Talvivaara has entered into a currency option programme comprising USD options for three months from October 2012 through to December 2012. Monthly obligation is USD 5.0 million and protection is USD 5.0 million. The collar ranges from 1.1500 to 1.3750.

Production review

Metals recovery

Talvivaara produced 4,030t of nickel (Q3 2011: 3,153t) and 7,184t of zinc (Q3 2011: 7,286t) in the third quarter of 2012, which represents a clear improvement over 3,194t nickel and 6,686t zinc in the previous quarter. During the first nine months of 2012, the Company produced 10,598t of nickel (Q1-Q3 2011: 11,319t) and 21,760t of zinc (Q1-Q3 2011: 21,291t).

The Company continued to achieve stable operation of the metals recovery plant for most of the third quarter. Deviations from stable operation were caused by two brief power outage -related stoppages in late July and an unscheduled downtime of 8 days in late September due to problems in re-starting hydrogen sulphide production following a planned 4-hour stoppage for piping installations to enable de-watering of the open-pit mine. Leach solution flow rate through the plant improved throughout the quarter and reached an average of 1,447 m³/h in September excluding the unscheduled stoppage.

Bioheapleaching and water management

Continued historically heavy rainfall throughout the third quarter has prolonged water balance issues at the Sotkamo mine. In the first nine months of the year, the total rainfall in the area amounted to 710mm, which exceeds the long-term average of 489mm by 45%. During most of the spring and summer, rainfall in the area exceeded the long-term average by 50-100%. The excess water in circulation has continued to dilute metal grades in leach solution. During the third quarter, the average nickel grade in solution pumped to the metals recovery plant was 1.5-1.6 g/l compared to slightly below 2 g/l at the start of the year.

Talvivaara is taking active measures to moderate the water balance and to enhance leaching performance. The construction of two reverse osmosis plants for water purification was nearly completed during the third quarter. The plants are expected to improve the water balance by enabling the Company to increase the recycling of purified process waters and to reduce raw water intake. A third reverse osmosis unit will be installed next spring.

The unusually high water content in the heaps has also been found to impact leaching by reducing the efficiency of aeration. Measures to improve aeration are being taken and include accelerated reclaiming of the existing primary heaps as well as improving the overall water balance, which over time enables reduction of the amount of water in circulation. Development work is also on-going to improve the design of future primary heaps for optimal aeration efficiency.

As a result of the heavy rains, some 1.7Mm³ of excess water has accumulated at the mine site and been temporarily stored in the open pit. De-watering of the pit started in September following the completion of an expansion of the gypsum pond, and is expected to take 2-3 months.

Ore production

Because water in the open pit prevented mining in accordance with original plans in the third quarter, the mining department sourced ore from a more distant location at the Southern end of the Kuusilampi pit. Despite this, a record level of 1.5Mt of ore was mined and subsequently crushed in July and equipment availabilities in materials handling approached the required steady state levels. In total, 2.6Mt of ore was mined and stacked in the third quarter (Q3 2011: 3.0Mt). Waste mining during the period amounted to 1.5Mt (Q3 2011: 4.5Mt).

As previously announced, Talvivaara has decided to discontinue mining and crushing operations for a period of 3-4 months from the beginning of September due to the prevailing water balance situation. Discontinuing mining and crushing operations is carried out without lay-offs or redundancies. The temporary production scheme alteration is proceeding as planned.

Production key figures

Sustainable development, safety and permitting

Safety

A safe working environment and safe working practices are top priorities for Talvivaara. Following the regrettable fatality at the site in March, the Company has implemented a number of preventative safety-related improvements to its processes and operational procedures. There have been no accidents leading to employee absence at the metals recovery plant during the second and third quarters of 2012. Talvivaara continues its efforts to improve occupational safety and to enhance the Company's safety culture.

At the end of the third quarter, the injury frequency among the Talvivaara personnel was 13.2 lost time injuries/million working hours on a rolling 12 month basis (30 September 2011: 13.9 lost time injuries/million working hours).

Environment

Talvivaara continues to focus on minimising the environmental impact of its operations. In the second quarter the Company announced investments in environmental technology amounting to more than EUR 13 million, which are currently being implemented. The new technologies will further improve the quality of effluent waters, reduce odour emissions and limit dust emissions.

