Talvivaara this morning issued an operational and management update. The company is now guiding for a 2011 production of at least 16kt of nickel in concentrate (corresponding to 28 to 30kt of zinc in concentrate). Talvivaara was so far guiding for the low end of the 22 to 28kt range (corresponding to 40 to 50kt of zinc in concentrate). In our scenario, we assumed zinc in concentrate contribution from Talvivaara of 35kt, which was below the official guidance.
Year-to-date (9M11) production amounted to 11,319t of nickel and 21,291t of zinc in concentrate. In view of the current volatility and uncertainty in commodity and financial markets, Talvivaara will focus on maximising profitability of operations rather than the production volume over the remainder of 2011.
As a reminder, Nyrstar has purchased 1.25mt of zinc in concentrate from Finnish nickel mining company Talvivaara. Under the agreement, Talvivaara will deliver 100% of its zinc concentrate production to Nyrstar until the 1.25mt of zinc in concentrate has been delivered. At full production (which was anticipated for 2012), Talvivaara was expected to deliver approximately 90kt of zinc in concentrate p.a.
Conclusion:
The announcement will trigger a downwards adjustment of our 2011 zinc in concentrate production volumes (by approximately 7kt). However, we are more concerned about the medium-term implications (slowdown of ramp-up). In our current scenario, we were assuming a contribution of zinc in concentrate from Talvivaara of 65kt in 2012 and 85kt in 2013.