October 16, 2009 / 1:43 PM / in 9 years

UPDATE 3-Timminco ups silicon production, stock soars

* To increase silicon metal production

* Will restart third furnace at Becancour facility

* Stock soars 34 pct to C$1.70 on TSX (Adds comments from Timminco executive, updates stock)

By Susan Taylor

OTTAWA, Oct 16 (Reuters) - Timminco Ltd TIM.TO said on Friday it will increase silicon metal production at its Becancour plant, the final stage of its return to full capacity after production was curtailed in April on waning demand.

Shares in Toronto-based Timminco, which said it will restart the third of three electric arc furnaces at its Quebec silicon facility, gained as much as 38 percent after the announcement.

As demand from its chemical and aluminum industry customers recovered, Timminco restarted Becancour’s second furnace in August and the first in late June.

Timminco also said it will recall 10 to 15 staff, which brings its headcount to 250, including management. At its peak in early 2009, the company had 350 employees when it was expanding its solar-grade silicon operations.

In May, the company temporarily laid off 172 unionized workers.

“We’re encouraged by the demand that’s being shown from our customer base, because that’s the underpinning of our company,” Chief Financial Officer Robert Dietrich said in an interview.

“And we continue to develop the market for our solar-grade silicon products, and hopefully the solar industry will also start to recover in the coming quarters.”

Silicon metal, used mainly in the chemical, electronics, aluminum, iron and steel industries, made up about 65 percent of the company’s silicon sales last year, with solar-grade silicon the remainder.

Timminco has developed its own method of purifying silicon metal into solar-grade silicon, used to make solar power cells, which it says is cheaper because less electricity is used in the purification process.

Shares in Timminco peaked at C$1.75 on the Toronto Stock Exchange on Friday before slipping to C$1.70, for a gain of 43 Canadian cents, or 34 percent. The stock has lost close to 60 percent of its value so far this year.

Of the seven analysts who follow the company, one has a “buy” recommendation, four have an “underperform” and two have a “sell” rating on the stock.

On average, analysts expect a third-quarter loss of C$9.9 million on revenue of C$19.7 million, according to Thomson Reuters I/B/E/S.

Timminco also said on Friday that it shipped 103 tonnes of solar-grade silicon in the third quarter, at an average price of C$39 per kilogram.

That includes an end-of-quarter shipment of 80 tonnes to a subsidiary of Netherlands-based AMG Advanced Metallurgical Group (AMG.AS), which owns a 47.9 percent stake in Timminco. That deal was worth about C$3.1 million.

“Our shipments in the quarter reflect the continuing difficult market conditions in the solar industry,” President and Chief Operating Officer John Fenger said in a statement on Friday.

In its second quarter, Timminco produced 243 tonnes of solar-grade silicon, but shipped only 34 tonnes, at an average price of C$39 per kilogram. It lost C$23.9 million on revenue of C$22.3 million in the three months ended June 30.

It is a sharp drop from first-quarter shipments of 131 tonnes of solar-grade silicon at C$58 per kilogram and fourth-quarter shipments of 424 tonnes at C$65 per kilogram.

“In this challenging environment, we have focused our efforts on meeting current market specifications for quality that would permit our customers to manufacture solar cells made from our solar grade silicon that are indistinguishable from cells made with polysilicon, through advancing our knowledge of ingoting and purification processes,” Fenger said.

$1=$1.04 Canadian Reporting by Susan Taylor; editing by Janet Guttsman

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