Sustainability Review 2019

Sustainable development!

JUNE 2020

PAGE 13

Operations are based on collaboration with our own personnel and with our partners PAGE 47

Moving forward in the value chain generates added value PAGE 55

Sustainability goals were complied into a programme for 2020–2024 1

TERRAFAME’S PRODUCTION PROCESS

Business model

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A unique integrated production process The carbon footprint of Terrafame’s bioleaching-based production process is small compared to the more traditional nickel production technologies. Our unique integrated production process from open pit to battery chemicals provides a short and traceable supply chain for our customers.

The production process begins at our own open pit where ore is

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mined. It is then crushed, agglomerated, transported and stacked to the bioleaching heaps. The bioleaching process utilises microbes to extract metals from ore.

Air is blown into the heaps and the heaps are irrigated with an acidic production solution. This creates optimal conditions for microbial activity.

Stacked ore is first leached

for approximately 15 months at a primary heap. The heap is then reclaimed and conveyed onto a secondary heap for final leaching.

Bioleaching is an energy efficient technology.

Metals are extracted from the production solution which is circulated at the heaps and precipitated as nickel-cobalt, zinc and copper sulphides in phases at the

metals production plant. The final products are filtered and sold for refining. Final products are transported to customers by train or ship. High nickel and zinc content in the final products saves logistics costs, because there is less material to be transported.

In the fall of 2018, Terrafame’s Board of Directors decided to invest in the production of battery-grade chemicals. The current main product – nickel-cobalt sulphide – will be used as raw material. Once completed, the battery

chemicals plant will move Terrafame forward in the value chain.

The production of zinc and copper sulphides will continue as before.

The nickel sulphate capacity of the battery chemicals plant will be 170,000 tonnes per annum.

This is a sufficient supply for approximately one million electric vehicles a year based on estimates using the currently available battery technologies. The cobalt sulphate capacity of the battery chemicals plant will be 7,400 tonnes per annum – a sufficient

supply for approximately 300,000 electric vehicles a year. Ammonium sulphate which is a commonly used fertilizer is a by-product of the production process. Its production capacity is estimated at around 115,000 tonnes per annum.

Terrafame's production plants are located in Sotkamo, Finland, where Terrafame is in possession of Europe's largest nickel ore reserves.

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EDITORIAL

We continue investing in safety and tangible environmental measures To continue improving occupational safety, we implemented several new practices in Terrafame’s industrial site in 2019. We updated our safety training programmes and discussed the importance of safety issues with our own personnel and with the staff of our partner companies. In 2019, the accident rate (LTIFR) among Terrafame’s own personnel remained close to the previous year. Thus, we did not succeed in our attempts to reduce the accident rate as we had hoped. In early 2020, we have continued our efforts to improve safety – we have introduced a policy of zero tolerance and have introduced monthly safety themes.

Last year, the major challenge in terms of occupational safety in the entire industrial site, was the construction site of the battery chemicals plant, where employees suffered several lost-time injuries in 2019. Construction site’s safety was an important focus area, and Trafigura, one of Terrafame’s owners, has offered to provide its expertise on the improvement of safety.

With the implementation of new practices, construction site safety has improved in the spring of 2020 and we plan to continue investing in the improvement of occupational safety. In 2020, our aim is to shift the focus to those areas of production where the

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gap between the present situation and acceptable safety levels is the widest. A satisfactory safety level is no less than zero injuries.

The first half of the year 2019 including the summer months went smoothly in terms of water management. However, the rainy and relatively warm winter months at the end of 2019 and in the early 2020 posed challenges. Water accumulated in the bioheapleaching to such an extent that it had to be removed using the neutralising process of the metals production plant. This was reflected in the sulphate content of the discharge waters at the end of 2019 and also in the spring of 2020. The sulphate load in 2019 totalled 41 per cent of the permitted sulphate quota.

Because of the large quantities of water, purified discharge waters had to be released over the winter months as well, and we were not able to completely avoid exceeding the monthly permitted sulphate quota. Terrafame plans to invest in a 2-line process at the centralised water treatment plant.

This change will provide improved isolation of waters in these types of situations.

The increased volume of discharge waters and the resulting increase in sulphate loads could be seen in the deeper sections of Lake Nuasjärvi as a slight increase in the sulphate levels towards the end of 2019 and early 2020.

However, sulphate levels remained modest and were clearly beneath the levels following the implementation of the discharge pipe in 2016 and 2017. Overall, the condition of nearby lakes has either improved or remained stable.

Improvements have been most visible in Lake Kalliojärvi and Lake Kolmisoppi. Both of these lakes function normally demonstrating a regular spring and fall circulation, and the sulphate levels today are only a fraction of the peak levels witnessed in 2013 and 2014.

In April 2020, Terrafame purchased water and associated waterfront areas of Lake Kivijärvi from Metsähallitus*. In the same connection Terrafame announced plans to start investigating the possibilities for restoring the lake.

According to current assessments, unlike in Lake Kalliojärvi, recovery will not be spontaneous in Lake Kivijärvi. Therefore, the implementation of restoration measures is justified. However, before any actual restoration measures can be implemented, the measures must be carefully planned. Very likely we will need to apply for an environmental permit also.

Currently, Terrafame has several measures ongoing relating to sustainable operations. Some of these measures stem from the company’s past while others are geared towards the future. Terrafame engages in extensive industrial ac-

*Metsähallitus is a state-owned enterprise that produces environmental services for a diverse customer base.

tivities which impact the environment. Therefore, we are committed to conducting our operations responsibly. Terrafame aims to launch the production of chemicals for electric vehicle batteries in early 2021 with the lowest possible carbon footprint and practicing responsible production policies and responsibility is also part of Terrafame's strategy. For the first time in Terrafame’s history, we have prepared a Sustainability Programme covering the years from 2020 to 2024. The programme includes key themes chosen by Terrafame and its stakeholders, and goals to achieve by 2024. We aim to achieve our goals through the implementation of the measures proposed in the programme.

This Sustainability Programme was prepared to propose concrete measures and to be as transparent as possible, and the achievements will be monitored annually.

Veli-Matti Hilla Chief Sustainability Officer Terrafame Ltd

Terrafame’s production process A unique integrated production process

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Editorial Investments in safety and tangible environmental measures are continued

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Comment Joni Lukkaroinen, CEO: Sustainability is at the core of our strategy

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Social responsibility Safety is one of our key values

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Our skilled professionals are Terrafame’s most important asset

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Close cooperation with stakeholders

18

Environmental responsibility The master permit and the environmental permitfor the battery chemicals plant are pending in RSAA

26

The water balance comprised approximately 11 million cubic metres of waters

32

Active monitoring of the environmental impacts

36

Low threshold for reporting environmental incidents

42

Financial responsibility Finland and Kainuu reap the economic benefits

46

Terrafame in figures

50

Terrafame’s Sustainability Programme 2020–2024

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Terrafame Ltd is a Finnish multi-metal company founded in 2015. Its mine and production plants are located in Sotkamo, Finland. The company's bioleaching-based production process is unique and it has a much lower carbon footprint than conventional nickel production technologies. Terrafame is currently constructing one of the world’s largest battery chemicals production lines, which will move the company ahead in the metal refinery chain from a manufacturer of semi-finished metal products to a producer of battery chemicals used in manufacture of electric vehicle batteries. In 2019, Terrafame’s net sales amounted to EUR 310 million, and the company's industrial site employed approximately 1,500 people, of which around half were employees of its partner companies. www.terrafame.com

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COMMENT

JONI LUKKAROINEN, CEO:

Sustainability is at the core of our strategy At the end of 2019, Terrafame’s purpose was summarised as follows: Enhancing low-carbon mobility with responsible battery chemicals. With this phrase, we turn our gaze to the future, to a time when Terrafame's main products will be battery chemicals used in manufacture of electric vehicle batteries. Terrafame’s Sustainability Programme 2020–2024 sets the company an ambitious goal for taking care of the areas surrounding its indsutrial site and, at the same time, enhancing sustainable development globally. The company takes part in the fight against climate change by supporting the electrification of road traffic. It does this by investing approximately EUR 240 million in the production of battery chemicals and by further reducing its own greenhouse gas emissions.

Joni Lukkaroinen, CEO, Terrafame: Sotkamo, Finland, where Terra"Already with our current prodfame is in possession of Europe's ucts, our presence in building a largest nickel ore reserves. Our more sustainable world is strong. unique integrated production Currently, a significant part of the process from open pit to battery nickel-cobalt sulphide intermechemicals provides a short and diates we produce is refined to traceable supply chain for our be used as chemicals for electric customers. vehicle batteries somewhere else, “Sustainability is right at the mainly in Asia.” core of our strategy. When Ter“In early 2021, we are moving rafame was founded some five forward in the value chain and years ago, our primary task was start producing battery chemito re-start production at the site cals in our own battery chemicals and bring environmental issues plant using our current nickel-counder control. We have made balt intermediate as raw material.

Joni Lukkaroinen good progress, although there The supply chains in the autois still much to be done. We aim motive industry are complex. The to continuously improve our materials and components required in car manufac- operations, and one of the results of this is included turing are delivered through a multi-layered supply in this publication — our Sustainability Programme chain. We at Terrafame want to introduce to this for 2020–2024. In the Sustainability Programme, chain a product with a responsible and transparent we have listed our very tangible objectives regarding own supply chain,” Lukkaroinen explains. water management, energy efficiency and by-prodTerrafame's production plants are located in uct recycling. The Programme calls on all of us to act

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TOIMITUSJOHTAJAN KATSAUS

responsibly in order to achieve our goals.”

Terrafame uses the bioleaching technology which is unique in the production of nickel. On one hand, the method requires vast land areas, but on the other its carbon footprint is small compared to the more traditional production technologies. Furthermore, integrated production in one industrial site enables the efficient use of by-products.

“We have set specific goals to further diminish our carbon footprint. In 2020, a 10 MW solid biofuel plant will be built on the industrial site. Once it is operational, process heat and steam will be produced mainly with biofuels. This year we are constructing a waste heat recovery system for our hydrogen plants. It is estimated that this will reduce the amount of energy produced by heating plants by 5 MW. Over the next 5-year period from 2020 to 2024 we intend to explore also other possibilities for utilising

We have set specific goals to further diminish our carbon footprint. waste heat, wind power and other renewable sources of energy.“ Terrafame's massive investment of EUR 240 million in the battery chemicals plant is scheduled to be completed by early 2021. In the beginning of this year, Terrafame announced the launch of an EIA procedure (Environmental Impact Assessment procedure) for using the ore deposit in Kolmisoppi. Terrafame’s current open pit is located at Lake Kuusilampi, and together these two ore deposits make it possible that mining and metal production in the area can be expected to continue for up to 50 to 60 years.

