Talvivaara Mining Company annual results review for year ended 31 December 2011

Stock Exchange Release
Talvivaara Mining Company Plc
16 February 2012


Talvivaara Mining Company annual results review for year ended 31 December 2011
Significant progress in ramp-up achieved, overcoming technical issues in metals
recovery


Highlights of Q4 2011
* Record quarterly production of 4,769t nickel and 10,524t zinc owing to
improved plant availability
* Net sales EUR 66.5m (Q4 2010: EUR 60.2m)
* Operating profit EUR 14.9m (Q4 2010: EUR 14.3m)
* Revolving credit facility increased to EUR 130m and maturity extended by one
year to June 2014
* European Commission approval for uranium off-take agreement with Cameco
Corporation received


Highlights of 2011
* Progress in ramp-up continued with 16,087t nickel production, up 55% from
10,382t in 2010
* Zinc production 31,815t, up 25% from 25,462t in 2010
* Net sales EUR 231.2m (2010: EUR 152.2m)
* Operating profit EUR 30.9m (2010: EUR 25.5m)
* Acquisition of an additional 4% shareholding in the operating subsidiary
Talvivaara Sotkamo Ltd from Outokumpu Mining Oy for EUR 60m in June
* Uranium off-take agreement signed with Cameco Corporation in February


Highlights after the reporting period
* Management changes

* Harri Natunen appointed CEO of Talvivaara and to join the Company from
19 March 2012
* Current CEO Pekka Perä to become Executive Chairman following the Annual
General Meeting to be held on 26 April 2012




Key figures

-------------------------------------------------------------------------------
EUR million Q4 Q4 FY FY
2011 2010 2011 2010
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Net sales 66.5 60.2 231.2 152.2
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Operating profit (loss) 14.9 14.3 30.9 25.5
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      % of net sales 22.5% 23.8% 13.4% 16.7%
-------------------------------------------------------------------------------
Profit (loss) for the period 3.7 (0.9) (5.2) (7.7)
-------------------------------------------------------------------------------
Earnings per share, EUR 0.01 (0.01) (0.04) (0.04)
-------------------------------------------------------------------------------
Equity-to-assets ratio 27.9% 31.7% 27.9% 31.7%
-------------------------------------------------------------------------------
Net interest bearing debt 455.7 315.0 455.7 315.0
-------------------------------------------------------------------------------
Debt-to-equity ratio 141.3% 81.7% 141.3% 81.7%
-------------------------------------------------------------------------------
Capital expenditure 21.6 23.5 79.1 115.7
-------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 40.0 165.6 40.0 165.6
-------------------------------------------------------------------------------
Number of employees at the end of the period 461 389 461 389
-------------------------------------------------------------------------------
All reported figures in this release are unaudited.








CEO Pekka Perä comments: "2011 marked another significant step in Talvivaara's
development into a fully producing mining company. Whilst not without its
challenges, the lessons learnt have provided a good platform for ongoing
improvement and ramp-up in 2012. During the spring of 2011, we held an extended
upgrade and maintenance stoppage to remove bottlenecks and to improve the
availability of the metals recovery plant. Whilst these targets were initially
achieved, production unfortunately suffered from unexpected downtime at the
hydrogen sulphide generators during the third quarter, stemming from
insufficient control of operating procedures and subsequent breakage of heating
elements and lack of spare parts. The decision to downgrade our production
target in response was accompanied by an overhaul of our management structures
and increased emphasis on operational systems to better reflect Talvivaara's
shift to steady production.

These improvements are part of an on-going process, and we are already seeing a
positive impact on processes that are running more steadily, and on morale on
the ground which is improving. Moreover, we were delighted that we reached our
revised nickel production target of 16,000tpa by the end of December 2011. Our
production target for 2012 is 25,000-30,000t of nickel, which we believe we can
achieve with continued focus on process optimization and management systems.

The environment is fundamental to Talvivaara's success and remains a priority
for us. When higher than expected levels of manganese and sulphate were detected
in treated process waters in late 2010, partly due to adjustments made to our
processes to minimise hydrogen sulphide odour levels at the site, we worked hard
in conjunction with local authorities to remedy the situation. Manganese
discharges have been reduced by 80% and sulphate levels by 50% since early
2011, and  we are continuing to focus on further recycling of process waters,
optimised consumption of chemicals and research into other technologies and
equipment to reduce these even further. Minimising our environmental footprint
remains one of our key goals in the years to come.

2011 was a turbulent year in the global markets, but despite a fall from earlier
highs and a degree of volatility, metal prices held out comparatively well. We
expect a high degree of volatility and uncertainty to persist in the short term,
but, backed by sustained worldwide demand driven particularly by China, we
continue to have confidence in the long-term strength of the commodity market.

After eight challenging but very enjoyable years as CEO I have taken the
decision to step down from day to day management at Talvivaara. Following the
search to recruit an operationally focused CEO who will take the Company forward
into steady state and growing production, I am delighted to announce that Harri
Natunen will join the Company on 19 March 2012 and step in as CEO after the AGM
on 26 April 2012. He has a very extensive and successful background in managing
mining and metallurgical operations internationally and can therefore provide us
with the expertise that is necessary for us to reach our full scale production
and cost targets.

My own intention is to continue to provide my full support as Executive Chairman
after the upcoming AGM. The current Chairman Edward Haslam will remain a Board
member and will thus continue to provide his guidance and expertise which have
been absolutely instrumental to Talvivaara's development ever since 2006.

Finally, I have every confidence in the team at Talvivaara, and would like to
thank them for their hard work and commitment which I have witnessed whilst
working together. I also wish to extend my sincere thanks to the current Board
of Directors for their commitment, and especially to the departing Chairman
Edward Haslam."

Enquiries:

Talvivaara Mining Company Plc.  Tel. +358 20 712 9800
Pekka Perä, CEO
Saila Miettinen-Lähde, CFO

Merlin            Tel. +44 20 726 8400
David Simonson
Anca Spiridon

Presentation and live webcast on 16 February 2012 at 9:00 am GMT/11:00 am EET

A combined presentation, conference call and live webcast on the Annual Results
will be held on 16 February 2012 at 9:00 am UK/11:00 am Finland at Event Arena
Bank, Helsinki, Finland. The presentation will be held in English.

http://qsb.webcast.fi/t/talvivaara/talvivaara_2012_0216_q4/

A conference call facility is available for participants joining via telephone
and there will be a Q&A following the presentation.

Listen via teleconference:
Europe & U.K Participants: +44 (0)20 7162 0077
US Participants: +1 334 323 6201
Finnish Participants: +358 (0)9 2313 9201

Conference id: 909943

Further details on the event can be found on the Talvivaara website,
www.talvivaara.com. The webcast will also be available for viewing on the
Talvivaara website shortly after the event until the end of 2012.

Summary of stock exchange releases and announcements

Talvivaara has released a summary of stock exchange releases and announcements
made in 2011 in accordance with the Finnish Securities Market Act, Chapter 2
Section 10c. The summary is posted at www.talvivaara.com.

Talvivaara notes that some of the information given in the releases may be out
of date.

Talvivaara's fourth quarter review

Improved reliability in production

All-time production records for nickel and zinc were achieved in the fourth
quarter of 2011 with nickel production of 4,769t (Q4 2010: 3,831t) and zinc
output of 10,524t (Q4 2010: 9,369t). The monthly volumes achieved in December
were especially promising at 1,924t nickel and 4,653t of zinc, indicating that
the production rates required to achieve the 2012 production targets of
25,000-30,000t nickel and 50,000-60,000t zinc had effectively been reached.

The fourth quarter production benefitted from significantly improved metals
plant availability, which at 85% was at the level expected to be maintained in
2012. This level was reached after both production lines operated steadily from
mid-October onwards after having suffered a series of unscheduled stoppages in
the third quarter.

The mining department produced 3.2Mt of ore (Q4 2010: 3.3Mt) and 2.0Mt of waste
(Q4 2010: 4.3Mt). The mining operations were uneventful during the period, but
the total tonnage mined was affected by part, on average a third, of the mobile
equipment having been on loan at the materials handling department to assist in
the reclaiming of the primary heap.

In materials handling, the availability of the crushing circuit continued to
improve and reached a level where it is no longer expected to impact on
achieving the planned 2012 production. However, reclaiming of the primary heap
continued to perform below expectations and was a bottleneck to the materials
handling output overall. Measures taken to improve the reclaiming capacity
included amongst others the testing of new loading arrangements to increase the
feed rate of reclaimed ore to conveyors. The results of these trials were
sufficiently promising to warrant their planned implementation in early 2012.
The amount of ore stacked during the quarter was 3.2Mt (Q4 2010: 2.9Mt).

Bioheapleaching progressed according to expectations during the fourth quarter
with the average nickel grade in solution pumped to the metals recovery plant
remaining steady at around 2 g/l. Solution was drawn from primary heap sections
1, 3 and 4, and from the secondary heap. Primary heap section 2 was under
construction with expected completion in February 2012.

