Giant piles of granite in Sotkamo are emblematic of the historic Talvivaara write-down, as the estimated value of their content has plummeted. The mining company’s more than 600 million euro quarterly loss is shocking for a company of its size: Talvivaara reported a total loss of 700 million euros in 2013.
Much bigger listed companies were built on similar unsustainable clouds in the early 2000s. Telecommunications Company Sonera was hit with a more than four billion euro loss after an exhausting depreciation of its UMTS business in Europe in mid-2002.
The Sonera and Talvivaara cases are also similar in that the depreciated business activities applied to operations that never actually produced anything concrete.
Finnish forest giant Stora Enso paid an exorbitant price when it acquired U.S. papermaker Consolidated Paper at the start of the new millennium, declaring a 420 million euro depreciation in 2009, less than Talvivaara’s loss today. In retrospect, some say Stora Enso’s write-down should have been even greater.
Still, Talvivaara’s figures are exceptionally sad, as fourth quarter operating losses totalled 50 times the company’s turnover last year.
Evli bank analyst Antti Kansanen has been following the Talvivaara situation and he is most concerned about the company’s income.
“The company’s operating loss was greater than its net sales. This is rare,” says Kansanen.
So even if the write-downs provide some relief, the fact is that Talvivaara’s mining operations made an annual loss of 109 million euros last year, more than the 79 million euros of income flowing into the company.