Today, Terrafame directly employs over 800 people, and over 900 people through its partner companies including those working at the construction site of the battery chemicals plant. Already,

Terrafame is an important actor in the regional economy of Kainuu.

Once the battery chemicals plant is fully operational, it has been estimated that Terrafame alone will be responsible for close to 20 per cent of the gross domestic product in Kainuu.

“Our goal is to turn Terrafame into a strong industrial brand that displays our company’s deep roots in Kainuu as well as our operational strengths. The nickel ore reserves in our mine in Sotkamo are considerable, and we have created a unique integrated production process from open pit to battery chemicals. We offer our customers an opportunity to purchase minerals that have been responsibly produced and have a traceable European supply chain”, Lukkaroinen explains.

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SOCIAL RESPONSIBILITY: OCCUPATIONAL AND ENVIRONMENTAL SAFETY

Safety is one of our key values Safety has been among the key focus areas since Terrafame started its operations. Furthermore, safety is listed as one of the company’s values. Terrafame’s top management is committed to safety efforts and participates in the safety walks organised weekly in the departments. Major risks to safety, processes and to the environment are mapped and updated annually. The results and any measures necessitated by the results are discussed by the company’s Management Team and Board of Directors. A comprehensive risk assessment update was launched in 2019. The identified significant risks are addressed through technical improvements, investments and skills development.

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Occupational safety Terrafame encourages improving occupational safety. Excellent performance is rewarded, and the safety bonus system covers all personnel*. As a result of the implementation of safety measures, the safety culture quickly improved at the start of operations. However, the development did not continue quite as good in the years 2018 and 2019.

Employees are rewarded for good occupational safety performance.

In 2019, a total of six lost-time injuries were reported at the construction site of the battery chemicals plant. The number exceeds our goals.

The vast majority of injuries at Terrafame are sustained during normal installation work or as a result of slipping and falling in the yard, for example. The year 2019 saw the safety campaign “Don’t get hurt” with over 10 safety-related themes. Various safety-themed trainings were also organised and occupational safety risk assessments updated.

The rolling 12-month lost-time injury frequency rate (LTIFR) for

Terrafame’s own employees was 9.6 (7.4 in 2018). The lost-time injury frequency rate represents the number of lost-time injuries per one million person-hours worked.

The lost-time injury frequency rate (LTIFR) for production and maintenance partners was 17.5.

The combined LTIFR of Terrafame and all of its partners was 14.2 (8.7). Terrafame found the LTIFR of companies operating in the battery chemicals plant – 33 – to be very high.

The high LTIFR among partners resulted in the launch of a new safety programme to promote occupational safety among the employees of companies operating in the area on project bases,

in particular. The programme was launched in early 2020 drawing attention to the importance of presenting safety requirements in a clear and unambiguous manner, systematic induction processes and monitoring of safety issues.

The programme encompasses every stage of a project starting with the undersigning of a contract and ending at handover. Trafigura, one of Terrafame’s owners, has been actively involved in the development of safety measures.

of possible protective measures.

In addition to these, occupational health professionals conduct inspection and counselling visits to the workstations. According to the biomonitoring results of the year 2019, the total concentration of nickel in Terrafame’s employ-

ees corresponded to the average concentrations in Finland.

Terrafame also requires its partner companies operating in the industrial site to organise regular biomonitoring in the same manner.

*The safety bonus system does not apply to members of the Management Team. For more information on the remuneration of the Management Team, please see the Remuneration Report 2019 at www.terrafame.com > Terrafame Ltd > Reporting.

Workplace hygiene Workplace hygiene is seen as part of occupational safety. The health of all personnel is monitored and occupational hygiene measurements are conducted once a year to determine possible exposure to metals, job-specific exposure risks, and the need for and extent

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Occupational and environmental safety | Social responsibility

Environmental safety The major environmental risks in Terrafame’s operations are related to the leaching solution circulation, waters collected from the area, and chemicals management.

For more information on Terrafame’s environmental monitoring, please see pp. 36-41.

Process safety The process safety risk assessment was updated in 2019. In production processes, the major safety risks are related to hydrogen sulphide and hydrogen plants, and the use of chemicals.

The objective is to run the processes without any unplanned ramp-ups or shut-downs.

Coronavirus Pandemic in the Spring of 2020 In December 2019, a cluster of pneumonia cases were detected in China. It was later discovered that the cases were caused by a new, previously unknown coronavirus, COVID-19. The World Health Organization WHO declared the coronavirus outbreak a pandemic in the end of January. In Finland, the first cases were confirmed in February. In Kainuu, the region where Terrafame’s production plants are located, the first coronavirus infection was detected at the end of March.

At Terrafame, we actively monitor the development of the epidemic situation in cooperation with occupational health representatives. A work group to coordinate actions and communication related to the corona virus epidemic was established in

mid-March. This spring, all personnel have received instructions on how to protect themselves against an infection and how to secure continuity of operations in case the epidemic spreads to the industrial site. Initial measures included restricting visitor access to the industrial site, and limiting all travel to the absolute minimum. Remote working and online meetings are recommended when feasible. Practical advice include maintaining a safe distance when queuing and at the cafeteria, for example. Shift change routines and moving around the industrial site have been adapted to prevent the spread of the virus infection.

By the beginning of June, corona virus epidemic has not spread to the Terrafame industrial site, and the overall situation in Kainuu is

calm. The coronavirus pandemic has not directly affected Terrafame's operations, and the construction of the battery chemicals plant has progressed as planned also. However, concerns about the effects of the pandemic on the global economy and indirectly on Terrafame’s operations have cast a shadow over the first few months of the year. As a result of the pandemic, metal prices plummeted in the first quarter of the year, although towards the summer the situation has somewhat stabilised. Predicting the effects of the coronavirus pandemic involves a great deal of uncertainty, and the company intends to monitor the situation closely to be able to update its plans to reflect the changing situation as required.

Social responsibility | Occupational and environmental safety

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SOCIAL RESPONSIBILITY: PERSONNEL AND PARTNERS

Our skilled professionals are Terrafame’s most important asset In addition to our own skilled personnel, an extensive partner network plays an important role in Terrafame’s operational model. Terrafame’s values – safety, commitment and efficiency – guide all operations carried out in the industrial site. All Terrafame employees and the employees of our partners working in Terrafame's production and support processes follow the company's operational principles.

Terrafame’s management system and detailed instructions regarding safety, the environment and quality promote the implementation of these principles.

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Nearly 1,500 people worked at the industrial site regularly.

Personnel strategy and skills management The priorities set in the company’s personnel strategy are capacity building and competence development, skilled managerial work, and the building of effective intracompany cooperation.

In 2019, we continued to allocate significant amounts of efforts and resources to the professional development of our employees.

In addition to department-specific development needs, on the company level, we focused on strengthening our induction processes for professionals and supervisors, promoting inter-department cooperation and clarifying the division of responsibilities between different operations.

In 2017, we initiated a significant operational change to incorporate the competencies in production and maintenance. The aim of this change was to enhance the usability of production lines. Team training to support the change towards Operator Driven Reliability ended in the spring of 2019, and implementing the new operational model was initiated.

Training opportunities organised in 2019 included managerial coaching, workplace instructor training and courses on occupational safety, chemical safety and the safe use of machines and equipment. Internal events to define and implement Terrafame’s values were organised for managerial staff. Professional skills were enhanced and motivating

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development paths offered to the personnel through training and internal job rotations. During the year, around 70 of Terrafame’s employees participated in education leading to a vocational qualification in maintenance, process engineering or electrical engineering, or in education leading to a specialist vocational qualification in technology, while working. The time spent in training courses registered with the employer totalled 4.2 (3.4 in 2018) days per person.

The time spent in training by supervisors totalled 4.3 (4.5) days per person. Terrafame encourages and supports participation in retraining and upgrading of qualifications.

Personnel’s job satisfaction is monitored regularly. The PeoplePower® index, which describes

Personnel and partners | Social responsibility

the overall results of the personnel survey carried out in September 2019, was 65.5 (65.1). Thus, a slight increase from the result of the 2018 survey. The result was midrange in the technology industry reference group.

Reaching out to skilled personnel and developing the recruitment process were important focus areas throughout the year.

The availability and retention of skilled personnel are key factors in terms of personnel risks also.

To support recruitment, Terrafame strengthens its local industrial expertise by cooperating with educational institutions. For more information on this cooperation, please turn to page 25.

Terrafame personnel 754

800 700

667

656

645

Our values: safety, commitment and efficiency

600 500

Our operational culture is built on the foundation of the company’s values.

Values reflect what we as a company find important.

400 300 200 100 0 31 Dec 2016

31 Dec 2017

31 Dec 2018

31 Dec 2019

Senior salaried Salaried Hourly-paid

At the end of the year 2019 Terrafame employed 754 people

We defined Terrafame’s values in 2019.

In October, representatives of the different personnel groups, departments and shifts gathered to discuss Terrafame’s corporate identity. As a result of this discussion, the representatives of the personnel verbalised the values we all share and what these values - safety, commitment and efficiency - mean to us.

With the expanding of operations, the number of employees has increased by 63 per cent since Terrafame started its operations in 2015.

Safety: Safety is a prerequisite for our operations. We bear responsibility for ourselves and for each other. Safety is an essential part of everything we do.

In the summer of 2019, Terrafame offered summer jobs to 70 people from dumper truck driving to process management at the metal plant.

Commitment: As an employer, we trust our employees, operate in an encouraging manner and invest in the competence of our personnel. As employees, we are proud of our company, our own expertise and the results of our work. We do our best to ensure that Terrafame succeeds. As a work community, we are reliable.

Breakdown of Terrafame’s employees:

90%

have a permanent contract

10%

women

89%

live in Kainuu region, most in Kajaani or Sotkamo

90%

men

Efficiency: We strive to be at the top in our industry, which requires that we operate systematically, work in a determined manner for our common objectives, and develop our operating methods open-mindedly.

Social responsibility | Personnel and partners

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Safety and Production Bonus Plans Since November 2015, all of Terrafame’s personnel* have been covered by the safety bonus plan.

A safety bonus is paid, if no losttime injuries occur in the defined functions.

A production bonus plan was established for the personnel* in

July 2017. A bonus is paid on a monthly basis, if the production targets for ore and nickel are met.

The remuneration system is supplemented by separate bonus payments for initiatives and personal performance.

*Excluding members of the Management Team. For a detailed description of the remuneration plans for the management, please see the Remuneration Report at www.terrafame.com > Terrafame Ltd > Reporting.

Building the battery chemicals plant organisation The building of a production organisation for the new battery chemicals plant was begun at the end of the year by initiating internal and external recruitment of experienced process and maintenance professionals. The plant

is scheduled to start operations in early 2021, and will employ over 100 people in the beginning of operations. Fully operational, the plant will employ close to 150 people. Extensive recruitment efforts will be continued this year.

