The Tellurium Supernova Has Erupted

In my previous article, The Tellurium Supernova, I discussed the rapidly expanding new applications of the extremely rare metal tellurium, and that looming global shortage of telluriumcould threaten the very survival of the red hot solar company, First Solar Inc. (FSLR), which produces solar PV panels based on the CdTe (cadmium telluride) semiconductor material.

The Tellurium Supernova article caused quite some disturbance on the internet. Not every one agrees with me. But I am happy that Mr. Free Market does seem to agree with me. The charts show that tellurium price staged an incredible rally since mid January, raising from 860 yuan to 2100 yuan per kilogram, or $300 per kilogram, a raise of 2.44 fold in less than three months. Tellurium went from $10 a kilogram in 2004 to now over $300. If such a stellar price rally does not indicate a severe global shortage of tellurium, then I don't know what does.

The Tellurium Supernova has erupted!

Does First Solar feel the squeeze of a tellurium shortage? Maybe not. At a conference last November, the CFOclaimed (22:58) "We have identified terawattslevels of tellurium availability." So the ultimate limit to the growth is one terawatts? No! The CEO proudly declared"Are there issues there that limit the ultimate size of the company? We think the answer to that is NO." Wow! I never knew that FSLR can grow without ultimate limit of size, even though they rely on a metal with extremely limited supply.

FSLR, as well as its dominant raw material supplier, 5N Plus Inc. (FPLSF.PK), repeatedly reassured people that it is not worried about tellurium availability and they are actively "managing it." But I noticed that it would NEVER divulge anything specific or anything quantitative when it comes to its tellurium supply. In multiple occasions, analysts, including Michael Molnar from Goldman Sachs, explicitly demanded specific and quantitative answers, but got only the vague go-around answers. Why is the company not willing to reveal any data on tellurium?

Fortunately, 5N Plus, the virtually exclusive high purity CdTe and dS supplier to FSLR, is now a publicly traded company and must file regular financial reports, allowing us to dig out some useful information. You can go to Sedar.com and search for "5N Plus" to find all 5N Plus regulatory filings. I think the 5N's Dec. 12, 2007 prospectus document is worth reading through carefully. It discusses a lot of details of the industrial use of high purity tellurium, and its relationship with FSLR. You might also listen to latest conference call. A few important things to note from the prospectus:

1. 5N Plus is the first to enter the market of high purity tellurium metal and compounds. It has years of expertise, large scale production capacity, and business relationship with tellurium sources. It is the world's dominant CdTe supplier and all dTe solar PV manufacturers purchase CdTe from them.
2. 5N Plus is a virtual monopoly in this niche market. The barrier of entry is too high for a second major CdTe supplier, and the market is too narrow to provide enough economic incentive for competitors to enter this small niche market and compete with 5N Plus. FSLR desperately wanted to diversify its CdTe sources but there is just no significant secondary supplier in existance in the world. It refuses to name the secondary supplier. Does it even exist at all? 5N already named all of its few potential competitors.
3. It is safe to say SLR gets virtually all of its dTe supply from 5N Plus. 5N Plus has plenty of production capacity, 100 metric tons of CdTe annually, and under contracts with FSLR, it is building a new Germany facility, bringing the annual capacity to 200 metric tons and eventually reaching 350 metric tons a year. Why would 5N expand if FSLR does not continue to heavily depend on 5N for supply?
4. 5N noted rapidly expanding industry demand on tellurium. It mentioned 300 metric tons of start metals per year for thermoelectrics applications (page 21). That number really strikes me. According to USGS, global tellurium supply can not be much more than 200 metric tons per year. Thermoelectrics usage of tellurium wasn't even mentioned a few years ago. Now that market alone consumes 143.4 metric tons of tellurium (48% of the Bi2Te3 thermoelectrics material is tellurium).

So we can pretty accurately estimate FSLR's raw material supply by looking at how much CdTe 5N is selling to FSLR. 5N refused to provide numbers in kilograms, but it gave a price range of C$300 to C$500 per kilogram during the Q2 conference call, and suggested in Q3 conference call that the price may exceed the top of the range now. So using $500 per kilogram, one can get some reasonable numbers. 5N also revealed that 60% of sales was to FSLR, and 65% to 70%.

Let me list 5N's quarterly sales revenue, as well as cost of goolds sold (in bracket) below. Note their fiscal year 2008 starts on June 1st, 2007. Q3,08 is the quarter ending Feb. 29, 08.

Q3,08 C$8.359M ($3.905M) OP. Margin C$4.454M

Q2,08 C$6.796M ($3.519M) OP. Margin C$3.277M

Q1,08 C$6.394M ($3.417M) OP. Margin C$2.977M

Q4,07 C$6.549M ($3.442M) OP. Margin C$3.107M

Q3,07 C$5.555M ($3.419M) OP. Margin C$2.136M

Q2,07 C$4.890M ($2.779M) OP. Margin C$2.111M

Q1,07 C$4.903M ($3.122M) OP. Margin C$1.781M

I noticed one curious thing. During the past quarters, even though the sales revenue saw some growth, the growth is not impressive at all. The cost of goods sold saw virtually no growth at all, while the operating profit jumps up rapidly!

Put it in a chart you can see the data more clearly. In the chart, blackis FSLR's rapidly ramped up quarterly production in MWs, red is 5N's cost of goods sold, blue is sales revenue, and green is gross operating profit.

