re-demption rights of the Company or its shareholders re-quire the consent of all shareholders. Alternatively, where the rights of certain shareholders only are affected, the consent is required from all those shareholders whose shares are affected by the amendment, in addition to the applicable majority requirement. The Company’s Articles of Association require a majority of three quarters of the shares represented and votes cast for the deviation from the pre-emptive rights of the shareholders.
A shareholder is entitled to make proposals relating to the Company’s business which are handled by a General Meeting of Shareholders provided that the Board of Directors has received the request early enough to include the matter in the notice convening the General Meeting. The request is always considered to have arrived in time if it is given to the Board of Directors at least four weeks prior to publishing the notice to convene the General Meeting of Shareholders. The dead line for submitting requests concerning issues to be included in the agenda of the Annual General Meeting is also published at the Company’s website.
The Board of DirectorsCompositionAccording to the Company’s Articles of Association, Tal-vivaara’s Board of Directors consists of at least three and not more than twelve members. The Board of Directors is quorate when more than half of the members appointed by the General Meeting of Shareholders are present. All the members of the Board of Directors are appointed by the General Meeting of Shareholders. The term of the Directors ends with the conclusion of the Annual Gen-eral Meeting following the appointment of the Director. A Director may be dismissed ahead of term by a General Meeting of Shareholders. The term of a dismissed Direc-tor ends with the conclusion of the General Meeting de-ciding on the dismissal, unless the General Meeting de-cides that the dismissal is effective from some other point in time. The annual remuneration payable for Board and Committee work and the basis for its determination are decided by the General Meeting of Shareholders. There are no contracts on notice periods, remuneration or any other terms of appointment relating to a person’s status as a member of the Board.
The Annual General Meeting of Shareholders held on 15 April 2010 in Sotkamo resolved the number of Board members to be eight and re-elected Mr. Edward Haslam,
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Mr. Eero Niiva, Ms. Eileen Carr, Mr. D. Graham Titcombe, Mr. Pekka Perä and Ms. Saila Miettinen-Lähde as Board Members and elected Mr. Roland Junck and Mr. Tapani Järvinen as new members of the Board of Directors. Mr. Antti Aaltonen was a member of Board of Directors until the Annual General Meeting of 15 April 2010.
According to recommendation 4 of the Finnish Code, a person proposed for the first time as Director shall par-ticipate in the General Meeting that decides on his or her election. As Mr. Järvinen was unable to attend the meet-ing in person, he participated in the meeting via tele-phone in order to answer any questions the shareholders might have had on his appointment. Mr. Junck was also unable to attend the meeting, but he was considered hav-ing well-founded reasons for his absence.
All five Non-Executive Directors have been serving as of the Annual General Meeting held on 15 April 2010 and up to the date of this statement. Mr. Eero Niiva, Ms. Eileen Carr, Mr. D. Graham Titcombe and Mr. Tapani Järvinen are deemed to be independent of the Company and significant shareholders. The Chairman of the Board, Mr. Haslam, meets the independence criteria both in re-lation to the Company and to significant shareholders under the Finnish Code. The UK Combined Code provi-sion A.2.2 states that the Chairman should, on appoint-ment, meet the independence criteria set out in the Code, but thereafter the test of independence is not appropri-ate in relation to the Chairman. Non-Executive Director Mr. Junck is not defined as independent of the Company under the Finnish Code recommendation 15 subsec-tion d) and the UK Combined Code provision A.3.1 due to his position as Chief Executive Officer of Nyrstar N.V. and Talvivaara’s contractual relationship with Nyrstar through the Zinc in Concentrate Streaming Agreement entered into in February 2010.The structure, size and composition of the Board of Directors were reviewed by the Nomination Committee.
In 2010, the Board of Directors convened 11 meetings.
The main duties of the Board of DirectorsThe Board of Directors supervises the Company’s adminis-tration and the appropriate organisation of the Company’s operation. The Board also oversees the compliance of the operations with applicable rules and regulations and the Articles of Association of the Company as well as instruc-tions given by General Meetings of Shareholders. The Board of Directors has general authority to decide on and act in any matters not specifically reserved by law or under the Articles of Association to any other governing body of the Company. The Board of Directors establishes the principles of the Company’s strategy, organisation, development, accounting and financial control as well as approves the budget of the Company. The Board of Directors also super-vises and controls the operative management and appoints and dismisses the Chief Executive Officer of the Company. The Board of Directors approves the financial statements and quarterly interim reports of the Company. The Board decides upon matters not belonging to day-to-day manage-ment of the Company led by the Chief Executive Officer and considered having major importance including signifi-cant engagements and investments of the Company. The Chairman of the Board Directors is responsible for the leadership of the Board.
The Board of Directors is always obliged to act in the best interest of the Company and in a manner such that any ac-tions or measures taken by the Board of Directors are not likely to allow unjustified benefit to any shareholder of the Company or to any third party. A Director may not partic-ipate in the decision-making process where a contractual undertaking between such Director and the Company is being discussed. When votes are cast, the majority opinion will be the decision of the Board of Directors. In case of a tie, the Chairman will have the casting vote. A tie in con-nection with an election will be decided by drawing lots.
The Board of Directors is provided relevant and timely information of the Company’s operations and plans so as to enable the Directors to perform their duties. Regular
Meetings of the Board of Directors and its Committees in 2010 (attendance)Board Audit Committee Nomination Committee Remuneration Committee
Mr. G. Edward Haslam 11/11 – – 2/2
Ms. Eileen Carr 10/11 4/4 – –
Mr. Roland Junck 3/81 – – –
Mr. Tapani Järvinen 7/81 – 0/02 1/12
Mr. Eero Niiva 11/11 4/4 1/1 2/2
Ms. Saila Miettinen-Lähde 11/11 – – –
Mr. Pekka Perä 11/11 – – –
Mr. D. Graham Titcombe 11/11 4/4 1/1 2/2
Mr. Antti Aaltonen 3/33 – 1/14 1/14
1 Member of the Board since 15 April 20102 Member of the Committee since 15 April 20103 Member of the Board until 15 April 20104 Member of the Committee until 15 April 2010
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information provided to the members of the Board includes monthly operational reports and management accounts, and other related information pertaining to the past and anticipated future performance of the Company and its subsidiaries. The Board holds annually a number of meetings at the Talvivaara mine site. During the site visits the members of the Board have an opportunity to tour the site and discuss any operational issues with the site management and employees.
The Directors and Officers of the Company and its sub-sidiaries are covered by Directors’ and Officers’ Liability Insurance.
Board CommitteesThe Committees established by the Board of Directors comprise Audit Committee, Remuneration Committee and Nomination Committee. The composition and chair-ing of the Committees is reviewed and decided annually by the Board. Whilst the Committees have been conferred upon several significant tasks relating to the Company’s governance, it should be noted that under the Finnish Companies Act the Committees have no independent de-cision-making power, but rather concentrate on matters delegated to them more extensively for the purpose of issuing recommendations to the Board of Directors. The Committees report regularly on their work to the Board.
Audit CommitteeThe Audit Committee monitors Talvivaara’s financial re-porting and financial forecasts. The Committee also over-sees the statutory audit and considers the independence, effectiveness and objectivity of the external auditors, including the nature and extent of non-audit services provided. In addition, the auditors themselves have proc-esses in place to ensure that their independence is main-tained, including safeguards to ensure that where they do provide non-audit services, their independence is not compromised.
Based on its consideration relating to the audit services, the Audit Committee prepares proposals pertaining to the election of the external auditors.
The Audit Committee considers and keeps under review the need for and effectiveness of the Company’s internal reporting and internal control policies and procedures for the identification, assessment and reporting of risks. The Committee focuses particularly on the Company’s com-pliance with legal requirements, accounting standards and, to the extent applicable, the UK Listing Authority Listing Rules, ensuring that an effective system of inter-nal and financial controls is maintained.
The Audit Committee has been chaired by Ms. Carr and its other members have been Mr. Titcombe and Mr. Niiva. The Chief Financial Officer attends the meetings by invi-tation. The Committee convenes at least four times each year. The members of the Audit Committee shall have the
qualifications necessary to perform the responsibilities of the Audit Committee, and at least one member shall have expertise specifically in accounting, bookkeeping or auditing.
During 2010, the Audit Committee met four times.
Remuneration CommitteeThe Remuneration Committee supervises, reviews and develops the remuneration and reward schemes of the Company and the remuneration paid to the members of the Board of Directors. The Remuneration Committee makes the necessary proposals to the General Meetings of Shareholders regarding the remuneration of the Board of Directors. The Committee also makes recommenda-tions to the Board of Directors and, within its terms of reference, decisions on Talvivaara’s remuneration poli-cies, the implementation of incentive schemes of senior management, and on reviewing the performance of Exec-utive Directors and senior management of the Company and its subsidiaries.
The Remuneration Committee has been chaired by Mr. Niiva and its other members have been Mr. Titcombe, Mr. Haslam and Mr. Järvinen. Mr. Aaltonen was a member of the Committee until the Annual General Meeting of 15 April 2010. The Chief Executive Officer attends the meet-ings by invitation.