Production key figures

-------------------------------------------------------
    Q4 Q4 FY FY
2011 2010 2011 2010
-------------------------------------------------------
Mining
-------------------------------------------------------
Ore production Mt 3.2 3.3 11.1 13.3
-------------------------------------------------------
Waste production Mt 2.0 4.3 17.0 16.7
-------------------------------------------------------
Materials handling
-------------------------------------------------------
Stacked ore Mt 3.2 2.9 11.1 13.3
-------------------------------------------------------
Bioheapleaching
-------------------------------------------------------
Ore under leaching Mt 35.6 24.3 35.6 24.3
-------------------------------------------------------
Metals recovery
-------------------------------------------------------
Nickel metal content Tonnes 4,769 3,831 16,087 10,382
-------------------------------------------------------
Zinc metal content Tonnes 10,524 9,369 31,815 25,462
-------------------------------------------------------


Financial performance in the fourth quarter of 2011

Net sales and financial result

Talvivaara's net sales for nickel and cobalt deliveries to Norilsk Nickel and
for zinc deliveries to Nyrstar during the quarter ended 31 December 2011
amounted to EUR 66.5 million (Q4 2010: EUR 60.2 million). Net sales increased by
9.7% compared to the previous quarter mainly due to the recognition of
additional extraction and processing fees for zinc deliveries in 2011, stemming
from increased raw materials prices, in particular those of elemental sulphur
and propane. Product deliveries at 4,658 tonnes of nickel, 134 tonnes of cobalt
and 11,669 tonnes of zinc also increased from Q3 2011, but due to the decline in
nickel price, this had little effect on the revenues.

Operating profit for Q4 2011 was EUR 14.9 million (Q4 2010: EUR 14.3 million).
Materials and services for the quarter were EUR (37.7) million (Q4 2010: EUR
(30.7) million) and other operating expenses EUR (13.1) million (Q4 2010: EUR
(13.6) million).

Profit for the period amounted to EUR 3.7 million (Q4 2010: loss of EUR (0.9)
million).

Balance sheet and financing

Capital expenditure during the quarter totalled EUR 21.6 million (Q4 2010: EUR
23.5 million). The expenditure was in line with expectations and related
primarily to the construction of secondary heap foundations and the uranium
extraction facility, and equipment for secondary leaching.

In October, Talvivaara signed an amendment agreement to the EUR 100 million
revolving credit facility with Nordea Bank, Sampo Bank, Svenska Handelsbanken
and Pohjola Bank. The facility was increased to EUR 130 million upon the
addition of Pohjola Bank to the lender group. The maturity of the facility was
also extended by a year until 30 June 2014. As at 31 December 2011, the
outstanding loan amount was EUR 50 million (2010: EUR 0).

During the quarter, Talvivaara issued commercial paper notes with the nominal
value of EUR 8.5 million based on the maximum EUR 100 million programme with
Sampo Bank, Nordea Bank and Svenska Handelsbanken. On 31 December 2011, the
outstanding commercial paper notes amounted to the nominal value of EUR 8.5
million.

Currency option programme

In December 2011, Talvivaara entered into a currency option programme comprising
USD options for three months from January 2012 through March 2012. The monthly
obligation is USD 5.0 million and protection is USD 5.0 million. The collar
ranges from 1.1140 to 1.4500.

Base metals prices impacted by macroeconomic uncertainty

Base metals prices were generally at their lowest levels of the year during the
fourth quarter, partially reflecting downgraded prospects for global economic
growth and consequently base metals demand. The European sovereign debt crisis
also intensified during the quarter, contributing to overall de-risking by
investors across asset classes and further pressure on base metals prices.
Towards the end of the quarter, however, the market gained a degree of positive
momentum following European policy initiatives to contain the debt crisis and
more encouraging data on macroeconomic development. The London Metal Exchange
("LME") cash price for nickel declined to its 2011 low of USD 16,935/t in late
November and recovered by the year-end to USD 18,280/t, with the quarterly
average being USD 18,303/t.

The global nickel supply-demand balance remained in a slight deficit in 2011
according to Brook Hunt, as several new large-scale laterite projects continued
to face commissioning issues. While Chinese nickel pig iron ("NPI") contributed
to increased supply, NPI capacity was reportedly shut down already at price
levels around USD 19,000/t while nickel prices were declining during the autumn.
LME nickel stocks continued to decline during the quarter and were at their
lowest levels since early 2009 at around 90,000 tonnes.




Talvivaara's annual results review 2011

2011 market environment was a tale of two halves

During the first half of 2011, commodities demand benefitted from a robust
global growth outlook, reflected in strong base metals prices. Demand from
China, in particular, continued to grow rapidly. Towards the summer, sovereign
debt and fiscal stability concerns in a number of European countries began to
impact financial markets with the effect carrying over to base metals during the
latter part of the summer. The Euro area crisis intensified during the second
half of the year, and compounded with growing concerns over macroeconomic growth
in both mature and developing markets, resulted in increased risk aversion and
lower base metals prices.

The LME cash price for nickel averaged USD 22,830/t for the year, some 5% above
the 2010 average of USD 21,804/t. Reflecting the broader market sentiment, the
price averaged USD 25,565/t for the first half, USD 20,202/t for the second half
and USD 18,303/t for the fourth quarter. The LME zinc price followed a broadly
similar pattern, averaging USD 2,191/t for the year, up some 2% from USD
2,157/t in 2010.

Global primary nickel consumption in 2011 was some 1.63 million tonnes, marking
an increase of 6.5% from 1.53 million tonnes in 2010. China comprised
approximately 40% of global demand in 2011, with year-on-year consumption growth
at 21%. (Source: Brook Hunt)

Global refined nickel output grew by 12.4% to 1.63 million tonnes in 2011,
leaving the market in a slight deficit for the year. Supply growth was to a
large extent driven by a 55% increase in Chinese NPI output, although the weaker
nickel price environment towards the end of the year resulted in shutdowns of
NPI capacity. Several greenfield nickel projects expected to come on-stream in
2011 continued to face commissioning issues, delaying supply growth. (Source:
Brook Hunt)

The EUR/USD exchange rate remained volatile throughout 2011, and was impacted by
the Euro area crisis particularly towards the end of the year. The Euro averaged
1.39 US dollars for 2011, and closed the year at approximately 1.30.

Significant progress in ramp-up despite technical issues in metals recovery

Talvivaara closed the year having produced 16,087t of nickel, up 55% from
10,382t in 2010. For zinc, the corresponding figures were 31,815t in 2011 and
25,462t in 2010, implying a 25% increase year-on-year. While this progress is
further proof of the feasibility of Talvivaara's processes in large scale
operation, it left room for improvement particularly in the reliability of the
metals recovery process and equipment availability across all functions. In
order to close the performance gap to full scale production, increasing
attention was paid on process optimisation and management systems especially
during the latter half of the year.

Year 2011 started off with an extended period of cold, sub -20°C temperatures in
Sotkamo, and with the metals plant partly handicapped by the after-effects of a
transformer failure in late 2010. Despite the challenging start, metals
production during the first quarter progressed well and proved the capabilities
of the plant in full scale production. However, the high rate of production
especially in March also exposed certain bottlenecks which had to be removed in
order to sustain the achieved throughput rates and to ramp up production
further. The Company therefore decided to hold an extended maintenance break in
April-May 2011 to allow for all of the identified issues to be addressed and for
the plant to be thoroughly inspected as part of the Company's preventive
maintenance plan.

The upgrade and maintenance programme was carried out successfully and
production re-started according to plan. However, within weeks of the re-start,
the heating elements in the hydrogen sulphide generators started to fail at a
rate that caused an acute lack of spare parts. The failure of the heating
elements was found to have been caused by excessive operating temperatures in
the hydrogen sulphide process, and the operating procedure was subsequently
amended to reflect this. However, the shortage in the spare parts inventory
continued to severely affect production for several months, until mid-October.

The decision to hold the extended upgrade and maintenance stoppage first forced
the Company to cut its production target for the year from 30,000t of nickel to
22,000-28,000t, as announced in April. In October, a further reduction of
guidance to 16,000t of nickel had to be announced, resulting from the problems
with the hydrogen sulphide generators. During the fourth quarter, production
reliability improved significantly allowing Talvivaara to reach the latest
guidance level.

Partly in response to the production issues, but significantly also to the
uncertainties in the market environment, Talvivaara announced in October its
intention to shift its short term focus from maximisation of production volume
to optimisation of profitability. Measures taken to realise this strategy
included reduced use of contractors particularly in materials handling and
efforts to optimise chemicals consumption in metals recovery. These measures
will continue into 2012, partly as part of the Company's focus on improving its
management systems, but are not expected to materially affect the production
output.

At the departmental level mining continued uneventfully with 11.1Mt (2010:
13.3Mt) of ore and 17.0Mt (2010: 16.7Mt) of waste blasted. The total output was
slightly down from the year before, reflecting the bottleneck in materials
handling. Waste mining continued at a high level with waste rock being used for
the levelling of the secondary heap foundations.

In materials handling, the volume of crushed and stacked ore in 2011 amounted to
11.1Mt (2010: 13.3Mt). Production output was restricted by delays in
commissioning of the primary heap reclaiming system, which operated
substantially below the budgeted levels throughout the year. Improved operating
methods were however identified during the fourth quarter and will be
implemented in early 2012.