Notice the gigantic contrast between how quickly FSLR's production ramped up, and how there is virtually no increase in 5N's cost of goods sold? Logically, as FSLR ramps up production, it needs to purchase way much more CdTe semiconductor material from 5N. Hence, 5N needs to spend more money to purchase the raw tellurium feedstock, not to mention the unit price of the feedstock raw material must increase dramatically as tellurium price went up a lot.

Something is not right here!

The rapid growth of 5N's gross operating profit, without much increase in the production cost, further enhances the logical wisdom that 5N enjoys an absolute monopoly in this small niche market of high purity CdTe supply, and hence can demand higher unit price as they see fit, while FSLR has nowhere to go but purchase the bulk of their CdTe supply from 5N.

My suspicion is FSLR is not getting all the CdTe it needs for its production. At 3 microns CdTe layer thickness, there's about 15 gramsof CdTe per 2 feet x 4 feet panel of 70 watts. Allowing for some production waste, 0.25 grams/watt CdTeis reasonable. FSLR produced 77 MW in Q4,07, that's a consumption of roughly 19.25 metric tons of CdTe. At over $500 per kilogram, that's worth C$9.625M of purchase from 5N. Add dS, which also came from NP, total purchase should be almost $11M for the quarter.

5N's latest quarterly revenue is only C$8.359M, and with 65% going to FSLR, that's C$5.433M. Split it into C$4.8M for CdTe and the rest for CdS, at over $500/kilogram, they sold about 9.6 metric tons of CdTe to FSLR. That's only about HALF of what FSLR would need!

From the 5N's cost point of view, about half of cost is salary, machinery and other fixed costs. Let's say C$2M of the C$3.905M cost in the quarter is on raw material purchase. SLR's portion takes 65%, or C$1.3M, tellurium price during the quarter probably averaged C$250/kilogram. So that gives 5.2 metric tons of tellurium, enough to make 9.8 metric tons of CdTe for FSLR, consistent with the above estimate, and inconsistent with FSLR's 19.25 metric tons requirement for quarterly production.

My conclusion, based on the best information available to me and the most logical and reasonable estimate, is that FSLR has already run into a raw material supply shortage due to the global shortage of tellurium. It is either now producing from the raw material inventory, or it probably booked quarterly sales but really could not produce and deliver the quantity of products it sold. Later this year and next, when its new Malaysia factories start production, I really have o idea how it is going to get the tellurium supply it needs.

I contacted SLR investor relations and raised the CdTe supply issues more than a month ago and asked for a clarification, and never got any response. I am hoping that FSLR can come out and clarify how and where it is getting its critical material supply, how much it has secured, and how much they need. Of course, if there really is a shortage, the investor community has every right to demand that the FSLR management disclose the information fully and publicly, as soon as it knows it, as required by the SEC regulations.

Disclosure: The author is heavily invested in the stocks of PAL and SWC but holds a small short position in FSLR since April 4th. I plan to add to my short position when the time is right.

Comments

[Andrew Ling:]

About time you came up with a better idea than shorting FSLR Mark, lol. I've been following 5N Plus since it's IPO and would probably buy some if not for the fact that I'm not allowed to buy stocks on the CAnadian exchange on margin. 5n Plus would have to appreciate twice as much as FSLR for me to make the same amount as I'm still fully margined on FSLR.

2008 Apr 11 04:48 AM

[Andrew Ling:]

The other problem is there is virtually no info available on 5N Plus. I dont even know how many shares are outstanding.

2008 Apr 11 04:50 AM

[Piggybank:]

Well i hold a quite fair psition in 5N plus since januari, and i like the company a lot, it has much going for it in these circustances and it is doing really well. As you mentioned, 5N plus is about the only one doing what it does, a monopoly position wich it will be able to profit from a long time, prices for materials that they can set themselfs, and rapidly increasing production. it is also in some other very inovative markets with superior technoligy, and they will start to produce high quality CIGS soon to.

Then again chinama... errr Mark. Several thing's still raise questions with me concerning this. First of all tellirium isn't exactly scarce on the earth, it is just not extracted much yet by the copper producers, but one could think that at certain prices it would become interresting, and that this price might not have to rise that much for it, as well there are clearly already company's extracting it. Maybe FSLR's comments point to the fact tat if needed, more tellirium can be extracted.

Another thing that also deffinatly raises questions with me is the amount of raw material inventory both company's have. Both 5n plus and FSLR have constant rising raw material inventory's. Not only in the last quarter, but also in the quarter before when FSLR's revenue's doubled.

wel many other questions pop up with me. How much cdte does FSLR use per panel and can it change the needed amount in the future, or ramp up the effeciancy of their panel for the same amount of CDTE used? Can FSLR make CDTE for themselfs if needed? Can VNP make CdTE with less TE? Is an increase in TE production in development? Can FSLR outweight rising CdTe prices with technoligy effeciancy?

In my oppinion, this is deffinatly speculation, its just very hard to tell how much FSLR can be affected by this. Don't get me wrong, it's quite interresting speculation that should lead to a nice discussion. I can definatly vouch for you on this board that you are a smart and capable analyst, and youre predictions on PAL, SWC and TE prices back in januari were bang on the money. And this is comming from a person that is not nessecarily in agreement with you on this specific issue, or atleast on how far reaching it is.