Hydrogen sulphide (odour) emissions have been largely addressed. Odour complaints from nearby residents have reduced substantially, and there were no complaints in September.

Dust emissions have been addressed through the commissioning in July of a new dust removal system at the screening hall. In line with Talvivaara's commitment to continuous improvement, several technological solutions are being studied to further reduce dust emissions.

Talvivaara has continued to make significant progress in reducing its sulphate and sodium discharges into nearby lakes as a result of process improvements and increased water recycling. In order to further reduce discharges into water, Talvivaara has invested in a reverse osmosis-based water treatment system, which is expected to be commissioned before year-end 2012.

In order to improve timely and transparent communication on environmental matters with the neighbouring communities and other interested stakeholders, Talvivaara launched a specific website for this purpose in January 2012. The Finnish language website, www.paikanpaalla.fi, reviews environmental data and events in blog format and aims to provide region-specific information in an easily understandable and concise form.

Permitting

In January, Talvivaara received a positive opinion on its uranium recovery process from the European Commission under the Euratom Treaty. In its opinion, the European Commission considered that uranium recovery at the Talvivaara mine complies with the goals set by the Euratom Treaty and may improve the supply security of nuclear fuel in the European Union. In March, Talvivaara also received a licence from the Finnish Government to extract uranium as a by-product from its existing operations pursuant to the Nuclear Energy Act. The permit is valid throughout the life of the mine, however, no longer than until the end of 2054.

In April, Talvivaara was informed by the Northern Finland Regional State Administrative Agency that the Company's environmental permit for uranium extraction and the general update of Talvivaara mine's environmental permit are to be processed together. Decisions on the permits were previously expected by year-end 2012, but the permitting authorities have informed the Company of a delay in processing the applications. Permit decisions are now expected to be postponed until late January or February 2013. Talvivaara continues to operate under the Company's existing environmental permit until the renewal process is completed and does not anticipate the delay having any material impact on its production output or financial results. Talvivaara aims to start uranium recovery as soon as all the necessary permits have been obtained.

Following completion of the Environmental Impact Assessment ("EIA") programme, the EIA process for the potential expansion of the Talvivaara mine was initiated during the first quarter of 2012. The EIA covers options to expand production capacity up to 100,000t of nickel per annum, and also the option to refine nickel sulphide into LME-quality nickel metal. Talvivaara expects to submit the environmental permit application for production expansion in 2013 following completion of the EIA process.

Business development

Uranium production

Talvivaara is preparing for the recovery of uranium as a by-product of the Company's existing operations. Uranium occurs naturally in small concentrations in the Talvivaara area and leaches into the process solution along with Talvivaara's main products. Annual uranium production is estimated at 350tU (ca. 770,000 pounds), corresponding to approximately 410t (900,000 pounds) of yellow cake (UO₄). Talvivaara's entire uranium production will be sold under a long-term agreement to Cameco.

Following receipt of the construction permit in August 2011, Talvivaara commenced construction of the uranium recovery facility, which will be completed during the current year. The permitting process for uranium production is on-going and the start of uranium production is further subject to, among others, environmental permit approval and chemical authorisation. The decision on the environmental permit is expected in late January or February 2013 in connection with the general update of the mine's environmental permit.

Production expansion - Operation Overlord

Conceptual studies relating to production expansion beyond 50,000tpa of nickel continued during the quarter, with a particular emphasis on permitting and the on-going Environmental Impact Assessment. The scoping studies are 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.

No investment decisions relating to the production expansion have yet been taken, with such a decision expected at the earliest in 2014.

Energy strategy

Talvivaara's energy strategy is focused on building an environmentally sound portfolio of low-cost capacity allowing the Company to be energy self-sufficient in the longer term. Talvivaara's electricity need is currently approximately 45MW, and is expected to increase significantly if the Company proceeds with the planned capacity expansion and further refining of nickel into LME-quality metal.

Talvivaara increased its capacity share in the Fennovoima nuclear project in Finland from approximately 10MW to approximately 60MW during the first quarter of 2012. The Company is also studying, amongst others, on-site windpower production, bioenergy and utilization of energy generated in the production process.