Bioheapleaching progressed according to expectations during the year, with
secondary leaching also proving successful upon increasing amounts of ore being
transferred from the primary to the secondary heap. Nickel grades in leach
solution varied from slightly less than 2 g/l to more than 3.5 g/l, reflecting
different ages of heaps and varying depletion rates of solution to metals
recovery. At year end, the nickel grade in solution pumped to the metals
recovery plant was around 2 g/l.

Reliability and availability of the metals recovery plant proved to be the
decisive factor in determining the overall production output for the year. The
availability of the plant in 2011 was approximately 49%, which is well below any
reasonably targeted long term levels, but in part still reflects the limited
operating history of the facility. Whilst no fundamental problems at the plant
have been identified, focus on improving the robustness and reliability of
production will continue in 2012.

Financial review

Net sales and financial result

Talvivaara's net sales during the financial year ended 31 December 2011 amounted
to EUR 231.2 million
(2010: EUR 152.2 million). 15,795 tonnes of nickel, 35,935 tonnes of zinc, and
approximately 400 tonnes of cobalt were sold during the year.

The Group's other operating income amounted to EUR 2.3 million (2010: EUR 20.9
million) and came mainly from indemnities on losses, gains on the sale of the
Talvivaara-Murtomäki railroad to the Finnish State and fair value gains on
derivatives.

Materials and services during the financial year ended 31 December 2011 amounted
to EUR (135.0) million (2010: EUR (99.0) million). The largest cost items were
consumables, external services and production chemicals, particularly propane
and caustic soda (lye). The increase in materials and services reflects the
increase in production volumes from 2010 to 2011.

Employee benefit expenses including the value of employee expenses related to
the employee share option scheme of 2007 were EUR (25.5) million (2010: EUR
(19.9) million). The increase was mostly attributable to the increased number of
personnel.

Other operating expenses amounted to EUR (55.2) million (2010: EUR (43.8)
million), of which energy and maintenance costs comprised more than two thirds.
Operating profit came to EUR 30.9 million (2010: EUR 25.5 million). The
operating margin was 13.4%, down from 16.7% reported in 2010 primarily due to
the reported production problems and related maintenance costs and cost
inefficiencies in 2011.

Finance income for the financial year was EUR 1.2 million (2010: EUR 3.5
million) and consisted mainly of interests on bank accounts and exchange rate
gains. Finance costs of EUR (39.1) million (2010: EUR (31.7) million) were
mainly caused by interest and related financing expenses on borrowings.

The Company's loss for the financial year amounted to EUR (5.2) million (2010:
EUR (7.7) million).

The total comprehensive income for the financial year was EUR (14.6) million
(2010: EUR (19.1) million), including a reduction in hedge reserves resulting
from the occurrence of the hedged sales.

Balance sheet

Capital expenditure in 2011 totalled EUR 79.1 million (2010: EUR 115.7 million).
The expenditure related primarily to secondary heap foundations, secondary
leaching equipment, and construction of a gypsum pond and the uranium extraction
facility. On the consolidated statement of financial position as at 31 December
2011, property, plant and equipment totalled EUR 762.0 million (31 December
2010: EUR 728.2 million).

In the Group's assets, inventories amounted to EUR 240.4 million on 31 December
2011 (31 December 2010: EUR 175.4 million). The increase in inventories
reflected the ramp-up of production and the consequent increase in the amount of
ore stacked on heaps, valued at cost. During the third quarter the Company re-
evaluated the assumptions concerning the operating capacity of the Talvivaara
mine to the extent such assumptions are used in inventory recognition. It was
concluded that because the ramp-up phase and optimization of the production
processes have proceeded slower than previously estimated, the expected
operating capacity had to be adjusted to reflect more closely the current and
short term expected level of production. The adjustment to the expected
operating capacity had the effect of increasing the inventories during the
second half of the financial year, as a bigger proportion of the operating costs
and related production overheads were subsequently accumulated as inventories
rather than being recognised directly as costs.

Trade receivables amounted to EUR 64.0 million on 31 December 2011 (31 December
2010: EUR 52.4 million). The increase in trade receivables reflects primarily
the additional extraction and processing fees for zinc deliveries in 2011,
stemming from increased chemical costs in zinc production.

On 31 December 2011, cash and cash equivalents totalled EUR 40.0 million (31
December 2010: EUR 165.6 million).

In equity and liabilities, total equity amounted to EUR 322.6 million on 31
December 2011 (31 December 2010: EUR 385.6 million). The reduction in equity was
primarily the result of the acquisition by Talvivaara of an additional 4%
shareholding in its subsidiary Talvivaara Sotkamo Ltd from Outokumpu Mining Oy.
As a result of the acquisition, Talvivaara's ownership in Talvivaara Sotkamo
increased from 80% to 84%, and Talvivaara's equity decreased by the acquisition
costs of EUR 61.9 million. The equity component of EUR 9.0 million for the
senior unsecured convertible bonds due 2015 was also recognised in equity in
2011. A total of 539,407 new shares were subscribed and paid for in 2011 under
the company's stock option rights 2007A and 2007B and the convertible bonds due
2015, and the entire subscription price of EUR 2.6 million was recognized in
equity.

Borrowings increased from EUR 480.6 million on 31 December 2010 to EUR 495.7
million at the end of 2011. The changes in borrowings during the financial year
included a partial draw-down of the revolving credit facility, determination of
the equity component for the senior unsecured convertible bonds due 2015,
issuance of commercial paper notes, and repayment of the borrowings drawn down
to finance the construction of the Talvivaara-Murtomäki railroad.

Total advance payments as at 31 December 2011 amounted to EUR 247.3 million (31
December 2010: EUR 259.9 million). In 2011, the advance payment from Nyrstar was
reclassified as a non-monetary liability, as the advance payment is repaid
through physical deliveries and therefore does not represent an actual foreign
exchange risk. In addition, Talvivaara received a total of EUR 14.4 million in
advance payments during the year based on a uranium off-take agreement with
Cameco Corporation. The advance payment made by the Finnish state for the
railroad was recognized as revenue in September.

Total equity and liabilities as at 31 December 2011 amounted to EUR 1,156.7
million (31 December 2010: EUR 1,214.5 million).

Financing

In October, Talvivaara signed an amendment agreement to the EUR 100 million
revolving credit facility agreement with Nordea Bank, Sampo Bank, Svenska
Handelsbanken and Pohjola Bank. The facility was expanded to EUR 130 million
upon the addition of Pohjola Bank to the lender group. The maturity of the
facility was also extended by a year to 30 June 2014. As at 31 December 2011,
the outstanding loan amount was EUR 50 million (2010: EUR 0).

During the second half of the year, Talvivaara issued commercial paper notes
with the total nominal value of EUR 18.5 million based on the maximum EUR 100
million programme with Sampo Bank, Nordea Bank and Svenska Handelsbanken. On 31
December 2011, the outstanding commercial paper notes amounted to the nominal
value of EUR 8.5 million.

In September, the Finnish State paid the second instalment of its reimbursement
towards the construction costs of the Talvivaara-Murtomäki railroad to
Talvivaara Infrastructure Oy. As a result of the reimbursement totalling EUR 40
million, the railroad became property of the Finnish State and a part of the
national rail network. After the reimbursement, Talvivaara repaid the remaining
EUR 18.7 million term loan and the EUR 4.2 million interest subsidy loans drawn
down to finance the railroad construction.

In February, Talvivaara signed a uranium off-take agreement with Cameco
Corporation. Under the terms of the agreement, Cameco will provide an upfront
investment of up to USD 60 million to cover the construction costs of the
uranium production facility and extraction circuit. Talvivaara will repay the
investment through deliveries of uranium concentrate during the initial years of
the agreement. Once the capital sum has been repaid, all uranium concentrate
produced thereafter until 31 December 2027 will be bought by Cameco at a price
based on market prices at the time of delivery.

In January, an Extraordinary General Meeting of Talvivaara resolved to approve
the proposal of the Board of Directors for the issue of special rights in
relation to EUR 225 million senior unsecured convertible bonds issued in
December 2010 and due in December 2015. The bonds are convertible into 27.0
million fully paid ordinary shares of the Company. The interest rate applied to
the convertible bond is 4.00% and the yield to maturity 6.50%, reflecting a
redemption price of 114.5% at maturity.

Business development and commercial arrangements

Planned uranium extraction and uranium off-take agreement with Cameco
Corporation
In February, Talvivaara signed a uranium off-take agreement with Cameco
Corporation. Under the terms of the agreement, Cameco will provide an up-front
investment of up to USD 60 million to cover the construction costs of the
uranium extraction circuit and related facilities.

Cameco's capital contribution will be repaid through deliveries of uranium
concentrate in the initial years of the agreement. Once the capital is repaid,
Cameco will purchase the uranium concentrate produced at Sotkamo through a
supply agreement that will be in effect until 31 December 2027. Cameco will
provide Talvivaara with payment for the uranium based on a formula that
references market prices at the time of delivery.

Annual uranium production is estimated at 350tU (ca. 770,000 pounds),
corresponding to approximately 410t (900,000 pounds) of yellow cake (UO(4)).

