Joni Lukkaroinen, CEO28.7.2017

»Interim report Q2 2017

Further processors

Manufacturers

Nickel Zinc

Cobalt

»Q2 in a nutshell

Primary leaching area taken in full production use

In the secondary leaching area, heap 3 taken in production use

Annual maintenance stoppage of metals production plant at the turn of May and June

Quarterly records in nickel and zinc production

Supreme Administrative Court issued its decision on key environmental permit matters

Main points

27.7.2017 Dokumentin nimi4

» Markkinat

» Nickel price decreased –zinc price at good level

»Nickel price decreased in Q2

Q2 average price was 9,225 USD/t, which was 10.2% lower than in Q1.

Compared with Q2 2016, average price was 4.6% higher.

Indonesia decided to partially lift the export ban of nickel ore and Philippines cancelled their plans to shut down mines due to environmental reasons.

In Q2, combined nickel stock level of LME and SHFE decreased by more than 13,000 tonnes, totalling about 440,000 tonnes.

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

7,000

8,000

9,000

10,000

11,000

12,000

30

.6.2

01

6

1.8

.20

16

2.9

.20

16

4.1

0.2

01

6

5.1

1.2

01

6

7.1

2.2

01

6

8.1

.20

17

9.2

.20

17

13

.3.2

01

7

14

.4.2

01

7

16

.5.2

01

7

17

.6.2

01

7

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

Price development for nickel 30 June 2016–30 July 2017

»Zinc price shows slight decline in Q2

Q2 average price was 2,596 USD/t, which was 6.6% lower than in Q1.

Compared with Q2 2016, average price was 35.3% higher.

Positive price development was driven by decreasing zinc stock levels as well as growing demand for zinc.

In Q2, combined zinc stock level of LME and SHFE decreased by approximately 199,000 tonnes, totalling about 356,000 tonnes.

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

1,000

1,500

2,000

2,500

3,000

3,500

30

.6.2

01

6

1.8

.20

16

2.9

.20

16

4.1

0.2

01

6

5.1

1.2

01

6

7.1

2.2

01

6

8.1

.20

17

9.2

.20

17

13

.3.2

01

7

14

.4.2

01

7

16

.5.2

01

7

17

.6.2

01

7

Price development for zinc 30 June 2016–30 June 2017

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

» New records in production

Ready inOctober 2016 Ready in

May 2016

2,0 Mt of ore (estimate) Ready in May 2017

23

Ready inNovember 20154 Ready in

March 2017

1.0 Mt of ore

1

Ready inMay 2017

»Primary leaching area was taken in full production use in mid-May

»Stacking of ore to secondary heap 3 started

4

3

1

2

3rd layer ready in December 2016

2nd layer ready in April 2016

3rd layer ready in April 2017

5,1

76

4,7

87

3,8

75

2,3

70

1,7

54

1,5

55

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

mto

5,3

61

5,0

86

4,8

85

3,0

46

2,1

58

1,4

95

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

Kaivostuotanto (t)Bioleaching (t)

»Nickel production in the first half of 2017 exceeded production of the whole year 2016

11

,03

8

10

,07

0

11

,75

7

10

,89

4

7,7

61

6,6

30

,0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

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)

Q2

20

17

Q2

20

17

Q2

20

17

2016: 37,042 t 2016: 11,584 t 2016: 9,554 t

11

,20

4

9,7

91

8,6

80

6,3

28

4,0

70

3,4

97

0

5 000

10 000

15 000

20 000

25 000

30 000

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

MTO

12

,65

7

10

,38

0

10

,69

7

8,7

20

5,8

73

2,5

78

0

5 000

10 000

15 000

20 000

25 000

30 000

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

bl

»All-time quarterly record in zinc production

23

,14

9

20

,23

9

22

,14

4

20

,61

2

14

,76

7

12

,77

6

,0

5,000

10,000

15,000

20,000

25,000

30,000

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

2016: 70,299 t 2016: 27,868 t 2016: 22,575 t

Q2

20

17

Q2

20

17

Q2

20

17

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

»Unit costs were lower than before

Ore processing volumes reached a record level.

Bioleaching performance were at a good level.

Construction of secondary leaching area to increase production capacity continued.

Annual maintenance stoppage of metals production plant at the turn of May and June limited production.

Unit costs of operations per nickel tonne decreased as estimated.

» Occupational safety improved

»Our lost-time injury frequency target for this year is below 5.0

Lost-time injury frequency = number of injuries per one million person-hours worked.