During 2010, the Remuneration Committee met twice.
Nomination CommitteeThe Nomination Committee considers the composition of the Board of Directors and appointment of Directors. It also advices and makes proposals and recommendations to the General Meetings of Shareholders on issues relat-ing to the composition and nomination of the Board of Directors. The Nomination Committee reviews regularly the size, composition and effectiveness of the Board of Directors. Only members of the Nomination Commit-tee have the right to attend the Nomination Committee meetings. However the Chairman, the Chief Executive Officer and external advisors may be invited to attend all or part of any meeting as and when appropriate. In connection with its duties, the Nomination Committee is authorized by the Board to take such independent advice (including legal or other professional advice, at the Com-pany’s expense) as it considers necessary.
During 2010, the Nomination Committee met once. The meeting was held to review the structure, size and composition of the Board, to discuss Board succession and to consider proposed recommendations to the Board for two new members. The Nomination Committee proposed to the Annual General Meeting of 2010 that Mr. Roland Junck and Mr. Tapani Järvinen be appointed as new members of the Board of Directors. Mr. Junck and Mr. Järvinen are considered to have strong and wide knowl-edge and experience of the mining and metals industries as well as recognized leadership skills. Their appointment
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was considered to benefit the Company. Accordingly, no external search consultancy nor open advertising as rec-ommended by the provision A.4.6 of the UK Combined Code was considered necessary nor reasonable under the circumstances. In accordance with the proposal by the Committee, the Annual General Meeting elected Mr. Junck and Mr. Järvinen to the Board.
The Nomination Committee comprises three inde-pendent Non-Executive Directors. The quorum necessary for the transaction of business is two. The Nomination Committee has been chaired by the Deputy Chairman of the Board (Senior Independent Director) Mr. Titcombe. Its other members have been Mr. Niiva and Mr. Järvinen. Mr. Aaltonen was a member of the Committee until the Annual General Meeting of 15 April 2010.
The Chief Executive OfficerThe Chief Executive Officer (“CEO”) is responsible for the implementation of the Company’s strategy and for the day-to-day management of the Company’s affairs in accordance with instructions and directions given by the Board of Di-rectors. The CEO may undertake acts considered unusual or extensive having regard to the scope and nature of the operations of the Company only with the authorisation of the Board. The CEO is also responsible for overseeing that the Company’s financial administration is in compliance with applicable laws and has been arranged in a reliable manner. The CEO reports to the Board of Directors and provides the Board with information relating to the finan-cial status of the Company, relevant business environment and other pertinent matters which are considered essen-tial for the Board of Directors to fulfil its obligations. The CEO of the Company is Mr. Pekka Perä.
Executive CommitteeThe role of Talvivaara’s Executive Committee is to man-age Talvivaara’s mining operations and administrative activities and to assist the CEO in the performance of his duties. Each member of the Executive Committee has his or her own area of responsibility and the duty to develop the operations in accordance with the targets set by the Board of Directors. The Executive Committee meets 1-3 times a month. During 2010, the Executive Committee met 12 times.
In addition to the ordinary Executive Committee meetings, the Company launched in 2010 working group meetings to further enhance the effectiveness of the Committee’s work. The Executive Committee has been divided into three working groups: Environment, Health, Quality, Safety and Human Resources working group, Financial and Commercial working group, and Production and Technology working group. Each member of the Executive Committee takes part in meetings of at least one of the working groups according to his/her area of
responsibility. The CEO and Chief Operations Officer at-tend meetings of all the working groups. Since the work-ing group division was launched in autumn 2010, each of the working groups has met twice in addition to the ordi-nary meetings of the Executive Committee.
InsidersThe Company has a policy which covers dealings in se-curities and applies to statutory as well as Company and project specific insiders. A comprehensive register of statutory insiders consisting of the Directors, members of the Executive Committee, the auditor of the Company and any other persons whose holding of shares shall be public according to the Finnish Securities Markets Act, is maintained by the Company and available on the Com-pany website and at the headquarters.
Talvivaara’s register of Company specific insiders in-cludes individuals who are defined by the Company as such and who regularly possess insider information due to their position in the Company.
Permanent insiders may not trade in securities issued by the Company during closed periods defined pursuant to section 1 of the Model Code annexed to the UK Listing Rules (the “UK Model Code”). The Company also follows the Insider Guidelines issued by NASDAQ OMX Helsinki (the “Finnish Insider Guidelines”). As the closed periods under the UK Model Code are longer than the minimum closed windows under the Finnish Insider Guidelines, the Company has decided to define its closed periods in ac-cordance with UK Model Code as follows:
the period of 60 days immediately preceding prelimi-•nary announcement of Company’s annual results or, if shorter, the period from the end of the relevant fi-nancial year up to and including the time of announce-ment; and
the period of 30 days immediately preceding the an-•nouncement of the quarterly results or, if shorter, the period from the end of the relevant financial period up to and including the time of the announcement.
All insiders are notified of close periods.The Company also maintains a project specific insider
register when necessary. Project specific insiders are pro-hibited from trading in the Company’s securities until the termination of the relevant project.
AuditorAccording to its Articles of Association, Talvivaara has one auditor elected by the Annual General Meeting of Share-holders. The term of the auditor terminates at the close of the Annual General Meeting of Shareholders following the election. The auditor shall be a company of auditors au-thorized by the Central Chamber of Commerce of Finland.
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The auditor of the Company has been the Authorized Public Accountants PricewaterhouseCoopers. Ms. Ylva Eriksson, APA, has principal responsibility for the con-duct of the audit. The auditors are paid based on approved invoices. In 2010, the compensation for auditing services amounted to EUR 76,000 in audit fees and to EUR 23,115 in non-audit fees. The auditor is responsible for auditing the Company’s and the Group’s accounting records for the financial period, the financial statements and the re-port of the Board of Directors. In addition, Finnish law requires that the auditor also monitors the legality of the Company’s administration.
Going concern The Group’s forecasts and projections, taking account of the Group’s current liquidity position and reasonably possible changes in production, metal prices and foreign exchange rates, indicate the Group to be able to continue in operational existence with adequate financial resources for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consoli-dated financial statements.
Relationship with the major shareholderTo date, Mr. Pekka Perä, Chief Executive Officer and Ex-ecutive Director of the Company, owns, together with his associates, approximately 23 per cent of the Company. The relationship between Mr. Perä and Talvivaara is gov-erned by a Relationship Agreement, pursuant to which Mr. Perä has undertaken, inter alia, to exercise all voting rights and any powers of control that he has in relation to the Company and any other members of the Talvivaara Group in such a way as to ensure that the Company and the other members of the Group are able, at all times, to carry on their businesses independently of Mr. Perä and his associates, and that any transaction or relationship be-tween Mr. Perä or any of his associates and the Talvivaara Group will be at arms length and on a normal commercial basis. The Relationship Agreement shall apply so long as Mr. Perä, collectively with his associates, controls 20 per cent or more of the voting rights at the General Meeting of Shareholders of the Company. The Board of Directors considers the provisions of the Relationship Agreement to be adequate safeguards for securing Talvivaara’s ability to operate independently of Mr. Perä and his associates.
Dialogue with institutional and major shareholdersThe Board of Directors recognizes that meetings with an-alysts and shareholders constitute an important element of the Company’s investor relations programme. Meet-
ings take place with major investors either individually or on a group basis, as required. These meetings may be ini-tiated either by the Company or analysts and investors, and are managed at the Group level by the Chairman, the Chief Executive Officer and the Chief Financial Officer, who brief the rest of the Board of Directors regularly on the Company’s relationships with its shareholders. The Senior Independent Director is available to attend meet-ings with major shareholders when requested by share-holders or considered necessary by the Company.
The Annual Reports and the Interim Results are the Company’s primary means of communicating with all shareholders. Financial reports, press releases, and other information about Talvivaara released in 2010 are availa-ble on the Company’s website at www.talvivaara.com.
The main features of the internal control and risk management systems pertaining to the financial reporting processTalvivaara’s internal control and risk management practices relating to financial reporting seek to ensure the reliability and objectivity of financial reporting, compliance with applicable laws and regulations, and effectiveness and efficiency of operations.
The Company’s internal control and risk management processes use the framework introduced by the Committee of Sponsoring Organizations (COSO) as the starting point. The framework comprises the key components of control environment, risk management, control activities, infor-mation and communication, and monitoring. Talvivaara aims to continuously improve its internal controls and risk management practices to eventually make them COSO compliant and to make these processes an increasingly in-tegrated part of all day-to-day operations.
Control environmentTalvivaara’s Board of Directors bears the overall respon-sibility for ensuring that an effective system of internal control and risk management is established. The Audit Committee periodically reviews the status of the relevant processes and reports of its findings to the Board. The Audit Committee also oversees that appropriate relations with the auditor are maintained. Operationally, the re-sponsibility for maintaining and improving the internal control and risk management systems is delegated to the CEO and the Executive Committee.