Occupational health The company provides extensive occupational health care services to its personnel. Exposure to hazardous substances and risks related to the capacity to work are systematically and continuously monitored. Early supportive measures and a change of duties can be implemented, if necessary. Additionally, workplace and ergonomics

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assessments are performed in the various working areas. Good physical and mental health is maintained by supporting the personnel’s exercising and cultural activities as well as with subsidised lunches at the site.

Employee sick leaves accounted for an average of 5.0 (4.3) per cent of theoretical regular working

Personnel and partners | Social responsibility

For job opportunities and vacancies, please visit www.kykyjentalteenotto.fi.

Partners play an important role Terrafame’s production chain is a unique integrated process where partner companies have an important role to play. Terrafame is increasingly shifting its operations to a partnership-based model. All partners are required to commit to high-quality operations, safety and continuous improvement of efficiency, and to following the common rules at the site. Terrafame evaluates the partner companies’ activities by conducting supplier evaluations and audits at regular intervals. The best partners will have an opportunity to grow and develop together with Terrafame.

Safety is an important value in partnership operations, and Terrafame actively monitors the safety performance of its partner companies. Terrafame monitors the number of accidents and the lost-time injury frequency rate (LTIFR) of its

partner companies as part of Terrafame’s own LTIFR monitoring.

The lost-time injury frequency rate (LTIFR) continued to rise among partner companies during 2019, and was particularly high in the construction site of the battery chemicals plant. To reverse this poor development of occupational safety, we started in the beginning of 2020 to implement zero tolerance rules in the industrial site and initiated a safety programme to improve the safety of partners working in construction, in particular. In the course of this year, we are updating the induction processes for our own personnel as well as for our partner companies.

Terrafame’s partner companies operating in the industrial site on a regular basis employed on average 735 people.

65 % of partner companies' personnel live in Kainuu region.

For more information on safety in the industrial site, please see pp. 9-11.

Social responsibility | Personnel and partners

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SOCIAL RESPONSIBILITY: COMMUNITY OUTREACH

Close cooperation with stakeholders The most important stakeholders include Terrafame’s own personnel and the personnel of partner companies, near-by residents and decision-makers, authorities, customers, owners and financial institutes, influencers and the media. Actively interacting with our stakeholders helps us understand their expectations and information needs. We respond to these needs by sharing timely news on our website and through internal channels of communication, and by actively arranging to meet with the representatives of our stakeholders. Every year up to 5,000 people visit Terrafame’s industrial site.

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Observations by local residents Terrafame welcomes and records all feedback from the nearby residents. Residents are encouraged to contact the company whenever its activities raise questions or are considered harmful.

Terrafame conducts systematical follow-up of observations reported by the near-by residents and authorities, and records them electronically. The company follows up on observations regarding dust, odours and vibration, for example. When Terrafame receives an observation, it attempts to determine its possible cause and decides on the required improvements to minimise the observed harm.

Observations have been systematically collected and stored for approximately a decade. Over the past few years, the number of reported observations has decreased considerably from the time when the mining operations were originally initiated. In 2019, Terrafame received a total of 13 observations which is half of the amount received the previous year.

Most observations were complaints regarding odours and vibration. The number of observations regarding noise and dust was two and two, respectively. One observation was made regarding water.

Environmental observations reported by near-by residents 2011–2019 200 150 100 50 0

2011

2012

2013

2014 2015* 2016

2018

2019

* Terrafame began its operations.

In 2019, observations reported by near-by residents regarded: odours (5 reports) A total of 13 observations

vibration (3 reports) noise (2 reports) dust (2 reports) water (1 report)

How to report an observation Observation regarding Terrafame’s operations can be reported by sending an email to EHSQ@terrafame.fi or by contacting Terrafame via our website at www.terrafame. com > Contact Us. Terrafame informs the near-by residents about possible odours associated with the ramp-ups and

An overview on waterbodies delivered to every household in Kainuu The first overview on waterbodies was published in 2019 and delivered to households in Kainuu with the local newspapers. The second overview on waterbodies was published in May 2020.

An overview on waterbodies includes a report on the condition of local waterbodies and any loads they are subjected to. A safety bulletin has also been sent to the nearby residents. Both the overview on waterbodies and the safety bulletin in Finnish can be accessed at www.terrafame.fi > Ympäristö.

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2017

Community outreach | Social responsibility

shut-downs of the metal plant, for example. Terrafame also informs the near-by residents of rescue drills and emergencies when rescue vehicles are likely to arrive to the area. An explosion schedule is delivered to the closest neighbours.

Meetings with nearby residents Once a year, Terrafame sits down with the nearby residents and owners of summer cottages to discuss news, environmental topics and safety and to introduce Terrafame’s area to the residents.

Over the years, these meetings have become quite popular. In 2019, the meeting was held in August with a total of 46 nearby residents and summer cottage owners in attendance. Terrafame also supports the activities of the nearby Tuhkakylä Village Association. In 2019, Terrafame participated in Tuhkakylä’s summer party, and introduced Terrafame’s industrial fire brigade and its operations.

Terrafame also collaborates with Sotkamon Jymy – one of the most successful baseball teams in Finland. One of the base lines for Vuokatti-Ruka Sports Academy is

Finnish baseball with a total of 207 athletes. The economic impact of the Vuokatti-Ruka Sports Academy on Sotkamo and the surrounding region is significant. Furthermore, Finnish baseball attracts a total of 30 to 35 athletes from other parts of Finland to come study in Sotkamo’s upper secondary sports school.

In the summer of 2019, Terrafame hosted one of Sotkamon Jymy’s home games inviting stakeholders to attend the match.

Terrafame’s personnel had free entrance to the game. Sotkamon Jymy organised baseball training for Terrafame’s personnel and their family members.

In addition to near-by residents and the friends and family members of Terrafame’s personnel, a number of students and

representatives of businesses and the government visit Terrafame’s industrial site every year. In 2019, Terrafame’s industrial site hosted a total of 5,577 visitors.

Open house for the friends and family members of Terrafame’s personnel In September 2019, Terrafame organised an open house for its personnel and their closest friends and family members.

Over 300 participants visited the industrial site on a sunny Sunday in early autumn. The carefully compiled programme included something for everyone - also for smaller children! For a tour of the site, interested participants gathered first in the conference room by the main gate where they could talk with Terrafame’s experts about occupational safety, environmental issues, the production process and the new battery chemicals plant, for example. The industrial fire brigade was also on display.

A tour of the industrial site was the most popular attraction of the day. At the mining equipment de-

pot, visitors could see the various vehicles used in mining operations, and children could try driving a dumper truck in a 3D simulator. The tour ended with lunch,

and a magician circled among the visitors entertaining the children and those young at heart.

Social responsibility | Community outreach

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Public events within the EIA review process Public events within the EIA review process are one of Terrafame’s key stakeholder forums. Hearings are open to the public and provide an opportunity for every citizen and stakeholder representative to participate and voice their opinions on a planned project.

A monitoring group is also an integral part of the EIA process.

Members of the group include representatives from Terrafame, relevant authorities and various stakeholders. In practice, the group includes representatives of all stakeholders who might be impacted by the project under review. The purpose of a monitoring group is to promote the dissemination of information among the members of the group.

Terrafame is currently involved in two separate EIA procedures.

The EIA procedure on the final disposal of old water treatment sludge was launched in 2019. The first public hearing was held in the spring of 2019.

The EIA procedure on using the ore deposit in Kolmisoppi and expanding the mining concession was launched in the beginning of 2020. The first public hearing was held in April 2020. This was the first time in Terrafame’s history when the public hearing was conducted virtually as a result of the exceptional circumstances caused by the coronavirus pandemic.

Rescue cooperation in case of an accident Terrafame and the Kainuu Rescue Authority have agreed that Terrafame’s industrial fire brigade acts as an additional resource and participates in rescue operations such as traffic accidents and forest fires also outside Terrafame’s industrial site. In 2019, Terrafame’s industrial fire brigade took part in 10 external rescue operations including traffic accidents, vehicle fires, forest fires and a major fire at the Majasaari waste management facility in Kajaani. Thus, Terrafame’s industrial fire brigade is an important addition to the region’s recue forces. In 2019, the fire brigade acquired the largest foam extinguishing unit in Northern Finland.

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Community outreach | Social responsibility

For more information on the two EIA procedures in Finnish, please visit Terrafame’s website at www.terrafame.fi > Ympäristö > Ympäristövaikutusten arviointi eli YVA.

Collaborating with the personnel Terrafame follows established practices when collaborating with its personnel. Collaboration is founded on national rules and regulations as well as international conventions on human rights and labour markets. Terrafame respects the freedom of association and abides by legally binding collective agreements. Employee participation and consultation have been organised in accordance with national rules and regulations.

The company has adopted an equality plan, which is updated periodically. Terrafame promotes equal opportunities and equal employment and career development in compliance with Terrafame’s Equality Plan. Furthermore, Terrafame has updated its processes, policies and guidelines on the processing of personal data to comply with the EU General Data Protection Regulation (GDPR).

Terrafame has established a committee for cooperation negotiations (YT-neuvottelukunta) to process cooperation nego-

tiations between the company and its employees. The purpose of the committee is to improve the company operations and the employees’ opportunities to have an effect on company decisions having an impact on their work, working conditions or position.

The committee for cooperation negotiations meets at least 4 times per year. In 2019, the committee for cooperation negotiations held 6 meetings.

The members of the occupational safety and health committee include representatives of the employer and employees. The committee prepares annually an action plan for safety and monitors the implementation of procedures in its meetings. In 2019, the occupational safety and health committee held 3 meetings. Acute issues regarding safety and well-being at work, occupational health care action plans and occupational safety plans were discussed in the meetings. The results from exposure and hygiene tests were also discussed in the meetings.

A recreation committee comprising representatives from various departments and personnel groups was established in the summer of 2019. The recreation committee keeps track of the various recreational activities the personnel engages in. The recreation committee supports joint activities by booking sports facilities, for example. The recreation committee organises trips to cultural events for Terrafame’s personnel. The recreation committee’s Christmas Party attracted a total of 250 participants.

The committee started the year 2020 very actively, and arranged among others a trip to see a theatrical performance in Kuopio. However, other events planned for the spring have all been rescheduled to a later date due to the corona virus pandemic.

For more information on Terrafame’s personnel, see pp. 13-17.

Social responsibility | Community outreach

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Partner companies Terrafame arranges to meet with its partner companies 3 to 4 times a year. Meetings usually have a specific theme, such as improving safety at work and following the common rules at the site.

Long contracts enhance commitment. The aim is to enable

sustainable development and to secure the high quality of performed operations. Cooperation and following the rules are regularly monitored for each supplier.

For more information on Terrafame’s partners, see page 17.

