The Government has proposed that an additional 112 million euros be earmarked for Terrafame to enable the wholly state-owned special-purpose company to invest more in acquiring the mining operations of the bankruptcy estate of Talvivaara Sotkamo.

Olli Rehn (Centre), the Minister of Economic Affairs, believes it is vital to find a commercially profitable solution for the troubled nickel mine.

“The Government must take a more active role in the mine, but not indefinitely. The mine can't be left in tatters. A solution to the fate of the company is overdue,” Rehn stated in a press conference on Wednesday.

A complete shutdown of the mine should according to Rehn be avoided by all means possible as it would take seven years and cost the Government 300 million euros.

The Government is prepared to invest more in the mining operations due to the failure of Audley Capital Advisors to scrape together the funds it requires to take over the operations with the Finnish Government.

The funds allocated in the supplementary budget draft would not be used to cover the costs of the bankruptcy estate, however, but simply to strengthen the capacity of the Government to invest in the takeover. The Government is looking to encourage investors to participate in the takeover by accepting a larger share of the risks.

The Ministry of Employment and the Economy announced in March that it has entered into a conditional agreement with Audley Capital Advisors to acquire the mining operations. Audley Capital Investors has under the agreement committed to holding 85 per cent of shares in the company to be founded to operate the mine and to providing 170 of the 200 million euros to be invested in it.

The negotiations have faced considerable stumbling blocks, prompting the Government to brace itself even for the decommissioning of the mine. The shutdown, however, is only considered a last resort due to the costs it would inflict on the Government.

The Government has already committed to investing 97 million euros in the takeover through its special-purpose company. It has also continued negotiations over the takeover with several investors.

The supplementary budget proposal would allow the Government to double its investment in the mining operations, provided that an agreement with investors is found.

The Ministry of Employment and the Economy has also approached Talvivaara to encourage it to invest in the company to be founded to operate the mine. The listed parent company of the bankrupt nickel miner is scheduled to hold its general meeting next Thursday to allow its shareholders to comment on the re-structuring proposal presented by lawyer Pekka Jaatinen.

He proposes that the debts of Talvivaara be converted into shares and that the debt-free company raise capital through a public offering. The capital would then be invested in the company established by Terrafame and other investors to take over the mining operations of Talvivaara Sotkamo.

The largest creditor of Talvivaara has already given its backing to the proposal.

The proposal can win the approval of the general meeting if Talvivaara can present a credible plan to generate revenues in the future. One possible way to do so would be to invest in the company founded to take over the mining operations.

Petri Sajari – HS
Aleksi Teivainen – HT
Photo: Miska Puumala / HS