In August 2011, Talvivaara obtained a construction permit for the uranium
recovery facility and construction work commenced. Commissioning of the
facility, subject to receiving the necessary permits and authorizations (as
further described in the Permitting section), is expected during the second half
of 2012. Cameco is providing technical assistance to Talvivaara in the design,
construction, commissioning and later in the operation of the uranium extraction
circuit.

Production expansion - Operation Overlord
Conceptual studies relating to production expansion beyond 50,000tpa of nickel
were carried out throughout the year. A dedicated project team was established
and at the end of 2011 consisted of nine members with metallurgical,
infrastructure, bioheapleaching, materials handling and project coordination
expertise.

The scoping studies were based on the target of doubling the presently planned
production to approximately 100,000tpa of nickel. Whilst studies relating to
various processing options continue, it appears relatively likely that a
substantial part of the expanded production would be LME quality nickel metal,
i.e. Talvivaara would integrate its production one step further downstream.
Production of cobalt metal remains also an option, but refining of zinc to zinc
metal is currently not within the planning scope. For certain products and raw
materials, e.g. manganese and sulphuric acid, joint ventures or other partnering
arrangements will be investigated.

The baseline studies of the environment relating to the planned expansion
commenced in the spring of 2011 and by year-end preparations for the
Environmental Impact Assessment were at an advanced stage. Permitting is
anticipated to proceed to the submission of an environmental permit application
during 2012.

No investment decisions relating to the production expansion have yet been
taken. Provided the investment is pursued, it is envisioned to be carried out in
a modular fashion to allow spreading out of the expenditure over an estimated
5-6 year period starting around 2014. The modular approach also allows
commissioning of the equipment and processes sequentially in the order of the
process stages, which is expected to reduce the risk of serious start-up issues.

Acquisition of an additional 4% shareholding in the operating subsidiary
Talvivaara Sotkamo Ltd from Outokumpu Mining Oy
Talvivaara Mining Company signed an agreement on 1 June 2011 with Outokumpu
Mining Oy and its parent company Outokumpu Oyj to acquire an additional 4%
shareholding in Talvivaara Sotkamo Ltd. As a result of the acquisition,
Talvivaara's ownership in Talvivaara Sotkamo increased from 80% to 84% and
Outokumpu Mining's ownership decreased to 16%. The acquisition price for the 4%
stake was EUR 60 million.

Simultaneously, Talvivaara entered into an exclusive option agreement with
Outokumpu Mining Oy and Outokumpu Oyj (the "Option") whereby it will have the
right, at its sole discretion, in one or more installments, to acquire Outokumpu
Mining's remaining 16% shareholding in Talvivaara Sotkamo for EUR 240 million at
any time prior to 31 March 2012.

As of 31 December 2011 Talvivaara had not exercised the Option and the Board
considered it unlikely that the Option would be exercised.

Redemption of the Talvivaara-Murtomäki railroad by the Finnish State
In 2008-2009, Talvivaara constructed a 25 km railway connecting the Talvivaara
mine with the national railway grid. Subject to agreed minimum transportation
volumes on the railroad being achieved, the Finnish State agreed to reimburse
the construction expenses to Talvivaara Infrastructure Ltd up to an amount of
EUR 40 million (0% VAT) in two instalments and to redeem the railroad. The first
agreed transportation milestone was reached in 2010 and the Finnish State
subsequently paid EUR 20 million in June 2010 as a partial reimbursement. The
remaining minimum transportation volumes were reached in January 2011, and the
Finnish State paid the remaining EUR 20 million in September 2011. In
conjunction with the final reimbursement, the railroad became property of the
Finnish State and part of the national rail network.

Geology

During 2011, Talvivaara's geological activities focused primarily on resource
infill drilling to improve geological mapping of already known ore profiles.
Apart from a brief campaign at the Kuusilampi deposit in early 2011, drilling
was carried out at the Kolmisoppi deposit where mining operations have not yet
commenced. In total, approximately 11,000 metres were drilled during the year.

Talvivaara's total mineral resources, as defined by the JORC code, stand at
1,550Mt and Measured and Indicated Resources at 1,121Mt. The resources contain
3.4Mt of nickel and 7.6Mt of zinc at average metal grades of 0.22% nickel and
0.49% zinc.

Significant exploration potential remains between the Kuusilampi and Kolmisoppi
deposits and to the north of the Kolmisoppi deposit. Talvivaara expects to
update its mineral resources statement in late 2012.

Research and development

Talvivaara's research and development activities focused mainly on further
optimisation of the bioheapleaching and metals recovery processes, and recovery
of additional metals from the leach solution.

Process development work in bioheapleaching included studies aimed at better
understanding the behaviour of full scale heaps, improving heap aeration
concepts, and optimising the hydrodynamics of the heaps. Four test heaps of
50,000t of ore each were constructed and started up during the second half of
the year to study parameters for improved leaching efficiency. The results
obtained from these heaps to-date are promising and provide further insight into
optimisation of the full scale heap performance as well as leaching costs.

In metals recovery, the focus was on production capacity and product quality
improvement especially regarding the moisture content of the zinc product.
Chemical purity of all products, in particular copper sulphide, was also in
focus, as was the optimisation of chemicals consumption to reduce costs.

Catalytic burning of hydrogen sulphide to avoid odour problems and to reduce
caustic soda consumption was one of the key projects of the year with a clear
target at production application in 2012. The tests showed that hydrogen
sulphide can be converted to sulphur oxides which in turn can be scrubbed out
without caustic soda. As a result, the investment project in catalytic burning
was committed and is expected to be completed during the coming summer.

As a response to the increased sulphate levels in effluent waters discovered in
late 2010, a project to evaluate and develop relevant water purification
technologies for sulphate removal commenced in early 2011. The project comprised
initially a technology study together with VTT, the Technical Research Centre of
Finland, to compare various technologies available for this application. The
study was later continued as a techno/economical study for selected appropriate
technologies. As a result, a membrane technology was chosen and the work
continued with laboratory tests to develop design criteria for further testing
and eventually for an industrial scale plant.

Various tests and piloting activities were carried out to provide necessary data
for the uranium permitting process. A continuous pilot process was also run with
the chosen technology supplier to verify the uranium extraction process.

Sustainable development

Talvivaara continued to develop its operations in line with its sustainable
development policy which emphasizes continuous improvement and operational
excellence. In 2011, the Company paid special attention to improved control of
water discharges, active stakeholder communication especially in the areas
neighbouring the mine, and implementation of management systems supportive of
sustainable development.

Talvivaara is committed to continuous improvement in environmental efficiency,
operational risk management and the reduction of environmental impact. Thanks to
investments aimed at reducing emissions to air, the environmental performance
improved throughout the year. Some further improvements in 2012 are still
necessary for the dust and hydrogen sulphide emission limits set in Talvivaara's
environmental permit to be consistently met.

Water emissions were in a particular focus following the higher than anticipated
concentrations of sulphate and manganese in discharge waters in late 2010 and
early 2011. With immediate reaction to the elevated concentrations, the sulphate
and manganese levels reduced significantly already by the summer of 2011 and any
permanent damage to the nearby lakes was avoided. By the end of the year, water
quality in the lakes closest to the mine had already started to improve even in
the deepest sections, where most of the sulphate containing water had
stratified. Going into 2012, recycling of process waters at Talvivaara is being
increased and new water purification methods are being tested with the aim of
implementing yet additional purification steps within the next 2-3 years. The
catalytic burning of hydrogen sulphide, which Talvivaara intends to start in
2012, has the potential of significantly reducing caustic soda consumption,
which in turn is expected to reduce sodium and sulphate concentration in process
waters.

The sulphate and manganese discharges from the mine attracted significant media
attention during the last quarter of the year, causing concern for many of
Talvivaara's stakeholders. In response, the Ministry of the Environment
requested a statement from the local Environmental Authority to attest whether
the monitoring of the mine had been sufficient and whether there were grounds to
consider coercive measures against Talvivaara. The conclusion, which was found
satisfactory by the Ministry, was that the monitoring programme had been and
continues to be extensive, and that no grounds for coercive measures, e.g. fines
or limitation of production, were found.

Talvivaara took again part in the CDP carbon footprint reporting initiative.
This data gathering and reporting exercise will help the Company to optimize its
greenhouse gas emissions in the future. Talvivaara also continued to develop its
Global Reporting Initiative (GRI) reporting and related data verification.

Talvivaara was awarded the environmental management system ISO 14001
certification in December 2010, followed by continuous improvement of the system
throughout 2011. The Company also prepared for the certification of the OHSAS
18001 occupational health and safety standard, and commenced development of a
risk management system in accordance with the ISO 31000 standard. Risk
assessment for disasters under the Seveso Directive was updated.

The environmental security placed for future restoration of the area and
monitoring obligations amounted to EUR 32.7 million at the year-end (2010: EUR
27.0 million).

With respect to safety issues Talvivaara's goal is a safe and healthy working
environment, and the Company continued to develop its safety culture based on
zero accident philosophy. The injury frequency in 2011 was 14.7 lost time
injuries/million working hours (2010: 10.7 lost time injuries/million working
hours).