Customers and other stakeholders Terrafame actively monitors the market developments in its field, and has participated in significant international events. Terrafame is preparing to start commercial deliveries of the battery chemical plant’s products in 2021.

Terrafame gives interviews and welcomes journalists on its industrial site. In connection with the publication of its financial reports, Terrafame broadcasts a public webcast with the CEO reviewing factors affecting the results and business development of the company.

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Terrafame is committed to the Finnish Network of Sustainable Mining and its principles of operation.

Terrafame is a member of the Technology Industries of Finland, the Finnish Mining Association, the battery group of the Chemical Industry Federation of Finland, and the Oulu Chamber of Commerce.

Terrafame maintains good and continuous interaction with its owners and investors.

Community outreach | Social responsibility

Enhancing cooperation with educational institutions Terrafame is one of the largest employers in the Kainuu region.

The commencement of the battery chemicals plant will further increase the demand for process engineers and professionals specialising in chemical industry.

In 2019, Terrafame enhanced its collaboration with the Kajaani University of Applied Sciences (KAMK).

In the autumn of 2018, Terrafame made a donation for a three-year principal lecturer position at Kajaani University of Applied Sciences KAMK to include courses and training in process engineering into the mechanical engineering studies. The new principal lecturer began on 1 April 2019, and was tasked with developing the study programme for process engineering and coordinating research and development work in the segment.

Studies in process industry at the Kajaani University of Applied Sciences are intended for new and returning engineer students. During their studies, students will have

various opportunities to familiarise themselves with the activities of Terrafame during traineeships, in projects and in connection with preparing their theses, for example.

In addition, Terrafame invests in apprenticeship training. The two-year apprenticeship training organised by Terrafame, the Kainuu Vocational College and educational consortium OSAO from Oulu, leads to a professional degree in the processing industry.

A total of 22 students began their studies in the spring of 2019, and 28 students in the autumn of 2019.

The third group with its 25 students started studies in the beginning of 2020.

The age and skill range of the students is wide: the minimum requirement is a vocational degree or matriculation examination, but most of the students entering the programme already have several years or even decades of work experience in various fields in ad-

dition to the basic education. The objective is to train over 100 professionals in process engineering by 2024 to meet the recruitment needs of Terrafame and other industrial actors.

In the autumn of 2019, a retraining and upgrading collaboration between the Kainuu University of Applied Sciences (KAMK) and the Lapland University of Applied Sciences started to enable the training of electrical automation engineers in Kainuu.

Similar retraining will be arranged as required.

Terrafame attracts student groups also. In addition to students from different universities, a total of 200 students from the upper secondary schools of Kainuu visited Terrafame in 2019 with their teachers. Terrafame has also actively participated in student fairs in Oulu, Kuopio and Kajaani, for example.

Social responsibility | Community outreach

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26

ENVIRONMENTAL RESPONSIBILITY: ENVIRONMENTAL PERMIT APPLICATION PROCESSES

The main environmental permit and the environmental permit for the battery chemicals plant are pending in RSAA The permit process on Terrafame’s application for the renewal of the main environmental permit is pending at the Northern Finland Regional State Administrative Agency (RSAA). The application was submitted in August 2017, and it was amended in July 2018. During 2019, the process progressed to the public hearing phase, and Terrafame expects the permit decision to be made by the end of 2020. The permit process includes a permit for a third gypsum pond, and Terrafame has requested the agency to give a decision for that permit as soon as possible.

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In December 2019, the Vaasa Administrative Court (VAC) issued two decisions concerning Terrafame’s permit processes. The first decision concerned Terrafame’s KL2 waste rock area: the VAC changed the permit into a temporary one until a final or enforceable decision is made on the main permit. In practice, this means linking a separate permit for the waste rock area to the master permit.

The second decision made by the VAC in December concerned the final disposal of the water treatment sludge. Following an appeal, the VAC annulled the RSAA’s previous decision given in 2017 in which the final disposal of water treatment sludge in

geotubes located near the open pit was permitted. Terrafame had already launched the relevant EIA procedure on the final disposal of old water treatment sludge in March 2019 to review the environmental impacts of sludge removal, transfer and final disposal.

The old water treatment sludge has mainly been generated by the operation of the water treatment units built in the area after 2012.

As of the beginning of 2017, the existing water treatment units located around the industrial site were replaced by a centralised water treatment plant, from where the accumulated water treatment sludge is transferred to a gypsum pond for final disposal. After the EIA procedure is completed,

Terrafame will apply for a permit for the final disposal of old water treatment sludge generated during the previous operator and located around the mining site from RSAA in the summer of 2020.

What is a geotube?

A geotube resembles a large sack and is used to extract solids from water.

In addition to industrial use, geotubes are also used in the restoration of lakes.

Terrafame's centralised water treatment plant

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Environmental permit application processes | Environmental responsibility

The battery chemicals plant will produce nickel and cobalt sulphates used in manufacture of electric vehicle batteries.

The chemicals and environmental permits for the battery chemicals plant The construction work on Terrafame’s battery chemicals plant is scheduled to be completed by early 2021. The environmental permit application for the battery chemicals plant was submitted to the RSAA in April 2019 after the completed EIA procedure. The application was amended in March

2020 and announced in March to April 2020. A decision on the environmental permit for the battery chemicals plant is expected to be given in early autumn 2020.

The chemicals permit application for the battery chemicals plant was submitted to the Finnish Safety and Chemicals Agency (TUKES)

in January 2020, and amended in May 2020. A decision on the chemicals permit is expected to be given in 2020.

The preparation of end product REACH documents according to the EU’s chemicals directive was initiated in the spring of 2020.

Environmental responsibility | Environmental permit application processes

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Mining and metals production is expected to continue for up to 50 to 60 years.

Using the ore deposit in Kolmisoppi and expanding the mining concession There are two ore deposits located in Terrafame’s mining concession that have been verified: Kuusilampi, where the company’s current open pit is located, and Kolmisoppi, which is planned to be taken into use in the late 2020s.

Together, these ore deposits make it possible that mining and metal production can be expected to continue for up to 50-60 years.

In order to build the new waste rock and secondary leaching areas needed to make full use of the deposits, the existing mining concession is planned to be expanded accordingly.

In early 2020, Terrafame launched an environmental impact assessment (EIA) procedure concerning activities related to mining the Kolmisoppi deposit, the watercourse changes for Lake Kolmisoppi, and the expansion of the mining concession. It is appropriate to assess the use of the ore deposits in Kolmisoppi and the ex-

pansion of the mining concession as a whole in the same assessment process.

The actual environmental impact assessment will be carried out during 2020. The EIA procedure will end with the coordinating authority presenting its reasoned conclusions. After that, Terrafame will apply for an environmental permit for the viable solution, most likely in early 2021.

For more information in Finnish on the EIA procedure on using the ore deposit in Kolmisoppi and expanding the mining concession, please visit Terrafame’s website at www.terrafame.fi > Ympäristö > Ympäristövaikutusten arviointi eli YVA.

Uranium extraction Terrafame filed a permit application for uranium extraction under the Nuclear Energy Act to the Finnish Government on 30 October 2017. The application has been amended during the years 2018 and 2019. In February 2020, the Finnish Government decided to grant a uranium extraction

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permit to Terrafame. An appeal to the decision has been lodged with the Supreme Administrative Court (KHO) where the case is currently pending. Terrafame has already been granted the chemical permit and environmental permit required for uranium recovery.

Environmental permit application processes | Environmental responsibility

Current mining concession

2 Kolmisoppi

2

1

3 4

2

Pond Latosuo

4

7

Battery chemicals plant Centralised water treatment plant

Secondary leaching

Plant site

Gypsum ponds

Kuusilampi open pit

Uranium extraction plant

7

Primary leaching

Waste rock area

5

Southern treatment unit

6

Expansion of mining concession

4

Action Plan 1. The open pit at Kolmisoppi 2. Waste rock and soil deposit areas related of Kolmisoppi 3. The raising of water level in Lake Kalliojärvi 4. Expansions of the secondary leaching

5. Expansion of the waste rock area 6. Expansion of the primary leaching area 7. Expansion of gypsum ponds

Environmental responsibility | Environmental permit application processes

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32

ENVIRONMENTAL RESPONSIBILITY: WATER BALANCE

The water balance comprised approximately 11 million cubic metres of waters In 2019, approximately 4.5 million cubic meters of purified discharge waters were released into waterbodies from the industrial site. The sulphate load in the discharge waters totalled 6,632 tonnes which is 41 per cent of the sulphate quota. The majority of the discharge waters were purified runoff waters (rainwater, meltwater) collected from the industrial site. The production process was run in a closed loop for most of the year. Approximately 90% of the discharge waters were released through the discharge pipe to Lake Nuasjärvi, and the rest using the so called old route for discharge waters towards the River Oulujoki waterbody. The release quota to the Vuoksi watercourse remained fully unused in 2019. However, a total of approximately 0.4 million cubic metres was released towards Lake Vuoksi in March–May 2020.

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Water management controls how waters generated in the industrial site are treated. Water management comprises three main processing elements: ∞ Circulating process waters inside the industrial site.

Average annual rain waters result in the accumulation of approximately 7 million cubic metres of water to be processed in the industrial site. If water contains metals, it is released into the bioleaching cycle, if possible, to recover the metals and to decrease the volume released for processing and the sulphate load of discharged waters. Clean waters must be isolated from the contaminated waters in the area and from sources of contamination, and diverted safely away from the industrial site. Clean waters are not included in the water balance of the mining site.

In 2019, a total of 7.3 million cubic metres of rainwater and meltwater were processed. Additionally, 1.4 million cubic metres resulting from discharges and protective pumping, for example, were collected from the area for processing. The neutralisation process purifying and removing water from the leaching process generated an additional 0.5 cubic metres of water for processing.

Ground waters accumulated mainly in the open pit generated approximately 1.8 cubic metres for processing.

Freshly mined ore stacked to bioleaching heaps binds water,

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and active bioleaching causes water to evaporate in somewhat larger quantities than normal.

Solution is removed from the process via metal recovery processes, and the raffinate is recycled into the leaching process.

In 2019, a total of 3.9 million cubic metres of water was removed through evaporation from the water balance. Approximately 0.8 million cubic metres were returned to the bioleaching process. Approximately 4 million cubic metres of purified waters that had been treated at the centralised water treatment plant were released from Latosuo through the discharge pipe to Lake Nuasjärvi, and approximately 0.5 cubic metres were released using the old route for discharge waters towards the River Oulujoki waterbody. Water stored in the basins located in the industrial site increased by 1.7 cubic metres in 2019.

Water balance | Environmental responsibility

P

ki

∞ Isolation and removal of clean waters located near the edges of the industrial site.

1

3

Purk uput

∞ Collection and purification of runoff waters, i.e. processing rainwater and meltwater with low contamination load.

