The top projects in 2018 were the stabilisation of operations and the planning of the battery chemicals plant
Terrafame’s third full year 2018 was already markedly different from the first two years. Alongside the ramp-up of production and the stabilisation of operations, work was increasingly directed towards planning the further processing of the main product.
In the third quarter of 2018, the full production level defined at the time of starting operations was achieved as planned. At this level, our nickel production equals to approximately 30,000 tonnes per year and our zinc production to approximately 64,000 tonnes per year. During the year, we produced 27,377 tonnes of nickel and 61,608 tonnes of zinc. We also continued to produce our by-products – cobalt and copper.
The commercial cooperation with Trafigura, which was launched in 2017, continued well. In accordance with the agreement, Trafigura purchased all of the nickel-cobalt and most of the zinc that we produced during the year. Thanks to close cooperation, we know that more than half of our nickel-cobalt is already being used in the manufacture of batteries for electric vehicles. The most important application of zinc is in the corrosion protection of metals.
Terrafame grew into a EUR 300 million export company
The net sales of Terrafame exceeded the previous year's figure already in the third quarter, and over the year the value of our export grew to EUR 325.8 million (2017: EUR 220 million). Our operating result increased to EUR 3.0 million (2017: EUR -6.2 million).
Despite hedging against metal price changes, the weakening of US-China trade relations had a significant impact on metal prices and Terrafame’s result. Both nickel and zinc prices declined markedly in the second half of the year. The average nickel price in the world market in 2018 was USD 13,122 per tonne (2017: USD 10,411 per tonne) and the average zinc price USD 2,922 per tonne (2017: USD 2,896 per tonne).
During the year, the combined nickel stock levels of the London Metal Exchange and Shanghai Futures Exchange decreased to 190,000 tonnes (2017: 411,000 t) and the combined zinc stock levels to 100,000 tonnes (2017: 250,000 t). In addition, the price of the dollar developed quite favourably for Terrafame.
Towards the production of battery chemicals with proper planning
From the beginning, Terrafame has been studying the opportunities to start the further processing of nickel-cobalt sulphide, which is currently the company's main product. At the same time, climate change has put countries increasingly under pressure to decrease the use of fossil fuels. This, in turn, has resulted in the rapid growth of the global market for electric vehicles. The production of electric car batteries will not be possible without primary metals from mining activities.
In 2018, we continued with the planning of the new battery chemicals plant and, in the second half of the year we made the decisions regarding the main technologies. Our target is to launch the battery chemicals production in the beginning of 2021. Based on our estimation the new plant will increase Terrafame’s net sales by approximately EUR 200 million and significantly improve our EBITDA.
At our industrial site in Sotkamo, Finland we also have a nearly completed uranium recovery plant. Over the course of 2018, the process of obtaining permit from the government for starting uranium recovery progressed more slowly than what was anticipated at the time of submitting the permit application in the autumn of 2017. The decision is expected in 2019.
Investing in local industrial expertise
With the battery chemical plant, recruiting new employees will become increasingly important to us, along with the development of existing personnel. Once finished, the plant will directly employ about 150 people.
To strengthen local industrial expertise, we announced a unique cooperation model with Kajaani University of Applied Sciences in late 2018. Simultaneously, we put out a call for applications for apprenticeship training leading to vocational qualifications in the process industry, which will be organised at our industrial site.
Continuous improvement requires commitment
Continuous improvement of operations remains at the heart of work at Terrafame, and it requires all of our commitment to act in a responsible manner. I find that we have achieved a great deal over the past year, but we too must work more vigorously to reduce carbon footprint. For us, this means, above all else, the commercial launch of modern battery chemicals production by 2021.
We at Terrafame are accustomed to major challenges. I also know that we have high expectations for our partners. That is why, in addition to our personnel, I would like to thank our partner companies and owners, who have joined us in searching new opportunities to develop the company's operations. And I warmly thank our local community for actively exchanging ideas with our experts. Also, I greatly appreciate how many groups have travelled to Sotkamo, Finland to visit our company. I hope that we will have these kinds of opportunities to tell people about our operations and goals in the future as well.