Open and frequent communication is of utmost importance when building a long-
term, trusting relationship with the nearby residents and communities, and
Talvivaara has focused increasingly emphasis on its community programme during
the past year. Open days for visitors and meetings with the local residents
continued; in addition, a new, locally focused internet site was launched soon
after the year end to provide up-to-date environmental information and a
discussion and feedback channel for the local residents.

Permitting

Permitting work during the year related to the extraction of uranium as a by-
product, the renewal of the existing environmental permit for the Talvivaara
mine, and preparations for the permitting process pertaining to the planned
production expansion, first to 50,000tpa and subsequently to up to 100,000tpa of
nickel.

In March, Talvivaara submitted an application for the renewal of the existing
environmental permit to the regional environmental permitting agency. The
updated permit is expected to be obtained by the autumn of 2012.

In June 2011, Talvivaara submitted an application to the Ministry of Employment
and Economy in accordance with the Mining Act (503/1965) for the expansion of
the Talvivaara mining concession area by approximately 70 km(2). Subject to
approval of the expansion, the total area of the Talvivaara mining concession
will be approximately 130 km(2). The expansion of the mining concession area
relates to the previously announced increase in the Talvivaara mineral
resources, the full exploitation of which is not possible within the existing
mining concession area.

Baseline studies of the environment relating to the potential production
expansion (Operation Overlord) and the expansion of the mining concession area
commenced in the spring and continued through the year. Preparations for the
Environmental Impact Assessment (EIA) for the production expansions initially to
50,000tpa and later to up to 100,000tpa of nickel commenced during the autumn.
By the year-end, the EIA programmes were close to completion and the actual EIA
work was anticipated to start in early 2012.

In March 2011, Talvivaara submitted the environmental permit application for
uranium extraction to the Regional Environmental Permitting Agency, with the
decision on the permit expected during Q2 2012. In April 2010, Talvivaara
applied to the Ministry of Employment and Economy for a permit to extract
uranium as a by-product, in accordance with the Nuclear Energy Act. Talvivaara
expects to obtain this permit during the first quarter of 2012.

Talvivaara received European Commission approval for the uranium off-take
agreements with Cameco in November 2011. A further ratification by the European
Commission pursuant to the Euratom Treaty was obtained soon after the year end,
in January 2012.

Management systems and operational quality

With Talvivaara moving closer to steady state production requiring corresponding
operational stability and processes, the Company launched a special programme
targeted at improving all operating procedures and creating a shared and
consistent working environment, the "Talvivaara Way of Working" (in Finnish,
"Talvivaaran Tapa Toimia", or T3+). Commenced in the fourth quarter, the
programme's initial stages focused on identification, measurement and follow-up
of key performance indicators at all levels of the organisation and processes.
The work will continue in 2012 and will also cover other aspects of operational
quality, such as cleanliness and order (5S), overall control systems, and
motivational factors. The initial results of the programme have been promising
and have encouraged the entire organisation to continue their efforts in
applying the new "Talvivaara Way of Working".

Risk management and key risks

In line with current corporate governance guidelines on risk management,
Talvivaara carries out an ongoing process endorsed by the Board of Directors to
identify risks, measure their impact against certain assumptions and implement
the necessary proactive steps to manage these risks.

In 2011, the Company's risk management activities were focused on further
development of risk management practices within departments and functions, and
on updating the Group level risk management policies to reflect Talvivaara's
present development stage as an operational rather than a project focused
entity.

Talvivaara's operations are affected by risks common to the mining industry,
such as risks relating to the development of Talvivaara's mineral deposits,
estimates of reserves and resources, infrastructure risks, and volatility of
commodity prices. There are also risks related to currency exchange ratios,
management and control systems, historical losses and uncertainties about the
future profitability of Talvivaara, counter parties, dependence on key
personnel, effect of laws, governmental regulations and related costs,
environmental hazards, and risks related to Talvivaara's mining concessions and
permits.

In the short term, Talvivaara's key operational risks continue to relate to the
ongoing ramp-up of operations. While the Company has demonstrated that all of
its production processes work and can be operated on industrial scale, the rate
of ramp-up is still subject to risk factors including the reliability and
sustainable capacity of production equipment, and eventual speed of leaching and
metals recovery in bioheapleaching. In addition, there may be production and
ramp-up related risks that are currently unknown or beyond the Company's
control.

The market price of nickel has historically been volatile and in the Company's
view this is likely to persist, driven by shifts in the supply-demand balance,
macroeconomic indicators and variations in currency exchange ratios. Nickel
sales currently represent close to 90% of the Company's revenues and variations
in the nickel price therefore have a direct and significant effect on
Talvivaara's financial result and economic viability. Talvivaara is, since
February 2010, unhedged against variations in metal prices. Full or
substantially full exposure to nickel prices is in line with Talvivaara's
strategy and supported by the Company's view that it can operate the Talvivaara
mine profitably during the lows of commodity price cycles.

Talvivaara's revenues are almost entirely in US dollars, whilst the majority of
the Company's costs are incurred in Euro. Potential strengthening of the Euro
against the US dollar could thus have a material adverse effect on the business
and financial condition of the Company. Talvivaara hedges its exposure to the US
dollar on a case by case basis with the aim of limiting the adverse effects of
US dollar weakness as considered justified from time to time.

Liquidity and refinancing risks may arise as a result of the Company's inability
to produce sufficient volumes of its saleable products, particularly nickel,
unexpected increase in production costs, and sudden or substantial changes in
the prices of commodities or currency exchange rates. Talvivaara seeks to reduce
liquidity risk by close monitoring of liquidity in order to detect any threat of
adverse changes in advance so as to allow for sufficient time to secure access
to adequate credit or other funding on reasonable terms. Talvivaara also seeks
to maintain a balanced maturity profile of its long-term debt in order to
mitigate refinancing risks.

Personnel

The growth in Talvivaara's personnel continued in 2011, with the total number of
employees increasing from 389 to 461. The personnel is mostly recruited locally
from the Kainuu region, where Talvivaara is the largest provider of new job
opportunities.

The average age of Talvivaara's personnel was 38.8 years, and the age
distribution of employees is comparable to the industry average in Finland. In
its recruitment process, Talvivaara seeks to maintain a representative staff age
structure, in spite of the reasonably high rate of recruitment from a limited
pool of potential recruitees in the region. Although the mining industry has
conventionally been male-dominated, Talvivaara seeks to hire employees
representing both genders. This has however proven difficult due to the limited
number of female applicants.

Personnel turnover continued to decrease during the reporting year, reflecting
the increasing maturity of the operations. As in previous years, the turnover
mainly affected newly recruited employees and did not affect the Company's
operations. The personnel turnover at Talvivaara Sotkamo Ltd was 4.3% (2010:
5.1%), and there was no personnel turnover at Talvivaara Mining Company (2010:
0%).

The salaries and wages of Talvivaara's personnel are based on industry-wide
collective agreements and company-specific job grading. The total compensation
consists of base salary and short and long term incentive schemes. Annual short
term incentive metrics include personal performance based and company-wide
criteria. During the ongoing ramp-up phase the primary criterion has been
Talvivaara's production output. The Company's long term incentive schemes
comprise Talvivaara's Stock Options 2007, which is allocated to all personnel,
and a management holding company Talvivaara Management Oy, which is targeted to
executive management and requires personal investment in the Company shares by
the participants. A new option scheme, Talvivaara Stock Options 2011 was
established at the Annual General Meeting of 2011, but these options have yet to
be allocated.

Personnel development is based on annual training and development plans. All
Talvivaara personnel participate in introductory training with work safety as a
key component. The Company's target is also that all of its employees will have
first aid competence.

Corporate governance statement

Talvivaara will issue a Corporate Governance Statement of 2011 and publish it as
part of its Annual Report and as a separate statement on its website at
www.talvivaara.com during the week starting 26 March 2012. The Corporate
Governance Statement will not form part of the Board of Directors' Report.

Resolutions of the Annual General Meeting

Talvivaara's Annual General Meeting was held on 28 April 2011 in Sotkamo,
Finland. The resolutions of the AGM included:
* that no dividend be paid for the financial year 2010;

* that the annual fee payable to the members of the Board in 2012 be as
follows: Chairman of the Board EUR 160,000, Deputy Chairman (Senior
Independent Director) EUR 69,000, Chairman of the Audit Committee EUR
69,000, Chairman of the Nomination Committee EUR 53,000, Chairman of the
Remuneration Committee EUR 53,000, Chairman of the Sustainability Committee
EUR 53,000, other Non-executive Directors and Executive Directors EUR
48,000;

* that the number of Board members be seven and that Mr. Edward Haslam, Mr.
Eero Niiva, Ms. Eileen Carr, Mr. D. Graham Titcombe, Mr. Pekka Perä, Mr.
Tapani Järvinen and Ms. Saila Miettinen-Lähde be re-elected as Board
Members;

* that the auditor be reimbursed according to the auditor's approved invoice
and authorised public accountants PricewaterhouseCoopers Oy be elected as
the company's auditor for the financial year 2011;

* that the Board be authorised to decide on the repurchase, in one or several
transactions, of a maximum of 10,000,000 of the Company's own shares. The
repurchase authorisation is valid until 27 October 2012. The proposed
authorisation replaces the authorisation to repurchase 10,000,000 shares
granted by the Annual General Meeting of 15 April 2010; and


· that the Company shall issue stock options partly to the key employees and
partly to the personnel of the Company and its subsidiaries. The maximum total
number of stock options issued will be 5,500,000 and the stock options entitle
their owners to subscribe for a maximum total of 5,500,000 new shares in the
Company or to receive existing shares held by the Company. The beginning of the
share subscription period shall require attainment of certain operational or
financial targets determined by the Board annually.



