Joni LukkaroinenCEO25 October 2017

»Interim report Q3 2017

Further processors

Manufacturers

Nickel Zinc

Cobalt

»Demand for metals is increasing in modern society

Energy productionand storage

RecyclabilitySustainability

»Q3 in brief

Net sales Q1–Q3 exceeded EUR 150 million –profitability improved clearly.

Metals production plant: quarterly production records in nickel and zinc as well as a yearly production record in zinc (Q1–Q3).

Cooperation negotiations to adapt personnel resources were concluded.

Key points

» Markkinahinnat

» Average nickel and zinc prices increased

»Global market price of nickel increased in July–August

In Q3, average price was 10,528 USD/t – 14.1% higher than in Q2.

Compared with 2016 Q3, average price was 2.6% higher.

China’s stainless steel production grew strongly; nickel producers made announcements regarding cuts in mine production.

The decrease of LME’s and SHFE’s combined nickel stocks stopped in Q3 and were at the same level as in Q2, approx. 438,000 tonnes.

Data source: Metal BulletinLME = London Metal ExchangeSHFE = Shanghai Futures Exchange

Day price for nickel on the London Metal Exchange (USD/t)

Day price for nickel on the London Metal Exchange (USD/t), 90 day average

Nickel price development 1 Jan 2016–30 Sept 2017

7,000

8,000

9,000

10,000

11,000

12,000

13,000

01

Jan

20

16

31

Mar

20

16

29

Ju

n 2

01

6

27

Sep

20

16

26

Dec

20

16

26

Mar

20

17

24

Ju

n 2

01

7

22

Sep

20

17

1,000

1,500

2,000

2,500

3,000

3,500

1 J

an 2

01

6

31

Mar

20

16

29

Ju

n 2

01

6

27

Sep

20

16

26

Dec

20

16

26

Mar

20

17

24

Ju

n 2

01

7

22

Sep

20

17

»Global market price of zinc at a good level

Day price for zinc on the London Metal Exchange (USD/t)

Day price for zinc on the London Metal Exchange (USD/t), 90 day average

Zinc price development 1 Jan 2016–30 Sept 2017

Data source: Metal BulletinLME = London Metal ExchangeSHFE = Shanghai Futures Exchange

In Q3, average price was 2,963 USD/t – 14.1% higher than in Q2.

Compared with 2016 Q3, average price was 31.4% higher.

Good price level resulted mainly from the decrease of stocks, which has continued for a long time.

LME’s and SHFE’s combined zinc stock levels continued to decrease in Q3 by approx. 38,000 tonnes and were approx. 318,000 tonnes.

» Ramp-up and stabilisation of operations continued

5,5

06

5,1

76

4,7

87

3,8

75

2,3

70

1,7

54

1,5

55

0

5 000

10 000

15 000

20 000

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

mto

7,1

97

5,3

61

5,0

86

4,8

85

3,0

46

2,1

58

1,4

95

0

5 000

10 000

15 000

20 000

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

BioliuotusBioleaching (t)

»Steady increase in nickel production

13

,19

2

11

,03

8

10

,07

0

11

,75

7

10

,89

4

7,7

61

6,6

30

,0

5,000

10,000

15,000

20,000

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

Kaivostuotanto (t)Ore processing (t) Metals production plant (t)

Q3

20

17

2017: 34,300 t (Q1–Q3)2016: 37,042 t

2017: 17,644 t (Q1–Q3)2016: 11,584 t

2017: 15,469 t (Q1–Q3)2016: 9,554 t

Q3

20

17

Q3

20

17

12

,24

2

11

,20

4

9,7

91

8,6

80

6,3

28

4,0

70

3,4

97

0

10 000

20 000

30 000

40 000

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

MTO

13

,02

7

12

,65

7

10

,38

0

10

,69

7

8,7

20

5,8

73

2,5

78

0

10 000

20 000

30 000

40 000

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

bl

»Yearly record in zinc production

25

,69

7

23

,14

9

20

,23

9

22

,14

4

20

,61

2

14

,76

7

12

,77

6

,

10,000

20,000

30,000

40,000

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

2017: 69,085 t (Q1-Q3)2016: 70,299 t

2017: 36,064 t (Q1–Q3)2016: 27,868 t

2017: 33,237 t (Q1–Q3)2016: 22,575 t

Bioleaching (t)Ore processing (t) Metals production plant (t)

Q3

20

17

Q3

20

17

Q3

20

17

»Unit costs per nickel tonne decreased as predicted

Ore mining and processing volumes were at target level.

Bioleaching performance stayed at a good level.

Construction work of the fourth secondary bioleaching heap continued to increase production capacity.

The autumn maintenance stoppage at the metals production plant in September–October limited production and sales.

» Occupational safety culture developed well

»New record: 131 days without injuries resulting in absence

Lost-time injury frequency = number of injuries per one million person-hours worked. Situation in 30 Sep 2017.

Partners

681employeesTerrafame

685employees

23.3

8.4

3.50

5

10

15

20

25

2015 2016 Liukuva 12 kkRolling 12 months

Lost-time injury frequencyTerrafame’s employees

Target in 2017

< 5.0

» Ympäristöturvallisuus» Sulamisvesien käsittely sujuihyvin luparajojen puitteissa

Vesikuva

» Environmental safety at good level

»Environmental effects are widely monitored

Terrafame monitors the mine’s operations and its effects based on an extensive and detailed environmental monitoring programme agreed with the supervisory authority.