Risk managementThe objective of Talvivaara’s risk management is to sup-port the achievement of the Group’s strategic and opera-tional targets while protecting the Company against loss, uncertainty and lost opportunity. There is an ongoing process in place, supported where necessary by external
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advisors, for identifying, evaluating and managing the significant risks facing the Talvivaara Group. The Board of Directors is responsible for reviewing the effectiveness of the systems for the identification and management of risk. Such reviews are periodically undertaken with the assistance of the Audit Committee.
The Chief Executive Officer, the Executive Committee and the Risk Management Committee as its sub-commit-tee are responsible for defining and implementing daily risk management procedures and ensuring that risks are taken into account in the Group’s strategic planning. The Executive Committee coordinates risk management ac-tivities and risk reporting in the Group.
In 2010, the Company’s risk management activities were focused on developing risk management practices within departments and functions, partly as part of inter-nal development programmes relating to environment, health and safety, internal controls, and production reli-ability. The goal set for 2011 is to update the Group level risk management policies to reflect Talvivaara’s present development stage as an operational rather than a project focused entity. The Group level risk assessment will be based on findings from the department level work and on experience gained from the chosen risk assessment tools which take into account the probability and estimated impact of the identified risks.
Risks specific to Talvivaara, its business and the indus-try in which it operates are discussed in more detail in Talvivaara’s Annual Report in section “Risk management and principal risks”.
Control activitiesTalvivaara’s management is responsible for setting up and maintaining an adequate internal control structure and procedures for reliable financial reporting. The Chief Executive Officer, the Executive Committee and other members of the senior management of Talvivaara and its subsidiaries are responsible for ensuring, under the su-pervision of the Board of Directors of the Company, that the accounting and governance in their respective lines of duty comply with the applicable laws as well as with the guidance given by the Board of Directors.
In 2010 Talvivaara continued the work commenced in 2009 and aimed at further improving its internal con-trols to reflect the Company’s growth and development into a revenue generating entity. The work on internal controls focused on the following key processes: procure-ment, payments, revenue, production, human resources and payrolls, financial reporting, and information tech-nology. Control matrices for all of the key processes were defined during the year and the effectiveness of the con-trols was tested. Whilst no significant findings pertaining to the controls were made, additional testing is planned for 2011 along with further updating and improvement of documentation relating to the processes, controls and
operating procedures. The foundation for the work on internal controls has been the identification of risks re-lating to the key processes and definition of the internal controls to minimize the identified risks.
Talvivaara views control activities an area of continuous improvement. In 2011, the Company intends to continue paying special attention to the effective implementation of the internal controls and on further documentation of the underlying operating procedures.
Information and communicationTalvivaara aims to keep its personnel as well as the Board of Directors informed of its internal controls and risk management policies in a transparent, accurate and time-ly manner in order to continuously build on a positive culture of control activities. The key information chan-nels towards all of the employees include the Company intranet and the weekly and monthly personnel publica-tions, Talvivaara Weekly and Talvivaara News. Relevant personnel groups are also separately informed of and trained relating to internal controls and risk manage-ment procedures. Employee input is also actively sought when identifying the key risks and controls.
Internal controls are a recurring agenda item in Audit Committee meetings, where they are discussed with the Chief Financial Officer as well as the Company’s auditors. The Audit Committee plays an important role in further communicating the status, targets and development of the Company’s internal controls to the Board of Directors.
MonitoringThe effectiveness of the internal controls is overseen by the Board of Directors and operationally monitored by the management on various organisational levels. The Company’s financial control function is responsible for periodically testing the controls and overseeing the com-mitments entered into in connection with the operations of the Talvivaara mine.
Talvivaara does not have a separate internal audit func-tion to evaluate and test the operating procedures and processes relating to internal controls. The establishment of an internal audit function, either internally or through outsourcing, is considered by the Audit Committee and the Board of Directors annually and is regularly discussed with the Company’s external auditors. The stage of devel-opment and operational scope of the Company have, in the Board of Directors’ view, not yet warranted establish-ment of an internal audit function. The key factors con-tributing to this view include the Group’s operations be-ing carried out on one mine site and in one country only, and the number of the Group’s customers being limited. Also, the ongoing development work on internal controls involves testing and evaluation of controls in a fashion that closely resembles internal audit.
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Risk Management and Principal Risks
Risk management policies and responsibilitiesIn line with current corporate governance guidelines on risk management, Talvivaara carries out an ongoing process endorsed by the Board of Directors to identify risks, measure their impact against certain assumptions, and implement the necessary proactive steps to manage these risks.
The objective of Talvivaara’s risk management is to support reaching of the Talvivaara Group’s strategic and operations targets while protecting the Company against loss, uncertainty, and lost opportunity. There is an ongoing process in place, supported where necessary by external advisors, for identifying, evaluating, and managing the significant risks the Group faces. The Audit Committee is responsible for assessing and the Board of Directors for reviewing the effectiveness of the systems for the identification and management of risk.
The CEO, the Executive Committee, and the Risk Management Committee as its sub-committee are responsible for specifying and implementing day-to-day risk management procedures and ensuring that risks are taken into account in the Group’s strategic planning. The Executive Committee co-ordinates risk management activities and risk reporting in the Group.
In 2010, the Company’s risk management activities were focused on developing risk management practices
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within departments and functions, such as internal development programmes related to the environment, health and safety, internal controls, and reliability of production. The goal set for 2011 is to update the Group-level risk management policies to reflect Talvivaara’s current stage of development as an operations- rather than project-focused entity. The Group-level risk assessment will be based on findings at the department level and on experience gained from the chosen risk assessment tools, which take into account the probability and estimated impact of the risks identified, both economically and with respect to operations. As part of the assessment, measures to manage the risks identified will also be specified.
Talvivaara divides its risks into four main categories: strategic risks; operational risks; financial and economic risks; and environmental risks, occupational health and safety risks, and risks of hazards.
Strategic risksBusiness environmentThe cycles of the global economy and business affect Talvivaara’s operations and profitability, through, for example, changes in base metals and raw material prices, foreign currency exchange rates, and interest rates. The effects and management of these risks are
discussed in more detail in the section ‘Financial and economic risks’.
Economic cycles also affect the demand for Talvivaara’s products in the markets. The Company has protected itself against demand risk by selling its nickel, cobalt, and zinc production to customers under long-term bilateral contracts, which cover Talvivaara’s total output of these metals for contract periods of several years. A long-term off-take agreement has also been concluded for the planned uranium concentrate production.
Although long-term sales agreements protect Talvi-vaara from demand risk, they also expose the Company to counterparty risk if the contractual partners do not fulfil their commitments. Talvivaara’s most important contractual partners are Norilsk Nickel Harjavalta Oy, to which the Company has agreed to sell all of its future nickel and cobalt production for 10 years from the commencement of full-scale production and when 300,000 tonnes, in the aggregate, have been delivered, and Nyrstar Sales and Marketing AG, to which the Company has agreed to sell all of its zinc production until 1.25 million tonnes, in aggregate, have been delivered. Revenues from these agreements are estimated to represent approximately 90% of the Group’s net sales when the Talvivaara mine has reached its full production rate. Talvivaara seeks to protect itself
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against counterparty risk by charting alternative potential buyers and by maintaining the related information and updating it regularly.
Political and legislative risksMining operations require a permit and are regulated by many laws and regulations. Changes to laws and regulations governing mining operations, the production of uranium, or environmental protection may cause significant increases in production costs and/or costs related to permits and their maintenance.
Talvivaara actively promotes the interests of the mining industry by participating in the work of the industry’s association and seeks to influence decision-making related to the industry and to foresee any effects of changes in legislation on its operations.
Estimates of mineral resourcesIn the long term, Talvivaara’s financial performance is affected by how great a proportion of its estimated mineral resources can be exploited. The descriptions of mineral resources in this report constitute estimates that comply with standard evaluation methods generally approved in the international mining industry and are stated in conformity with the Australian JORC code.
In respect of these estimates, no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realised, or that mining and processing will be economically profitable. The actual reserves may not conform to geological, metallurgical, or other expectations. Lower market prices, increased production costs, lower than expected recovery rates, and other factors may render Talvivaara’s reserves uneconomical to exploit and may result in revision of its reserve estimates from time to time. The information on reserves is not indicative of future results of operations.
Talvivaara seeks to reduce the risk related to its mineral resources through additional surveys, which are carried out continuously, to improve the reliability of reserve estimates and the quality of mine planning.
Operational risksRisks related to production ramp-upAt present, the Talvivaara mine is in the production stage, and the production volumes reached have already demonstrated that all the production processes and technologies work on a commercial scale. However, the ramp-up of production still continues, and its successful completion for reaching the planned production volumes according to the estimated schedule is dependent on many factors, such as the recovery rates and the leaching rate of metals in bioheapleaching, the sufficiency and reliability of the production equipment used in the various processes of production (in the mine, materials
handling, bioheapleaching, and recovery of metals), and the personnel’s ability to manage the production processes as planned. If the planned level of production cannot be met with the existing equipment and processes, additional investments may be required for reaching the capacity needed and achieving full production capacity may be delayed. Any deviation from the planned ramp-up schedule may adversely affect the Company’s financial situation and profitability.