Shares and shareholders

The number of shares issued and outstanding and registered on the Euroclear
Shareholder Register as of 31 December 2011 was 245,781,803. Including the
effect of the EUR 85 million convertible bond of 14 May 2008, the EUR 225
million convertible bond of 16 December 2010, and the Option Scheme of 2007, the
authorised full number of shares of the Company amounted to 290,636,391.

The share subscription period for stock options 2007A is between 1 April 2010
and 31 March 2012 and for stock options 2007B between 1 April 2011 and 31 March
2013. By 31 December 2011 a total of 449,286 Talvivaara Mining Company's new
shares had been subscribed for under the stock option rights 2007A and a total
of 1,883,814 stock option rights 2007A remain unexercised. On 31 December
2011, 108,700 shares were not registered. A total of 48,763 new shares of
Talvivaara were subscribed for under the stock option rights 2007B and a total
of 2,284,337 stock option rights 2007B remain unexercised. In addition, a total
of 215,736 new shares of the Company were subscribed for under the convertible
bonds due 2015.

In 2011 a total of 952,000 stock options 2007C were allocated. The share
subscription period for stock options 2007C is between 1 April 2012 and 31 March
2014.

As at 31 December 2011, the shareholders who held more than 5% of the shares and
votes of Talvivaara were Pekka Perä (23.0 %), Varma Mutual Pension Insurance
Company (8.6%), Solidium Oy (7.0%) and Ilmarinen Mutual Pension Insurance
Company (5.9%).



Share based incentive plans

By resolution passed at the general meeting of shareholders on 28 February
2007, the Company resolved to issue free stock options to the personnel of the
Company and its subsidiaries entitling them, after the split of the Company's
shares 1:70, to subscribe for a maximum of 6,999,300 new shares in the Company
(2007 Option Scheme). Pursuant to the terms and conditions of the 2007 Option
Scheme, the Board of Directors shall decide upon the distribution of the stock
options.

During 2011, the Board of Directors, based on the recommendation of the
Remuneration Committee, allocated 952,000 2007C options, giving an entitlement
to subscribe for a total of 952,000 new shares in the Company, to the personnel
of Talvivaara and its subsidiaries. Of the options allocated since
2007, 78,000 2007C options entitling to subscribe for 78,000 shares were
returned back to the Company during 2011. In 2011, a total of 274,908 new shares
were subscribed for under the stock option rights 2007A and 48,763 with 2007B.
At the end of 2011, 100 2007C options were available for allocation under the
2007 Option Scheme. The voting rights of the shares to be issued against the
outstanding share options amount to 2.6% of the total share capital.

In December 2010, The Board of Directors of Talvivaara decided on a new
shareholding plan directed to members of the Talvivaara Executive Management
Team (the "Participants"). The plan enables the Participants to acquire a
considerable long-term shareholding in the Company. Through this plan, the
Participants personally invested a significant amount of their own funds in
Talvivaara's shares. The Participants financed their investments partly by
themselves and partly by a loan provided by Talvivaara.

The EUR 5.7 million loan granted by the Company to Talvivaara Management Oy for
the purpose of acquiring Company shares carries an interest of 3.0% and shall be
repaid in full by 2014. The 1,104,000 shares held by Talvivaara Management Oy
have been pledged to Talvivaara as security for the loan.

By resolution passed at the Annual General Meeting of 28 April 2011, the Company
resolved to issue free stock options to the personnel of the Company and its
subsidiaries (2011 Option Scheme). The maximum total number of stock options
issued will be 5,500,000 and the stock options entitle their owners to subscribe
for a maximum total of 5,500,000 new shares in the Company or to receive
existing shares held by the Company. The commencement of the share subscription
period will require attainment of certain operational or financial targets
determined by the Board annually. As at 31 December 2011, no options under the
2011 Option Scheme had been allocated.

Events after the review period

Uranium permitting
Talvivaara received a ratification on its uranium recovery process from the
European Commission under the Euratom Treaty ("Treaty") in January 2012. One of
the main objectives of the Treaty is to improve the supply security of nuclear
fuel in the European Union. In its opinion, the European Commission considers
that uranium recovery at the Talvivaara mine complies with the goals set by the
Treaty and may improve the supply security of nuclear fuel in the European
Union.

Management of process waters
In order to improve water management in view of the environmental effects of the
mining operations, Talvivaara has implemented new water recycling procedures
allowing the reduction of raw water intake by approximately 50%. The new
arrangement also allows further improvement of the quality of discharge waters
and is expected to help in eventually reducing the amount of water emissions.

Installation of the new water recycling systems required a four-day stoppage at
the metals recovery plant. Apart from this, operations at the plant have been
uneventful during the early part of 2012.

Short-term outlook

Market outlook
Following general sentiment driven weakness during the latter half of 2011,
nickel and base metals prices more broadly have shown signs of recovery in early
2012. Volatility is however expected to remain at an elevated level, as
investors and other market participants assess the likely outcome of the
European sovereign debt crisis as well as the global growth outlook.

Barring a severe global recession, significant downside to nickel prices beyond
levels already seen in late 2011 would appear to be capped by marginal costs of
production. Talvivaara continues to believe the longer term support level to be
around USD 20,000 per tonne.

Talvivaara expects the global nickel market to remain broadly balanced from a
supply-demand perspective. Several new laterite nickel projects have continued
to face commissioning issues, and it appears increasingly likely that their
contribution to supply in the near term will be limited. Chinese NPI production
is expected to also balance the market, as the utilisation rate of this capacity
tends to quickly react to variations in nickel price.
Operational outlook
Talvivaara expects production at the Sotkamo mine to continue ramping up and to
reach the annual nickel production volume of 25,000-30,000t in 2012. In line
with the guidance provided at the Company's Capital Markets Day in November
2011, total operating costs in 2012 are expected to amount to approximately EUR
250 million including leasing, and capital expenditure to EUR 40-50 million
excluding construction of the uranium extraction circuit.


Board of Directors proposal for profit distribution

The Board of Directors is proposing to the Annual General Meeting to be held on
26 April 2012 that no dividend is declared in respect of the year 2011.


Talvivaara Mining Company Plc
Board of Directors



CONSOLIDATED INCOME STATEMENT

Unaudited Audited Unaudited Audited
three three twelve twelve
months to months to months to months to
(all amounts in EUR '000) 31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
--------------------------------------------------
Net sales 66,492 60,218 231,226 152,163

Other operating income 268 3,661 2,304 20,904

Changes in inventories of
finished
goods and work in progress 17,491 14,003 59,727 67,100

Materials and services (37,687) (30,745) (135,022) (99,029)

Personnel expenses (6,353) (5,498) (25,482) (19,944)

Depreciation, amortization,
depletion
and impairment charges (12,158) (13,757) (46,642) (51,948)

Other operating expenses (13,121) (13,556) (55,212) (43,790)


--------------------------------------------------
Operating profit (loss) 14,932 14,326 30,899 25,456



Finance income 236 81 1,197 3,477

Finance cost (11,279) (8,125) (39,060) (31,655)
--------------------------------------------------
Finance income (cost) (net) (11,043) (8,044) (37,863) (28,178)



Profit (loss) before income
tax 3,889 6,282 (6,964) (2,722)

Income tax expense (161) (7,166) 1,748 (5,012)

--------------------------------------------------
Profit (loss) for the period 3,728 (884) (5,216) (7,734)
--------------------------------------------------
Attributable to:

Owners of the parent 1,915 (810) (8,263) (8,699)

Non-controlling interest 1,813 (74) 3,047 965
--------------------------------------------------
3,728 (884) (5,216) (7,734)
--------------------------------------------------
Earnings per share for profit (loss) attributable
to the
owners of the parent (expressed in EUR per share)

Basic and diluted 0.01 (0.01) (0.04) (0.04)




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



Unaudited Audited Unaudited Audited
three three twelve twelve

months to months to months to months to

(all amounts in EUR '000) 31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
----------------------------------------
Profit (loss) for the period 3,728 (884) (5,216) (7,734)

Other comprehensive income,
items net of tax

Cash flow hedges (1,983) (2,769) (9,368) (11,341)

----------------------------------------
Other comprehensive income,
net of tax (1,983) (2,769) (9,368) (11,341)
----------------------------------------
Total comprehensive income 1,745 (3,653) (14,584) (19,075)
----------------------------------------
Attributable to:

Owners of the parent 249 (3,025) (16,132) (17,772)

