Talvivaara gets nod to restart metals plant after leak

HELSINKI Wed Nov 21, 2012 3:06pm GMT

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HELSINKI (Reuters) - Mining company Talvivaara (TLV1V.HE) TALV.L is set to restart its metals plant in Finland after a leakage of toxic waste water, and analysts expect it to seek over 100 million euros ($128 million) from investors to keep the site running.

Local authorities gave Talvivaara permission to restart the plant in Sotkamo, eastern Finland and production was due to begin by Sunday, three weeks after the leak was found on November 4, the company said on Wednesday.

It said a week ago that the leakage had stopped, but the permission to restart came later than it expected amid a public outcry over the disaster.

Officials said waters near the plant showed a dangerously high concentration of uranium and other metals that could kill fish. Studies found uranium more than 50 times higher than normal in nearby streams.

Ore from the nickel and zinc mine contains the uranium.

Talvivaara said it would launch a new water treatment system that will employ reverse osmosis technology to reduce the risk of further accidents.

Finnish officials have demanded closer monitoring of the mine and analysts said Talvivaara would remain vulnerable to political pressure as the state pension fund Solidium holds a stake of about 9 percent.

"The situation is very unclear with political risks. I don't want to speculate what the future's going to be in two years' time," said Antti Kansanen, an analyst at Evli, an investment and wealth management bank.

Clean-up costs and losses from suspended production are likely to cost several million euros, Talvivaara's CEO Pekka Pera has said.

With the company already facing the redemption of 84.9 million euros in bonds next May, analysts expect it needs to raise well over 100 million euros in funds. Most expect a share issue, a move that would dilute the value of existing shares.

Some said it could seek around 150 million euros to lower a debt-to-equity ratio of over 140 percent.

Talvivaara shares rose 1 percent on the London and Helsinki stock exchanges, with investors relieved that authorities had finally given the green light. They stock was still down 20 percent since the leakage came to light.

FUNDAMENTAL PROBLEM

The mine was considered an industry pioneer for its use of bacteria to extract nickel, a process known as bioheapleaching. But it has been hit by a series of problems in the past year including production disruptions and the death of a worker.

Some investors wonder whether the mine could ever live up to its promise of cost-efficient production. Talvivaara swung to an operating loss of 4.3 million euros in the third quarter due to low production and weak nickel prices.

The company has cut its annual nickel production target twice this year, and plans to announce new production forecasts next week, with analysts expecting a big downward revision.

Asa Bridle, a mining analyst at Seymour Pierce, said the series of problems showed the company was having difficulty executing its original plan.

"There seems to be a fundamental problem in getting all the parts singing and dancing at the same time and on a scale that was once envisaged," he said.

"I guess you're looking at a company which may see some significant structural changes in the next six to 12 months, but it's been in that process for four or five years."

(Additional reporting by Sarah Young in London and Jussi Rosendahl in Helsinki; Editing by Tom Pfeiffer)

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