Talvivaara Q4 Disappoints, Confident of FY Output

LONDON, Feb. 25 -- Finnish nickel and zinc producer Talvivaara Mining (TALV.L) posted disappointing output figures, but said it expects to turn cash flow positive in the second half of 2010 if nickel prices stay near current levels.

"Production of only 410 tonnes of nickel in the fourth quarter was well below our expected over 2,000 tonnes," said Andy Davidson, an analyst at Numis.

Talvivaara stuck to its target of producing 30,000 tonnes of nickel this year helped by the recent increase in nickel grades.

However, Davidson remained cautious that the miner could meet that figure.

Lower-than-expected mining and materials handling rates means there is a strong chance that Numis' 23,000 tonne nickel production target for 2010 may be optimistic, he said.

Shares in Talvivaara were down 2.4 percent at 1250 GMT.

Its full-year results showed a swing to an annual net loss of 55.0 million euros ($75 million), from a profit of 5.8 million the year earlier, after technical problems with its crushing process early in the year delayed a production ramp-up.

Talvivaara restarted nickel production on Feb. 20, after a catalyst failure, Chief Executive Pekka Pera told Reuters.

It announced on Feb. 11 that nickel production of 1,000 tonnes or more could be delayed from the first quarter due to the catalyst problem, although it expects to make up this figure in the second quarter.

The very low temperatures in Finland, which have continued for the past two months, have had a positive effect on the nickel process but slows down maintenance work, Pera said.

The nickel grade in solution reached a record 2.2 grams a litre (g/l) on Tuesday and is expected to reach 2.5 g/l around the Summer or earlier, he said.

In a research note earlier this month, Numis estimated that Talvivaara needs to produce at an average grade of 2.5 g/l throughout 2010 to meet the 30,000 tonnes production target. Pera anticipates the company's production being weighted towards the end of the year.

On the nickel outlook, Pera said he expects to see a small correction from current prices MNI3 as supply of the metal -- a key ingredient in stainless steel -- continues to outstrip demand.

The company is fully exposed to the price after recently closing its hedging programme.

Talvivaara said it expects to produce around 50,000 tonnes of zinc in 2010.