Talvivaara seeks to minimise risks related to the production ramp-up by continuously monitoring the progress of the ramp-up and the operation of the processes and equipment as operation capacity increases. The aim is to eliminate any bottlenecks as soon as practically possible, so as to ensure the progress of the ramp-up process. In 2010, the Company also initiated a production reliability project with a view to improving the availability and reliability of production equipment – via, for example, surveys to chart the needs for predictive maintenance, critical processes, and production risks, as well as through related improvement measures.
Availability of supplies and energy, logistics, and related price risksThe most important supplies required in Talvivaara’s operations are limestone, burnt lime, caustic soda, elemental sulphur, sulphuric acid, and propane. These are all critical for the continuation of production and are used in large amounts, for which reason stock for only a few weeks can be kept at the mine. Any disruptions in the availability of supplies or in logistics may result in delivery on less favourable terms or, at worst, in production losses.
The Company seeks to ensure continuous and sufficient availability of supplies as well as reasonable commercial terms, by concluding contracts with two parallel suppliers and, where possible, through long term, fixed-price contracts. In addition, Talvivaara intends to increase its reserve stocks in order to bring flexibility to logistics.
Talvivaara’s mining operations also require significant levels of energy, most notably electricity. Any volatility in energy prices could affect the Company’s results of operations. Talvivaara uses hedging and other contractual means to minimise energy price risk, where possible.
Infrastructure risksThe Talvivaara mine is in a sparsely populated, sub-Arctic area in Eastern Finland, where the Company’s production operations will rely on the infrastructure being adequate. Talvivaara depends on trucking and the rails for delivery of the raw materials and supplies to its operations, while its products are transported by rail and partly also by ship to the customers. The electricity required by the mine is supplied through the Company’s own power line connected to the Finnish main grid. Disruptions in the
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power supply or transport services because of weather-related problems, failures in key equipment, lockouts or other industrial action, and other events could temporarily disturb Talvivaara’s mining operations and impair its ability to receive supplies and to supply its products to its customers, which could have a material adverse effect on the business, financial situation, or the results of operations for the Talvivaara group.
Talvivaara seeks to manage infrastructure risks by making provisions for alternative transport routes and modes, insofar as this is practically possible. In addition, the Company intends to increase its reserve stocks of raw materials and its end-product inventories. However, the effect of disruptions to power on the Company’s production operations cannot be prevented completely, as the stand-by generators are not able to maintain production, only certain critical functions.
Personnel risks and dependence on key personnelThe business of the Talvivaara group depends in significant part upon the contributions of a number of the Talvivaara group’s key senior management and personnel – in particular, its highly skilled team of engineers and geologists. Factors critical to retaining Talvivaara’s present staff and attracting additional highly qualified personnel include Talvivaara’s ability to provide these individuals with competitive compensation arrangements.
A failure by Talvivaara to retain or attract highly qualified individuals in key management positions as well as highly skilled engineers and geologists could have a material adverse effect on the Talvivaara group’s business, financial situation, or results of operations. Talvivaara seeks to manage key personnel risks by updating its remuneration and incentive schemes and providing its key personnel with training and advancement opportunities, where possible. For urgent and acute situations, a succession plan has been developed for the senior management.
Other key risks associated with personnel include risks related to gaps in competence, data security, and occupational accidents and diseases. Talvivaara seeks to minimise these risks through systematic determination of competence areas and training, an active communications policy, and clear instructions emphasising safety. The Company cannot completely eliminate the risks connected with national strikes; however, it aims to ensure that duties that are critical for the safety of the environment and the production plants can always be performed.
Communications and reputation risksTalvivaara aims to provide information in an open, transparent, accurate, and timely manner in both internal and external communications. The Company seeks to prevent the dissemination of incorrect or untimely information by applying a standard communications
policy and issuing appropriate instructions, as well as through internal control related to financial processes. Internal guidelines and processes associated with internal control are reviewed on a regular basis, for their continuous improvement.
Risk to Talvivaara’s reputation may arise from the Company’s own actions or the actions of third parties. The Company seeks to avoid errors in its actions, such as accidents, by providing appropriate and up-to-date instructions and training. However, should an accident or other event damaging to the Company’s reputation occur, Talvivaara seeks to provide appropriate, open, and truthful communication concerning such event. The same principle applies when the Company’s reputation is threatened by any action of third parties.
Technology and intellectual property rights Talvivaara is the first company in the world to apply bio-heapleaching technology to the recovery of nickel. It has already been demonstrated that the process works at the Talvivaara mine, but the final recovery rates of nickel and other metals on an industrial scale are still unknown. If the final recovery rates or the leaching rate for the full process deviate substantially from the Company’s estima-tes, this may have a significant economic impact on the Company in the medium and long term. Talvivaara seeks to minimise this risk proactively through process deve-lopments and additional studies. However, the final re-covery rates and the leaching rate can be confirmed only in 2013, at the earliest, when the ore stacked in 2008 in the early stage of production is expected to reach the final leaching stage.
The Talvivaara group does not currently have any registered intellectual property rights related to the bioheapleaching technology, and the Company does not consider it likely that this process, which occurs naturally, could be patented. The Board of Directors believes that the technology used by Talvivaara does not infringe the rights of any third parties. However, there can be no guarantee that Talvivaara will not be subject to claims of infringement of third-party intellectual property rights. If such a claim were made, it might result in protracted legal proceedings that could adversely affect Talvivaara’s business and cause considerable costs and liability to pay compensation related to rights of use, regardless of the outcome of the claim.
In line with its strategy related to intellectual property rights, Talvivaara seeks to establish whether its technologies can be protected insofar as they meet the criteria set for the level of inventiveness and novelty, and the Company believes that having registered intellectual property rights would protect the utilisation of the invention at Talvivaara or provide opportunities for commercial utilisation of the invention elsewhere. In addition, the Company aims to chart any third-party
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rights that might pertain to Talvivaara’s operations and thus avoid the risk associated with any infringement of patents or other intellectual property rights.
Financial and economic risksCommodity price riskThe market price of nickel has historically been volatile, and the Company believes that this is likely to persist, driven by factors such as shifts in the supply–demand balance, macroeconomic indicators, variations in currency exchange rates, the availability and costs of substitutes, the inventory levels maintained by producers and others, and actions of participants in the commodities markets. Nickel sales currently represent approximately 90% of the Company’s revenues, and variations in nickel prices therefore have a direct and significant effect on Talvivaara’s financial result and economic viability. Where Talvivaara’s second most important product, zinc, is concerned, there is no price risk, as the minimum price is set in the zinc streaming agreement concluded with Nyrstar for the term of supply, which is estimated at 10–15 years.
Since February 2010, Talvivaara has been unhedged against fluctuations in nickel prices. Full or practically full exposure to nickel prices is in line with Talvivaara’s strategy and is supported by the Company’s view that it can operate the Talvivaara mine profitably through the lows of commodity price cycles.
The effect of variations in nickel prices on the Group’s financial result and equity is discussed in more detail under note 3 to the financial statements (‘Financial risk management’).
Foreign exchange riskTalvivaara’s revenues are almost entirely gained in US dollars, whilst the majority of the Company’s costs are
incurred in euros. Therefore, strengthening of the euro against the US dollar has the potential to have a material adverse effect on the business and financial position of the Company. Talvivaara hedges its exposure to the US dollar case-specifically with the aim of limiting the adverse effects of US dollar weakness as is considered justified at the relevant time.
The effect of changes in foreign currency exchange rates on the Group’s financial result and equity is discussed in more detail under note 3 to the financial statements (‘Financial risk management’).
Liquidity and refinancing risksLiquidity risk arises when a company is not able to obtain the funds it requires for compliance with its obligations under financial instruments or other agreements entailing financial commitments. Talvivaara seeks to reduce its liquidity risk through close monitoring of liquidity in order to detect any threat of adverse changes in advance, so as to allow sufficient time to secure access to adequate credit or other funding on reasonable terms. Talvivaara also seeks to maintain a balanced maturity profile for its long-term debt in order to mitigate refinancing risks.
Talvivaara’s liquidity improved significantly in December 2010 when the Company completed an offering of EUR 225 million of convertible bonds maturing in 2015.
Internal control Talvivaara’s internal control related to financial adminis-tration covers the following key processes: procurement, payments, revenue, production, human resources and payroll, financial reporting, and information technology. The internal control system comprises authorisations, distribution of work tasks so as to avoid risky combina-tions, and controls that form part of accounting and con-trol systems.
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If the control systems and the related internal controls do not detect erroneous actions, the reliability of Talvivaara’s internal and/or external reporting may be impaired, which, in turn, may have an adverse effect on the Company’s business operations, communications, and reputation.
Talvivaara seeks to reduce risks linked to internal control by testing its processes and controls periodically and by developing its practices and the related guidelines. The work on internal controls is based on the identification of risks related to key processes and on definition of internal controls to minimise the risks identified.
Environmental risks, occupatio-nal health and safety risks, and hazardsMining activities are generally subject to risks of damage as a result of the processes, structures, and chemicals used in the extraction and production. This is particularly applicable to the bioheapleaching and metals recovery methods employed by Talvivaara, which require that the Company use chemicals such as sulphuric acid, hydrogen sulphide, and caustic soda.
