Terrafame Group Ltd.'s review
Terrafame's year 2016 from the owner's perspective
The start of Terrafame's operations has been strongly marked by two things: the methodical ramp-up of the mine as well as advancing the financing and ownership negotiations. These matters have also been strongly present in 2016 – the year when Terrafame's good operational results truly became concrete.
The ramp-up of mining and metal production started in August 2015, and Terrafame provided the first expected proof of the functionality of the process soon after. We have been happy to see how the professional and uncompromising efforts of Terrafame's employees and the company's partners produced the expected results in 2016: the ramp-up proceeded towards the full level of operations, set for 2018, according to plan.
During the year, several significant leaps were made in water management, production and occupational safety. Net sales of more than EUR 100 million signify considerable business with many multiplier effects locally in the Kainuu region as well as in entire Finland. The effects on economy and employment will expand further when Terrafame makes progress towards full production.
The notebook on 2016 also has entries about challenges. The additional discharges of purified waters in order to ensure dam safety, the decisions of the Vaasa Administrative Court on the Nuasjärvi discharge pipe and other matters concerning the environmental permits, preparing for the proposed early shutdown of the mine as well as the fire in the H2S reactor in December were issues that demanded special efforts from Terrafame.
However, 2016 will be remembered as Terrafame's first full year of operations. Achieving the planned results of the ramp-up have been absolutely essential for Terrafame's future operating prerequisites. Thus, we want to convey the state owner's thanks to each employee of Terrafame and the company's partners for their efforts to ensure Terrafame's future.
Alongside the ramp-up, the negotiations to secure the financing necessary for completing the ramp-up stood out in 2016. During the year, Terrafame Group made preparations for strengthening and expanding the mine's ownership base according to the state owner's aims.
In early autumn 2016, financing negotiations began from a new starting point: with the good progress of the ramp-up, the key risks associated with Terrafame as an investment had decreased significantly when compared with the situation in 2015 when operations started. Due to Terrafame's achievements, the state owner has since then retracted the requirement of the 2016 year end as the deadline for the financing negotiations, which supported achieving the best possible result in the negotiations.
The ownership and financing negotiations, which continued intensively throughout the autumn, were sealed in February 2017 when Terrafame Group, Terrafame, Trafigura Group and Galena fund, part of Trafigura, agreed on a financing solution and long-term commercial cooperation. Sampo acted as a co-investor in the arrangement alongside Terrafame Group. We were happy to find that international and Finnish investors trust Terrafame's operations – the private financing arrangement ensured that Terrafame's ramp-up can now be completed according to plan.
2016 was a year of strong and positive development for Terrafame. The goals for environmental safety, stable ramp-up and private financing were achieved. The ramp-up process is still ongoing. Thanks to the advances in 2016, the outlook for Terrafame's operations and the ramp-up's progress for 2017 are favourable and inspire confidence.
Chair of the Board of Directors
Terrafame Group Ltd.
Terrafame Group Ltd.