Further processing of main products into battery chemicals boosts the value of Terrafame’s products
In 2018, Terrafame reached the production targets set at the time of launching the ramp-up in 2015. The development and improvement of operations continued with the whole staff participating in these efforts. In the autumn, Terrafame’s Board of Directors made the decision to invest in the further processing of nickel-cobalt sulphide into sulphates needed in battery manufacturing for the rapidly growing global electric vehicle industry.
In the summer of 2018, Terrafame achieved its planned target level for nickel and zinc production volumes according to the set timeline. Net sales, EBITDA and efficiency developed as expected, despite the effects that lower metal prices had on performance in the last quarter.
Environmental safety is now at a good and sustainable level, and the metal and sulphate contents of discharge waters for the whole year were well below the limits set in the environmental permit. With the stabilisation of production, process safety has also improved substantially. The target set for occupational safety was not achieved. To our disappointment, the lost-time injury frequency rate was not as good as in the previous year. We have worked very hard on all fronts to strengthen the overall occupational safety culture and the personal accountability related thereto.
Over the course of the year, Terrafame’s personnel came up with many excellent initiatives and ideas on how to improve production efficiency and quality. We are very pleased with this development as it is very important for the continuous improvement of our production. This supports our efforts to build a company that operates in a safe, efficient and sustainable way. I would like to warmly thank our personnel for the past year.
Terrafame is an important part of the Finnish battery value chain
Since the beginning of its operations, Terrafame has worked hard to find possibilities to increase the value of its main product. In October, the Board of Directors made the decision to invest EUR 240 million into a battery chemicals plant. In the near future, the current main product – nickel-cobalt sulphide – will be refined into nickel and cobalt sulphates at a new plant at the current industrial site located in Sotkamo, Finland for use in electric vehicle batteries. Plant capacity will be significant on a global scale.
When the decision to invest was made, the owners of Terrafame – Finnish Minerals Group, Trafigura Group and Sampo Plc. – agreed to an additional financing arrangement for the battery chemicals plant. According to our estimate, the new battery chemicals plant will increase Terrafame's annual net sales and exports by approximately EUR 200 million. This will have a positive effect on the company's EBITDA.
The global demand for electric vehicles and related batteries is growing rapidly and, even according to cautious forecasts, the demand of nickel and cobalt will increase. Terrafame’s mineral resources and expertise are the key assets to success in the current transition to electric vehicles as well as to contributing to the reduction of CO2 emissions in the traffic. With this investment, we are also speeding up building up a battery value chain in Finland and Europe.
Targeting for long-term, profitable business
Terrafame is now speeding up efforts to increase the value of its main product, shifting the focus from mining towards the chemicals and process industry. The company's future business will also be based on large reserves that will extend for several decades. The market prices for metals and the dollar FX rate will of course continue to have a significant impact on Terrafame’s results. Our target is to develop our company so that it can operate safely, efficiently and sustainably in the global market.
Over the past three years, Terrafame has grown into a major exports company that is known around the world as a professional and reliable player. At the same time, the value of the company has significantly increased. Construction of the battery chemicals plant has significant positive effects in Kainuu and Finland as a whole.
Our achievements prove that Terrafame has good possibilities to succeed in the long term. I expect the construction of the battery chemicals plant to run smoothly, on budget and on schedule. And I am confident that the commercial production of battery chemicals will start successfully in 2021.
Chairman of the Board