HELSINKI, March 8 Shareholders in Finnish nickel
miner Talvivaara are expected on Friday to
approve a share issue worth up to 260 million euros ($338
million), a move seen as vital to keeping the firm's mine
running after a costly waste water leak.
A share issue would dilute earnings for existing
shareholders, but the company has said its proposed issuance of
up to 26 billion new shares is necessary for the mine to keep
"I do not think that there will be such a large group of
owners who say no to the issue," FIM analyst Markus Liimatainen
said. "Why would anybody say no when they know what the
alternative would be?"
Talvivaara reported an operating loss of 57 million euros in
the fourth quarter, hit by clean-up costs and halted production
following the waste water leak in November.
The miner announced the rights issue plan on Feb 14.
Its three top owners, CEO and founder Pekka Pera, Finnish
government investment firm Solidium and mutual pension insurance
firm Varma, are backing the move. Their combined stake in the
company, with a market capitalisation of 277 million euros,
amounts to 38 percent.
The Sotkamo mine was initially hailed as a pioneer in the
use of bacteria to extract nickel in a process called
bioheapleaching, but has proven a disappointment for investors
over the past few years.
Even before the November leak, it had suffered from a series
of production disruptions including the death of a worker and
excess rain water that forced it to halt ore mining and crushing
At the end of December the firm had a debt-to-equity ratio
of 184 percent and cash of just 36 million euros.
Some analysts said the money raised through rights issue
would give Talvivaara more breathing space and a chance to
resume normal production later this year as planned.
"The second half (of this year) is critical, because they
have said the production is developing positively and have given
production guidance, which they have to reach," Evli analyst
Antti Kansanen said. Talvivaara has estimated it will produce
around 18,000 tonnes of nickel this year.
Yet analysts note that even with the share issue, Talvivaara
still has a way to go before securing stability.
Talvivaara has been granted approval to release extra
amounts of waste water from the mine. It has begun draining the
water, meeting a condition for support from five banks
underwriting the share offer.
However, a nature conservation group and municipalities have
asked a Finnish court to revoke the waste water permit.
FIM's Liimatainen said next year Talvivaara should be able
to increase annual nickel production to around 25,000 tonnes and
turn cash flow positive. If it can't, he said, it may have a
tough time rolling over a convertible bond maturing in 2015.
($1 = 0.7692 euros)
(Reporting by Mark Potter)