Annual General Meeting

Talvivaara's Annual General Meeting was held on 26 April 2012 in Sotkamo, Finland. The resolutions of the AGM included:

• that no dividend be paid for the financial year 2011;
• that the annual fee payable to the members of the Board for the term until the close of the Annual General Meeting in 2013 be as follows: Executive Chairman of the Board EUR 280,000, Deputy Chairman (Senior Independent Director) EUR 69,000, Chairmen of the Board Committees EUR 69,000 and other Non-executive Directors EUR 48,000;
• that the number of Board members be eight and that Mr. Edward Haslam, Ms. Eileen Carr, Mr. D. Graham Titcombe, Mr. Tapani Järvinen and Mr. Pekka Perä be re-elected as Board members and Mr. Stuart Murray, Mr. Michael Rawlinson and Ms. Kirsi Sormunen be appointed as new members of the Board;
• 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 2012;
• 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 authorisation is valid until 25 October 2013 and replaces the authorisation to repurchase 10,000,000 shares granted by the Annual General Meeting of 28 April 2011; and
• that the Board be authorised to decide on the conveyance, in one or several transactions, of a maximum of 10,000,000 of the Company's own shares.The shares may be conveyed to the Company's shareholders in proportion to their present holding or by waiving the pre-emptive subscription rights of the shareholders and the authorisation is valid until 25 April 2014.

Risk management and principal risks

In line with current corporate governance guidelines on risk management, Talvivaara carries out an on-going 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.

Talvivaara's operations are affected by various 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 counterparties, currency exchange ratios, management and control systems, historical losses and uncertainties about the future profitability of Talvivaara, 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 on-going 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 rates of 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, once it has been fully ramped up, profitably also 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 and management

The number of personnel employed by the Group on 30 September 2012 was 551 (Q3 2011: 446).

Wages and salaries paid during the three months to 30 September 2012 totalled EUR 4.8 million (Q3 2011: EUR 4.9 million). Wages and salaries paid during the nine months to 30 September 2012 totalled EUR 17.1 million (Q1-Q3 2011: EUR 16.2 million).

Harri Natunen was appointed as CEO in April 2012. Following his appointment, Natunen consolidated the Executive Committee, which now continues in the following composition:

Harri Natunen, Chief Executive Officer
Saila Miettinen-Lähde, Deputy CEO / Chief Financial Officer
Pekka Erkinheimo, Chief Commercial Officer
Kari Vyhtinen, Chief Investment Officer
Eeva Ruokonen, Chief Sustainability Officer
Maija Kaski, Chief Human Resources Officer
Mikko Korteniemi, Chief Production Officer (Bioheapleaching and Metals Recovery)
Jari Voutilainen Chief Mining Officer (Mining and Materials Handling).

Shares and shareholders

The number of shares issued and outstanding and registered on the Euroclear Shareholder Register as of 30 September 2012 was 272,309,640. Including the effect of the EUR 85 million convertible bond of 14 May 2008, the EUR 225 million convertible bond of 16 December 2010, the Option Scheme of 2007 and share subscriptions registered during 2012, the authorised full number of shares of the Company amounted to 315,785,376.

The share subscription period for stock options 2007A was between 1 April 2010 and 31 March 2012. By the end of the subscription period a total of 2,279,373 Talvivaara Mining Company's new shares were subscribed for under the stock option rights 2007A. A total of 53,727 stock option rights 2007A remained unexercised following the end of the subscription period and expired.

The share subscription period for stock options 2007B is between 1 April 2011 and 31 March 2013. No new shares of Talvivaara were subscribed for under the stock option rights 2007B in Q1-Q3 2012 and a total of 2,284,337 stock option rights 2007B remain unexercised. A total of 2,333,000 option rights 2007C have been issued to 250 key employees and the subscription period for stock options 2007C is between 1 April 2012 and 31 March 2014. A total of 2,333,000 stock options 2007C remain unexercised.

In February 2012, Talvivaara completed an issue of 24,589,050 new shares. An Extraordinary General Meeting of Talvivaara Mining Company Plc. resolved on 12 March 2012 to approve the proposal by the Board of Directors on the share issue in deviation from the shareholders' pre-emptive subscription rights. The new shares were registered with the Finnish Trade Register on 13 March 2012.

