NYRSTAR - Talvivaara to raise EUR 260m

Talvivaara this morning announced FY12 results, FY13 production outlook and € 260m rights issue.

Talvivaara confirmed its FY12 production of 12,916t of nickel and 25,867t of zinc. For the current year, the company is guiding for a production of approximately 18,000t of nickel and 39,000t of zinc. The company expects to resume ore production during the months of July, once the water issues have been resolved. In our scenario, we are assuming Talvivaara to deliver 30kt of zinc in concentrate this year. We keep our scenario unchanged for now but acknowledge the upside potential on our numbers.

Talvivaara entered into an agreement with Nyrstar whereby Nyrstar will make an upfront payment of € 12m in return for Talvivaara not charging the extraction and processing fee of € 350/t for the next 38,000t of zinc in concentrate.

Key announcement this morning was the upcoming rights issue, which is to raise a gross amount of € 260m. Further details regarding this rights issue are expected on 8 March.

The rights issue aims at securing liquidity for a continued ramp-up of operations towards full capacity (50,000t of nickel in concentrate), enable refinancing of short- and medium-term debt and satisfy a condition subsequent under an amended revolving credit facility.

The proposed rights issue is underwritten through a combination of irrevocable subscription commitments from the three largest shareholders, Mr. Pekka Perä, Solidium and Varma Mutual Pension Insurance Company and standby underwriting letter by the syndicate of banks involved in the rights issue for the portion of the rights issue that is not subject to shareholder commitment.

Conclusion:
We regard today’s announcement as very favourable to the Nyrstar investment case. The proposed € 260m rights issue is to allow Talvivaara to fully ramp-up its operations also allowing the company to refinance short-to medium-term debt.