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UPDATE 2-Trafigura acquires stake in recovering Finnish nickel mine
February 10, 2017 / 12:26 PM / 8 months ago

UPDATE 2-Trafigura acquires stake in recovering Finnish nickel mine

* Trafigura takes 15.5 pct stake, part of 250 mln euro deal

* Mine returned to profit in Q4 after years of losses

* Mine been seeking new investors (Adds detail, background)

By Jussi Rosendahl

HELSINKI, Feb 10 (Reuters) - Commodities trader Trafigura said it will take a 15.5 percent stake in Finland’s Terrafame nickel and zinc mine as part of a 250 million euro ($266 million) deal, which will help the mine ramp up production.

The mine in northern Finland has been under government control since 2015 following years of losses and production problems but returned to profit in the final quarter of last year, helped by a rebound in metals prices. It has been looking for new investors for some time.

Trafigura will acquire the stake through its Galena fund and will also finance a new loan as part of the deal.

“The investment ... will provide the working capital needed to enable the Terrafame mine to reach its potential to become a world-class mine ... Looking forward, the demand side for nickel looks robust,” Trafigura Chief Executive Jeremy Weir told a news conference on Friday.

As part of the arrangement, Trafigura agreed to buy all nickel deliveries and 80 percent of the zinc deliveries for seven years, a deal worth around 3 billion euros, Terrafame said.

The mine produced 22,575 tonnes of zinc last year and 9,554 tonnes of nickel.

Global zinc consumption is estimated at 14.5 million tonnes this year and nickel at around two million tonnes.

The government took over the mine in 2015, and set up a company called Terrafame to build it up after production problems, environmental damage and weak nickel prices pushed former owner Talvivaara into a debt restructuring in 2013.

The government has so far injected about 500 million euros in the site, seeking to protect jobs and the environment in the rural Kainuu region. Closing the mine would have cost an additional 300-400 million euros, the government estimated.

“According to our estimate, Terrafame does not need additional funding from the state after this. The financing arrangement will strengthen the economy,” economy minister Mika Lintila said.

Terrafame returned to profit in the fourth quarter on the back of growing production volumes and rising metal prices. Zinc prices at around $2,900 a tonne are more than double the levels seen in January 2015 and nickel is up roughly 25 percent over the same period to around $10,660 a tonne.

In the fourth quarter of last year, Terrafame’s nickel output surged 64 percent from the previous quarter to 3,875 tonnes and its zinc production rose 37 percent to 8,680 tonnes.

Talvivaara, which developed the mine, had aimed to make it Europe’s biggest nickel mine by pioneering an extraction process called bioheapleaching.

But repeated production problems were compounded when the mine leaked waste water in 2012, causing one of Finland’s most serious environmental disasters. ($1 = 0.9394 euros) (Additional reporting by Pratima Desai in London; Editing by Susan Thomas and Susan Fenton)

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