Owner's review

State owner’s key targets were met

At the end of summer 2015, the state owner set three key targets for Terrafame, which was establishing its operations. Firstly, the challenging environmental situation inherited by Terrafame was to be brought under control; secondly, substantial private funding was to be arranged for the finalisation of the production ramp-up; and thirdly, the company’s prerequisites for profitable business were to be demonstrated within two years. Looking back on 2017, as the majority shareholder, we can state that Terrafame’s achievements are even far beyond these targets.

The company has overcome its environmental challenges, the most important of which was water management. When the mine was taken over by Terrafame, there was over 10 million cubic metres of stored water at the site. With persistent efforts, the amount of water has been reduced to the target level, and the environmental situation has also otherwise stabilised. It should be noted that, of the mine’s 16,300-tonne sulphate quota, only about 10,400 tonnes were used in 2017. The condition of adjacent waterbodies is closely monitored, and the condition of Lake Nuasjärvi, for example, is good. In terms of environmental issues, Terrafame has performed its duties very well.

Private funding for Terrafame was also arranged in accordance with the state’s commission. Last year, a total of EUR 350 million of private funding was secured for the company. Based on the experience of our first year together, we can state that Trafigura has been the right choice as strategic partner for the Terrafame Group in the development of Terrafame. Trafigura has brought added value to several operational areas, such as occupational safety, metals price hedging, and market intelligence.

Thirdly, Terrafame has demonstrated that it has realistic prerequisites for profitable business. Last year, the company broke the records in nickel and zinc production for the mine’s entire history. These developments appear favourable. However, we must also remain humble, as the production ramp-up is an ongoing process and there still is a lot of work to be done. The company’s objective is to achieve a positive result and cash flow during the 2018 financial period. However, this entails issues which are outside the company’s sphere of influence, i.e. metal prices and exchange rates. It appears that the global market price of nickel is emerging out of its slump, but the weakening dollar is threatening to absorb a large part of the increase in metal prices.  

Thus, the targets of the state owner have been met, but Terrafame has also made achievements in other areas. In November 2017, plans were announced to produce a battery chemical plant and a financing arrangement concerning the required investment. Such an investment means that Terrafame will become an important international player in the supply chain of raw materials for electric cars. The plan to increase the degree of processing in Terrafame’s production also represents a significant initiative in the development of the Finnish battery cluster.

The exceptionally rich natural resources of, for example, nickel, cobalt and lithium in Finland, the chemical and automotive industry located on the west coast, as well as high-level research and expertise present excellent opportunities for establishing manufacturing associated with the production of batteries for electric vehicles in Finland. It is in our national interest that these resources are used so that the highest possible amount of value creation remains in Finland. This calls for smart decisions from company executives, financers and politicians alike.

 


Janne Känkänen
Chairman of the Board
Terrafame Group Ltd

Matti Hietanen
CEO
Terrafame Group Ltd

 


 

 

 

 

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