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LONDON, Mar. 10 -- Nickel and zinc producer Talvivaara Mining (TALV.L)TLVIV.HE said a strike by Finnish port workers could halt production if it continues for a month as it would be unable to obtain vital chemical supplies.
Port workers across Finland were on strike for a sixth consecutive day on Tuesday over a wage deal, halting goods flows in and out of the country.
Talvivaara said it is looking at an alternative source for reagents, used to bring about a chemical reaction necessary for production, such as trucking the substance though Sweden. But it noted this would hurt margins due to higher transport costs.
&quot;In a month's time it might start impacting on certain chemicals,&quot; Chief Executive Pekka Pera said at the Reuters Global Mining and Steel Summit. &quot;We would have to stop production if we can't get reagents.&quot;
The company has also been unable to ship any of its zinc output because of the strike.
Still, the group expects nickel output of about 7,000 to 8,000 tons in the first half, before a second production line, which will double capacity, becomes fully operational in June.
Production will also be lifted by higher nickel grades. The nickel grade in solution, a figure keenly watched by analysts, recently rose to a record 2.4 grams a liter (g/l), Pera said.
Numis Securities had estimated Talvivaara needs to produce at an average grade of 2.5 g/l throughout 2010 to meet its 30,000 tons production target.
&quot;30,000 is definitely a realistic target this year and it also reflects the fact we have a huge inventory build up,&quot; Pera said at the Summit, held at the Reuters office in London.
Pera added zinc output is well ahead of the targeted 50,000 ton production level for 2010.
EXPANSION
Pera said the company could produce up to 55,000 tons of nickel at full capacity at the Talvivaara plant before requiring further expansion. It currently aims to produce 50,000 tons of nickel from 2012.
Talvivaara is seeking to raise production to 100,000 tons in the next five to 10 years and Pera said the group would have to look outside Finland to achieve this target.
Pera does not expect the company to need to raise any equity unless it is for an acquisition and noted the group's priority is to get the Talvivaara mine running properly.
&quot;We are definitely interested in nickel, but we don't exclude any other base metals,&quot; said Pera, adding it is looking in Europe, Australia, Canada and northern Africa.
He expects the company to be cashflow positive in the second half of this year, but doesn't anticipate paying a dividend before 2012.
The company previously announced plans to recover uranium as a by-product and to produce enough to make Finland almost self-sufficient in uranium.
It has started the permitting process, which it expects to take between three months and a year, and said the search for a partner to market the uranium is going well.
Pera said the company may also look to spin off the uranium business and list it as a separate entity.
He expects the uranium market to start picking up as early as next year ahead of an anticipated deficit in 2013.
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