Production & Commercial Update

Production &

Commercial

Update

Lassi Lammassaari, Chief Operations Officer

Marja Riekkola-Vanhanen, Chief Technology Officer Leif Rosenback, Chief Metallurgist

Pekka Erkinheimo, Chief Commercial Officer 4 December 2008

First metal production achieved on time –

ramp-up continues

Overview of mining infrastructure • Operational surface area 61 km2

• Surface area of construction 20 km2

• Mine area roads 25 km • Mine area pipelines 100 km

• Bioheapleaching irrigation and recycling pipelines 6,700 km • Circulated solutions 30,000 m3_/h • Buildings 770,000 m3 Environmental permit; earthworks Leveling of ore Mining Materials handling Metals recovery 1.4.2007 1.11.2007 1.7.2008 1.10.2008 1.4.2008 2007 2008

Work commenced on schedule

Primary Heap Secondary Heap Stage 1 Secondary Heap Stage 2 Kuusilampi open pit Kolmisoppi open pit Waste Dump Waste Dump Waste Dump Metals Recovery Gypsum Pond 1

Operational areas November 2008

Metals Recovery & Offices Secondary pad Open pit Primary Heap pad 1 Waste dump Pads 2 & 3 Mine Workshop PLS Ponds Irrigation Ponds Gypsum Pond Railhead and powerline

3 • Low unit cost of production

– Bypasses traditional and energy intensive processing

– Economies of scale

Mining

First blast, 1 April 2008

Mining –

Mine equipment

Production equipment at open pit

2008 2009 at max

Drill rig Sandvik DP1500 3 3 5

Sandvik DX 800 1 1 2

Hydraulic shovel Hitachi EX3600 1 1 3 20 m3/bucket

Dump Truck Hitachi EH3500 3 4 18 170 t

Front end loader Komatsu WA1200 1 1 1 20 m3/bucket

Contractors at open pit

Forcit Ltd Explosives supply 3 4 5

Destia Waste rock load and haul 15 - 20 15 - 20 2 - 3 Mtpa Rotator ltd Mobile equipment maintenance

Fleet Capacity

Mining -

Production update

• Mining capacity exceeds planned need • Ground water and rock conditions in

the pit as expected

• Technical and management staff in place for full production

• Overburden removal progressing well; 2009-2010 mining areas to be exposed by year end

• Approx. 3.3 million tonnes, of which more than 2 million tonnes of ore, blasted YTD

Mining –

Mine plan 1(2)

Crusher Pilot plant 500 m Year 2008 = Red Year 2009 = Cyan Year 2010 = Brown Ore Kuusilampi Mining plan 2008 – 2010 Planview Talvivaara Proj J. Kankkunen 25.11.20 7

Year 2008 = Red Year 2009 = Cyan Year 2010 = Brown Main Ramp Ore Section 10200 +195 +165 +210

Mining –

Mine plan 2(2)

Ore Ni_feed Cu_feed Co_feed Zn_feed Waste Total Mining Waste to

Year tonnes % % % % tonnes tonnes ore

2008 2,600,000 0.25 0.13 0.02 0.50 1,595,856 8,295,856 0.61 2009 17,600,000 0.26 0.14 0.02 0.52 7,771,938 21,271,938 0.44 2010 15,000,000 0.25 0.14 0.02 0.51 7,792,687 22,792,687 0.52

Materials handling –

Production facilities 1(2)

Fine crushing Agglomeration Ore stockpile Conveyor Con vey_or Primary heap 1 2 3 4 800 m 2400 m 9

Materials handling –

Production facilities 2(2)

Materials handling equipment

2008 2009 2010

Materials Handling Primary Crusher

contr. mobile crushers 4

TPO FLS Smidth gyratory 1 3 000 t/h

Kuusilampi Conveyor Sandvik 1

Ore Stockpile Sandvik 1 20 000 t

Screening Sandvik 2x6

Secondary Crushing Sandvik Hydrocone 2x1

Tertiary Crushing Sandvik Hydrocone 2x3 2 500 t/h

Stacking conveyor FAM 1 2 500 t/h

Reclaiming conveyor FAM 1 2 500 t/h

Secondary stacking conv. FAM 1 2 500 t/h

Materials handling -

Production update

• Materials handling slightly behind schedule due to

system design issues

• Primary crushing contracted out for the time being,

as planned; own primary crusher expected to be operational early 2009

• Sandvik secondary and tertiary crushing operational

since July 2008

– Ramp-up supported by additional contractor

crushing to supplement Sandvik output

• FAM stacking equipment operational since August

2008 Status of heap construction as of 19 Nov 2008 10 11

Operating personnel 2008 -

2010

0 10 20 30 40 50 60 70 80 90 Mine Materials Handling Metals Recovery Water Management Administration Maintenance 2008 2009 2010