Contractors

693employeesTerrafame

757employees Includes nearly 90

summer employees

23.3

8.4

4.4

0

5

10

15

20

25

2015 2016 Liukuva 12 kkRolling 12 months

Lost-time injury frequencyTerrafame’s employees

» Ympäristöturvallisuus» Sulamisvesien käsittely sujui hyvin luparajojen puitteissa

Vesikuva

» Spring melt waters were managed well within permit limits

0.0

01

0.0

28

0.0

31

0.4

34

0.6

86

2,0

21

0.5

44

<0.0

2

<0.0

39

0.0

57

<0.0

01

18

9

»Spring increased the amount of water at the site in Q2

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 water discharged from the site

1 July 2016–30 June 2017

Concentrations proportional to the permit limits

1) Maximum concentration permitted for an individual sample 2) No permit limits set for Pb and Na

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

7 000 000

8 000 000

9 000 000

10 000 000

11 000 000

1.7

.20

16

1.8

.20

16

1.9

.20

16

1.1

0.2

01

6

1.1

1.2

01

6

1.1

2.2

01

6

1.1

.20

17

1.2

.20

17

1.3

.20

17

1.4

.20

17

1.5

.20

17

1.6

.20

17

Target level

Volume of stored water at the site1 July 2016–30 June 2017

1

2

3

4

5

6

7

8

9

10

11

30 June 20173.7 Mm3

The spring overturn of Lake Nuasjärvi was completed down to bottom.

Lake Jormasjärvi, Lake Laakajärvi and waterways below them suit recreational purposes very well.

Condition of waterways below the mine has improved or remained unchanged.

Conductivity (Nuasjärvi J1, east of discharging point)

Surface Bottom

Further information: www.terrafame.fi/ymparisto

»Nearby lakes are monitored closely

»Effective sulphate management with two treatment plants

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

H1: 5,318 t

Sulphate to bioleaching heaps from reverse osmosis plant (t)

0

1 000

2 000

3 000

4 000

5 000

6 000

2016 2017

Q11,564Q1

413

Q22,131

Q31,631

Q41,422

Q21,104

2017

27.7.2017 Dokumentin nimi19

» Liikevaihto kehittyi xxx

» Liikevaihto 41,3 miljoonaa euroa» Result weakened by nickel market

price and US dollar exchange rate

»Net sales EUR 88.5 million in H1

Record high production volumes were also noticeable in sales volumes in Q2.

In Q2, average price of nickel decreased by 10.2% on the world market compared with Q1.

Also average price of zinc decreased by 6.6% on the world market compared with Q1.

Average exchange rate of dollar against euro decreased from 1.06 to 1.10 (3.5%) in Q2.

Annual maintenance stoppage decreased production and sales volumes.

47

.2

41

.347

.6

21

.2

18

.0

14

.2

0

10

20

30

40

50

60

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

LiikevaihtoNet sales, EUR million

Q2

20

17

2016: EUR 101.0 million

»EBITDA without change in work in progress developed as planned

WIP = work in process

-60

-50

-40

-30

-20

-10

0

10

20

30

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

EBITDA, EUR million

Q2

20

17

-53

.1

-44

.8

-38

.5

16

.0

-18

.4

-32

.9

-53

,02016: -120.4 M€

-60

-50

-40

-30

-20

-10

0

10

20

30

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

EBITDA excl. change in WIP, EUR million

Q2

20

17

-53

.0

-45

.2

-40

.6

-31

.2

-33

.3

-24

.2

-53

,0

2016: -170.0 M€

»Investments into ramping up production

Construction of secondary leaching area to increase leaching capacity continued

Construction of foundations for a new waste rock area

Construction of a third hydrogen sulphide production line

Investments into increasing zinc filtration capacity as well as into alteration work required by productisation of copper

24

.9

16

.520

.2

18

.1

35

.2

10

.8

0

5

10

15

20

25

30

35

40

45

50

Q2

20

17

Q1

20

17

Q4

20

16

Q3

20

16

Q2

20

16

Q1

20

16

Investoinnit

Q2

20

17

Investments, EUR million

2016: EUR 84.3 million

»Near-term outlook

Target is to further increase the production and delivery volumes of nickel and zinc as well as to improve cost-efficiency, in accordance with the business plan.

Productisation of copper has begun and work is progressing.

We are exploring possibilities for further processing of nickel.

We continue preparing a study on rare earth elements and uranium.

We will apply for an environmental permit encompassing our entire operations by the end of August.

MISSIONWe are building

a sustainable world with high-qualitymetal products.

Terrafame Ltd.www.terrafame.com