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 http://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 and B.1.1: 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 members of the Board 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. Consequently, the Company also determines Mr. Haslam, Ms. Carr, Mr. Niiva and Mr. Titcombe as independent of the Company notwithstanding the options granted.

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. This way of presenting has been considered a clear and effective way to make the essential information available to the shareholders.

UK Code provision E.1.1: The Senior Independent Director should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders.

In 2011 the Board considered that it would not be either practical or efficient for the Senior Independent Director to attend meetings with major shareholders unless such discussions were requested by shareholders.

UK Code provision B.6.2: Evaluation of the board of FTSE 350 companies should be externally facilitated at least every three years.

The Board of Directors has carried out a self-assessment of its performance. The results of the assessment are discussed by the Board and used in developing the Board work. The Company has over the last five years gone through the construction and ramp-up phases of its main asset, the Talvivaara mine, and continues its work towards the full steady-state production. Thus due to the current stage of development of the Company the evaluation of an external facilitator has so far been seen neither necessary nor reasonable.