The most significant risks to be identified at Talvivaara in connection with harm to the environment are those of accidents occurring during the handling and storage of chemicals and of damage caused by heavy rains and the breakdown of the tight structures used for process solutions, which can result in the contamination of soil and exceptional discharges into surface waters.
The most significant occupational health and safety risks are risks of accident caused by traffic in the plant area and the handling of chemicals as well as health risks caused by harmful impurities in the atmosphere at the workplace.
Talvivaara’s operations involve the handling and storage of dangerous substances covered by the EU’s Seveso II directive. As required by the directive, a safety report, covering all of the Company’s operations, has been prepared for Talvivaara, and the related risk assessments have been performed. At Talvivaara, the most significant risks of accident-related hazards are posed by the handling and storage of chemicals. The mine’s internal rescue plans include instructions to be applied in the event of any accidents. In addition, emergency drills are organised annually. The Company aims to prevent accidents through appropriate operation and work instructions.
In 2008–2009, Talvivaara has conducted baseline studies of accident, environmental damage, and occupational safety risks arising from the handling and storage of chemicals and other factors associated with production. Similar studies have been conducted on occupational health risks caused by traffic in the plant area and dust in the atmosphere at the workplace. These studies will be updated in 2011.
At Talvivaara, the management of environmental risks, occupational health and safety risks, and hazard demand systematic preventive measures to identify hazards, assess risks, and reduce risk levels. Risk management is mainly based on appropriate operation and work instructions, our certified ISO 14001 environmental management system, the safety report prepared for the mine, and internal rescue plans. Talvivaara monitors the state of the environment in accordance with the requirements set in its environmental permit.
Talvivaara has taken out insurance for protection against risks of damage. The insurance covers any material loss and interruptions to production caused by damage to property owned or possessed by the Company.
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G. Edward HaslamBorn 1944. Non-Executive Chairman of the Board since 2006. Independent from the Company and significant shareholders. Other key positions of trust: Non-Executive Director of Aquarius Platinum Ltd, Chairman of the Remuneration and Succession planning committee and member of the Audit Committee at Aquarius Platinum Ltd, Senior non-executive Director of Namakwa Diamonds Ltd.
Primary experience: CEO of Lonmin Plc until 2004, various positions with Lonmin Plc, Falconbridge Nickel Mines and British Steel Corporation.
Pekka PeräBorn 1964. M.Sc. (Mining) Helsinki University of Technology. Executive Director and CEO of the company since its incorporation 2003. Primary experience: Project Manager of Mining at Arctic Platinum Partnership from 2001 to 2003 and as a Project Manager at Pyhäsalmi Mine Oy, various positions with the Outokumpu Group in Finland and elsewhere from 1991 to 1999.
Saila Miettinen-LähdeBorn 1962. M.Sc.(Eng.) Executive Director and CFO of the company since 2005. Primary experience: Founding partner of SIDOS Partners Ltd (Jan 2004 to Dec 2004), Director at D. Carnegie AB (2000 to 2003), Vice President of Business Development at Orion Pharma (Jan 2000 to Oct 2000), Director of the Finnish National Fund for Research and Development (1998 to 1999) and various positions
at Leiras Oy (1993 to 1998).
D. Graham TitcombeBorn 1942. Non-Executive Director since 2007. Independent of the Company and significant shareholders. Deputy Chairman of the Board (Senior Independent Director). Other key positions of trust: Senior Independent Director of the Board at Cap-XX Ltd. Primary experience: Number of senior positions at Johnson Matthey Plc, retired as Group Managing Director in 2002, member of the
Board of Directors of Johnson Matthey Plc for 12 years, Non-Executive Director of Wagon Plc (1996 to 2003), Chairman of the Board of Infast Plc (2002 to 2005), Senior Independent Director of the board at PolyFuel Inc until 2008.
Eileen CarrBorn 1957, M.Sc. (Management) University of London, Sloan Fellow, FCCA. Non-Executive Director since 2007. Independent from the Company and significant shareholders. Primary experience: Number of senior positions within the mining industry including Finance Director and Company Secretary at Cluff Resources plc (1993 to 1996)
and at Cluff Mining plc (1997 to 1999); CFO and Company Secretary at Monterrico Metals plc (2002 to 2007); Non-executive director at Goldstar Resources NL (2003 to 2009); Deputy Chairman at Cluff Gold plc (2007 to 2010).
Eero NiivaBorn 1960. M.Sc. (Industrial Management) Lappeen-ranta University of Technology. Non-Executive Director since 2005. Independent of the Company and significant shareholders. Other key positions of trust: Partner and member of Board of Directors at MB Funds (since 2003), Chairman of the Board of Directors of Norpe Oy, Chairman of the Board of Directors of Forchem Oy, member of the Board
of Directors of Mainio Vire Oy, Chairman of Board of Directors of Tailwind Capital Oy. Primary experience: Head of Corporate Finance and Senior Executive of Carnegie Investment Banking in Helsinki (1995 to 2003), various positions with Postipankki Corporate and Investment Banking (1988 to 2003), Representative and Deputy Chief Representative of Postipankki Tokyo Representative Office (1989 to 1992), various positions in corporate and investment banking including Corporate Analyst at Mortgage Bank of Finland Ltd (1985-1988).
Tapani JärvinenBorn 1946, Lic. Sc. (Tech.) Helsinki University of Technology. Non-Executive Director since April 2010. Independent of the Company and significant shareholders. Other key positions of trust: Member of the Board of Directors (since 2003) of Dragon Mining Limited, Australia, Member of the Board of Directors (since 2007) of Normet Oy, Member of the Board of Directors (since 2008) Okmetic Oyj, Member
of the Board of Directors and Audit Committee (since 2009) Konecranes Oyj, Member of the Board of directors and Human Capital Committee (since 2010) Outotec Oyj. Primary experience: President and CEO of Outotec Oyj, (Oct 2006 to 2009), President and CEO of Outokumpu Technology (2003 to 2006), Executive Vice President and Member of the Group Executive Committee of Outokumpu Oyj (2000 to 2005), General Manager & CEO of Compañia Minera Zaldivar, Chile (1994 to 2000), various positions with the Outokumpu Group in Finland and elsewhere from 1985 to 2000 and prior to joining Outokumpu various positions at Kone Corporation from 1971 to 1985.
Roland JunckBorn 1955, Mechanical Engineer Federal institute of Technology, Zürich, MBA Sacred Heart University Luxembourg. Non-Executive Director since April 2010. Other key positions of trust: Member of the Board of Directors (2007 to 2009) of Nyrstar NV, Member of the Board of Directors (since 2008) of AGFA-Gevaert NV, Member of the Board of Directors (since 2008) Interseroh SE, Member of the Board of
Directors (since 2008) of Samwha Steel SA. Primary experience: CEO & Managing Director of Nyrstar NV (since 2009), CEO of Arcelor Mittal (2006–2007), Senior Executive Vice-President of Arcelor S.A. (2002 to 2006), various positions with Idem – TrebilArbed – Arbed in Europe from 1980 to 2002.
Antti AaltonenBorn 1947. Non-Executive Director from 2005 until April 2010. Resigned from the Board of Directors at the Annual General Meeting on April 15, 2010. Independent of the Company and significant share-holders since 16.10.2009. Primary experience: President of Norilsk Nickel Finland Oy until 15 October 2009, President of OMG Finland Oy and OMG Harjavalta Nickel Oy until March 2007, previously
several senior management positions at OMG Finland Oy and OMG Harjavalta Nickel Oy, in the 1970s several positions in development and technology at Outokumpu Cobalt Plant.
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Pekka PeräExecutive Director and CEO
Saila Miettinen-LähdeExecutive Director and CFO. Mrs. Miettinen-Lähde’s area of responsibility covers Group’s financial management, investor relations, treasury, risk management and communications.
Pekka ErkinheimoBorn 1972, Chief Commercial Officer since 2006, LL.M, Pekka Erkinheimo’s area of responsibility covers group sales and procurement, logistics and legal affairs. He is the Company Secretary. Primary experience: Senior associate at Castren & Snellman Attorneys from 1999 to 2006 and has also worked as a tax consultant at Arthur Andersen in Helsinki and Zürich.
Lassi LammassaariBorn 1972, Chief Operations Officer since 2008, M.Sc. (Environmental Engineering). Mr. Lammas-saari’s area of responsibility is the operation at the Sotkamo mine. Primary experience: Joined the Company in 2005. Prior to joining the Company, he worked for Pöyry Infra Ltd as Project Manager 1998–2002, Arctic Platinum Partnership as Environmental Manager 2002–2003 and LVT Ltd as Project Manager 2003-2004. Before being appointed Chief Operations Officer, Mr. Lammassaari was the General Manager of Environment and Infrastructure for Talvivaara Project Ltd 2005–2008.
Tapio IkonenBorn 1957, Chief Administrative Officer since 2008, Master of Laws degree. Tapio Ikonen’s area of responsibility covers human resources strategy, policies and processes, HR Development and performance management. Primary experience: Prior to joining the Company, he worked for OMG as global Vice President of HR, and held various HR positions with PricewaterhouseCoopers, Nokia, and Outokumpu and employer organizations in Finland.