2

4

5

L

Terrafamen kaivospiiri

6

7

8

Discharge routes of purified waters to the Oulu watercourses in the North and to the Vuoksi watercourses in the South 1. Lake Nuasjärvi 2. Lake Jormasjärvi 3. Lake Kolmisoppi 4. Lake Kalliojärvi 5. Lake Salminen 6. Lake Ylä-Lumijärvi, isolated on perimeters in 2013 7. Lake Kivijärvi 8. Lake Laakajärvi L = Discharge pipe outlet P = Discharge pipe end

Rainwater and meltwater

7.29 Mm3

Mainly ground water accumulated in the open pit

Runoff, protective pumping and other waters collected from the area

1.76 MmÂł

1.39 Mm3

Water generated in the neutralisation process

0.53 Mm3

Water management balance sheet 2019

Purified discharged water

Evaporation

Water stored in the industrial site

Returned to bioleaching

4.52 Mm3

3.9 Mm3

1.71 Mm3

0.84 Mm3

The sulphate load in purified discharge waters is highly dependent on precipitation, because precipitation determines whether the bioleaching-metals recovery process cycle can be run in a closed loop, or not. The process can be run in a closed loop for approximately 10 months per year when annual precipitation remains average. In this case, nearly all of the processing solution led from bioleaching to metals recovery returns to the bioleaching heaps after metals recovery.

Because bioleaching releases heat, it causes a significant amount of the water to evaporate every year.

Water management takes advantage of evaporation by leading additional water into the bioleaching process using water fractions with higher sulphate levels. Sulphates precipitate on the bioleaching heaps and, hence, sulphate loads in discharged waters remain low.

During the summers, autumns and long periods of rain, water accumulates into the bioleaching process and the extra water needs to be removed. This is carried out by using the neutralisation process at the metals recovery plant. Process waters are purified using the neutralisation process before water treatment. The neutralisation and water treatment processes recover metals very effectively. However, some of the sulphate is not removed and ends up being discharged with the released water.

Hence, the sulphate load is larger in the years when precipitation is above average and extra water needs to be removed from the process during the course of several months.

Environmental responsibility | Water balance

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ENVIRONMENTAL RESPONSIBILITY: MONITORING ENVIRONMENTAL IMPACTS

Active monitoring of the environmental impacts Terrafame monitors the environment of the mining site in accordance with the permit decisions and the environmental monitoring scheme approved by the authorities. Sampling is performed by outside specialists and by persons trained by Terrafame. Fishing records required by the fishery monitoring arecompiled by fishermen appointed to the task.

In addition to environmental monitoring scheme, Terrafame’s personnel monitors the impacts of general operations. This is called in-house control, which is performed in a manner agreed with the Kainuu Centre for Economic Development, Transport and the Environment (ELY Centre). Tasks include monitoring general operations, other monitoring of the environment, monitoring heating plants, and flow rate and water level measurements.

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The results of environmental monitoring are shown in the table below. Topic-specific monitoring reports are available in Finnish at www.terrafame.fi > Ympäristö > Ympäristövaikutukset ja tarkkailu > Ympäristötarkkailuraportit.

Target

2019 results

Released to Approximately 4 Mm3 purified discharge water released through waterbody the discharge pipe, and approximately 0.5 Mm3 released using the natural watercourses (the so called old routes) through Latosuo. No Centralised water released in the direction of the Vuoksi waterbody. The volume water treatof water released from the centralised water treatment plant to the ment plant environment was demonstrably larger than in 2018. However, the total volume of released water has decreased compared to 20152017. The quality of water released through the discharge pipe and via old routes remained below permit thresholds (see Figure 1).

Method Sampling weekly during water release.

Water to centralised water treatment plant sampled once a month.

Released to The sanitary waste water treatment plant achieved required purifica- Sample collection 4 waterbody tion efficiency and fulfilled all of the requirements of the government times per year. decree.

Sanitary waste water treatment ​ plant

Air quality

Hydrogen sulphide levels remained below threshold limits in all Eight measurement measurement locations over the year. Sulphur dioxide levels remain- points, measured ed below threshold limits in all measurement locations over the year. twice a year.

Figure 1. Volume-weighted concentrations of discharged water in 2019

1) Permitted peak concentration in an individual sample 2) No permit thresholds for lead and sodium

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Monitoring environmentla impacts | Environmental responsibility

Target Surface waters Oulujoki waterbody

2019 results Water quality improves when waterbodies are subjected to smaller loads. The impacts of the early years of mining are most intensive in Lake Salminen. With improved water quality, Lake Kalliojärvi demonstrated full spring and fall circulations in 2019.

Increased sulphate load compared to previous year seen in Lake Nuasjärvi as a slight increase in sulphate levels in the three measurement points closest to the discharge pipe. No impact from waters released from the mine detected in coastal waters and Lake Oulujärvi.

Method Surface water sampling, continuous measurements, distribution mapping, measurements on site.

The impacts of earthworks and waste rock deposit areas were monitored at the Kivipuro and Pirttipuro sampling points. Impacts of incidents that had taken place in the vicinity were detected in the water quality in Kivipuro. For more information about these incidents, see page 45. Impacts from mining operations not detected in the water quality in Pirttipuro.

For more information on the status of nearby lakes, see the May 2020 overview of waterbodies in Finnish at www.terrafame.fi > Ympäristö > Vesistökatsaus.

Surface waters Vuoksi waterbody

The Vuoksi waterbodies are recovering from the earlier loads. No water released in the direction of the Vuoksi waterbody in 20172019.

The impacts of mining operations most intensive in Lake Kivijärvi.

However, water quality has improved significantly with partial circulation in the deeper sections. Two of the deeper sections remain stratificated. In Lake Laakajärvi located below Lake Kivijärvi and other waterbodies below Lake Laakajärvi, conductivity and sulphate, manganese and sodium levels decreased close to natural levels.

Water sampling, continuous measurements, dispersion mapping, water samples, measurements on site.

For more information on the status of nearby lakes, see the May 2020 overview of waterbodies in Finnish at www.terrafame.fi > Ympäristö > Vesistökatsaus.

The ecological status of flowing water

Samples from the River Tuhkajoki and the River Kivijoki present a satisfactory condition based on the amount of diatom communities characteristic of this type of water body. The IPS index representing the community and the PMA index representing the composition and abundance ratios of different species are both excellent. Based on the diatom composition, the water quality is for most part humus acid and oligotrophic/mesotrophic.

Measurements performed every three years. Exception: River Kivijoki and River Tuhkajoki where measurements performed annually. One sample from both rivers.

Ground waters

Compared to the previous years, abnormal changes in quality in domestic water wells detected in one well only. In two of the wells, nickel concentration was elevated as in previous years. Elevated levels of metals detected in well water samples result most likely from local geological conditions. However, it is important to monitor the development of concentrations.

Samples collected from domestic water wells twice a year, except in Lamposaari and in Heteranta one every year. A total of 11 measurement points.

Domestic water wells

Environmental responsibility | Monitoring environmental impacts

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Target

2019 results

Ground waters

In the mining concession, impacts of mining operations observed in the elevated levels of metals and sulphates in the ground water in the site, primary leaching area, Pond Kortelampi area and in the Sampling waste rock KL2 area. In the spring of 2019, damage was detected in pipes laid on the liner structure of the primary leaching area. To prevent harmful soil and rock impacts on ground water, more effective protective pumping performed in the area surrounding the primary field. After installation of replacement liner, levels in the primary area are decreasing. New ground water measurement points have been installed between the primary field and Pond Kortelampi. Results show that the impact of liner damage on ground water has remained local. For more information on the primary field liner damage, please see page 44.

Method In the mining concession and its immediate surroundings, sampling pipes laid on soil and rock, a total of 36 environmental monitoring points.

Sampling 1 to 4 times a year.

Metal concentrations detected in ground water may be naturally elevated as a result of local geological conditions in the KL2 area, in particular. The impact of stored waters remains detectable in the ground water monitoring points beyond the Pond Kortelampi dam.

Compared to previous years, the metal and sulphate levels have mainly decreased. In the plant site, the impact of operations can be seen in the elevated metal and sulphate levels in ground water.

Fish

River Tuhkajoki runs from the Lake Kolmisoppijärvi to the Lake Jormasjärvi and is a natural habitat for trout. Trout were detected in the river in the 2019 fish inventory.

Annual recording of fishing.

Mercury in fish varies greatly depending on the lake. There seems to be no link between concentrations in fish and total concentrations of mercury in the water. In the monitoring period 2014–2019, mercury concentrations in perch have increased in Lake Kivijärvi. In other lakes and fish populations monitored in 2019, no statistically significant increase in concentrations was detected. Mercury in pikeperch in the comparison area did not differ from the mercury in pikeperch in other monitored lakes.

Metal concentrations in fish studied three times every year 2) (2019 Lake Kolmisoppi and Lake Jormasjärvi, Lake Kivijärvi and Lake Laakajärvi, Lake Rehja-Nuasjärvi, Lake Kianta used for comparisons).

Fishing survey sent to Based on fishing records, conclusions on the fish population of the commercial fisherlakes cannot be drawn, because of differences in the amount and ty- men every 2 years. pes of fishing. However, the results seem to indicate that there have Exploratory electrical been no obvious changes. In Lake Jormasjärvi, there is annual variafishing annually in tion between net-specific catches. In 2019, the difficult ice situation River Tuhkajoki, othindered net fishing over the winter months. herwise every 3 years.

According to the fishermen, there is no commercial fishing in Lake Rehja-Nuasjärvi.

Metal concentrations in fish

In the case of Lake Kivijärvi, Kalliojärvi and Kolmisoppi, the recommendation issued in 2012–2013 not to use fish as food is still valid.

Fish from other lakes such as Lake Jormasjärvi, Laakajärvi and Nuasjärvi can be used as food normally.

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Monitoring environmentla impacts | Environmental responsibility

Target Dust

2019 results

Method

Based on the results from the 2019 deposit monitoring, impacts of mining operations can be most clearly detected in the production sites and in their immediate surroundings. The impacts of mining operations on the environment were relatively modest. Results will become more precise as monitoring is continued.

Extraction Prior to 2015, extraction and process waste was classified as hazarand process dous waste according to the Finnish legislation. Based on monitowaste ring results and current waste classification principles, neutralisation sludge and water treatment sludge are classified as normal waste.

Pre-neutralisation sludge and waste rock are high in zinc and have therefore been classified hazardous to the environment. Nickel, zinc and manganese are critical elements when classifying waste segments.

16 measurement points in the mining concession area and its immediate surroundings. Continuous monitoring.

Monthly samples compiled from weekly partial samples.

Samples drilled from waste rock compiled to create a monthly composite sample.

There have been no significant changes in the landfill eligibility of waste fractions. Landfill eligibility criteria for hazardous waste are only exceeded for pre-neutralization sludge. The solubilities of the metals in all waste fractions have been so low that their solubility is not considered significant. The amount of sulphate soluble in the waste fractions is essential for investment.