Non-controlling interest 1,496 (628) 1,548 (1,303)
----------------------------------------
1,745 (3,653) (14,584) (19,075)
----------------------------------------



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited Audited
as at as at

(all amounts in EUR '000) 31 Dec 11 31 Dec 10

ASSETS

Non-current assets

Property, plant and equipment 761,985 728,226

Biological assets 7,688 8,464

Intangible assets 7,371 7,737

Deferred tax assets 26,398 20,552

Other receivables 2,902 7,626

Available-for-sale financial assets 630 464

806,974 773,069

Current assets

Inventories 240,436 175,361

Trade receivables 64,027 52,354

Other receivables 5,249 8,702

Derivative financial instruments 10 40

Cash and cash equivalent 40,019 165,555

349,741 402,012

Assets held for sale - 39,391

Total assets 1,156,715 1,214,472

EQUITY AND LIABILITIES

Equity attributable to owners of the parent

Share capital 80 80

Share issue 278 91

Share premium 8,086 8,086

Hedge reserve - 7,494

Other reserves 449,532 433,012

Retained earnings (151,129) (80,068)

306,847 368,695

Non-controlling interest in equity 15,733 16,895

Total equity 322,580 385,590

Non-current liabilities

Borrowings 467,161 437,623

Advance payments 235,569 225,068

Trade payables - 17

Provisions 6,036 3,935

708,766 666,643

Current liabilities

Borrowings 28,515 42,934

Advance payments 11,684 34,800

Trade payables 33,677 39,408

Other payables 51,478 43,820

Derivative financial instruments 15 1,277

125,369 162,239

Total liabilities 834,135 828,882

Total equity and liabilities 1,156,715 1,214,472




CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

A. Share capital
B. Share issue
C. Share premium
D. Hedge reserve
E. Invested unrestricted equity
F. Other reserves
G. Retained earnings
H. Total
I. Non-controlling interest
J. Total equity

(all amounts in EUR '000)

A B C D E F G H I J
--------------------------------------------------------------------------------
1 Jan 10 11, 382,
80 - 8,086 16,567 401,248 16,200 (71,368) 370,813 784 597

Profit (loss)
for the   (7,
period - - - - - - (8,699) (8,699) 965 734)

Other
comprehensive
income

- Cash flow (2, (11,
hedges - - - (9,073) - - - (9,073) 268) 341)
-------------------------------------------------------------------
Total
comprehensive
income for (1, (19,
the period - - - (9,073) - - (8,699) (17,772) 303) 075)

Transactions
with owners

Stock options - 91 - - 364 - - 455 - 455

Perpetual 4, 24,
capital loan - - - - - 19,926 - 19,926 982 908

Incentive
arrangement
for
Executive 1, (5,
Management - - - - - (7,142) - (7,142) 432 710)

Employee
share
option scheme

- value of
employee 2,
services - - - - - 2,415 - 2,415 - 415
-------------------------------------------------------------------
Total
contribution
by and
distribution 6, 22,
to owners - 91 - - 364 15,199 - 15,654 414 068

Total
transactions
with 6, 22,
owners - 91 - - 364 15,199 - 15,654 414 068
-------------------------------------------------------------------
31 Dec 10 16, 385,
80 91 8,086 7,494 401,612 31,399 (80,067) 368,695 895 590
-------------------------------------------------------------------
1 Jan 11 16, 385,
80 91 8,086 7,494 401,612 31,399 (80,067) 368,695 895 590

Profit (loss)
for the 3, (5,
period - - - - - - (8,263) (8,263) 047 216)

Other
comprehensive
income

- Cash flow (1, (9,
hedges - - - (7,869) - - - (7,869) 499) 368)
-------------------------------------------------------------------
Total
comprehensive
income for 1, (14,
the period - - - (7,869) - - (8,263) (16,132) 548 584)

Transactions
with owners

Stock options - 187 - - 658 - - 845 - 845

Conversion of
senior
unsecured
convertible
bonds due 1,
2015 - - - - 1,800 - - 1,800 - 800

Perpetual (2,
capital loan - - - - - - (1,891) (1,891) (360) 251)

Acquisition (2, (61,
of subsidiary - - - 375 - 997 (60,908) (59,536) 350) 886)

Incentive
arrangement
for
Executive
Management - - - - - 94 - 94 - 94

Senior
unsecured
convertible
bonds due
2015, equity 9,
component - - - - - 9,018 - 9,018 - 018

Employee
share
option scheme

- value of
employee 3,
services - - - - - 3,954 - 3,954 - 954
-------------------------------------------------------------------
Total
contribution
by and
distribution (2, (48,
to owners - 187 - 375 2,458 14,063 (62,799) (45,716) 710) 426)

Total
transactions (2, (48,
with owners - 187 - 375 2,458 14,063 (62,799) (45,716) 710) 426)
-------------------------------------------------------------------
31 Dec 11 15, 322,
80 278 8,086 - 404,070 45,462 (151,129) 306,847 733 580
-------------------------------------------------------------------



CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited Audited Unaudited Audited
three three twelve twelve
months to months to months to months to

(all amounts in EUR '000) 31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
----------------------------------------
Cash flows from operating activities

Profit (loss) for the period 3,728 (884) (5,216) (7,734)

Adjustments for

Tax 161 7,166 (1,748) 5,012

Depreciation and amortization 12,157 13,758 46,641 51,949

Other non-cash income and expenses (8,171) (3,976) (34,987) (8,340)

Interest income (236) (81) (1,197) (3,477)

Fair value gains on financial assets at
fair value
through profit or loss (193) (4,068) (520) (24,348)

Interest expense 11,279 8,125 39,060 31,655
----------------------------------------
18,725 20,040 42,033 44,717

Change in working capital

Decrease(+)/increase(-) in other
receivables (16,763) (20,607) (2,380) (40,381)

Decrease (+)/increase (-) in inventories (15,398) (14,972) (65,075) (65,850)

Decrease(-)/increase(+) in trade and
other payables (8,429) 32,888 (403) 47,141
----------------------------------------
Change in working capital (40,590) (2,691) (67,858) (59,090)
----------------------------------------
(21,865) 17,349 (25,825) (14,373)

Interest and other finance cost paid (10,579) (9,849) (24,666) (26,213)

Interest and other finance income 274 (3,438) 1,329 49,382

Income taxes paid (15) - (15) -
----------------------------------------
Net cash generated (used) in operating
activities (32,185) 4,062 (49,177) 8,796

Cash flows from investing activities

Acquisition of subsidiary, net of cash
acquired (398) - (61,885) -

Purchases of property, plant and
equipment (21,511) (23,048) (78,833) (114,947)

Purchases of biological assets (18) - (82) (7)

Purchases of intangible assets (54) (427) (229) (704)

Proceeds from sale of property, plant
and equipment - - 19,995 -

Proceeds from sale of biological assets - 13 257 89

Proceeds from sale of intangible assets - - 5 -

Proceeds from government grant
related to intangible assets - 302 - 302

Purchases of financial assets at fair
value
through profit or loss - - (12,010) -

Purchases of available-for-sale
financial assets - (463) (167) (463)

Proceeds from sale of

financial assets at fair value through
profit or loss - - 12,022 -
----------------------------------------
Net cash generated (used) in investing
activities (21,981) (23,623) (120,927) (115,730)

Cash flows from financing activities

Realised stock options 278 90 845 454

Related party investment in Talvivaara
shares - (5,713) -  (5,713)

Proceeds from interest-bearing
liabilities 59,226 235,973 70,242 292,512

Perpetual capital loan - - (3,042) 24,875

Proceeds from advance payments 7,381 - 14,381 263,419

Payment of interest-bearing liabilities (11,255) (51,210) (37,858) (314,935)
----------------------------------------
Net cash generated (used) in financing
activities 55,630 179,140 44,568 260,612

Net increase (decrease) in cash and cash
equivalents 1,464 159,579 (125,536) 153,678

Cash and cash equivalents at beginning
of the period 38,555 5,976 165,555 11,877
----------------------------------------
Cash and cash equivalents at end of the
period 40,019 165,555 40,019 165,555
----------------------------------------



NOTES

1. Basis of preparation

This year-end report has been prepared in compliance with IAS 34.