Jukka PitkäjärviBorn 1960, Chief Geologist since 2007, M.Sc. (Geology and Mineralogy), Jukka Pitkäjärvi’s area of responsibility covers exploration and reserve development. Primary experience: Before joining Talvivaara he held various positions within the Outokumpu Group from 1989, most recently as a Chief Geologist of Kemi Mine.
Leif RosenbackBorn 1952, Chief Technology Officer since 2009, M. Sc. (Chemical Engineering), Leif Rosenback’s area of responsibility covers technology, research and development. Primary experience: Joined Talvivaara in 2007 and held various positions within the Outokumpu Group from 1990, most recently as a Senior Process Metallurgist of Outokumpu Technology in Spain.
Tapio HyödynmaaBorn 1951, General Manager Projects since 2008, B.Sc. (Process Engineering), Mr. Hyödynmaa is responsible for investments and project execution. Primary experience: Joined Talvivaara in 2007 and held various positions within the Outokumpu Group from 1973, most recently as a Senior Project Manager of Outokumpu Engineering Services Oy.
Kari VyhtinenBorn 1971, General Manager Expansion since 2010, M.Sc. (Mineral Processing) and Executive MBA, Mr. Vyhtinen’s area of responsibility covers the development of the expansion project. Primary experience: Joined Talvivaara in November 2007. Prior to joining Talvivaara, he worked as a Sales Manager of Process Technology at Outotec Oyj from 2004 to 2007 and as a Managing Director of VTG Worldwide Group’s Australian and Finnish offices from 1998–2004. Before being appointed General Manager – Expansion Project, Mr. Vyhtinen was the General Manager – Business Development 2008–2010.
Eeva RuokonenBorn 1960, Chief Sustainable Officer since 2010, M.Sc. (Mining) and Lic.Tech. (Mineral Processing), Eeva Ruokonen’s area of responsibility covers sustainability, environment, health, and safety management and business excellence. Primary experience: Prior to joining Talvivaara she worked for ABB Oy Service as Vice President - HSE (2007 – 2009), Boliden Ab as global Vice President - QHSE (2006–2007), Boliden’s zinc smelter in Kokkola as General Manager - administration (2005 – 2006) and copper/nickel smelters in Harjavalta as Vice President HSE (1999–2005). During 1991–1999 she worked for Outokumpu-company at Kemi chromium mine in operational and process development positions.
Jari VoutilainenBorn 1966, General Manger Business Development since 2010, M.Sc. (Metallurgy and Strategy & International Marketing), Mr. Voutilainen’s area of responsibility covers business development. Primary Experience: Prior to joining Talvivaara, he held senior management positions in Nokia Operations and Logistics during 2002-2009 and management positions in Outokumpu Copper Products and Base Metals during 1992–2002.
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Remuneration principlesThe primary objective of remuneration is to attract, retain and motivate key personnel, as well as to provide a competitive remuneration package in the prevailing market situation. To ensure that compensation elements are aligned with shareholder interests, remuneration is based on the achievement of specific individual targets and corporate goals. Furthermore, remuneration levels are systematically compared to the industry’s general remuneration practices, and long-term incentive schemes are based on the positive development of the Company’s share price. Talvivaara has a remuneration policy that covers all managers and senior salaried employees.
The decision-making process for remunerationThe General Meeting of Shareholders decides on the remuneration payable for Board and Committee work, as well as the basis of its determination.
The Board of Talvivaara has nominated a Remuneration Committee from among its members, which comprises
Remuneration Reportof at least three Directors independent of the Company. Committee members serve for a term of one year. The Remuneration Committee has been chaired by Mr. Niiva. Its other members have been Mr. Haslam, Mr. Järvinen and Mr. Titcombe. The CEO attends meetings of the Committee by invitation. During 2010, the Remuneration Committee met twice. All members of the Committee and the CEO attended both meetings. The CEO did not attend when the Committee considered his remuneration package.
Within the framework of its terms of reference, the Remuneration Committee is responsible for making rec-ommendations to the Board of Directors on Talvivaara’s senior management remuneration policy. It makes sim-ilar recommendations on the performance of Executive Directors and the senior management of Talvivaara and its subsidiaries, and on determining specific remuner-ation packages for Directors and senior management members. These may include pension rights, any com-pensation payments and the implementation of execu-tive incentive schemes. Moreover, the Remuneration Committee ensures that Talvivaara’s remuneration prac-
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tices comply with the UK Combined Code, that remunera-tion levels are sufficient and well-sized and that remuner-ation is based on the achievement of specific individual targets and corporate goals.
Remuneration and other benefitsThe remuneration of Talvivaara’s key personnel consists of the base salary, an annual performance-based bonus scheme and long-term stock-based incentives.
The monthly base salary of the Chief Executive Officer and members of the Executive Committee is based on the executive’s position, skills and experience, and individu-al performance. To ensure the appropriate remuneration level, Talvivaara regularly gathers and evaluates informa-tion on market-based remuneration levels for the mining sector and comparable listed companies in Finland and the UK market. To ensure that compensation elements are aligned with shareholder interests, remuneration is based on the achievement of specific individual targets and corporate goals. Furthermore, long-term remunera-tion levels are based on the positive development of the Company’s share price. Total remuneration development is regularly compared to general remuneration develop-ments within the industry.
Directors’ service contractsThe service contracts entered into with the CEO and the CFO of the Company are valid until further notice and may be terminated by either party with six months’ notice. Upon termination by the Company, for a reason other than substantial breach of the service agreement or gross misconduct, the CEO and the CFO are entitled to additional compensation equal to six months’ salary and fringe benefits for that period. Accordingly, upon said termination, the CEO and the CFO may receive a maximum payment of 12 months’ salary.
Remuneration of the Board of DirectorsThe Board of Directors’ compensation consists of annual compensation and long-term stock-based incentives. The annual compensation decided by the AGM 2010 is as fol-lows: Chairman of the Board of Directors EUR 153,000, Deputy Chairman (Senior Independent Director) EUR 64,000, Chairman of the Audit Committee EUR 64,000, other Non-executive Directors and executive directors EUR 48,000. The Annual General Meeting of Sharehold-ers decides on the remuneration of members of the Board of Directors.
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The Company granted options to Non-Executive members of the Board as part of the 2007 Option Scheme. These options were granted in 2007 prior to the Company’s initial public offering and the subsequent listing of its shares on the London Stock Exchange (“LSE”). The options granted were disclosed in the pathfinder and the final prospectus, and published in connection with the listing of the Company’s shares on the LSE Main Market. Thereafter, no options have been granted to Non-Executive Directors, nor has the Company any intention of granting such options to Non-Executive Directors in the foreseeable future.
In 2010, the Company allocated a total of 35,554 2007A Options and 48,000 2007B Options to Executive members of the Board.
Remuneration of the executive Committee membersTalvivaara’s Executive Committee manages the Company’s operations, the construction of the mine site and the conduct of its mining operations. The Executive Committee meets 1–3 times a month. Talvivaara’s
Executive Committee consists of two Executive Directors, the Group Chief Executive Officer and Chief Financial Officer and nine executives.
Talvivaara has a general remuneration policy that covers all managers and senior salaried employees. Some key items of the Executive Committee’s employment agreement terms are covered in the following.
All Executive Committee members are eligible to re-ceive an annual bonus, whose maximum amount ranges from 0 to 50% of the annual individual base salary. Bonus criteria can be based on Company’s financial and opera-tive results, as well as on each individual’s performance targets. Annual Company level criteria, as well as indi-vidual performance targets for Executive Directors and other senior management, are decided at the Board of Directors’ meeting, based on the recommendation by the Remuneration Committee of the Company. Before giv-ing its recommendation, the Committee hears the CEO. A person cannot participate in decisions making regarding his/her own remuneration.
Talvivaara’s Executive Committee members’ pension benefits are determined on the basis of statutory employ-ment pension cover. Executive Committee members do
Salaries, bonuses and other remuneration of the Board of Directors1 (EUR ‘000)2010 2009 2008
G. Edward Haslam Chairman of the Board 153 153 163
Pekka Perä CEO, Board Member 403 279 413
Saila Miettinen-Lähde CFO, Board Member 303 209 310
Graham Titcombe Deputy Chairman of the Board 64 64 68
Eileen Carr Board Member 64 64 68
Eero Niiva Board Member 48 48 48
Roland Junck Board Member 32 – –
Tapani Järvinen Board Member 32 – –
Antti Aaltonen2 Board Member 16 48 48
1 115 865 1 1181) The composition of the Board of Directors was changed by a decision of the AGM of 15 April 2010.2) Board member until 15 April 2010.
Share ownership and options of the Board* (as at 31 December 2010)Shares 2010 Options 2010
G. Edward Haslam Chairman of the Board 301 086 28 000
Pekka Perä CEO, Board Member 56 573 460 142 276
Saila Miettinen-Lähde Board Member 445 140 148 278
Graham Titcombe Deputy Chairman of the Board 60 000 28 000
Eileen Carr Board Member 28 000 28 000
Eero Niiva Board Member 1 299 950 28 000
Roland Junck Board Member – –
Tapani Järvinen Board Member 8 650 –
58 716 286 402 554* Figures include the holdings of persons closely associated with the shareholder, and corporations over which the shareholder exercises control, excluding Talvivaara Management Oy’s holding of 1,104,000 shares.