2008 Apr 11 06:58 AM

[Mark Anthony:]

PiggyBank:

We can have nice discussions without necessarily agreeing on things. Neither VNP nor FSLR is willing to reveal specific information on their tellurium supply, so any outsider can only speculate, but my speculation is logical and reasonable based on all publically known information.

Tellurium IS scarce on earth. It's on books of geology science so do not try to dispute it. It is true that currently the extraction efficiency of tellurium from copper mines is only 33%, so there is some room for improvement if there is enough economic incentives. But tellurium price already went up almost 30 fold from 4 years ago and we have not seen dramatically ramped up tellurium production yet. Why do you think copper mines will be interested in doing anything to extract more tellurium any time soon, if a 30 fold increase of price is still not incentive enough to them?

According to Professor Martin Green, in average, out of one ton of copper, there exists 100 grams of tellurium, and ultimately 33 grams is extracted using existing technology. One ton of copper is worth $8800, the 33 gram of tellurium, at today's price, is only worth $10, which is nothing compare with the $8800 main stream copper revenue.

Tellurium price will have to go up another 100 fold, bring the tellurium portion up to $1000, compare with $8800 for copper, for there to be some interest to try to get more tellurium out.

But my estimate is if tellurium price triple or quadruple from current price, it will be enough to kill FSLR as a business.

2008 Apr 11 09:58 AM

[Piggybank:]

Well i rather thought that there were copper mines who just didn't extract the tellerium that they otherwise could because they didn't find it interresting enough. But i'm not skilled enough to talk geoligy neither.

talked it over with others though, and there was one big argument i didn't mention yet, and this argument made a lot of sense with the "collegue's". namely that one of scale:

Fslr revenue's: roughly 200 million $
Fslr profit: roughly 62 million $

VNP revenue: roughly 8 million $
VNP profit: roughly 2 million $

It's like to say with te words of one collegue i would call "the ultimate hedgehog" that it's like comparing the Titanic with a tugboat, although in that fact titanic was a bit badly chosen allusion and we changed it to oil tanker and then we had a discussion as to what an iceberg could do to an oiltanker ... Anyway, it's kinda a drop in the bucket if you consider that from the 8 million $ VNP earns about 6 million $ comes from FSLR, and that aint all that much on a total cost of revenue of about 93 million $ for FSLR. And this is for the most recent quarter when Te had already risen as you noted. Consider that for sell/general/admin expenses FSLR had 3 million $ costs less than last quarter while having rising revenue, enough in that aspect alone to offset these rising Te prices.

consider then that still their raw material inventory's of both company's are rising. you might argue they are hoarding but then the Te price is a bit overprized now and and the hoarding has very few effect on their EBITDA.

this should IMO ultimatly schatter youre argument that "if tellurium price triple or quadruple from current price, it will be enough to kill FSLR as a business." Te seemingly already tripled and it didn't hurt FSLR by a bit, the difference is scale is just to big. For the tripling of Te's price VNP didn't realy ask much of a premium for it's CDTE. Sure it ask what, 1 million $ more from FSLR at the moment? There is still 60 million $ profit for FSLR to go trough. And this rough 1 million $ more paid to FSLR also includes most probably a larger volume of CDTE sold, afterall from the company's balance sheet one can see that their production assets have rizen in the last quarter, by a fair bit to.

The difference of scale is just to big. Atleast more than big enough to push this "issue" much further down the agenda in the future, it's hardly an issue now, you have been posting on this since januari and last FSLR's figure's didn't show anything of a problem in this regard. I doubt shorting FSLR for ths issue alone is a wise choice. Atleast not now.

2008 Apr 11 12:02 PM

[frflyer:]

What I find interesting about this whole tellurium availablility discussion is the idea that FSLR will be the only user of Tellurium.
If you have read the article in Scientific American called Solar Grand Plan, they propose using cadmium telluride solar cells in concentrating solar power plants in the U.S. southwest.

Scientific American A Solar Grand Plan
www.sciam.com/article....

From what I've been reading about solar power plants, it appears that solar thermal plants are a better idea for this proposal, and in general. The proposal advocates using both solar thermal and concentrating Pv power plants.
But their emphasis is on concentrating PV. It you look at the progress already being made with solar thermal in California, Arizona and Nevada, you'll see that small but significant steps are already being made. Green Wombat has a bunch of stories about this.
blogs.business2.com/gr.../

I had already read your articles about the possible lack of supply of telllurium, when I read the SciAm article.
All I could think is, where do they think they are going to get enough tellurium, if it already may be an issue with just FSLR's demannd? The SciAm article shows what is possible with solar, but I think the specifics need to be rethought.

www.ecogeek.org/conten.../
"Using mirrors to focus the sun's heat on one of any various heat-to-electricity converters seems to have separated itself out as being the cheapest form of solar power."

Also their idea to use caverns filled with compressed air to store energy for nightime power generation is interesting, but other methods, like using molten salt to store the heat are probable better, with less impact on the ground near the plants. Molten salt only loses 1% of it's heat in a day, so it is very efficient at storing energy.

From Ausra solar's website:
"All of America's needs for electric power – the entire US grid, night and day – can be generated with Ausra's current technology using a square parcel of land 92 miles on a side. For comparison, this is less than 1% of America's deserts, less land than currently in use in the U.S. for coal mines."

"Solar thermal power plants such as Ausra's generate electricity by driving steam turbines with sunshine. Ausra's solar concentrators boil water with focused sunlight, and produce electricity at prices directly competitive with gas- and coal-fired electric power."

