Commodity trader Trafigura has bought a 15.5 per cent stake in Finnish state-owned nickel and zinc miner Terrafame, as part of a €250m recapitalisation of the company.
Trafigura’s Galena fund has made a €75m equity investment in Terrafame and also agreed to a €75m five year loan to the company, it said in a statement. The company’s state-owned parent has made a €25m investment on the same terms as and offered a €50m stand-by loan.
Terrafame acquired its mining operations from former London-listed miner Tavlivaara in 2015 following its bankruptcy. It has since been ramping up its mining operations in Sotkamo, in the north of the country. Tavlivaara previously had an agreement to supply zinc to Belgium’s Nyrstar, which is part-owned by Trafigura.
“The Trafigura Group’s investment through Galena will provide the working capital needed to enable the Terrafame mine to reach its potential to become a world-class mine,” Jeremy Weir, chief executive of Trafigura, said.
As part of the agreement, Trafigura will get access to a large quantity of zinc and nickel from the mine for its trading division. That comes as prices for zinc and nickel have rebounded over the past 12 months following a drop to multi-year lows. They will get 100 per cent of the mine’s nickel-cobalt and 80 per cent of its zinc over the next seven years.
Demand for nickel, which is used in stainless steel, “looks robust,” Weir added, while the market for refined zinc is starting to tighten, which should support prices this year.
As part of the deal, Finnish financial company Sampo has also agreed to a €25m loan to Terrafame.