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Details of the 2007 Option Scheme
Option Number of OptionsNumber of Shares under One Option
Exercise Price (Share Subscription Price) Subscription period Expiry Date
2007A 2,333,100 1 £2.25 1 April 2010 31 March 2012
2007B 2,333,100 1 £2.625 1 April 2011 31 March 2013
2007C 2,333,100 1 £2.75 1 April 2012 31 March 2014
Key management compensation (EUR ‘000)2010 2009 2008
Salaries and other short-term employee benefits 1 589 1 196 1 590
Share-based payments 599 579 567
2 188 1 775 2 157Key management consists of the Executive Committee.
not have pension benefits exceeding this. The mandatory retirement age is 68 years for all members of the Executive Committee. According to the Employment Pension Act in force, the optional retirement age varies from 63 to 68 years of age. In cases of employment termination, the pe-riod of notice is 6 months. For all agreements, the non-competition period is also 6 months.
Executive Directors and other members of the Executive Committee are entitled to a daily allowance for business trips, in accordance with the tax guidelines of the Finnish Tax Administration and the maximum amounts decided by the Ministry of Finance from time to time.
Other remuneration, including selected fringe benefits, typically consists of insurances e.g. liability insurance, traveler’s insurance and some other benefits related to the usage of mobile communication and media.
Monthly remunerations and bonusesThe monthly total remuneration levels of Executive Directors and other Executive Committee members have been reviewed, based on the available reports and comparisons from Finnish listed companies and from UK listed metals and mining companies. According to Finnish statistics, Talvivaara’s Executive Directors and other Executive Committee members are compensated above median levels, when the Company’s turnover and personnel are applied as comparison criteria, but slightly below the median when the balance sheet is so applied. According to statistics regarding UK listed metals and mining companies, Talvivaara’s Executive Directors and other members of the Executive Committee are compensated at a lower level than the Company’s closest peers. It is recognised that differences exist between living costs, working environments, duties, local taxation, etc. that make direct comparisons with UK listed companies
somewhat challenging. These differences will be taken into consideration in future compensation reviews.
The Executive Directors’ and other Executive Commit-tee members’ monthly remunerations were not increased in 2010. Their remuneration development therefore fell short of that of other senior salaried employees, who re-ceived a 1.5% salary increase based on a collective agree-ment concluded in August 2010.
In 2010 the Company’s Board of Directors allocated a total of 160,000 Talvivaara 2007A options to those mem-bers of the Executive Committee who were employed by the Company during its construction phase in 2008 and 2009. This allocation included a partial share subscription and holding obligation. Furthermore, based on the rec-ommendation of the Remuneration Committee, in 2010 the Board of Directors allocated 110,300 2007B Options to members of the Executive Committee.
The maximum bonus potential of Talvivaara’s Executive Directors’ and other Executive Committee members can be considered to correspond well to those of Finnish listed companies, but to be below those of UK listed metals and mining companies. Similarly to monthly remunerations, when setting each individual’s bonus criteria careful consideration was given to the transformation from a project company to a production company. Since Talvivaara’s annual production of saleable metals, and therefore revenues from operations, do not yet reflect the eventual size and potential of the steady state full production, it was considered fair that bonus criteria for all Executive Directors and other Executive Committee members in 2010 be based on a combination of Health and Safety, as well as discretionary evaluations of individual performances made by the Remuneration Committee and the Board of Directors of Talvivaara.
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Share Option PlanBy a resolution passed at the General Meeting of Share-holders on 28 February 2007, the Company resolved to issue free stock options to key personnel of the Company and its subsidiaries, entitling them, after the 1:70 split of the Company’s shares, to subscribe for a maximum of 6,999,300 new shares in the Company (2007 Option Scheme). Pursuant to the terms and conditions of the 2007 Option Scheme, the Board of Directors shall decide upon the distribution of the stock options.
During 2010, based on the recommendation of the Remuneration Committee, the Board of Directors allo-cated 176,600 2007A Options, 245,100 2007B Options and 663,000 2007C Options, conferring an entitlement to subscribe for a total of 1,084,700 new shares in the Company, to the personnel of Talvivaara and its subsid-iaries. Of the options allocated during previous years, 312,000 options were returned to the Company in 2010. At the end of 2010, the number of options for alloca-tion under the 2007 Option Scheme was 874,100 2007C Options. The voting rights attached to the shares to be issued against the outstanding share options amount to 2.4% of the Company’s total share capital.
The management holding company Talvivaara Management OyOn 14 December 2010, the Board of Directors of Tal-vivaara decided on a new shareholding plan directed at members of the Talvivaara Executive Committee and the key personnel of Talvivaara Mining Company Plc (Partici-pants). This plan enables Participants to acquire a consid-erable long-term shareholding in Talvivaara. Through this plan, the Participants will invest their own funds in Tal-vivaara’s shares. The Participants partly finance their in-vestments themselves and partly through a loan provided by Talvivaara. Actual owner risk will be borne personally by the Participants, with respect to their personal invest-ment in the plan.
For the purposes of share ownership, the Participants have acquired a limited liability company named Talvi-vaara Management Oy (Talvivaara Management), whose
entire share capital they own. Talvivaara Management acquired a total of 1,104,000 Talvivaara shares. These acquisitions were financed by equity investments in Talvivaara Management on the part of the Participants, to a total amount of EUR 1,432,000, as well as by a loan of EUR 5,728,000 provided by Talvivaara. Some of the Participants financed their equity investments in Talvivaara Management by transferring part or all of their Talvivaara shares to Talvivaara Management. Through Talvivaara Management, the Participants hold approximately 0.4% of Talvivaara shares.
As part of the plan, the Board of Directors of Talvivaara decided to grant Talvivaara Management an interest-bearing loan of a maximum amount of EUR 6,000,000, to finance the acquisition of the Talvivaara shares. The loan will be repaid in full by 31 March 2014, at the latest. Under the applicable terms, should the plan be continued by one year at a time in 2013 or 2014, the term of the loan will be extended correspondingly. Talvivaara Management has the right to repay the loan prematurely at any time. It is also obliged to repay the loan prematurely by selling any Talvivaara shares it holds, in a situation where the quoted price of the Talvivaara share exceeds the average price of the Talvivaara shares acquired for the plan, multiplied by two (2), during a predetermined number of consecutive trading days.
The plan will be valid until the publication of Talvivaara’s financial statements 2013, after which the intention is to dissolve the plan in a manner to be determined later. The plan may be dissolved e.g. by merging Talvivaara Management with Talvivaara, or by selling the Talvivaara shares held by Talvivaara Management in some other manner. The plan will be continued one year at a time, in case the Talvivaara share price after the publication of Talvivaara’s financial statements 2013 is lower than the average price which Talvivaara Management paid for its Talvivaara shares.
During the plan’s period of validity, the transfer of Talvivaara shares held by Talvivaara Management is restricted.
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Talvivaara shares and the official list of shareholders are included in the book-entry securities system maintained by Euroclear Finland Oy. Each share entitles a shareholder to one vote at the General Meeting.
Shares and Share CapitalThe Company’s share capital totalled EUR 80,000 and the number of shares issued and outstanding registered on the Euroclear Shareholder Register as of 31 December 2010 was 245,316,718. Including the effect of the 16 December 2010 convertible bond approved at the Extra-ordinary General Meeting of Shareholders on 27 January 2011, the 14 May 2008 convertible bond and the Option Scheme of 2007, the authorised full number of shares of the Company amounted to 296,756,846 at the end of the reporting period.
The share subscription period for stock options 2007A commenced on 1 April 2010 and ends on 31 March 2012. By 31 December 2010 a total of 140,000 Talvivaara Mining Company Plc’s new shares were subscribed for under the stock option rights 2007A and registered in the Euroclear Shareholder Register. Between 1 September 2010 and 31 December 2010 a total of 34,378 Talvivaara’s new shares were subscribed for under the company’s stock option rights 2007A and these shares were registered in the Trade Register on 20 January 2011, as of which date the new shares established shareholder rights and were visible in the Euroclear Shareholder Register. A total of 2,158,722 stock option rights 2007A remain unexercised.
Shares and Shareholder Information
ShareholdersTalvivaara had 15,958 shareholders at the beginning of 2010 and 32,078 as of year end 2010 in the official list of shareholders in the book-entry securities system main-tained by Euroclear Finland Oy. This excludes holders of nominee registered shares as Talvivaara does not have di-rect access to information regarding individual nominee registered shareholders.