And now Abu Dhabi is investing billions in solar thermal power plant company Torresol. Check out what Green Wombat has to say.

The irony is too rich to leave unsaid: A leading oil producer invests billions in carbon-free energy while a leading consumer of fossil fuels - the United States - continues to subsidize Big Oil while while offering only tepid support for green technology."
"It is inevitable that climate change will foster the rise of renewable energy - the only question is which countries and companies will profit from the new energy economics. It is entirely possible that the U.S. will trade energy dependence of one kind - on Middle East oil - for another - on Middle East and European solar technology - in the era of global warming. It’s no coincidence that most of the solar energy companies with contracts to build utility-scale power plants in California and the Southwest have overseas roots - Ausra hails from Australia, BrightSource was founded by American-Israeli pioneer Arnold Goldman, Solel is based in Israel and Abengoa is headquartered in Spain."

We better wake up quickly in this country. The current proposal going through congress to renew alternative energy tax credits calls for spending $6 billion over 6 years. Meanwhile, one estimate is, that we give oil companies $80 billion annually in tax credits and subsidies. The Iraq war is costing us $6 billion every two weeks, and we can barely find the political will to ok this penny ante subsidy bill for alternatives.

2008 Apr 11 01:53 PM

[justcommenting:]

Piggybank,

I'm not an expert on this issue by any means, but I've enjoyed your discourse with Mark.

I agree with you that even if Te prices were to rise 3 to 4 times, that would probably be a drop in the bucket for FSLR in terms of their raw materials cost.

However, in support of Mark, Te is a rare element irrespective of the price/kilo. Even if the price of Te went up 4 times, according to Mark, the mining company would only get $40 of Te for the $8800 in copper it could get. I don't think that's enough of an incentive for a mining company to start mining for Te. (As Mark mentioned, the Te proce would have to increase in orders of magnitude for the miners to look at getting more Te, at which point the price would significantly affect FSLR's production costs)

This gets me to my main point which is that even though FSLR could pay for more Te at a higher price, there just may not be enough of it to meet FLSR's demand, irrespective of price. That might hamper FSLR's ability to grow at the rate it projects. (which I think is one of Mark's original points) I'll leave it to Mark to estimate how much Te is available and how much FSLR needs to meet its growth targets, but from a 30,000 feet point of view, that seems to me to be the concern for FSLR going forward.

With a P/E ratio as high as it is, FSLR is richly priced and will need to meet or beat all of its forecasts in order for people to sustain the stock price or push it higher. Any sign of weakness or lowered growth forecasts and this stock probably tanks to more reasonable P/E ratio.

2008 Apr 11 01:59 PM

[User 161473:]

Mark,

Great Article!

I have a question for you. How does thin film efficiency hold up over time vs. silicon cells. I have heard over time (epecially in very hot climates) thin film warps and the efficiency goes down. I would appreciate any thoughts on this.

Thanks

2008 Apr 11 02:18 PM

[Shyam:]

How in God's green earth are you equating VNP's COGS in a given quarter to FSRL's MW sales in thar same quarter? How are you positing any relation between the 2? Do you not understand the lag factor in a supply chain? And have you heard of stockpiling a raw material? It's a common practice in industry. The numbers behind your grand conclusion are based on entirely faulty premises.

Well, there goes the supernova, folks.

2008 Apr 11 04:04 PM

[zawy:]

Great comments frflyer. I agree that using thermal solar plants might be more practical (no limit in indium and tellurium) and cheaper. But it really needs desert-like conditions and distribution since the curved mirrors need to stay clean and because of the complexity of the oil-to-water heat exchanger, tubes, tower, and turbine. This means at-home amorphous 100 micon silicon could still compete on a massive scale since CIGS and CdTe can only play a part (like wind) due to material constraints keeping them down to about 1 TWpeak combined (100 to 300 GW 24-hour net, enough for 15% of U.S. needs but spread out worldwide). At-home amorphous units would have a nice "independent" appeal in addition to saving a lot of distribution costs. But it would be nice if people could use 1 sq ft of mirror to provide 150 W of halogen-bulb equivalent light during the day. Using mirrors on the north side of the house to reflect light into windows would be a 80% conversion of sunlight energy into heat (double-pane windows and the mirror itself reflect about 20%). For most houses, simply having a silver roof with an air-gap in the summer and an internal black absorber in the winter would save more energy than a solar cells could produce year-round in a cloudy area. But i don't know how it could be reasonably implemented. Rotating 500 pounds of dirt-dessicant in and out of the sun for drying (and cooling the roof) combined with two cardboard window water-evaporator units and an attic fan can lower in-door temperature 15 degrees below ambient even in high-humidity areas like Mississippi, and not just Arizona and Nevada (they don't need the dirt-dessicant to dry the air).

2008 Apr 12 10:08 AM

[zawy:]

I forgot to mention energy storage. If supercapacitors do not pan out soon enough, flywheels are worth looking into. I bought BCON at $1.1 a share. In large-scale production, a $5,000 flywheel the size of a small hot-water heater can store enough energy for days for a solar-cell house. Carbon composite has changed everything in the old world of flywheels. In 5 years carbon nanotubes will cost $4 a pound (the current 5-year trend) and this could make flywheels a super technology in 10 years, keeping up with supercapacitors. There is a theoretical basis for this: as nano gets here, the mechanical and electrical worlds have equal potential.