1) Daughter nuclides of uranium tested once a year from segments released to gypsum ponds.

2) Metals in fish determined every 1 to 6 years depending on the lake and according to the environmental monitoring programme.

The status of the fish population in Lake Jormasj채rvi In light of the results from fishing records, the status of species relevant for fishing is positive in Lake Jormasj채rvi. In Lake Jormasj채rvi, recorded catches have remained on a high level for pikeperch, in particular.

Decreases in fishing activity are mostly due to the poor ice conditions in the winter months in 2019. According to estimates, water quality and the status of the fish population in Lake Jormasj채rvi have improved. However, conclusions drawn based on the recorded entries include some uncertainty when the person making the entries changes. Fishing areas and methods are not constants which affect the reliability of catch comparison when assessing changes in the fish populations.

What does protective pumping mean?

Protective pumping refers to the removal of possibly contaminated waters flowing in the area. Protective pumping wells are built in the immediate vicinity of production areas. The purpose of protective pumping is to control possibly contaminated rainwater and ground water and prevent them from becoming mixed with clean surface or ground waters.

Environmental responsibility | Monitoring environmental impacts

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ENVIRONMENTAL RESPONSIBILITY: ENVIRONMENTAL INCIDENTS

Low threshold for reporting environmental incidents Operations requiring an environmental permit are monitored for their entire life cycle. Monitoring that the conditions of an environmental permit are followed is primarily the responsibility of ELY Centres. However, also municipal environmental protection authorities monitor industries operating within their region. The ELY Centres ensure that the terms of the permit, including emissions compliance, are followed. In addition to scheduled reporting, operators are obliged to report any major incidents and breaches in emissions compliance to the relevant authority which in Terrafame’s case is the Kainuu Centre for Economic Development, Transport and the Environment.

Terrafame’s personnel monitors the environmental impacts of Terrafame’s operations. This is called in-house control. The company reports any environmental incidents including a significant risk for the environment to the Kainuu Centre for Economic Development, Transport and the Environment (ELY Centre). Terrafame has a low threshold for reporting incidents and near misses to the relevant supervisory authority.

Terrafame develops its operations to prevent near misses and more serious incidents. Details of a disruption are disclosed also to the North Savo Centre for Economic Development, Transport and the Environment, the Radiation and Nuclear Safety Authority in Finland (STUK), the environmental authorities and to the Kainuu and Ylä-Savo SOTE Joint Municipal Authorities’ environmental health departments.

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Damaged liner structure in the primary leaching area In 2019, a significant environmental incident materialised when damages were found in the liner structure in the primary leaching area. In March 2019, in connection with the regular environmental monitoring measures, Terrafame detected elevated metal concentrations in the ground water monitoring and protective pumping stations located in the immediate vicinity of the primary leaching area. Contaminated waters were diverted to the process circulation using protective pumping.

In more detailed examination of the primary leaching area, damages were found in the plastic membrane (HDPE) and the protective structure above it, but not in the bentonite mat below the membrane. Damages were caused by the movement of the primary

Environmental incidents reported to the supervisory authorities

17 pcs

leaching heap, high leaching solution temperatures, and damages to the structure protecting the membrane. The main cause for the damage was that the structure protecting the membrane from above was inadequate.

Repair measures to construct a new water-tight liner structure over the existing structure were immediately initiated. The liner structures of the primary leaching area were built for the first time in 2007–2010. The new protective layer positioned above the membrane is significantly more resilient than the original structure. In 2019, the membranes of the primary leaching heap were replaced in block two and in half of block three. The membrane replacement will be continued in 2020 when the heap is dismantled and new

ore is heaped. Samples are taken at regular intervals of the repaired structure to ensure it remains fully functional.

In addition to repairing the liner structure, protective pumping around the primary field was enhanced to prevent the contamination from spreading, and additional ground water pipes were installed to detect possible environmental impacts. Ground water pipes are now part of environmental monitoring. Results from monitoring show that there has been a significant decrease in the metal levels of protective pumping. Results from the new ground water pipe monitoring show that the contamination caused by the damaged liner structure did not spread past the immediate surroundings of the bioleaching heap.

Environmental incidents with environmental impact hazard risk 7 disruptions such as overflows or processing faults 5 incidents of increased metal concentrations in clean water ditches 3 incidents of damaged pipe, pipe actuator or liner 1 fire 1 gas explosion

In 2019, Terrafame filed a report to the supervisory authority, i.e. the Kainuu Centre for Economic Development, Transport and the Environment (ELY Centre) on 17 environmental incidents with possible environmental impact. Terrafame also reported to the authorities near misses, damaged structures and emissions that were immediately blocked.

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Environmental incidents | Environmental responsibility

Damaged pressure line The second significant environmental incident in 2019 was the breaking of a process solution pressure line which resulted in process solution leaking to an area partially unprotected by a membrane. The leak occurred within the industrial site and most of the

leaked solution was returned to the prosess circulation. However, some of solution flowed over from the channel and ended up in the basins located in the industrial yard. The solution was recovered from the basins and yard area and returned to the circulation. The

contaminated soil was removed and taken to a hazardous waste processing facility. Measures to enhance environmental monitoring were implemented without delay. The incident did not cause environmental impacts outside the industrial site.

Other incidents in the industrial site In November, there was a small fire in the plant area, which the industrial site’s own firefighters were able to put out. Additionally, there were 9 minor fires that were successfully put out in the industrial site. Terrafame’s industrial fire brigade plays an important role in fire prevention. When necessary,

Kainuu Regional Rescue Authority can provide additional rescue resources.

A total of 11 oil spills occurred in the industrial site in 2019. These were for the most part minor spills from faulty machines, damaged hoses or overflows. The spilled oil was recovered using sorbents.

The contaminated materials were taken to be processed as hazardous waste by the Kajaani Waste Disposal Facility. To prevent minor oil spills, implementing scheduled maintenance of machinery and transfer equipment, and initial and periodic inspections is vitally important.

Stream Kivipuro is monitored daily Kivipuro is a narrow natural stream located at the edge of the mining concession, outside the production area. Rain water seeps into the Kivipuro naturally through black shale terrain where bedrock or soil may have metal concentrations that are higher than normal. In Kivipuro, abnormal metal concentrations have mainly related to earthworks, and the incidents have been transient. Terrafame has expanded the collection area to prevent untreated waters from seeping into Kivipuro. Terrafame monitors Kivipuro on a daily basis.

In January 2019, water containing metals was released into Kivipuro by accident when a faulty butt welded joint gave in. The faulty joint was repaired and wa-

ters from the nearby settling basin were pumped into the DP4 basin.

Due to the slow flow in Kivipuro, the environmental impacts were only minor.

In February 2020, water containing metals leaked into the environment when the valve mechanism of a pressure pipe ventilation well located in the waste rock area broke. To prevent further environmental impacts, a dam was built in the Kivipuro, and protective pumping installed to recover the metal containing water into the basin in the waste rock area. The area around the affected area was white washed. A detailed assessment of the soil contamination and purification needs will be conducted in 2020.

Technical improvements have been implemented into the pipe lines and voluntary operator monitoring increased to prevent such incidents from recurring. A catching ditch will be dug near the pressure pipe to prevent water leaking outside the mining concession and to reroute any leaks back to the basins.

Environmental responsibility | Environmental incidents

45

46

FINANCIAL RESPONSIBILITY: ADDED VALUE

Finland and Kainuu reap the economic benefits Terrafame generates economic benefits directly and indirectly for its stakeholders by improving the economy in Kainuu and in other parts of Finland. For example, in 2019 Terrafame employed on average a total of 1,500 people – directly 722 and the rest were employed by Terrafame’s partner companies. Compensation paid to employees enhances consumer demand and generates positive gearing effects regarding consumer products and services. Furthermore, tax proceeds benefit municipal economy and supports municipal services.

47

In addition to the direct impact of operations, operations increase demand in other industries also indirectly. For example, Terrafame needs companies in the chemical industry to provide raw materials, and logistics companies to transfer materials and products.

These in turn require maintenance and repairs provided by yet other companies. Additional demand is generated through machine and device manufacturing, earthworks

and various industrial level services.

Terrafame has invested EUR 240 million in the construction of a battery chemicals plant. Once completed, the battery chemicals plant will move Terrafame forward in the value chain. Economic impacts already during the construction phase are impressive the construction project employs approximately 600 people. The regional impacts of the battery chemicals plant are depicted in a

graph on the next page.

The following table visualises how the additional value generated by Terrafame in 2019 is distributed among the main stakeholders. The table is prepared based on GRI (Global Reporting Initiative, 201-1).

The largest cash flows are generated by profits from customer purchases, the purchase of goods, materials and services, the salaries paid, and taxes and investments.

Net sales

t'000 â‚Ź

Other income

310,426 1,338

Value added produced

311,764

Suppliers

Purchases, materials and services

-375,751

Employees

Staff costs and ancillary costs

-41,478

Lenders

Net financial items

-13,594

Public sector

Taxes and parafiscal charges paid

-16,546

Public sector

Adjustment for withholding taxes and salaries

Owners

Dividend

7,798 0

Shared added value

-447,369

Surplus/deficit in economic value

-135,605

Capital expenditure Capital expenditure in 2019 totalled EUR 130.6 million, or 4.2 per cent of net sales. Capital expenditure is reviewed at Terrafame in two groups: investments in improving productivity and capacity, and investments in sustaining production. in 2019, the sustaining capital expenditure amounted to EUR

48

Added value | Financial responsibility

42.1 million. Capital expenditure to improve productivity and increase capacity totalled EUR 88.5 million, and were mainly related to the construction of the battery chemicals plant, scheduled to commence in 2021, and its main equipment procurement.

Tax contribution Terrafame started the ramp-up of production in 2015, and the company does not yet have any taxable income. However, a considerable amount of tax expenses have accumulated due to the energy and fuel taxes related to the company’s operations. In addition, the company has paid taxes related to the acquisition and ownership of assets, as normal.

The company pays all its taxes to Finland.

In 2019, Terrafame’s direct taxes comprising property tax, employer’s health insurance contributions and parafiscal charges totalled EUR 0.8 million. Indirect taxes including electricity taxes, insurance premium tax, fuel taxes and waste tax totalled EUR 16.3 million. Withheld taxes and collected VAT totalled EUR 46.7 million. Taxes paid, collected and accounted for represented 7.93% of net sales in 2019.

Terrafame’s tax contribution according to the state ownership steering instructions is described in more detail in the Annual Report 2019 available at www.terrafame.com > Terrafame Ltd > Reporting.