In addition, the Board of Directors has resolved, on the basis of the authorisation granted by the Extraordinary General Meeting held on 12 March 2012, to issue special rights entitling to subscribe up to 184,428 new shares, in order to carry out an adjustment to the conversion price, as a result of the equity placing, in accordance with the terms and conditions of the convertible bonds due 2013. Accordingly the maximum number of ordinary shares that may be issued upon conversion is 11,677,591 shares. Due to an adjustment to the conversion price of the convertible bonds due 2015, as a result of the placing, the maximum number of ordinary shares that may be issued upon conversion is 27,180,708 shares.

As at 30 September 2012, the shareholders who held more than 5% of the shares and votes of Talvivaara were Pekka Perä (20.8%), Solidium Oy (8.9%), Varma Mutual Pension Insurance Company (8.7%) and Ilmarinen Mutual Pension Insurance Company (6.2%).

Events after the review period

Commencement of copper production

Talvivaara has commenced production of saleable quantities of copper sulphide in October 2012. For the time being, the product is being sold under spot arrangements.

Leakage at the gypsum pond

Talvivaara located on Wednesday 7 November 2012 the gypsum pond leakage detected on Sunday morning 4 November 2012. The leakage was detected near the center of the approximately 60-hectare pond. The process of plugging was initiated following the detection of the leakage, and at the time of this announcement we have managed to materially reduce the leakage.

As a precaution, Talvivaara's metals recovery plant was temporarily suspended following detection of the leakage. Preparations for the re-start of the metals recovery plant are being carried out, and the Company anticipates starting the metals production by this weekend.During the shutdown, Talvivaara reconfigured the process flows enabling the isolation of the damaged gypsum pond from the solution circulation. In addition, the new reverse osmosis plant connections were completed. The re-start of production at the plant will not cause additional strain on the damaged gypsum pond, or impact the measures or timing of repairing the pond.

Short-term outlook

Operational outlook

As previously announced, Talvivaara has decided to discontinue mining and crushing operations for a period of 3-4 months from the beginning of September due to the prevailing water balance situation. The temporary production scheme alteration is proceeding as planned and, as a result, Talvivaara expects to realize operating cost savings of approximately EUR 20 million during the fourth quarter of 2012 and first quarter of 2013. The altered production scheme is not anticipated to negatively impact metals production during the remainder of 2012. Because of the large nickel inventory already under leaching in the heaps and the long leaching times that in total extend over several years, the impact on 2013 production is also anticipated to be minor.

As a result of the ongoing efforts to reduce the impact of excess water on leaching performance, Talvivaara expects to see moderate improvement in the leach solution grades during the remainder of 2012. However, a complete reversal of the impact is unlikely to be achieved before the year-end. As a result, Talvivaara anticipates its Q4 2012 production to improve over the level attained in Q3 2012, but the Company considers it unlikely that its full year 2012 production target of approximately 17,000t of nickel will be achieved.

Talvivaara expects to release its 2013 full year production guidance in connection with the Company's Capital Markets Day, which will be held in London on 20 November 2012. Further details of the event and its video cast will be available on the Company's web site approximately one week prior to the event.

Market outlook

The nickel price remained at a depressed level through most of the third quarter, and the August average LME nickel price of approximately USD 15,700/t was the lowest monthly average since mid-2009. While the nickel price somewhat recovered towards the end of the quarter, short-term visibility remains low and volatility is likely to remain elevated.

Talvivaara foresees the nickel industry fundamentals to support favourable nickel price development in the longer term, driven by increasing marginal cost of production across the nickel industry and lack of new committed nickel projects to replace depleting supply after the next few years. Talvivaara continues to see the longer term nickel price support level at around USD 20,000/t.

8 November 2012

Talvivaara Mining Company Plc.
Board of Directors

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

NOTES

1. Basis of preparation

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

The interim financial information set out herein has been prepared on the same basis and using the same accounting policies as were applied in drawing up the Group's statutory financial statements for the year ended 31 December 2011.

Capital commitments

At 30 September 2012, the Group had capital commitments amounting to EUR 22.8 million (31 December 2011: 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.

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.