Infrastructure

• All infrastructure needed for operations in place

– Roads

– Powerline

– Water management • Rail road construction

progressing ahead of schedule – Tracks already in place – Scheduled opening for

traffic July 2009

Bioheapleaching -

Production update (1/2)

• Bioheapleaching has got off to a good start;

early results in line with those obtained from the pilot heap

• Thermal reactions very strong;

heap temperatures up to 90°C, leach solution

from the heap at approx. 50°C

• Due to heavy rains, the relative amount of liquid

in circulation is approx. 5 times the amount used in the pilot heap

• Sulphuric acid consumption substantially less

than in the pilot heap –positive OpEx effect

0 10 20 30 40 50 60 25/09/2008 05/10/2008 15/10/2008 25/10/2008 04/11/2008 14/11/2008 Le ac h s ol u ti on t e mpe ra tur e ( C ) 0 0.5 1 1.5 2 2.5 3

Leach solution temperature (left Y-axis) pH (right Y-axis)

Leach solution temperature and pH

Acid consumption 0 500 1000 1500 2000 2500 01/07/2008 10/08/2008 19/09/2008 29/10/2008 08/12/2008 Ac id c o ns u m p ti o n ( to nn e s )

Assumed acid consumption Realised acid consumption

Bioheapleaching -

Production update (2/2)

0 20 40 60 80 100 120 140 160 20/08/2008 09/09/2008 29/09/2008 19/10/2008 08/11/2008 28/11/2008 18/12/2008 to n s in P L S Ni Zn 0 100 200 300 400 500 600 700 800 900 1000 11/07/2008 20/08/2008 29/09/2008 08/11/2008 18/12/2008 N i (m g /l) 65-131 m 131-197 m 197 -263 m 263-329 m 329-395 m

Metals in Pregnant Leach Solution

Nickel in PLS in the growing heap

(1)

(1)

Metals recovery -

Production update

• Metals plant ready for production

• First metal sulphides produced on 1 Oct 2008 • Further small scale production runs planned for

the remainder of 2008

• Commercially significant amounts to be produced Q1 2009

Metals recovery process

H2S

NaOH

Limestone

Nickel & cobalt sulphide Gypsum precipitate Al(OH)₂precipitate Zinc sulphide Copper sulphide AIR Ore feed Effluent Lime Oxygen Plant H2SO4 Metals recovery Bioheapleaching PLS Gypsum Fe Precipitate Sulphur H2S NaOH Limestone

Nickel & cobalt sulphide Gypsum precipitate Al(OH)₂precipitate Zinc sulphide Copper sulphide AIR Ore feed Effluent Lime Oxygen Plant H2SO4 Metals recovery Bioheapleaching PLS Gypsum Fe Precipitate Sulphur 17 Burnt Lime

Commercial

Update

Pekka Erkinheimo, Chief Commercial Officer 4 December 2008

Talvivaara nickel/cobalt concentrate

• Offtake with Norilsk Nickel Harjavalta Oy in place:

– Covers the entire Ni/Co output and ca. 75% of the projected turnover of Talvivaara

– Contract term 10 years or 300,000 tonnes of Ni metal delivered, extendable by Norilsk, at market terms, with additional 150,000 tonnes in metal content – Treatment charges for both Ni and Co at market level

– Calcium extraction circuit at the Harjavalta refinery to be commissioned during winter/spring 2009

Talvivaara zinc concentrate

• European Zn market:

– No significant new Zn mine projects in Europe foreseen besides Talvivaara – Zn mine capacity of existing mines is decreasing

– There will be a longer term deficit of Zn concentrates in Europe

– Will all (European) buyers of Zn concentrate survive the 2008-2009 slump? • Talvivaara’s Zn concentrate:

– High quality and grade with Zn content > 62%

– Low in all major harmful elements for Zn metal production (mercury, cadmium, arsenic, lead, germanium, thallium etc.)