The short-term for BCON is california needing to even-out the power grid voltage swings. After that, there's a lot of wind farms that need their output evened out.

2008 Apr 12 10:23 AM

[Dino N V:]

Materials for Solar Photovoltaic Cells II: Tellurium, Not So Rare After All

www.resourceinvestor.c...

2008 Apr 12 01:22 PM

[johneeeeee:]

i still dont know why anyone would want to buy a company like this when they could buy a company like dryships(drys) with a p/e of 3.5 and a dividend

[COMMENT EDITED TO REMOVE ABUSE]

2008 Apr 12 04:46 PM

[zawy:]

Dino, that article is correct: there's no tellurium shortage. There will easily be 1,000 tonnes/yr in 2012 when FSLR is producing 5GW/yr. Right Mark Anthony? Right?? ;) You know what i mean. Keep the faith.

2008 Apr 12 07:19 PM

[User 162922:]

Not directly related, but Marc Antony had talked much about palladium recently.

www.resourceinvestor.c...=

2008 Apr 13 11:06 AM

[jonnoarmo:]

Very interesting article Mark I wish you would have talked more about VNP though.

VNP has a monopolistic hold on the Tellurium metals market and are the largest supplier of the refined metal to FLSR. Some worries that you brought up in the posting are whether there is sufficient supply of this material available to FSLR and other users of it. This is yet to be seen but I would argue that there is sufficient material available. VNP is slated to open an additional manufacturing facility by the end of July in Germany to further provide for their customers because the demand is so great. This is already known and should be reflected in both stocks. However, there are more forces at work that have not been factored into the stock prices of each. More so for VNP than FSLR. Jim Cramer, despite his antics, is very bullish on the FSLR play. He fully endorsed FSLR two weeks ago on CNBC and that he would continue to talk about out it (pump it) throughout the year. To come out and make such a bold statement would require some serious homework of which would uncover whether FSLR has sufficient supply of Tellurium or not. Analysts on the street have probed both management teams of FSLR and VNP and have been reassured not to worry on shortage or supply issues of the material to meet demand and production. If the analysts cannot come up with any dirt (and they have the brains and the resources to get as much information possible) and if Cramer has done his homework (which I believe is safe to say in this case, YES) then the dynamics for VNP (with its monopolistic position as FSLR affiliation) are exceptionally bullish. Any wind of problems would quickly lead to a downgrade on FSLR. Just think about it. The hottest solar stock out there, covered by the major brokerage houses, if they uncovered anything, what a short that whould be. Forget about us, for them!!! VNP also continues to put out great numbers. They just reported record 3Q earnings, and a second round of bought financing (4 million shrs @ $11.55 CDN) which was pitched to both U.S. and Canadian investors. It would not take much for this stock to start FLYING if it only got some exposure in the media. I agree with Mark that anyone interested in VNP should definitely check out 5N Plus' prospectus, it has to be one of the hottest solar stories out there. Oh, and they are and have been profitable for a while. How many solar plays do you know turning a profit?

There has been a lot of press lately on FSLR and I believe it speaks volumes on VNP’s potential.

seekingalpha.com/artic...

online.barrons.com/art...

Both articles are extremely bullish on FSLR. Once could treat VNP as a call option on FSLR!!! FSLR May $270 Call Option went out at $29.20 Friday where VNP went out at $12.

With FSLR you area paying up the rear for volatility, I mean this stock can have a $20 trading range in a day no problem. At the end of the day, they take on the risk of performing and managing expenses. Any hit to earnings for this play and you could see a rapid deterioration in the stock price. With VNP you are betting on a relatively unknown company with a monopoly in the market place. Rapidly expanding, just completed a round of bought financing to fuel that growth, and the management has not sold out. They are also divesifited across other industries, and hey, im sure in such a tight market for this stuff there are several companies out there that would be happy the supply off FSLRs hands.

You really need to look into this company to understand what a great play it is.

VNP is a company with a real story, profitable, experienced management team, diversified, with the dominant position in the Tellurium market.

2008 Apr 13 03:55 PM

[Dino N V:]

Can recycled Tellurium become highly purified to the 5N level? Anyone know how much refined / recycled Tellurium that Umicore provides to the market each year?

www.preciousmetals.umi...

2008 Apr 13 08:30 PM

[Dino N V:]

But is it at least 99.999 or at least capable of becoming 5N with further refining??? Anyone know???


Tellurium

Tellurium is a rare element, obtained
mainly as a by-product of copper and lead
metallurgy and is then recovered mainly
from electrolytic slimes. Tellurium is used in
rubber vulcanisation and catalysts, as well
as in metallurgical applications.
Umicore Precious Metals Refining has an
annual production capacity of 150 tonnes.

www.preciousmetals.umi...

2008 Apr 13 09:00 PM

[Piggybank:]

Wel as i said im very bullish on VNP and hold a conciderable position in it. And i would like the extra exposure but it doesn't have to be to open, it's a wonderfull play and i'm pretty sure ill make a load on it.

Umicore doesn't have the tech that VNP has iirc, not by far. And it's less of a "pure play" in this regard, and VNP is expanding side by side with FSLR.

