Talvivaara to scale back output guidance after tough Q2

Nickel- and zinc-focused mining group Talvivaara says that it is unlikely to hit its nickel production targets this year as a result of flooding, scheduled maintenance and a fatality-related stoppage during its second quarter.

Nickel production totalled 3,194t in the period, while zinc output was 6,686t. Nickel output in April was only 198t. However, when work was restarted, the group said that the metals plant operated "continuously and steadily", producing 1,477t and 1,519t of nickel in May and June, respectively.

"Throughout the second quarter, metals production was affected by flooding that followed the rapid melting of snow and the unusually heavy rainfall that has amounted to over 190mm during the spring in comparison to the long term average of approximately 100mm. The excess water in circulation has diluted the leach solutions such that the average nickel grade in solution pumped to the metals plant was 1.8 g/l in the second quarter," the group announced on Tuesday morning.

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Talvivaara said that it is no longer confident of achieving the previous production guidance of 25,000-30,000t of nickel in 2012. However, it still anticipates a "substantial" increase over last year's output of 16,087t of nickel and says that the annualised production rate during the remainder of the year will be more than 25,000t per annum.

"The company continues to evaluate opportunities for production increases in the near term and anticipates that it will be in a position to give updated guidance for the current year at the interim results on August 16th 2012," the statement said.

Meanwhile, second-quarter financial results were affected by a weak nickel price that was recently trading in the range of $16,000-17,000 per tonne. Nickel product inventory build-up at the mine site due to an annual maintenance stoppage at its off-take Norilsk Nickel Harjavalta will also have an impact on net sales.

"Over the summer, we will focus on recovering from the water balance issues caused by the wettest spring recorded since 1983 in the Kainuu region, and we also continue evaluating our production outlook in more detail with the intention of re-establishing production guidance for 2012 in August at the time of our second quarter results," said Chief Executive Officer Harri Natunen.

"Whilst all production processes still need some improvement, we have seen evidence that the stability of production has improved significantly and I don't see any reason why this trend would not continue."

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