– Due to low Fe content of only < 0,5%, smelters will have less environmental problems in depositing iron residues

Talvivaara zinc concentrate

• Marketing strategy:

– Nearest Zn smelters are all potential customers: low freight cost from mine to smelter is a mutual benefit

– Contractual discussions are ongoing with Boliden Kokkola, Nyrstar, Xstrata in Germany and Spain, and Chelyabinsk Kazakhstan

– Aim is to have 2-3 long term customers and to leave some free tonnage for the spot market

Update on chemicals supply –

calcium compounds

• Limestone

− Multiyear contracts in place with Nordkalk Oyj and SMA Minerals Oy on the entire demand

• Burnt lime

− Multiyear contracts covering the second CO₂ emission period in place with SMA Minerals Oy and Rheinkalk GmbH (Lhoist - Germany) on the entire demand

• Chalk

− Contract in place with Omya on the supply of chalk prior to commissioning of Talvivaara’s limestone grinding circuit in winter 2008/2009

Update on chemicals supply –

sulphur compounds

•

Sulphuric acid

− A contract covering the demand for 2008-2009 in place with Kemira Oyj

− Longer term supply arrangements awaiting normalisation of the acid pricing

•

Sulphur

− Short term spot-type contracts with CIECH, Lukoil, Tengizchevroil and Gazprom

− Elemental, granulated and flaked sulphur forms are being tested to optimize the process

− Discussions ongoing with several producers and trading houses on longer term arrangements

− Long term supply arrangements awaiting normalisation of the sulphur pricing and conclusion on the optimal sulphur form for the process

Update on chemicals supply –

sulphuric acid price development

7 PentaSul prices since Jan. 2004

in US-$ (average low/high)

0 50 100 150 200 250 300 350 400 450 500 U S -$ / to

Chile cfr North. Term. Tampa (st) cfr customer Hamburg-ARA fob Export

Update on chemicals supply –

caustic soda

• Multi-year contracts in place with Kemira Oyj and Tessenderlo, covering substantial part of the demand for the ramp up period

• Pricing based on references to Harriman indices (Nordic FOB low)

• Longer term aim is to have 2-5 suppliers delivering under multi-year contracts • Short term market movements on the caustic soda pricing are difficult to predict,

as European demand for both chlorinated derivatives and caustic soda are dropping, squeezing both the supply and demand side of the caustic soda markets

• Longer term outlook is for the tighter caustic soda markets, as the mercury grade production is likely to be prohibited in Europe by 2020, forcing many producers to either make substantial investments or exit the business

Update on chemicals supply –

caustic soda price development

Update on chemicals supply -

propane

• A multi-year contract in place with Teboil/Lukoil

• Pricing is based on monthly averages of Platt’s CIF7000+ index and EUR/USD exchange rate fluctuations (delivery month average)

• Talvivaara is in advanced talks on engaging another international supplier to share the volume demand on similar terms

Electricity supply

• A spot price agreement in place with Vattenfall

• Forward purchases under consideration

Update on legal & environmental status

• Talvivaara’s environmental and water regulation permit issued on 29 March 2007 became final and binding through a decision by the Supreme Administrative Court (SAC) published on 24 November 2008

• The SAC ruling rejected all the appeals and upheld the terms of the permit issued by the Northern Finland Environmental Permitting Agency, as amended by the Appellate Court of Vaasa (with no or only insignificant cost consequences)

• A separate environmental permit applied for the oxygen generation plant became final and binding earlier in November 2008, as no appeals were launched against the decision

• A few processes of lesser significance are still ongoing at various appellate courts/SAC

Permitting considerations for expansion

Environmental permit update

• The operations and functions have already been approved under a final and binding environmental permit of 29 March 2007

• Expansion would only call for a limited number of updates regarding discharge/emission levels etc. provided in the current permit

• A standard permitting process with a possibility to appeal to the appellate court and supreme administrative court (total processing time of the original permit 2.5 years)