2008 Apr 14 12:30 PM

[Jack Satan:]

Mark - did you read those financial statements that you referred to? Allow me to paint a picture using direct quotes from First Solar's 10K and 5N Plus' Prospectus (available at Sedar.com)

First Solar 10K - Our total material cost per solar module has been stable over the past three years, even though the cost of tellurium, a component of cadmium telluride, increased by approximately three times from 2003 to 2007. The increase in the cost of tellurium did not have a significant impact on our total raw material cost per solar module because raw tellurium represents a relatively small portion of our overall material and manufacturing costs. Historically, we have not entered into long term supply contracts with fixed prices for our raw materials. Starting in 2006, however, we entered into multi-year tellurium and CadTel supply contracts in order to mitigate potential cost volatility and secure raw material supplies.

Slightly further down (in the same 10K)

We purchase raw materials for inventory, services and manufacturing equipment from a variety of vendors. During the normal course of business, in order to manage manufacturing lead times and help assure adequate supply, we enter into agreements with suppliers that either allow us to procure goods and services when we choose or that establish purchase requirements.

Followed by a table of Contractual Obligation... Excerpt - (in thousands)
Purchase obligations (Total) 430,505 (Less Than 1 Year) 125,460 (1-3 Years) 161,107 (3-5 Years) 143,938

From 5N Plus' Prospectus -

We can also experience variations in our sales depending on the volume of material that we need to purchase to generate revenues, as we also offer custom-refining services, or “tolling”, to our customers, who provide us with the raw materials free of charge. In this latter case, our revenues are associated only with the refining services provided and do not include the raw material component, leading to a corresponding reduction in sales.

Further down in the same Prospectus -

Our gross profit margin increased to 46.6% from 36.3%. The significant increase in gross profit as a percentage of our sales is attributable to a general improvement in efficiency, scalability, production throughput and an increase in our custom-refining or “tolling” volumes, thereby increasing our gross profit margin.

And again...

We also provided more custom refining services (“tolling”) in 2007 than in 2006, for which our cost structure does not include any raw materials.

Now lets tie together all these thing which are actually in the documents, rather than vague speculation, and figure out whether the world is about to end...

It seems to me, starting back in 2006, First Solar felt it necessary to secure future availability and price stability of Tellurium (I know this because that is what they said). Exactly how much future availability First Solar contracted for is not completely evident since they do not specifically break out the numbers for CdTe from other raw material. However, it should be noted that they have raw material contracts for over $430 million - by itself enough to buy out nearly all the Tellurium production in the world for the next five years according to Mark's figures... My speculation (and I am laying it out as such - this is an educated guess, and I welcome anyone who may be knowledgeable on the subject to posit a logical disagreement) is that the vast majority of First Solar's $430 million in future contracts is specifically for CdTe. I base this assumption on fact that by First Solar's own admission, CdTe is "The key raw" for which they have numerous disclaimers in their 10K of potential disruption... They do not seem to have any major concerns about the future availability of glass, so it seems unlikely to me that they would have entered into such massive long-term contracts for readily available material which is decidedly "not critical".

Further reading into the "facts" explains a lot of you confusion... Since First Solar does not purchase CdTe from 5N Plus, but rather has long term contracts with mining concerns. 5N Plus has not recognized an increase in their "cost of goods sold" as you have noticed because they have not been buying ANY Tellurium for First Solar (they have been purchasing it for their radiation market, but that is a separate issue) since First Solar provides the raw materials, and 5N Plus simply changes a feed to process it ("tolling").

Finally, to really put the nail in the coffin, First Solar entered into most of these raw material supply contracts in FY 2007, since if you look at the same chart detailing long term contracts of more than a year in the 2006 10K you find just over $20 Million in contracts... that jumped to more than $430 Million by YE 2007. So connecting the dots, First Solar entered into contracts for the supply of raw materials of over $410 Million during the year of 2007, a time when the price of Tellurium was, on average, less than $100 per Kg... making a wide end number for total contract purchases (if all of their long-term contracts were for CdTe) of as much as 4,000 Metric Tons of Tellurium. (Note: I don't think it is likely they contracted for quite that much, but it does give you a figure of just how well positioned they might be...) But irrespective of the exact figure of just how much Te First Solar actually purchased, down to the gram, it is obvious that they certainly contracted for a very substantial quantity. Which leads to the final point... why is the market going through the roof now? Maybe it is because last year First Solar bought out the vast majority of the excess capacity in the market for the coming five years...

In conclusion, a short Q & A

Is it possible that there is a short-term shortage of Te in the market due to First Solar's massive contractual stockpiling? Sure.

Does that in any way hurt First Solar? Absolutely not.

Why not? Because First Solar has already contractually purchased thousands of Metric Tons ("terawatts") worth of Te. Does this shortage in any way HELP First Solar? Absolutely.

How does this help First Solar? In two ways, 1) during the coming five years if First Solar bought up as much of the excess market capacity as it seems, it can make it much more difficult and expensive for a potential large scale CdTe competitor to enter the market, and 2) a substantial and prolonged shortage of Te is simply put the best way to promote and encourage investment and innovation in better mining and extraction techniques... Techniques that will likely be just picking up steam in about five years from now, when First Solar's long-term contracts begin to expire.

2008 Apr 14 04:43 PM

[Andrew Ling:]

Good response Jack. I've read similar responses from about 10 different people "Marc Anthony" just ignores them all and continues to blab. As you said FSLR has stated that Te supplies are not a constraint issue and that there are adequate supplies available for terrawatts of production. Marc Anthony responds by calling them liars. I think I'll trust FSLR management over some guy that shorted FSLR at $80 and covered at $250.

