Terrafame proved its credibility and operating capability in 2016
2016 can be considered successful in the history of Sotkamo's mine for several good reasons. It was Terrafame's first operating year during which we achieved several key goals.
The ramp-up of the mine, bioleaching and metal production proceeded seamlessly, safely and efficiently. This was a great achievement in the processing industry in general. Terrafame's employees managed and executed the ramp-up of operations through 2016 according to plan, pre-emptively and diligently. The cornerstones of our operations – safety, efficiency and commitment – were strongly present in all our work.
The starting point for the ramp-up last year was less than ideal. In the beginning of the year, the mining area still had 10.1 million cubic metres of excess water, which is why water management was one of the key tasks at the mine alongside the ramp-up. As Terrafame's operations began, securing environmental safety was set as one of our most important goals. In 2016, we achieved a considerable improvement in the water situation, and the amount of water at the mine area was near the target level of 3 million cubic metres at the end of the year. Thanks to determined work and successful progress of the ramp-up, we were able to decrease the risk level associated with the operations significantly by autumn 2016.
During its first year of operations, Terrafame's mine achieved several records in its history when ore mining and processing reached an all-time peak in annual output. Terrafame mined, crushed and agglomerated 14.2 million tonnes of ore. 37,042 tonnes of nickel and 70,299 tonnes of zinc were stacked on the primary leaching heaps, and 75% of the primary leaching area was in production at the end of the year. It is worthwhile to mention that the bioleaching process proved its functionality beyond expectations. The well-functioning bioleaching has enabled the steady operations of the metals production plant. As a result, the quality of the commercial products has been very consistent and has met expectations.
In addition to production-related achievements, Terrafame continued the target-oriented work to improve occupational safety in 2016. When operations started in August 2015, the starting point for occupational safety was poor. Improving occupational safety was thus chosen as a special target area, alongside environmental safety. Our production processes are rather complex and contain several risk factors typical for the chemicals industry. Managing these risk factors is one of the fundamentals of safety. Safety at work is a key ingredient of efficient operations and has a considerable effect on productivity.
Occupational safety developed positively as lost-time injury frequency fell from 23.3 (end of 2015) to 8.4 in 2016. We did not reach our goal for 2016 which was less than 7 accidents resulting in absence per one million work hours. However, Terrafame's employees made history in summer 2016, when Terrafame achieved 80 days without work-related accidents resulting in absence.
The uncompromising and systematic work for environmental and occupational safety during the ramp-up which we have done since August 2015 as well as the good operational results achieved in 2016 led to a preliminary agreement for private financing arrangement to complete the ramp-up, signed on 19 December 2016. The final agreement was signed on 10 February 2017.
The state owner was joined by Trafigura Group, one of the world's largest trading companies, as a minority shareholder. Trafigura also has its own mining operations. This brings more industry expertise as well as commercial and technical know-how to Terrafame. The financing and ownership arrangement of EUR 250 million is clear proof that Terrafame fulfils the prerequisites for profitable and environmentally sustainable business operations. It should also be noted that the commercial cooperation agreement with Trafigura is very substantial: Trafigura will buy 100% of the nickel-cobalt and 80% of the zinc sulphide produced by Terrafame for the next seven years.
I am very happy to say that 2016 was a year where we proved the functionality of our processes and our organisation as well as the commitment of the management and all of our employees to complete Terrafame's ramp-up successfully. The year was very busy. I would like to convey my warm thanks to all Terrafame employees for your efforts towards reaching our common goals. During the journey, we have heard doubtful comments about the company's future and chances to succeed, but together we have shown that it is possible to build a new future for Sotkamo's mine and multi-metal plant. I also want to thank our partners and stakeholders whose support and contribution have been extremely important in achieving the good results of 2016.
In 2017, our target is to continue ramping up production and delivery volumes and further improving cost efficiency. At the same time, we commit to continuing the work for environmentally sustainable and safe operations. We will also continue to invest strongly in occupational safety and, through it, in continuous improvement of our operations.
Chairman of the Board of Directors