The company also actively collects and analyses additional samples from the mine area and its surrounding environment.

Terrafame keeps close contact with nearby residents, and their observations are taken into consideration.

0

5

10

15

20

25

30

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

Jan

Ap

ril

July

Oct

2010 2011 2012 2013 2014 2015 2016 2017

Environmental observations by neighbours 2010–2017

Other

Water

Dust

Vibration

Noise

Smell

»Approximately half of 2017 sulphate quota unused

Sulphate quota 16,300 t in 2017Discharge pipe 15,000 t/a and old routes 1,300 t/a

Q1–Q3 2017 7,794 t

Q12,306

Q23,012

Q32,4760

.00

1

0.0

34

0.0

44

0.5

55

0.4

48

1,9

88

0.6

93

<0.0

2

<0.0

57 0

.11

2

<0.0

01

43

0

0.31)

mg/l0.31)

mg/l0.51)

mg/l6

mg/l4,000mg/l

4mg/l

101)

µg/l1.5µg/l

3µg/l

0.5mg/l

Cu (mg/l)

Ni (mg/l)

Zn (mg/l)

Mn(mg/l)

Fe (mg/l)

SO4

(mg/l) U

(µg/l) Hg

(µg/l) Cd

(µg/l) Al

(mg/l) Pb2)

(mg/l) Na2)

(mg/l)

Concentrations in the water discharged

1 Jan 2017–30 Sept 2017

Concentrations in relation to permit limits

1) Max. allowed concentration in a single sample2) No permit limits for Pb and Na

26/10/2017

Dokumentin nimi17

» Liikevaihto kehittyi xxx» Terrafame is advancing

towards a profitable business

»Net sales developed positively

63

.9

47

.2

41

.347

.6

21

.2

18

.0

14

.2

0

10

20

30

40

50

60

70

80

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

LiikevaihtoNet sales, M€

Q3

20

17

Q3’s record production volume also evident in sales volumes.

Average global market price of nickel increased by 14.1% compared with Q2.

Average price of zinc also increased by 14.1% compared with Q2.

In Q3, the average exchange rate of the dollar against the euro decreased by 6.6% compared with Q2.

The autumn maintenance stoppage limited production and sales volumes.

2017: 152.4 M€ (Q1–Q3) 2016: 101.0 M€

»EBITDA developing to right direction

WIP = value of work in process

-60

-40

-20

0

20

40

60

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

EBITDA, M€

Q3

20

17

-53

.1

-44

.8

-38

.5

16

.0

-18

.4

47

.6

2017: -3.7 M€ (Q1–Q3)2016: -120.4 M€

-60

-40

-20

0

20

40

60

Q3

20

17

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

EBITDA excl. change in WIP, M€

Q3

20

17

-53

.0

-45

.2

-40

.6

-31

.2

-33

.3

-7.9

2017: -65.4 M€ (Q1–Q3)2016: -170.0 M€

-32

.9

-24

.2

»Investments in the third quarter EUR 28,3 million

0

20

40

60

80

100

20172016 Q1–Q3 2017

Key investments in Q3:

The construction work of the fourth secondary bioleaching heap and a new waste rock area.

The construction of a third hydrogen sulphide production line.

Investments, M€

2016: 84.3 M€

64.169.7

Q1–Q3 2016

26/10/2017

Dokumentin nimi21

» Liikevaihto kehittyi xxx» Talous» Uraanin talteenotto» Terrafame applies for a permit to recover uranium

»Terrafame prepares to recover uranium

Terrafame has decided to apply the government for a permit to recover uranium, in accordance with the Finnish Nuclear Energy Act.

The permit application will be submitted in the weeks to come.

If the government grants the permit, Terrafame estimates that uranium recovery could commence towards the end of 2019.

The uranium recovery plant requires from Terrafame an investment of 10 million euros. Previously 75 million euros have been invested in the plant.

»Natural uranium can be found almost everywhere on Earth

Natural resources must be used efficiently

• Uranium is present in the ore Terrafame is mining, but it is not recovered currently.

• Uranium recovery would be an addition but not a key factor for Terrafame’s business.

In its environmental permit application, Terrafame is applying a permit to produce a maximum of 37,000 tonnes of nickel, 80,000 tonnes of zinc and 250 tonnes of uranium per year.

Very small concentration in the water

• The uranium concentration in the purified water discharged from the mine area was approx. 0.5 μg per litre in 2016.

• The Radiation and Nuclear Safety Authority recommends removing uranium from drinking water if the concentration exceeds 100 μg per litre.

The uranium concentration in normal tap water is approx. 1 μg per litre.

Responsible processing

• Transports will be done in accordance with authority regulations.

• The recovered natural uranium will be transported abroad from Finland forprocessing.

The natural uranium recovered by Terrafamewill be used in energy production.

»Near-term outlook

Ramp-up and stabilisation of operations continues.

Profitability will be systematically improved by focusing on operational cost-efficiency.

We aim to further increase the production and delivery volumes of nickel, zinc and cobalt.

We are studying two alternative options to upgrade the nickel product:

1. NiFe alloy for stainless steel production

2. Nickel and cobalt sulphates for battery applications

www.terrafame.com