2008 Apr 16 10:34 AM

[Mark Anthony:]

Jack:

You wrote a comment that spans almost three pages. I haven't time to debate all your points one by one yet. If I do I need to write a whole new article to do it. But let me clarify a few points:
1.In VNP's latest conference call, some one asked for a breakdown what percentage is regular CdTe sale and what percentage is tolling. The answer is there is essentially NO change of the mix of tolling/none-tolling, the mix is about constant in the last few quarters. So you can't have a significant increase in tolling, without also an increase of non-tolling sale, if the relative percentage mix is a constant. The raw material cost for the non-tolling part hasn't increased in any significant way, so neither will the tolling portion. They just raised the tolling fee that's all.

2.VNP is selling CdTe to FSLR at well over $500 per kilogram. If you consider that the average cost of tellurium during the quarter is probably $250/kg, accounting for about $133/kilogram in the total sales price of $500/kilogram CdTe. So the bulk of the price tag is cost of high purity processing and VNP's profit margin. So FSLR either purchase the non-tolling CdTe from VNP at $500/kg, or provide their own tellurium and pay a tolling fee of $367/kg. The total cost to FSLR is the same and the profit of VNP is the same. Using tolling cost of $367/kg for FSLR, and total CdTe sales to FSLR only $4.8M, even if half of the sale is tolling, it only brings the total tons of CdTe sold up to 11.3 tons, still far short from what FSLR would need for the quarter, 19.25 tons.

3.Why don't you guys try to contact FSLR and try to get an answer. They should know it all and provide a definite answer. Why are they so quiet on the issue? I emailed them to raise the issue long before I write this article, they never responded.

2008 Apr 16 07:29 PM

[msd10004:]

To help understand the amount of Tellurium (Te) used in PV production as well as the available supply of the mineral, these sites are helpful.

Tellurium (Te) and cadmium (Cd) are combined (CdTe) in the production of thin film PV devices and have been used in thin film PV production since the 1980’s because of their unique properties. There are a couple of useful resources that shed some light on Te usage in PV production. According to a comprehensive study by Fthenakis and earlier work by Moskowitz “The Life Cycle Impact Analysis of Cadmium in CdTe PV Production”, CdTe is deposited on a thin film substrate using electrodeposition, chemical surface deposition, and vapor transport deposition. FSLR reports in their 10K that they employ a proprietary vapor transport deposition process for CdTe PV production.

A thin film of CdTe is deposited on a substrate at a thickness of 3 microns. According to the Fthenakis and Moskowitz, back in the 1980’s, a 10 megawatt (MW) PV facility employing vapor transport deposition of CdTe uses 3,720 kilograms (kg) of CdTe to achieve a10% efficiency at 3 microns. A one-one bond of CdTe with an atomic weight of Cd at 112.41 and Te at 127.60 suggests Te comprises 53% of the weigh of CdTe. With 3,720 kg of CdTe used at 10MW, the amount of Te used is estimated at 1,978 kg or 197.8 kg/MW. This equates to about 19 tons of Te for 100MW PV production.

The electrodeposition CdTe process using a mixture of cadmium sulfate and tellurium dioxide used 880 kg of tellurium dioxide, which amounts to approximately 696.8 kg of Te for 10 MW PV productions. The electrodeposition CdTe process would equate to about 69.7 kg of Te per MW. For a 100 MW PV production approximately 7 tons of Te are consumed.

One would assume the PV production process would improve significantly from the 1980’s and the amount of Te consume would decline with improving efficiencies. This would suggest that FLSR at 200 MW PV capacity in 2007 would consume somewhere between 14 and 38 metric tons of tellurium. This figure is closer to10 tons per 100 MW (100 kg/MW) estimated from your research.

As far as Te production is concerned we have found Te production estimates ranging from 132 metric tons (MT) to 300 MT per annum. In a National Renewable Energy Laboratory (NREL) report Assessment of Critical Thin Film Resources in 1999 estimated Te production between 200 and 300 metric tons per year in 1997 and they indicated under utilization of tellurium production capacity.

With annual global Te production at 300 MT (300,000 kg) Te production and FSLR using 80% of the Te production, capacity of PV tops out at about 2,400 MW (2.4 GW).

The U.S. electric energy usage in 2006 was 4,059.91 billion kilowatt hours (KWH) which translates into 463,460 MW (divide 4060 by 365 days x 24 hours). So without significant investment into research and development for PV FSLR could be constrained at 2,400 MW representing only 0.5% of the U.S. electric usage in 2004.

If this is helpful it is part of a post from Green Econometrics

2008 Apr 16 07:33 PM

[Andrew Ling:]

FSLR didn't respond to you? What a shock. Maybe you should go straight to George W. for a response then? Most companies aren't in the habit of responding to loons unless they have a team of dedicated customer service professionals located in India to do so.

2008 Apr 18 07:03 PM

[greencapita...:]

mark, fslr is expanding into north american market with their so.california plant. looks like a massive 730mw deal with 22mw pilot.

i suppose they are also looking onto another 1gw entry into north america.

with 2gw committed already + 2gw coming in, there seems be no shortage of any demand + fslr monster push into per wattage cost coming onto main levels looks like the monster company is for limitless growth.

am i missing something. this baby might even go 1000 bucks if they announce another 4gw entry into 3 to 5 projects. you add to that china and india, the potential looks limitless.

