March 17, 2010 / 8:31 PM / 8 years ago

Timminco suspends solar-grade silicon production

* Says weak solar industry to continue hurting results

* Stock drops 13.3 pct to C$1.11 on TSX

By Susan Taylor

OTTAWA, March 17 (Reuters) - Shares of Timminco Ltd TIM.TO dropped 13.3 percent on Wednesday after the company said it was suspending solar-grade silicon production and would not resume operations until customer demand recovered.

Timminco said after markets closed on Tuesday that it expects gloomy solar energy market conditions to continue hurting demand for its products and financial results in the foreseeable future.

The Toronto-based company has developed its own method of purifying silicon metal into solar-grade silicon to make solar power cells.

Depressed solar-grade silicon prices are one effect of a global slump in the solar power market, which is beset by tight project funding and an oversupply of panels and parts.

Timminco said its average selling price of solar-grade silicon in the fourth quarter fell to C$36 per kilogram from C$65 at the same time last year.

“With an uncertain future for the solar silicon business and an increasing focus on its silicon metal business, Timminco is not a clear fit for our clean tech mandate,” National Bank Financial analyst Rupert Merer said in a note on Wednesday that discontinued his coverage of the company. He previously had a C$1 target on the stock, which he rated “underperform”.

Timminco said that demand for its silicon metal is robust and evidence of an ongoing recovery from a downturn that hurt customers in the chemical, aluminum and polysilicon industries for most of 2009.

Full silicon metal production resumed at the company’s Becancour, Quebec, plant in November after the company laid off staff and shut down operations in May 2009 as customers terminated contracts.

“We’ve, in essence, sold out 2010. We have commitments for the majority of what we can produce,” Chief Financial Officer Robert Dietrich said of silicon metal in an interview.

“In the solar-grade silicon side of the business, we don’t have committed volume at this point in time for 2010 ... (but) we’re ready to participate in a market as demand arises.”

Timminco said it lost C$69.4 million, or 48 Canadian cents a share, in the three months ended Dec. 31, versus a year-earlier loss of C$1.3 million, or 1 Canadian cent a share.

The results included C$45.7 million in one-time costs related to restructuring.

Revenue tumbled to C$25.5 million from C$72.7 million.

Silicon metal sales of C$29.4 million were offset by negative solar-grade silicon revenue of C$3.9 million, as customers returned products shipped in previous quarters.

Timminco said it had C$1.2 million in cash at quarter-end and US$300,000 available through a revolving credit facility.

The company said it is in talks with Bank of America to mitigate liquidity risks resulting from a C$7.1 million inventory writedown.

Unless borrowing base calculations in its credit facility are revised, Timminco said it will have to repay about C$3.5 million under the credit agreement when its annual financial statements are finalized.

Shares of Timminco shed 17 Canadian cents to close at C$1.11 on the Toronto Stock Exchange on Wednesday. In the past five months, the stock has fallen more than 60 percent.

$1=$1.01 Canadian Reporting by Susan Taylor; editing by Rob Wilson

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