Debt-laden Finnish miner Talvivaara took a bashing on Thursday morning after plans to increase its shares in issue by around one-tenth through a share placing were accompanied by the news that Chief Executive Officer Pekka Per is to step down.
The proceeds of the placing will be used to provide additional financial and operational flexibility for the continuing ramp-up of the mining and processing operations, as well as additional capital for potential investment in energy generation.
The group plans to increase nickel production from 16,087 tonnes in 2011 to 50,000 tonnes and it already has a pile of debt, hence the need to raise fresh funds; in its fourth quarter trading update the group revealed its debt-to-equity ratio at the end of 2011 had risen to 141.3% from 81.7% at the end of 2010.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The book-building process for the placing, which will be to both new and existing Talvivaara shareholders, is still in progress so the price at which the shares will be placed has yet to be determined; as a precaution the market has marked down Talvivaara's shares by 24.5p in early trading to 305p.
The group said it produced a record amount of nickel and zinc in the fourth quarter of 2011, owing to improved plant availability. Earlier in the year the group had to reduce its 2011 production target and overhaul its management structure, as it placed increased emphasis on operational systems.
"These improvements are part of an on-going process, and we are already seeing a positive impact on processes that are running more steadily, and on morale on the ground which is improving," claimed Talvivaara's Chief Executive Officer (CEO) Pekka Per, who also announced his intention to make way as CEO to industry veteran Harri Natunen after the firm's annual general meeting in April.
"Moreover, we were delighted that we reached our revised nickel production target of 16,000tpa [tonnes per annum] by the end of December 2011. Our production target for 2012 is 25,000-30,000t of nickel, which we believe we can achieve with continued focus on process optimization and management systems," Per added.
Fourth quarter net sales rose to €66.5m from €60.2m in the final quarter of 2010. Operating profit edged up to €14.9m from €14.3m a year earlier but declined as a proportion of net sales to 22.5% from 23.8%.
The company made a fourth quarter profit of €3.7m, which still left it with a loss on the year as a whole of €5.2m (versus 2010 loss of €7.7m), but which marked a turnaround from the €0.9m loss made in the fourth quarter of 2010.
Net interest bearing debt at the end of 2011 had risen to €455.7m from €315m at the end of 2010. Not surprisingly, the company is not yet one which pays dividends to shareholders.
jh
MPs warn over Lifetime ISAs which could leave savers out of pocket
FCA reveals 'once in a generation' advice changes - what the reforms mean for you
