Corporate Governance

Regulatory Framework

As a limited liability company incorporated in Finland, Talvivaara is governed under the provisions of the Finnish Companies Act and its Articles of Association. Responsibility for the control and management of the Company is divided between the general meeting of shareholders, the Board of Directors and the Chief Executive Officer. The shareholders participate in the control and management of Talvivaara through actions taken at general meetings of shareholders.

Talvivaara complies with the Finnish Corporate Governance Code 2010 for listed companies (the “Finnish Code”), the Insider Guidelines issued by NASDAQ OMX Helsinki and the UK Corporate Governance Code dated June 2010 (the “UK Code”).

The Finnish Code is available on the Securities Market Association’s website at www.cgfinland.fi and the UK Code on the Financial Reporting Council’s website at www.frc.org.uk.

The Company has departed from the following recommendations under the Finnish Code and the UK Code:

Recommendation 43 of the Finnish Code and UK Code provisions B.1.1 and D.1.3: Participation of the members of the Board of Directors in a share-related remuneration scheme

The Company granted 2007 A options to the Non-Executive Board members of that time as a part of the 2007 Option Scheme. The options were granted in 2007 prior to the listing of the Company’s shares on the London Stock Exchange ("LSE"). The options granted were disclosed in the pathfinder and the final prospectus and published in connection with the listing of the Company’s shares on the LSE Main Market. More details about the options can be found from the remuneration section of the Company’s annual report or from the Company’s annual accounts. Thereafter, no options have been granted to Non-Executive Directors, nor has the Company any intention to grant such options to Non-Executive Directors in the foreseeable future. The subscription period of the 2007 A options expired on 31 March 2012. Currently the Non-Executive members of the Board hold no stock options of the Company. Consequently, the Company determines Ms. Eileen Carr and Mr. D. Graham Titcombe as independent of the Company notwithstanding the options granted in 2007. The

UK Code provision A.3.1 states that the Chairman should, on appointment, meet the independence criteria set out in the Code, but thereafter the test of independence is not appropriate in relation to the Chairman. Mr. G. Edward Haslam, the former Chairman of the Board until 26 April 2012, was considered independent at the time of his appointment. Mr. G. Edward Haslam is determined as independent of the Company under recommendation 15 of the Finnish Code notwithstanding the options granted in 2007.

UK Code provision B 3.2: The terms and conditions of appointment of Non-Executive Directors:

All the members of the Board of Directors are appointed by the General Meeting of Shareholders. The term of the Directors shall end with the conclusion of the Annual General Meeting following the appointment of the Director. The annual remuneration payable for Board and Committee work and the basis for its determination are solely decided by the General Meeting of Shareholders. There are no contracts on notice periods, remuneration or any other terms of appointment relating to a person’s status as a member of the Board.

UK Code provisions B.2.1, C.3.3 and D 2.1: The terms of reference of the Board Committees

The Nomination Committee, the Remuneration Committee and the Audit Committee each have a written charter. Instead of the full texts, the essential contents of the charters have been disclosed according to the Finnish Code Recommendation 20 on the Company’s website.

UK Code provision D.2.1: The Chairman of the Board may be a member, but not chair, of the Remuneration Committee if he or she was considered independent on appointment as Chairman

The Board decided to reorganize the management of the Company as of 15 November 2012: the independent Non-Executive Director, Mr. Tapani Järvinen was appointed Chairman of the Board of Directors and Mr. Pekka Perä, who had chaired the Board as of 26 April 2012, was appointed Chief Executive Officer. Both appointments are of interim nature and in force until further notice and at least until the Company's operations have been stabilized following the gypsum pond leakage at the Sotkamo mine site in November 2012 and the events following the leakage. Accordingly, in these exceptional circumstances the Chairman of the Board has also chaired the Remuneration Committee as of 15 November 2012. The composition and chairing of each Committee is reviewed and decided annually by the Board in the organizational meeting following the Annual General Meeting.