Timminco tries to placate investors
ANDY HOFFMAN
00:00 EDT Wednesday, April 23, 2008
Under siege from skeptics and short sellers, Timminco Ltd. yesterday reassured investors about healthy shipments of solar-grade silicon to customers during the first quarter, but the update failed to buoy the company's battered stock, which skidded 17 per cent on unanswered questions about the economics of its "breakthrough" technology.
The Toronto company said its subsidiary, Becancour Silicon Inc., produced and shipped 100 tonnes of solar-grade silicon to customers during the three-month period at "average selling prices in excess of $60 per kilogram."
Timminco said "each shipment was tested by an independent laboratory and met specifications set by customers."
The news release did not provide information on Timminco's cost of production.
In the past, the company has said it is targeting between $10 and $12 per kilogram, less than half the cost of other solar silicon producers.
Robert Dietrich, Timminco's chief financial officer, declined to answer further questions.
In a voice-mail message, he said the company's news release provided "adequate information to understand the company's position."
René Boisvert, Becancour's Quebec-based president and chief executive officer, did not return calls.
Timminco was the top performer on the Toronto Stock Exchange last year, when its share price surged from roughly 40 cents to more than $20 after the once sleepy company stunned investors by saying it had developed a metallurgical process to purify commodity-grade silicon to levels high enough for use in solar cells, and won supply contracts with several unidentified makers of solar cells.
Last month, Timminco said it had signed a contract with Q-Cells AG, the world's largest solar cell manufacturer, to provide 410 tonnes of solar-grade silicon in 2008 and 3,000 tonnes in 2009 at "fixed prices."
Timminco's stock soon soared above $28, giving it a market value of more than $2.5-billion.
Timminco started up its new, 3,600-tonne-a-year solar silicon plant in the first quarter.
It has not provided earnings or revenue guidance for its new solar division.
However, in a recent report, CIBC World Markets analyst Michael Willemse estimated that once the company expands its solar silicon production to a projected 14,400 tonnes in 2010, the solar division could generate revenue of $652.3-million and post earnings before interest, taxes, depreciation and amortization (EBITDA) of $514-million.
For 2008, Mr. Willemse is estimating solar division revenue of $116-million and EBITDA of $84-million.
He rates the stock a buy with a $30 target price.
But short sellers and others are raising questions about Timminco's claims it has come up with a process to cheaply produce solar-grade silicon.
Timminco has said its process applies existing metallurgy techniques.
According to a patent application and information released by the company, Timminco heats commodity-grade silicon in a rotary oven powered by natural gas.
It uses chemical slag and stirring to remove impurities such as boron and phosphorous from the silicon.
A source who has done extensive research on Timminco's claims says the key issue is how many times the silicon must pass through the process to achieve the desired purity.
The company has not said what its energy costs are for each pass, how much slag is used or how much commodity-grade silicon is needed to produce one kilogram of solar-grade silicon.
"What's mystifying to me is why the company doesn't come out and say, 'This is going to all be water under the bridge in a couple of quarters, we're going to have fantastic earnings and we'll be vindicated,' " the source said.
Timminco's stock has lost 30 per cent in the past three days.
TIMMINCO (TIM)
Close: $18.23, down $3.92
Wednesday, April 23, 2008
Timminco tries to placate investors CIBC Says $30.00 Target
Tuesday, April 22, 2008
GMP Loads Up As Anonymous Dumps+Q-Cells backs challenged silicon supplier Timminco
Tue Apr 22, 2008 4:02pm EDT
FRANKFURT, April 22 (Reuters) - Germany's Q-Cells (QCEG.DE: Quote, Profile, Research), the world's largest solar cell maker, stood behind its Canadian silicon supplier, Timminco (TIM.TO: Quote, Profile, Research), which has recently drawn criticism about its operations.
Q-Cells Chief Executive Anton Milner told Reuters in an interview on Tuesday: "I sat down personally with the management to find out how they are doing, what they are doing and I had a very intensive discussion. We have a very high regard (for) the company and its management and what they've been able to achieve."
Timminco's stock fell C$3.92, or 17.6 percent, to close at C$18.23 on the Toronto Stock Exchange. The shares are off nearly 29 percent since Wednesday as questions mounted about the firm's silicon-purifying process.
A report in Barron's financial magazine questioned the company's claim that its technology can purify silicon for solar cells at a low cost, while the Globe and Mail newspaper reported that Wall Street investor Manuel Asensio, a short-seller with a reputation for bringing down companies, has also challenged Timminco's assertion.
Q-Cells signed a supply contract for directly purified metallurgical silicon with Timminco's subsidiary Becancour Silicon Inc (BSI) in March, which sees Q-Cells getting 410 metric tons this year and 3,000 tons in 2009, with prices fixed.
Q-Cells is negotiating a follow-up contract for up to 6,000 tons annually from 2010 to 2013, it said.