According to the 2018 report by Ramboll consulting, Terrafame’s impact on Kainuu’s GDP will be close to a fifth once the battery chemicals plant currently under construction is ramped up to full operational capacity. Terrafame’s effects on employment and economy extend widely to other parts of Finland and to various industries. The report is accessible in Finnish at www.terrafame.fi > Ympäristö > Ympäristövaikutusten tarkkailu > Akkukemikaalien tuotannon YVA-menettely.

Financial responsibility | Added value

49

50

Added value | Financial responsibility

FINANCIAL RESPONSIBILITY: TERRAFAME IN FIGURES

Terrafame in figures FINANCIAL

2018

2019

27,377 61,608

27,468 55,222

Nickel production Zinc production

t

Net sales EBITDA

EUR million

325.8 32.8

310.4 32.0

Capital expenditure, total

EUR million

81.5

130.6

Environmental investments Environmental operating costs Provisions for environmental restoration Collaterals for environmental restoration1)

EUR million

31.9 24.8 159.0 113.9

32.2 14.2 157.4 122.0

Salaries and remunerations2)

EUR million

29.5

31.8

1) In the end of 2018, excluding collaterals for starting operations despite appeal.

2) Excluding members of the Management Team. For a detailed description of the remuneration plans for the management, please see the Remuneration Report at www.terrafame.com > Terrafame Ltd > Reporting.

51

ENVIRONMENT Ore mined Waste rock mined

Mt

Process chemicals total Limestone CaCO3 Sulphuric acid H2SO4 (93 %) Caustic soda NaOH (50 %) Burnt lime CaO Sulphur Explosives Hydrogen peroxide (50 %) Sulphur dioxide Propane Others

t'000

Total energy use Electricity Light fuel oil Heavy fuel oil Propane

Tj

Total water use Lake Kolmisoppi Household water Recycled water Total recycled water

Mm3

Volume of water directed to surface waters Nickel loading Zinc loading Copper loading Manganese loading Sulphate loading Sodium loading

Mm3 kg/a

Non-hazardous waste Hazardous waste Waste utilised as materials or energy

t

Process waste Gypsum Precipitate from preneutralization Waste rock Utilisation of process waste

t'000

52

%

t/a

%

%

Terrafame in figures | Financial responsibility

2018

2019

17.9 24.4

14.4 17.9

537.0 132.9 113.0 118.6 77.9 54.1 15.8 6.0 0.1 16.8 1.9

383.8 84.9 82.1 114.0 13.2 50.8 13.3 5.7 0.0 13.7 2.6

2,333.4 1,522.4* 664.1 87.7 -

2,302.4 1,433.0 700.9 0.0 166.3

4.3 1.4 0.03 2.8 65.7

4.5 3.3 0.03 1.1 24.3

2.5 72.7 107.4 3.4 2.1 3,434 619

4.5 169.2 332.6 8.4 3.9 6,632 696

2,856 382 89.6

3,782 499 88.2

24,840 337.6 135.6 24,367 0.5

18, 119 117.4 101.4 17,900 0.6

ENVIRONMENT

2018

2019

362,242* 132,197*

231,214 110,447

115,020* 115,025*

62,891 57,877

%

19* 32* 14* 16* 17* 2*

19 27 23 26 4 0

New land used during the year

ha

87

90

Operating areas with a closing plan

%

100

100

Neighbours' environmental observations

pcs

26

13

2018

2019

677 40.8 97.5 8.4 87.0 3.4 10.8 1:1

754 40.8 89.8 10.2 89.0 4.2 8.6 1:1

2018

2019

Carbon dioxide (CO2) emissions Direct CO2 emissions (Scope 1) Indirect CO2 emissions from purchased electricity generation (Scope 2) Other indirect CO2 emissions (Scope 3) Sources of CO2 emissions Limestone Electricity Light fuel oil Propane Burnt lime Heavy fuel oil

tCO2E

PERSONNEL Number of personnel at the end of the year Average age of personnel Permanent employees Female employees Employees from Kainuu Training days Employee turnover Ratio of basic salary women to men

years %

days/person %

OCCUPATIONAL SAFETY AND HEALTH Number of lost-time injuries, LTI Lost-time injury frequency, LTIFR1 Number of accidents, TRI Accident frequency, TRIFR, Seriousness of injuries

pcs pcs/million hours worked pcs pcs/million hours worked days/LTI

8 7.4 38 35.0 11.2

11 9.6 56 58.9 19.3

Occupational diseases Accidental deaths at work Sickness absences Sickness absences

person

0 0 10.7 4.3

0 0 12.0 5.0

days/person %

* Reporting refined at 2020.

LTI = accidents leading to more than one day’s absence, does not include accidents during commuting (Lost Time Injury) LTIFR = accidents leading to more than one day’s absence per million hours worked, does not include accidents during commuting (Lost Time Injury Frequency) TRI = number of accidents (Total Recordable Injury) 53 TRIF = number of accidents per million hours worked (Total Recordable Injury Frequency)

54

SUSTAINABILITY PROGRAMME

Terrafame’s Sustainability Programme 2020–2024 Sustainability is at the core of Terrafame’s strategy. In the beginning of 2020, Terrafame compiled its sustainability actions and goals into a programme for the years 2020-2024. The Sustainability Programme comprises nine key themes that are important to the company and its stakeholders.

The nine themes are further divided into goals and measures that will be implemented during the five-year period. The implementation is monitored annually, and at the end of the five-year period, the accomplishments are compared against the set goals.

UN Sustainable development goals

55

The nine themes of the Sustainability Programme The themes of the Sustainability Programme have been combined with the UN Sustainable Development Goals insofar as Terrafame's Sustainability Goals and the UN Sustainable Development Goals have been seen as intersections.

Safety: Safety is one of the three core values of Terrafame. The other two are commitment and efficiency. We have worked very hard to improve our safety culture, and intend to continue on this path in the coming years. Our goal is to be the among the industry’s leaders in safety.

in various locations around the industrial site. Our aim is to find a safe solution for the final disposal of old water treatment sludge in the near future. The so called old routes for discharge waters include small waterbodies that have clearly been affected by the mining operations. Our aim is to Training: Skilled profession- restore the small waterbodies not related to production. als are one of Terrafame’s main keys to success. We invest in Waste and recycling: Terthe training of our personnel, but rafame has investigated the we also participate in developing options for recycling the hose and process industry and electrical pipe waste generated in the biautomation engineering studies in Kainuu. Cooperation between oleaching process. Plastic waste is recycled and used to produce new Terrafame and the educational facilities benefits also other indus- hoses. Bioleaching is used to contries. trol the metal containing by-flows and to prevent generating additional industrial waste segments.

Sulphate loads: Sulphate released to waterbodies Energy: Terrafame is changis the major environmental impact of Terrafame’s operations. ing over to renewable energy sources in steam production and Metal concentrations in purified district heating. Furthermore, a discharge waters have been low throughout Terrafame’s operation, project to recover the hydrogen but sulphate load varies depending plant energy losses for the proon rainfall and the need to release duction of process steam was launched in the beginning of waters. Our aim is to develop our 2020. The carbon footprint of operations so that the sulphate Terrafame’s nickel product is small load would not increase with compared to traditional producincreased precipitation, and that sulphate could be more efficiently tion technologies. rerouted back to the processes.

Sustainable industry: Once completed the Water treatment sludge battery chemicals plant currently and lakes nearby: Deposunder construction will be one of its of old water treatment sludge the world’s largest battery chemigenerated during the early days of operation wait for final disposal cals plants. The battery chemicals

56

Sustainability Programme

plant is scheduled to commence the manufacture of nickel and cobalt sulphate for electric car batteries in early 2021. The production volumes will be large and will thus, boost the development of electric traffic and help achieve climate goals.

Employment and economic growth: Terrafame is one of the key actors in the Kainuu economic region. Terrafame’s share of the region’s GDP is considerable and will become even larger once the battery chemicals plant is completed. Including the people employed by its partner companies, Terrafame employs a total of 1,500 people. In addition to direct economic impacts, Terrafame’s operations generate considerable indirect cash flow.

Fairness and good governance: Terrafame operates responsibly. The company adheres to good corporate governance in all of its operations, and conducts its operations transparently.

In the near future, we intend to implement new commitments and systems to further demonstrate our responsible approaches.

Safety

Current state 2020 In 2019, the lost-time injury frequency rate (LTIFR1) of Terrafame's own personnel was 9.6.​

Actions 2020–2024

Target 2024

In 2020, zero-tolerance rules LTIFR1 is less than 2.5 for Terwere introduced, and a safety rafame’s personnel and partprogramme was launched ners operating in the area.​ to improve the safety level of partners working in construction projects, in particular. ​

The LTIFR of partners regularly operating in the area was 17.5.​ ​ rientation practices for new O personnel will be renewed.​ The LTIFR of companies working in the construction Between 2020 and 2024, project of the battery chemi- safety work will be systemacals plant was 32.9.​ tically continued to improve the safety of both our own personnel and our partners operating in the area.​ Safety-related measures will be compiled into a safety programme by the end of 2020.​

LTIFR1 = accidents leading to more than one day’s absence per million hours worked, does not include accidents during commuting (Lost Time Injury Frequency) Training

Current state 2020

Actions 2020–2024

Target 2024

In 2019, we launched an apprenticeship training to train process engineering professionals for Terrafame's needs.

The training continued in 2020.​

Apprenticeship training in process engineering will be organised as needed (estimated 25-50 people per year in 2020–2022) ​

Annually, Kajaani University In 2018, we donated a three- of Applied Sciences will offer year principal lecturer posithe opportunity for approtion for the Process Enginee- ximately 40 mechanical engiring Degree Programme at neers specialising in process Kajaani University of Applied engineering.​ Sciences. ​ Conversion training for In 2019, we started converelectrical automation will be sion training for electrical and organised as needed.​ automation engineers. ​ We train approximately 30 Participation in conversion members of our personnel and further training will be each year in programmes for supported and encouraged.​ further vocational qualifications and specialist vocational qualifications in process industry. ​

We have trained over 100 process professionals for both Terrafame and other industries.​ With Terrafame's support, Kainuu has developed training in process industry and electrical automation engineering.​

With apprenticeship training and conversion training, at least 95% of Terrafame’s personnel have a degree corresponding to the job requirement.​

About 90% of our personnel have a degree corresponding to the job requirement.​

Sustainability Programme

57

Load on waterbodies

Current state 2020

Actions 2020–2024

Terrafame's water treatment is efficient and metal emissions into discharge water are very small. ​

Water treatment sludge and nearby lakes​

During 2020, the centralised water treatment plant will introduce a 2-line operating model, after which further neutralisation of the iron preThe sulphate load is also well cipitation sludge at the centunder the annual quota, but ralised treatment plant will the load is heavily dependent no longer affect the sulphate on rain. ​ concentrations of the treated In rainy years, water has to collection waters.​ be removed from the bioleaching cycle by means of iron precipitation, resulting in more sulphate in discharge waters than in less rainy years.​

Purified process-based water is used primarily as recycled water for production in the recovery of metals or in bioleaching.​

From the mining site, e.g. from the open pit area, rainwater and runoff is collected, which is either used in the process or released from the site, purified. In rainy years, sulphate from process-based purified waters ends up in discharge waters.​

The aim is to differentiate the collection water more efficiently by means of the 2-line operating model built for the centralised water treatment plant.​

Low-sulphate collection waters are either utilised as raw water or released from the site, purified. ​

Current state 2020

Actions 2020–2024

Target 2024

Across the industrial site, there are water treatment deposits in land-based pools and so-called geo tubes, accumulated during the early operating years of the mine.​

During 2020, an application for an environmental permit for the final disposal of the deposits will be submitted to the Northern Finland Regional State Administrative Agency (RSAA). ​

An EIA procedure and planning for the final disposal of the deposits are underway.​

58

Target 2024

The restoration work is estimated to start in 2021–2022 and will last for several years.​

Due to the operation of the mine in the early years, lakes Salminen, Kalliojärvi and Kivijärvi, which are located on the so-called old discharge routes, have been artificially stratified due to sulphate. ​

Terrafame has bought land and water areas in the Kivijärvi area. During 2020, the company will start planning for the restoration of the lake.

