Timminco at risk as a ‘going concern’: UMG-Si sales plummet

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The plentiful and subsequently cheap polysilicon available for the solar industry is having a devastating impact on UMG-Si producer Timminco and its production arm, Becancour. Timminco’s problems have been exacerbated by the inability of Becancour to raise the purity-levels of its UMG-Si to enable wider adoption of the material. The company said in a statement regarding its third quarter financial results that the lack of demand for UMG-Si would continue into the ‘foreseeable future, thereby subjecting the Company to substantial liquidity risk and creating uncertainty as to the ability of the Company to continue as a going concern.’

“Our financial results for the third quarter continued to reflect the extremely challenging conditions of our markets, which have severely impacted the financial results throughout 2009,” said Dr. Heinz Schimmelbusch, Chairman of the Board and Chief Executive Officer of Timminco. “We are, however, experiencing improved demand for silicon metal products from Timminco’s traditional chemical, aluminum and electronics customers and have responded by restarting all three of our silicon metal furnaces. Based on these developments, we expect, in December, to produce silicon metal at capacity on an annualized basis.”

However, it is the UMG-Si issues that are of most concern to company. UMG-Si net revenues for Q309 were $0.4 million, equating to only 16MT of sales. This compared to sales of $15.6 million and 300MT in the same quarter a year ago, highlights the dramatic decline in demand.

Timminco has also been hit by the rapidly decline prices it can get for UMG-Si as pure-polysilicon overcapacity continues to build and spot prices continue to decline to below $65 per kg. The company noted that its average selling price for Q309 was $39 per kg compared with $62 per kg for Q308 and the average selling price of solar grade silicon shipped for YTD-09 was $48 per kg compared with $59 per kg for YTD-08.

Market analysts are continuing to forecast a decline in polysilicon prices through 2010 as more capacity comes online, though price declines are set to slow. However, UMG-Si is forced to be sold at a major discount to polysilicon, resulting in further downward pressure, which is difficult to absorb when demand remains extremely low.

Timminco’s net loss for the quarter was $18.5 million compared with a loss of $13.7 million for the third quarter of 2008. Losses at within its Silicon Group were $5.4 million.

Due to quality issues with its UMG-Si, Timminco has settled a claim with a solar customer regarding repayment of an outstanding deposit liability and accrued interest of $20.5 million through the issuance of 10.0 million Timminco common shares.

The company noted that it has also concluded negotiations with all solar grade silicon customers that placed advanced deposits against future shipments of UMG-Si in 2008, and who had claimed earlier this year that their contracts were terminated.

“We continue to make progress in our efforts to meet the higher quality demanded by our solar grade silicon customers in the current market environment where there appears to be a large supply of low-priced polysilicon,” added Schimmelbusch. “Ongoing refinements to our proprietary purification process and the development of ingoting techniques are advancing towards the goal of enabling our customers to produce wafers and cells with characteristics that are indistinguishable from those of wafers and cells made from polysilicon.”

Timminco did not give guidance on when the purity issues would be resolved.

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