* Trafigura takes 15.5 pct stake, part of 250 mln euro deal
* Mine returned to profit in Q4 after years of losses
* Mine been seeking new investors
(Adds detail, background)
By Jussi Rosendahl
HELSINKI, Feb 10 Commodities trader Trafigura
said it will take a 15.5 percent stake in Finland's Terrafame
nickel and zinc mine as part of a 250 million euro ($266
million) deal, which will help the mine ramp up production.
The mine in northern Finland has been under government
control since 2015 following years of losses and production
problems but returned to profit in the final quarter of last
year, helped by a rebound in metals prices. It has been looking
for new investors for some time.
Trafigura will acquire the stake through its Galena fund and
will also finance a new loan as part of the deal.
"The investment ... will provide the working capital needed
to enable the Terrafame mine to reach its potential to become a
world-class mine ... Looking forward, the demand side for nickel
looks robust," Trafigura Chief Executive Jeremy Weir told a news
conference on Friday.
As part of the arrangement, Trafigura agreed to buy all
nickel deliveries and 80 percent of the zinc deliveries for
seven years, a deal worth around 3 billion euros, Terrafame
The mine produced 22,575 tonnes of zinc last year and 9,554
tonnes of nickel.
Global zinc consumption is estimated at 14.5 million tonnes
this year and nickel at around two million tonnes.
The government took over the mine in 2015, and set up a
company called Terrafame to build it up after production
problems, environmental damage and weak nickel prices pushed
former owner Talvivaara into a debt restructuring in
The government has so far injected about 500 million euros
in the site, seeking to protect jobs and the environment in the
rural Kainuu region. Closing the mine would have cost an
additional 300-400 million euros, the government estimated.
"According to our estimate, Terrafame does not need
additional funding from the state after this. The financing
arrangement will strengthen the economy," economy minister Mika
Terrafame returned to profit in the fourth quarter on the
back of growing production volumes and rising metal prices. Zinc
prices at around $2,900 a tonne are more than double the levels
seen in January 2015 and nickel is up roughly 25 percent over
the same period to around $10,660 a tonne.
In the fourth quarter of last year, Terrafame's nickel
output surged 64 percent from the previous quarter to 3,875
tonnes and its zinc production rose 37 percent to 8,680 tonnes.
Talvivaara, which developed the mine, had aimed to make it
Europe's biggest nickel mine by pioneering an extraction process
But repeated production problems were compounded when the
mine leaked waste water in 2012, causing one of Finland's most
serious environmental disasters.
($1 = 0.9394 euros)
(Additional reporting by Pratima Desai in London; Editing by
Susan Thomas and Susan Fenton)