Finnish Government To Invest $233M In Restructuring Debt-Laden Nickel Mine

By @chelean on
Talvivaara's nickel mine in Sotkamo
IN PHOTO: Dump trucks drive along a road at Talvivaara's nickel mine in Sotkamo January 16, 2013, in this picture provided by Lehtikuva. Talvivaara CEO Pekka Pera still has the one euro coin he used to buy the rights to ore deposits at the company's nickel mine in Sotkamo, eastern Finland, a decade ago. While the previous owner saw no future for the site, Pera was so sure it would succeed with the help of a pioneering metals extraction process called bioheapleaching that he bought the coin back as a keepsake. Picture taken January 16, 2013. REUTERS/Kimmo Rauatmaa/Lehtikuva

In November 2014, Finnish nickel company Talvivaara announced that the corporation’s major asset owner was thinking of drafting a bankruptcy protection as debts continued to soar after several financing failures. But the Finnish government said it is willing to add €112 million ($233 million) to its wholly owned company Terrafame just to save the base metal reserve from shutting down.

In so doing, this will enable Terrafame to put more money on fully acquiring the mining operations of the bankruptcy estate of Talvivaara Sotkamo. Recently, Reuters reported that a local mining minister said the government's latest decision came after a potential buyer’s failure to arrange viable financing scheme. The bankruptcy application in 2014 was the result of the sudden fall of nickel prices in the last quarter of the previous year.

During this period, several mining companies decided to either trim down or shut down operations completely. Giant Russian nickel firm Norilsk, for instance, had to slim down operations due to dismal base metal prices on the global market. First Nickel Inc. is also planning to close its Lockerby nickel-copper mine as its production suffers from weak prices and demand uncertainties.

However, there are companies that managed to earn investor reputation amid falling commodity prices. Among which is Amur Minerals Corporation (London AIM:AMC), a small Russian mining company with a projected nickel ore production of 90 million tons. Share prices in the company remain stable during the last year’s Q4 and quadrupled on news that it finally obtained pre-production license approval from the Russian government in May.

Last March, British investment firm Audley Capital expressed its intention of acquiring the troubled mine through a conditional agreement with its main stockholders. The agreement says that a consortium led by Audley will take an 85 percent stake in the subsidiary, leaving the Finnish government with a miniscule 15 percent.

"With the only asset of the company sold, the probability of (listed) Talvivaara going bankrupt is 90 percent. That company is no longer viable. At Nordnet alone we have about 15,000 investors who have put money into Talvivaara shares. They will lose it all in a bankruptcy," Nordnet's equity strategist Jukka Oksaharju told Reuters.

The main goal of Finland's funding is to create a new company around the mine. A government official said that if talks on its acquisition end up well, a €97 initial funding will be used to initiate its restoration immediately.

In a local news conference, Finland Minister of Economic Affairs Olli Rehn said that the government plans to look for alternative options if it fails to find a commercially viable way to stop the mine’s fast approaching demise.

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