"The results that we have got on the Timminco product are with cell efficiency rates of well above 15 percent, which makes it a very interesting product, particularly given the cost of the alternative products," Milner said.
"The results on the sell side were positive and the product is very good and we are happy with the contract," he added.
Alternative products include polysilicon, whose prices have risen 20-fold in recent years as the solar sector began to compete with the semiconductor industry for the ingredient and supplies tightened.
Timminco has said it can purify metallurgical grade silicon at about half of what it costs its competitors. Last year, it shipped 89 tonnes of solar grade silicon to customers.
"With all technological developments there is risk. The largest risk is technology and they seem to have mastered that very well. There are normal ramp up risks beyond that, but those affect everybody," Milner said.
Q-Cells's Milner confirmed the company's outlook, which it raised in March after securing further silicon supplies.
Q-Cells expects sales to rise to 1.275 billion euros ($2.02 billion) this year and to more than 2 billion euros in 2009, while striving for a production volume at its core business of more than 1.5 gigawatt peak in 2010.
(Reporting by Eva Kuehnen, editing by Richard Chang)
(Additional reporting Jonathan Spicer in Toronto)
Tim:t "To doubt is easy," Mr. Sprott said in an interview.
Some Timminco brass cashed in early
ANDY HOFFMAN, JACQUIE McNISH, ANDREW WILLIS
00:00 EDT Tuesday, April 22, 2008
As TSX high-flier Timminco Ltd. hunkered down yesterday to defend its stock against bearish short sellers, at least one group of early investors had already pocketed more than $390-million (U.S.) by indirectly spinning off their holdings.
Safeguard International Fund LP (SIF), a private equity fund based in Wayne, Pa., and headed by Timminco's chairman and chief executive officer Heinz Schimmelbusch and Timminco vice-chairman Arthur Spector, transferred the fund's controlling interest in Timminco to another subsidiary company on March 29, 2007, according to regulatory filings.
That company, Amsterdam-based AMG Advanced Metallurgical Group NV, conducted an initial public offering on the Euronext in July. The IPO and subsequent stock sales provided proceeds to SIF and its senior officials, including Mr. Schimmelbusch and Mr. Spector, of more than $390-million.
"To the layman, it is a complicated structure, but to us, it was a very logical endgame for how to take this group of companies and get value for them for the limited partners," Mr. Spector said in an interview yesterday.
His comments came on a hectic day of trading for Timminco shares on the TSX yesterday.
The company's stock slipped 3.5 per cent on heavy volume of more than five million shares. Major shareholder Eric Sprott, whose Sprott Asset Management Inc. owns nearly 18 per cent of Timminco's stock, said his firm added to its position on the weakness.
"To doubt is easy," Mr. Sprott said in an interview. "What you get paid for in this business is figuring out if something is right early, while everybody else is doubting. That's how you make money."
Mr. Spector, who's also deputy chairman of AMG, said SIF, whose investors included the "usual suspects" of large U.S. pension funds, was reshuffling its assets and was due to expire next year.
SIF's reorganization, that transferred its Timminco stake to AMG, came within weeks of the Toronto company's stunning announcement on March 15, 2007, that it had won a contract to provide solar-grade silicon to a major solar cell maker.
The surprise contract was the initial catalyst spurring Timminco's meteoric ascent on the TSX, which saw its stock climb from roughly 40 cents to a recent high of more than $28.
Timminco said it had developed a metallurgical process to make solar-grade silicon at a cost lower than its competitors, which include well-established players such as Dow Chemical.
Ravi Sood, president of Lawrence Asset Management Inc., is among a group of short sellers who have been critical of Timminco's lofty valuation and said it is "very peculiar" that insiders transferred the stock and profited through its IPO.
"It is curious that the major shareholders have effectively been reducing their stake," Mr. Sood said. "It makes you raise your eyebrows."
In an unusual development, some investors complained of a dearth of available Timminco stock to short.
"There is no place to borrow Timminco stock," said one hedge fund manger that was trying to do just that yesterday. A number of fund managers said institutional investors that currently own Timminco, including Sprott, are refusing to lend their shares to investors that want to bet on a drop in price of the silicon producer.
Short sellers profit from borrowing shares from other investors or dealers, and selling the stock. The shorts then buy the shares back at a lower price and replace what they borrowed.
"Preventing borrowing doesn't change fundamentals from dictating the price of Timminco. It just stops the shorts from profiting on any decline," said one equity trader who covers hedge funds and other short sellers.
Until the transfer to AMG, Safeguard had been Timminco's controlling shareholder. In 2006, Safeguard added to its position after making a series of loans to what was then a cash-strapped producer of industrial-grade silicon, magnesium and magnesium extrusions.
For example, in September of 2006, while Timminco was working on its process to use metallurgy to make solar-grade silicon, Safeguard agreed to lend Timminco $3-million (U.S.) in exchange for the right to buy an equal amount of shares at 40 cents each.
