* Firm ended Q3 with $1.2 billion in liabilities
* To restructure debt after running low on funds
* Analysts say company will need to raise more money
(Adds comments from analyst, hedge fund)
By Ritsuko Ando and Jussi Rosendahl
HELSINKI, Dec 17 Struggling Finnish nickel miner
Talvivaara has won court approval to renegotiate its
debt, allowing the company to continue production and avoid the
immediate risk of bankruptcy.
While the news sent its shares up almost 20 percent on
Tuesday, analysts said the firm's future was still in doubt due
to hefty liabilities, uncertainty over talks with creditors and
production problems at its only mine in Sotkamo, north Finland.
"This news can be seen as diminishing their immediate risk
of bankruptcy. But it is difficult to understand these share
price moves. This is not that positive," said Inderes Equity
Research analyst Antti Viljakainen.
"They will need new financing anyway. I don't believe they
have enough cash for the whole first quarter, I think they will
be pretty dry by mid-February."
Hurt by falling nickel prices and repeated production
disruptions, Talvivaara sought a court-led reorganisation in
November as it ran low on funds. It has been waiting for court
approval to include the debt of a subsidiary, Talvivaara
Sotkamo, in its reorganisation plans.
"With the reorganisation process now beginning, we can also
continue our metals production, which re-commenced last week
after a one month stoppage of our metals recovery plant," Chief
Executive Pekka Pera said in a statement.
Analysts said the reorganisation could involve creditors
swapping some of their debt for equity, and that Talvivaara
would also need to raise more money. The company has said only
that it has enough cash for the first quarter of 2014.
Talvivaara pioneered the use of bacteria to extract nickel
in a process called bio heapleaching, an innovation initially
hailed as cost-efficient. But the mine ran into a series of
production problems last year, including a toxic leak that
pushed up uranium levels in nearby lakes and rivers.
The cost of cleaning up and halting production forced the
company to go to shareholders with a cash call in March. It has
also suffered from a drop of more than fifth in the price of
nickel this year.
Including loans and upfront payments from zinc producer
Nyrstar and Canada-based uranium miner Cameco Corp
, Talvivaara ended the third quarter with 865.6 million
euros ($1.2 billion) in total liabilities.
Nyrstar is Talvivaara's top creditor after paying 232
million euros in advance for zinc deliveries. On Monday, Nyrstar
reinstated support for the reorganisation after previously
withdrawing it due to uncertainty over the process.
Other creditors include Finnish bank Nordea Pankki Suomi
, government agency Finnvera and pension fund Varma.
With the shares down around 70 percent from two years ago,
Nordic brokerage Nordnet said there had been strong buying by
Finnish small investors in recent trade.
But analysts said caution was still in order, warning the
company will likely need to issue more shares as part of the
debt restructuring process, thereby diluting the holdings of
Hedge fund Noster Capital, which has a short position on
Talvivaara, said the restructuring would likely result in a
substantial impairment of equity and debt. It called on the
company to better communicate the impact of the process.
At 1450 GMT, Talvivaara shares were up 18.5 percent at 0.086
($1 = 0.7271 euros)
(Editing by Louise Heavens and Mark Potter)