At the beginning of the year 37% of Talvivaara share-holders were households increasing to just over 40% at the end of the period. 81% of the shares were held by the largest 23 shareholders. As at 31 December 2010,
Corporations
Financial and insurance corporations
Public institutions
Non-profit institutions
Households
Foreign countries and nominee registered
Ownership split by category in Euroclear shareholder register (%)
7,52,9
0,7
40,6
14,234,1
Ownership structure in Euroclear shareholder register
Shares %
Households 99 554 945 40.6
Foreign countries and nominee registered 83 542 448 34.1
Public institutions 34 921 649 14.2
Corporations 18 375 907 7.5
Financial and insurance corporations 7 135 663 2.9
Non-profit institutions 1 786 106 0.7
Total 245 316 718 100
Number of shares in Euroclear shareholder register
Owners% of
owners Shares %
1–100 5 499 17.1 392 114 0.2
101–500 13 669 42.6 4 102 312 1.7
501–1000 6 134 19.1 5 152 721 2.1
1001–5000 5 733 17.9 12 938 822 5.3
5001–10000 592 1.8 4 321 159 1.8
10001–50000 335 1.0 6 653 429 2.7
50001–100000 47 0.1 3 154 145 1.3
100001–500000 46 0.1 9 859 928 4.0
500001– 23 0.1 198 742 088 81.0
Total 32 078 100 245 316 718 100
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Top 20 Shareholders Shares %1 Perä Pekka Heikki Juhani 56 573 460* 23.06
2 Varma Mutual Pension Insurance Company 21 106 093 8.60
3 BlackRock Investment Management Ltd (UK) 14 710 994 6.00
4 Norilsk Nickel Holdings (Cyprus) Ltd 12 173 770 4.96
5 M&G Investment Management Ltd (UK) 11 269 855 4.59
6 Outokumpu Mining Oy 10 522 366 4.29
7 Ilmarinen Mutual Pension Insurance Company 9 939 905 4.05
8 Legal & General Investment Mgmt Ltd (UK) 6 770 129 2.76
9 Salo Olli 5 705 666 2.33
10 Capital Research & Management (US) 5 573 057 2.27
11 Pohjola Asset Management (FI) 2 548 507 1.04
12 Norges Bank Investment Management (NO) 2 301 792 0.94
13 F & C Asset Management Plc (UK) 2 250 000 0.92
14 Old Mutual Asset Managers (UK) 2 211 666 0.90
15 Threadneedle Asset Management Ltd (UK) 2 060 647 0.84
16 The State Pension Fund 1 850 000 0.75
17 Svenska Handelsbanken (FI) 1 674 851 0.68
18 Alfred Berg Rahastoyhtiö Oy (FI) 1 606 377 0.65
19 Bioinvest Oy 1 583 852 0.65
20 E.Niiva 1 299 950* 0.53
*Including beneficial ownership
the shareholders who held more than 5% of the shares and votes of Talvivaara were Pekka Perä* (23.1%), Varma Mutual Pension Insurance Company (8.6%), and BlackRock Investment Manage-ment Ltd (6.0%).
Trading InformationTalvivaara’s shares have been listed on the main market of the London Stock Exchange since 1 June 2007 and the secondary listing on the Helsinki Stock Exchange was completed on 11 May 2009. As a result of the dual listing in Helsinki, investing in Talvivaara shares has become easier for Finnish retail investors and less complex for funds that invest in the Euro area and the Nordic countries. This is evident from the increase in the number of shareholders from some 700 in April 2009 to some 32,000 at year end 2010 on the Euroclear Shareholder Register (excluding nominee registered shares). Talvivaara shares are traded on the London Stock Exchange under the code TALV and on the NASDAQ OMX Helsinki under the trading code TLV1V. The ISIN code is FI0009014716 and trading takes place in Pounds Sterling (GBP) and Euros (EUR).
Share Performance and TradingTalvivaara’s stock closed in London at the end of the reporting period at GBp 595 and Helsinki at EUR 7.07 which represents an increase of 48% and 57% respective-ly on the year opening price. The share price started the year at GBp 402 and EUR 4.49 and peaked at GBp 610 on 30 Dec 2010 and EUR 7.18 on 29 Dec 2010. The closing price at the end of the year gives the company a market capitalization on 31 December 2010 of GBp 1.46 billion and EUR 1.73 billion.
The Talvivaara share price showed little daily fluctua-tion during the year and trading volumes remained good throughout the year. Average daily trading amounted to some 370,758 shares in London and 556,000 shares in Helsinki, or 0.15 % and 0.23% Helsinki of the company’s total shares. During the year as a whole, 93,801,822 mil-lion shares were traded in London and 140,114,644 in Helsinki, accounting for 38% of stock in London and 57% in Helsinki.
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DividendThe Board of Directors is proposing to the Annual General Meeting to be held on 28 April 2011 that no dividend is declared in respect of the year 2010.
Investor Relations Activities in 2010The Chief Executive Officer, Chief Financial Officer and Senior Managers met investors at around 150 meetings in Europe, the United States of America and Canada in 2010. Regular dialogue was also maintained with analysts and brokers including site visits and various metals and mining conferences.
Information for InvestorsTalvivaara’s investor relations function aims to provide information about the Company’s activities, financial position and goals in a timely, open and accurate man-ner, enabling the markets to form a true and fair view of Talvivaara as an investment prospect. Investor commu-nications include an Annual Report, Quarterly Reports, Stock Exchange Announcements, Press Releases, investor web pages and regular dialogue with analysts and inves-tors. The Company follows the provisions set out in the Model Code in the UK Listing Rules in determining its closed periods.
Analysts Covering TalvivaaraThe investment banks and stockbrokers below follow Tal-vivaara Mining Company on a regular basis. The analysts do so by their own initiative and independently, hence Talvivaara as a Company does not accept responsibility for the research statements released by them.
Nordea Bank Harri Taittonen, Finland +358 9 1655 9924, [email protected]
Danske Bank A/S Ari Järvinen, Finland +358 10 236 4760, [email protected]
Cazenove Global Equities Ian Rossouw, UK +44 20 7155 6411, [email protected]
Seymour Pierce Limited Asa Bridle, UK +44 20 7107 8034, [email protected]
Merrill Lynch & Co., Inc Jason Fairclough, UK+44 20 7995 0225, [email protected]
Liberum Capital Michael Rawlinson, UK+44 20 3100 2084, [email protected]
BMO Capital Markets David Cotterrell, UK+14 163 597 723, [email protected]
Evli Bank Plc Marcus Neckmar, Sweden+46 8 407 8024, [email protected]
FinnCap Joe Lunn, UK+44 20 7600 1658, [email protected]
Handelsbanken Capital Markets Fredrik Agardh, Sweden+46 8 701 2597, [email protected]
Ambrian Nick Mellor, UK+44 207 634 4762, [email protected]
Swedbank Markets Erkki Vesola, Finland+358 9 681 781, [email protected]
SEB Enskilda Equities Juha Iso-Herttua, Finland +358 9 6162 8900, [email protected]
RBC Capital Markets Patrick Morton, UK+4 402 070 022 111, [email protected]
Pohjola Bank plc Jari Räisänen, Finland +358 10 252 4504, [email protected]
Numis Securities Limited Andy Davidson, UK+44 20 7260 1232, [email protected]
E. Öhman J:or Fondkommission AB Johannes Grunselius, Sweden+46 8 402 51 31, [email protected]
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Financial Calendar and Reporting Schedule for 2011
Q4 and full year 2010 results17 February 2011
Q1 2011 interim results28 April 2011
Annual General Meeting of Talvivaara Mining Company Plc28 April 2011 in Sotkamo, Finland
Annual Report 2010Published during the week starting 28 March 2011
Q2 2011 interim results17 August 2011
Q3 2011 interim results9 November 2011
Talvivaara Capital Markets Day 2011To Be Confirmed
Annual General Meeting 2011The Annual General Meeting of Talvivaara Mining Com-pany Plc is held on 28 April 2011 at 10 a.m. (Finnish time) in Sotkamo at Holiday Club Katinkulta Hotel, at Katinkullantie 15, 88610 Vuokatti, Finland. The recep-tion of persons who have registered for the meeting and the distribution of voting tickets will commence at 9.00 (Finnish time).
Each shareholder, who is registered on 14 April 2011 in the shareholders’ register of the Company held by Euroclear Finland Ltd., has the right to participate in the Annual General Meeting. A shareholder, who is registered in the shareholders’ register of the Company and who wants to participate in the Annual General Meeting, shall register for the meeting no later than 21 April 2011 at 4 p.m. (Finnish time) as by giving a prior notice of participation, which shall be received by the Company no later than on the above-mentioned date. Such notice can be given:
a) on the Company’s website: www.talvivaara.com/agm-2011-registration
b) by e-mail [email protected];c) by telefax; +358 20 712 9801; ord) by regular mail to Talvivaara Mining Company Plc,
Ahventie 4 B, 5th floor, Espoo, FIN-02170 Finland.
More detailed instructions for participants are given in the notice to the Annual General Meeting.
Investor ContactsTel. +358 20 712 9800
Saila Miettinen-LähdeChief Financial Officer
Timo LaatioInvestor Relations Coordinator
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Talvivaara Mining Company PlcAhventie 4 B, 5th floorFI-02170 EspooFinland
Tel +358 20 712 9800Fax +358 20 712 9801www.talvivaara.com
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