Restoration could start in 2021 at the earliest.​

In Kalliojärvi there have been spring and full overturns in 2019, and the lake has almost been restored.​

Salminen will be partly taken over by construction in 2022–2024. The rest of the lake will be restored during construction. ​

Of the sulphate from the process ending up in water treatment, over 80% is recycled back into the bioheapleaching. ​ Sulphate concentration and monthly sulphate load are under limit values in every circumstancies.​

The final disposal of the water treatment deposits has started and the first ground-based pools have been cleaned.​ The purification of the areas and the final disposal of the deposits will continue in the coming years.​

Lake Kivijärvi has been restored close to their natural state. ​ Part of Salminen is taken over by construction, the rest of the lake has been restored.​ Concrete plan for Ylä-Lumijärvi restoration. ​ ​

Waste recovery ​

Current state 2020

Actions 2020–2024

Target 2024

In 2019, the recovery rate of conventional municipal and industrial waste was 88.2% ​

Increased waste advice, improved labelling of waste bins, more effective department-specific monitoring​.

The recovery rate of conventional municipal and industrial waste is over 95%​.

Approximately 3,500 k tonnes of hose and pipe waste (plastic waste) is generated annually in the area, which can be placed in the waste rock area under the environmental permit.​

During 2020, Terrafame will start recycling plastic hoses and pipes together with a partner.​

Approximately 4,000 t of plastic raw material is processed and delivered for reuse annually, and the material is used to produce hose and pipe materials for Terrafame's needs.

The plastic hoses and pipes will be crushed in a dense field and washed. The washing water will be returned to the process. The washed, crushed plastic will be delivered to the partner for further processing.​

The hoses and pipes in the primary leaching area are collected before the heap is reclaimed, so the recyclingpossibilities of such plastic waste has been explored. The Hose and pipe waste has hoses used in the secondary been stored in the area, leaching area remain inside which will also be recycled. the heap.​ Currently, of the processbased side streams, the preneutralisation precipitate of the metals recovery plant is recycled and placed in the secondary leaching area, enabling the leaching and reuse of metals in it.​

For several years, the amount of material recycled annually is higher than the amount of waste generated per year, as hose waste has been stored in the area, which is also recycled.​

With the commissioning of the battery chemicals plant, the utilisation of process-based side streams will increase.

The effluent solution of the battery chemicals plant will be directed to the circulating leaching solution, the metals contained in the solution will be used and, at the same time, consumption of sulphuric acid will be reduced.​

Process-related side streams are recycled as effectively as possible, reducing the generation and dumping of waste.

At the same time, the metals contained in side streams are utilised in production.​

In 2019 we utilized the of waste approx

In 2024 our goal is to recover the waste over

88%

95%

Sustainability Programme

59

Energy used in production and energy efficiency​

Current state 2020

Actions 2020–2024

Target 2024

Steam and district heating are During 2020, a 10 MW solid Over 90% of steam and heat produced with propane and biofuel plant will be built, production is carried out with partly with fuel oil.​ after which heat and steam renewable energy.​ will be produced mainly with biofuels.​ In 2019, carbon-neutral energy accounted for 63.6% of electricity.​

In 2020–2024, the potential for the exploitation of wind and other renewable energy will be explored.​

In 2024, carbon-neutral energy accounts for 100% of electricity.​

The carbon footprint of metal nickel made from the current nickel product is up to 40% lower than the industry average for similar products.​

In 2020, a study (LCA) will be prepared on the carbon footprint of the main product of the battery chemicals plant, namely nickel sulphate.​

The carbon footprint of Terrafame’s nickel sulphate is at least 50% smaller than nickel sulphate produced by other commonly used technologies.​

For waste heat, utilisation op- During 2020, a recovery portunities have been found of waste heat will be built at hydrogen plants.​ for hydrogen plants, which is estimated to reduce the amount of energy produced by heating plants by 5 MW.​

Process-based waste heat recovery accounts for at least 15% of the process steam and district heat used in the process.​

In 2020–2024, other possibilities for utilising process-related waste heat will be explored.​ In winter, a large part of the industrial buildings are heated by district heating. In summer, there is little need for heating, on the contrary, some buildings need cooling due to the high temperature of the process solution.​

60

Sustainability Programme

Ways to improve the energy efficiency of buildings will be explored. In particular, a solution will be explored that can reduce the consumption of heating energy in winter and implement summer-time cooling of process spaces energy-efficiently.​

By 2024, a solution has been designed to reduce the energy efficiency of buildings and implement cooling energy-efficiently.​ ​ he energy efficiency of T buildings will be improved in accordance with the plan and programme.​

Products

Current state 2020 Current products (nickel-cobalt sulphide, zinc sulphide and copper sulphide) are intermediates with high processing levels. A significant proportion of nickel-cobalt sulphide is processed elsewhere into nickel and cobalt sulphate, which are battery chemicals.​ Construction of our own battery chemicals plant is underway. ​​

Actions 2020–2024

Target 2024

In 2021, the battery chemicals plant will be commissioned to produce battery chemicals (nickel sulphate and cobalt sulphate).​

Annually, approximately 170,000 t of nickel sulphate and 7,400 t of cobalt sulphate are produced. The annual production of nickel sulphate is sufficient for about one Ammonium sulphate will be million and cobalt sulphate produced as a by-product of for about 300,000 electric the battery chemicals plant.​ cars.​ Zinc will be produced as the Approximately 115,000 t of current, high-quality zinc ammonium sulphate is prosulphide. duced annually for the needs of the fertiliser industry. The product is produced as a by-product of nickel and cobalt sulphate production, so no raw materials are used for it alone.

Over 100,000 t of zinc sulphide is produced annually, which is used for e.g. corrosion protection, thus promoting sustainable construction.​

On 6 February 2020, the Government granted Terrafame a permit for uranium recovery. The permit is not final. Final environmental and chemical permits for uranium recovery are in place.​

Terrafame will start the recovery of natural uranium if the recovery permit becomes final and the market price of uranium allows profitable operations.​

Natural uranium is sold for further processing to secure partners for energy production needs. Terrafame's natural uranium is used after further processing as a fuel for nuclear plants. ​​

With uranium recovery, recovery of rare earth elements The planned uranium prowill also be explored.​ duction capacity corresponds to about 12 percent of Finland's electricity consumption.

Out nickel sulphate production will be enough for about a million electric car needs.

Sustainability Programme

61

Regional economy​

Current state 2020

Actions 2020–2024

Target 2024

Terrafame’s net sales in 2019 totalled EUR 310 million. At the end of 2019, Terrafame employed 754 people and the partners operating in the area, 735 people. Terrafame's share of GDP in Kainuu is approximately 11% (Ramboll Finland 2016)​

The commissioning of the battery chemicals plant at the beginning of 2021 will increase Terrafame's net sales by approximately EUR 200 million per year.​

In 2024, Terrafame’s net sales will approximately double compared to 2019.​

The battery chemicals plant is being built, the construction employs up to 500–600 people.​

Justice and good governance

Some 150 new employees will be hired for the battery chemicals plant, so Terrafame's importance as a source of employment grows.

The environmental impact assessment (EIA) and design for the exploitation of Lake Kolmisoppi and the expansion of the mining concession are underway.​

Construction related to the opening of Kolmisoppi will start in 2024–2025. The regional economic effects of Kolmisoppi will be investigated during the EIA.​

Exploitation of the Kolmisoppi deposit and expansion of the mining concession enable Terrafame to operate for up to 50–60 years.​

Current state 2020

Measures 2020–2024

Target 2024

Terrafame has certified quality, safety and environmental management systems (ISO 9001, ISO 45001, ISO 14001).​​

Between 2020 and 2024, the The new management sysenergy management system tems are certified and part of ETJ+ or ISO 50001 will be normal operations. built and certified and the implementation of the security management system ISO 27 001 will be explored.​

We are committed to the Finnish Towards Sustainable Mining Standard. Half of the tools have been evaluated, and the results of the self-assessments are C-AA.​

The remaining elements of the Finnish Towards Sustainable Mining Standard will be self-assessed during 2020 and an action plan will be drawn up to achieve level A.​

In the Finnish Towards Sustainable Mining Standard, level A has been achieved in all elements.​

Production is responsible and transparent and respectful of human rights, but the need to demonstrate corporate responsibility also through international systems has been identified.​

In 2020, we will commit to complying with the UN Global Compact corporate responsibility initiative.​

Production is responsible and transparent and respectful of human rights, and corporate responsibility has also been demonstrated through international systems that are based on the ISO26001 standard.​

An external Together For Sustainability audit will be conducted.​ The conditions for joining the Responsible Care programme for the chemical industry will be explored.​

62

According to a regional economic study, Terrafame's share of GDP in Kainuu will be approximately 19% (Ramboll Finland 2018) unless other major new industries develop in the region. ​​

Sustainability Programme

Sustainability Programme

63

This review on sustainability includes key financial, social and environmental impacts of Terrafame in 2019.

The review also includes some sustainability events in early 2020.

This review supplements the Statement of Non-Financial Information included in the 2019 Annual Report. Economic added value calculations are based on the 2019 Financial Statement. To access the Report of the Board of Directors and Financial Statements 2019, the Corporate Governance Statement 2019 drawn up in accordance with the reporting requirements of the Securities Market Association’s Corporate Governance Code 2020, Remuneration Report 2019 and Remuneration Policy, please visit the company’s website at www.terrafame.com.

Terrafame Ltd Malmietie 66 88120 Tuhkakylä Finland p. +358 20 7130 800 (switchboard)