2. Property, plant and equipment

Machinery Construction Land Other
and in and tangible
(all amounts in EUR '000) equipment progress buildings assets Total
--------------------------------------------------
Gross carrying amount at 1 Jan
11 336,598 21,036 257,613 206,227 821,474

Additions 1,389 78,314 126 4 79,833

Disposals (7) - (66) - (73)

Transfer to assets held for
sale - - - 50 50

Transfers 23,265 (58,006) 16,248 18,515 22
--------------------------------------------------------------------------------
Gross carrying amount at 31
Dec 11 361,245 41,344 273,921 224,796 901,306
--------------------------------------------------
Accumulated depreciation and
impairment losses at 1 Jan 11 39,794 - 21,150 32,304 93,248

Disposals (1) - - - (1)

Depreciation for the period 26,998 - 11,494 7,582 46,074
--------------------------------------------------------------------------------
Accumulated depreciation and
impairment losses at 31 Dec 11 66,791 - 32,644 39,886 139,321
--------------------------------------------------
Carrying amount at 1 Jan 11 296,804 21,036 236,463 173,923 728,226
--------------------------------------------------
Carrying amount at 31 Dec 11 294,454 41,344 241,277 184,910 761,985
--------------------------------------------------



3. Trade receivables

(all amounts in EUR '000)

31 Dec 11 31 Dec 10
--------------------
Nickel-Cobalt sulphide 55,258 50,437

Zinc sulphide 8,769 1,917
--------------------
Total trade receivables 64,027 52,354
--------------------



4. Inventories

(all amounts in EUR '000)

31 Dec 11 31 Dec 10
--------------------
Raw materials and consumables 14,016 8,668

Work in progress 213,629 154,632

Finished products 12,791 12,061
--------------------
Total inventories 240,436 175,361
--------------------







5. Borrowings

(all amounts in EUR '000)

Non-current 31 Dec 11 31 Dec 10
--------------------
Capital loans 1,405 1,405

Investment and Working Capital loan 57,863 57,324

Revolving Credit Facility 49,110 -

Senior Unsecured Convertible Bonds due 2015 217,138 219,426

Senior Unsecured Convertible Bonds due 2013 80,796 78,086

Finance lease liabilities 37,444 53,018

Other 23,405 28,364
--------------------
467,161 437,623
--------------------

Current

Investment and Working Capital loan 1,430 -

Commercial papers 8,481 -

Railway Term Loan Facility - 18,527

Finance lease liabilities 18,604 20,211

Interest Subsidy Loans - 4,196
--------------------
28,515 42,934
--------------------
--------------------
Total borrowings 495,676 480,557
--------------------




6. Advance payments

(all amounts in EUR '000)

Non-current 31 Dec 11 31 Dec 10
--------------------
Deferred zinc sales revenue 221,187 225,068

Deferred uranium sales revenue 14,382 -
--------------------
235,569 225,068
--------------------
Current

Deferred zinc sales revenue 11,684 14,800

Advance payment on railway - 20,000
--------------------
11,684 34,800
--------------------

--------------------
Total advance payments 247,253 259,868
--------------------



7. Changes in the number of shares issued

Number of shares
-----------------
31 Dec 10 245,316,718

Stock options 2007A and 2007B 249,349

Conversion of senior unsecured convertible
bonds due 2015 215,736
-----------------
31 Dec 11 245,781,803
-----------------



8. Contingencies and commitments

(all amounts in EUR '000)

The future aggregate minimum lease payments
under non-cancellable operating leases

31 Dec 11 31 Dec 10
--------------------
Not later than 1 year 1,919 1,175

Later than 1 year and not later than 5 years 929 1,993

Later than 5 years 37 11
--------------------
2,885 3,179



Capital commitments

At 31 December 2011, the Group had capital commitments amounting to EUR 14.5
million principally relating to the completion of the Talvivaara mine, improving
the reliability and expansion of production capacity. These commitments are for
the acquisition of new property, plant and equipment.



Talvivaara Mining Company Plc

Key financial figures of the Three Three Twelve Twelve
Group months to months to months to months to

31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
----------------------------------------
Net sales EUR '000 66,492 60,218 231,226 152,163

Operating profit (loss) EUR '000 14,932 14,326 30,899 25,456

Operating profit (loss)
percentage 22.5 % 23.8 % 13.4 % 16.7 %

Profit (loss) before tax EUR '000 3,889 6,282 (6,964) (2,722)

Profit (loss) for the period EUR '000 3,728 (884) (5,216) (7,734)

Return on equity 1.2 % -0.2 % -1.5 % -2.0 %

Equity-to-assets ratio 27.9 % 31.7 % 27.9 % 31.7 %

Net interest-bearing debt EUR '000 455,657 315,002 455,657 315,002

Debt-to-equity ratio 141.3 % 81.7 % 141.3 % 81.7 %

Return on investment 1.9 % 0.9 % 4.0 % 2.8 %

Capital expenditure EUR '000 21,583 23,475 79,144 115,658

Research & development
expenditure EUR '000 - 365 - 365

Property, plant and equipment EUR '000 761,985 728,226 761,985 728,226

Derivative financial
instruments EUR '000 (5) (1,237) (5) (1,237)

Borrowings EUR '000 495,676 480,557 495,676 480,557

Cash and cash equivalents at
the end of the period EUR '000 40,019 165,555 40,019 165,555




Share-related key
figures

Three Three Twelve Twelve
months to months to months to months to
31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
------------------------------------------------
Earnings per share EUR 0.01 (0.01) (0.04) (0.04)

Equity per share EUR 1.25 1.50 1.25 1.50

Development of share
price at
London Stock Exchange

Average trading
price(1) EUR 2.57 6.27 4.22 4.89

GBP 2.20 5.39 3.66 4.20

Lowest trading price(1) EUR 2.28 5.70 2.25 3.99

GBP 1.95 4.90 1.95 3.42

Highest trading
price(1) EUR 2.98 7.10 7.17 7.11

GBP 2.55 6.10 6.22 6.10

Trading price at the
end
of the period(2) EUR 2.39 6.92 2.39 6.92

GBP 2.00 5.96 2.00 5.96

Change during the
period -20.6 % 21.1 % -66.4 % 54.2 %

Price-earnings ratio 463.2 neg. neg. neg.

Market capitalization
at the end
of the period(3) EUR '000 588,487 1,697,196 588,487 1,697,196

GBP '000 491,564 1,460,861 491,564 1,460,861

Development in trading
volume

1000
Trading volume shares 25,743 16,728 67,799 93,802

In relation to weighted
average
number of shares 10.5 % 6.8 % 27.6 % 38.2 %

Development of share
price at
OMX Helsinki

Average trading price EUR 2.55 6.35 4.33 5.18

Lowest trading price EUR 2.27 5.65 2.27 3.99

Highest trading price EUR 2.98 7.18 7.34 7.18

Trading price at the
end
of the period EUR 2.49 7.07 2.49 7.07

Change during the
period -16.2 % 24.5 % -64.8 % 63.3 %

Price-earnings ratio 459.3 neg. neg. neg.

Market capitalization
at the end
of the period EUR '000 612,488 1,734,389 612,488 1,734,389

Development in trading
volume

1000
Trading volume shares 73,918 42,665 190,901 140,115

In relation to weighted
average
number of shares   30.1 % 17.4 % 77.7 % 57.1 %

Adjusted average number
of shares   245,601,204 245,241,660 245,601,204 245,241,660

Fully diluted average
number
of shares   244,497,204 244,137,660 244,497,204 244,137,660

Number of shares at the
end of
the period   245,781,803 245,316,718 245,781,803 245,316,718


(1)) Trading price is calculated on the average of EUR/GBP exchange rates
published by the European Central Bank during the period.
(2)) Trading price is calculated on the EUR/GBP exchange rate published by the
European Central Bank at the end of the period.
(3)) Market capitalization is calculated on the EUR/GBP exchange rate published
by the European Central Bank at the end of the period.



Employee-related key figures

Three Three Twelve Twelve
months to months to months to months to
31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
----------------------------------------
Wages and salaries EUR '000 5,385 4,443 21,574 16,652

Average number of employees 451 381 445 362

Number of employees at the end
of the period 461 389 461 389




Other figures

Three Three Twelve Twelve
months to months to months to months to
31 Dec 11 31 Dec 10 31 Dec 11 31 Dec 10
----------------------------------------
Share options outstanding at the end
of the period 6,501,151 5,950,822 6,501,151 5,950,822

Number of shares to be issued against
the outstanding share options 6,501,151 5,950,822 6,501,151 5,950,822

Rights to vote of shares to be issued
against the outstanding share options 2.6 % 2.4 % 2.6 % 2.4 %



Talvivaara Mining Company Plc

Key financial figures of the Group

Return on equity Profit (loss) for the period
---------------------------------------
(Total equity at the beginning of
period + Total equity at the end of
period)/2


Equity-to-assets ratio Total equity
---------------------------------------
Total assets


Interest-bearing debt - Cash and cash
Net interest-bearing debt equivalent


Debt-to-equity ratio Net interest-bearing debt
---------------------------------------
Total equity


Profit (loss) for the period + Finance
Return on investment cost
---------------------------------------
(Total equity at the beginning of
period + Total equity at the end of
period)/2 + (Borrowings at the
beginning of period + Borrowings at
the end of period)/2


Share-related key figures


Profit (loss) attributable to equity
Earnings per share holders of the Company
---------------------------------------
Adjusted average number of shares


Equity attributable to equity holders
Equity per share of the Company
---------------------------------------
Adjusted average number of shares


Price-earnings ratio Trading price at the end of the period
---------------------------------------
Earnings per share


Number of shares at the end of the
Market capitalization at the end of the period * trading price at the end of
period the period







Talvivaara annual results review for year ended 31 December 2011:
http://hugin.info/136227/R/1586406/497264.pdf




This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.

Source: Talvivaaran Kaivososakeyhtiö Oyj via Thomson Reuters ONE

[HUG#1586406]


Unternehmen: Talvivaaran Kaivososakeyhtiö Oyj - ISIN: FI0009014716