At the time, Timminco had not publicly disclosed it was working on the solar silicon process.
On February 8, 2007, Safeguard agreed to lend Timminco $4.5-million (Canadian) for the right to buy an equal amount of stock at 42 cents a share.
Mr. Spector said Safeguard was aware at the time that Timminco was working on the project, but didn't know if it would win the contract with the solar cell maker.
"What is, is," Mr. Spector said.
TIMMINCO (TIM)
Monday, April 21, 2008
Timminco Ltd. is facing mounting pressure from one of Wall Street's most feared short sellers
ANDY HOFFMAN AND JACQUIE McNISH
Monday, April 21, 2008
It was the top performing stock on the TSX last year and a home run for investing guru Eric Sprott, but market darling Timminco Ltd. is facing mounting pressure from one of Wall Street's most feared short sellers to defend claims it has developed a breakthrough method for producing solar grade silicon.
Manuel Asensio, a flamboyant New York-based investor who boasts a trophy case full of corporate hides, is challenging the Toronto-based metals firm's assertion it can cost-efficiently purify metallurgical grade silicon to a level high enough for solar cell use.
By targeting Timminco, the controversial Cuban-born money manager has set a collision course with Mr. Sprott, whose investment firm, Sprott Asset Management Inc., owns more than 19 million Timminco shares.
Over the weekend, an article in financial journal Barron's raised many of the same questions about Timminco that Mr. Asensio has been asking.
Among them, how the company can claim its unique process allows it to refine silicon at half the cost of its competitors. Timminco's Quebec solar silicon plant began operating in December, but the company has yet to release detailed cost information for the new plant or its pilot trials.
Reached yesterday, chief financial officer Robert Dietrich said Timminco's contracts with several solar cell manufacturers, including the world's largest, Q-Cells AG, offer proof that the technology works.
Timminco has already delivered more than 89 tonnes of solar grade silicon to customers.
"They are very impressed. It meets or exceeds their specifications and it certainly meets their expectations. They're finding it to be material they can use. We haven't had any returned. We haven't had anybody not pay for it. We ship it and they pay for it and they're happy," Mr. Dietrich said.
Once Timminco's new plant is up to full capacity by the end of the second quarter, the company expects to produce 3,600 tonnes of solar grade silicon a year. It plans to expand annual capacity to 14,400 tonnes by mid-2009.
Timminco's claim it had developed a revolutionary way to purify silicon helped its stock skyrocket from 30 cents to more than $22 last year, generating massive returns for its major investors - including Mr. Sprott's firm, which owns nearly a fifth of the company. In the past 12 months, the stock has gained 490 per cent, giving the company a market value of $2.4-billion.
Demand for solar grade silicon is soaring. But it is expensive to produce. Attempts by companies such as Dow Chemical to develop cost-efficient ways to convert metallurgical silicon into solar grade silicon, with a grade of 99.9999 per cent, have been largely unsuccessful.
Timminco is spending about $87-million to construct its plant in Becancour, Que., while a competitor called Elkem AS is spending more than $700-million to build a plant with less capacity.
Mr. Dietrich says Timminco's costs are so much lower because its "admittedly simple" process is very different than Elkem's.
"There are a number of people who would read our patent applications and nod their heads knowingly and say, 'Yep, that makes sense.' They may not be people that are shorting our stock," he said, presumably referring to Mr. Asensio.
Short sellers such as Mr. Asensio borrow stocks from their owners and then sell the shares on the bet that they can profit by buying them back at lower prices. Last month he went public with his Timminco criticisms in an interview with the Business News Network. He has also spoken frequently with Globe and Mail reporters about Timminco's alleged shortcomings.
Mr. Asensio, nicknamed Demolition Man for his aggressive tactics, won't say when he began to bet against Timminco or how much he is wagering.
He has been chased off company properties by security guards and was once fined by the National Association of Securities Dealers for "misrepresentation" in one of his many lawsuits. He raised early alarms about such high fliers as dotcom darling Winstar Communications and onetime Canadian hot stocks such as Crystallex International Corp. and Biovail Corp.
Mr. Sprott first made his name as a stock spoiler in the 1980s by accurately spotting such troubled companies as Grandma Lee's Inc. and Geac Computer Ltd. He parlayed his short selling successes into his investment firm, which is preparing for an initial public offering that values Mr. Sprott's stake in the company at about $1-billion.
Timminco Ltd.
Friday's close: $22.95, down $3.20
SOURCE: THOMSON DATASTREAM
The Timminco story
The edge
Timminco said last year it had invented a way to affordably refine highly pure silicon for use in solar panels.
The new market
The solar panel business is booming. And the highly purified silicon sells for a higher price than the metallurgical-grade product that has been Timminco's mainstay for years.
The doubter
One short seller, who profits when a stock falls, is questioning Timminco's claim that it can produce solar panel silicon for far less than its competitors do.