2008 Apr 19 01:33 AM

[Mark Anthony:]

GreenCapitalist:

I never claimed that FSLR is short on the demand side. Their production capacity for the next few years have already been fully booked into existing sales contracts. They have no spare capacity to expand into the North America even if they want to. But they are severely short on the SUPPLY side, tellurium supply. That's worse than demand shortage.

You surely are missing something. Don't you wonder why they haven't announced any new contracts for a long while now, and the insiders are selling like crazy? They can have as many new customers as they want, but they don't have any production capacity to satisfy new customers.

Then don't you wonder why they have not announced any new factory plan for over a year now? There is still plenty of land available in Malaysia. They can build more factories adjacent to each other, all the way to the seashore!

Because they know they don't have the tellurium supply to expand new production capacity. They announced 4 new Malaysia factories last year. But we haven't heard about any progress on the construction of the four factories so far. I suspect not all of them will be constructed after all.

Each factory would cost $150M at original estimate, and now estimated at $180M a piece due to cost oevr-run and inflation. They need $720M in cash to pay for the cost, plus some more for production startup cost. They will need $800M. They did one secondary offering in last year getting a total of $400M. They are still short of $400M, and so far they still have no indication they will do an additional secondary offering to get the cash, why? Even the existing $400M hasn't been spent much if you look at their latest balance sheet. Have they abandoned some of the Malaysia factories? Why the money hasn't been spent yet, when the first factory should already be finished by now?

Why FSLR hasn't responded to me? I personally reported the CFO to SEC on his terawatts tellurium claim. Shouldn't that be enough to make them jump and send a lawyer to me immediately? Why don't you, Andrew Ling, contact FSLR and find out how they would respond to my articles? Why don't you ask them to provide specific data on the quantity of their tellurium supply?

I don't even currently hold any FSLR short for now. I am heavily in PAL and SWC on the precious metal play. I am hoping they run FSLR price up and I have in vested interest in seeing FSLR fall at this time. But truth must be told, and must be researched by all concerned parties in FSLR. Why is FSLR so secretive on their tellurium supply?

2008 Apr 19 07:39 AM

[Andrew Ling:]

Mark, where did you get the info stating that FSLR consumes 8 grams tellurium per panel? I was unable to come up with that info anywhere. FSLR's tellurium consumption isn't stated in any of their filings.

2008 Apr 19 04:40 PM

[greencapita...:]

>>>>>&g... never claimed that FSLR is short on the demand side. Their production capacity for the next few years have already been fully booked into existing sales contracts. They have no spare capacity to expand into the North America even if they want to. But they are severely short on the SUPPLY side, tellurium supply. That's worse than demand shortage.
i agree on this. their 4 plants sure is for existing contracts.

>>>>>&g... surely are missing something. Don't you wonder why they haven't announced any new contracts for a long while now, and the insiders are selling like crazy? They can have as many new customers as they want, but they don't have any production capacity to satisfy new customers.
i guess is it due to lack of orders. meaning with their 4 current plants almost dedicated to existing customers, they are probably waiting for new customers to commit. so.cal plant might be the first one. assuming, so.cal okays after their 22mw pilot and gives close to 750mw to fslr, i suppose we can expect one or 2 additional plants. why build plants when utilities take time in giving orders. pilot projects in say so.cal or florida or china or india can easily satisfied by existing plants.
i remember them issuing new plants in last may. maybe in this may 1st earnings we can expect some new orders assuming some big order win is on the way.
also i guess insider selling is booking some profit right. if i were a ceo and my company shares has burst ahead, i sure want some cash. can you give some details on the insider selling in terms of numbers.

>>>>>&g... don't you wonder why they have not announced any new factory plan for over a year now? There is still plenty of land available in Malaysia. They can build more factories adjacent to each other, all the way to the seashore!
please see my reply for above point.

>>>>>&g... they know they don't have the tellurium supply to expand new production capacity. They announced 4 new Malaysia factories last year. But we haven't heard about any progress on the construction of the four factories so far. I suspect not all of them will be constructed after all.
i think you are assuming lot of things. why should they update every day on plant progress. i am sure this earnings they will announce progress. if not then during next earnings. it is not as though walmart is giving sales figures everyday.

>>>>>Ea... factory would cost $150M at original estimate, and now estimated at $180M a piece due to cost oevr-run and inflation. They need $720M in cash to pay for the cost, plus some more for production startup cost. They will need $800M. They did one secondary offering in last year getting a total of $400M. They are still short of $400M, and so far they still have no indication they will do an additional secondary offering to get the cash, why? Even the existing $400M hasn't been spent much if you look at their latest balance sheet. Have they abandoned some of the Malaysia factories? Why the money hasn't been spent yet, when the first factory should already be finished by now?
i remember listening in last conference call that first plant is almost done and rest 3 plants will take lot of inputs from first plant in terms of costs savings and per wattage improvement. which balance sheet are you referring. did you get the latest one after last earnings.

>>>>Why FSLR hasn't responded to me? I personally reported the CFO to SEC on his terawatts tellurium claim. Shouldn't that be enough to make them jump and send a lawyer to me immediately? Why don't you, Andrew Ling, contact FSLR and find out how they would respond to my articles? Why don't you ask them to provide specific data on the quantity of their tellurium supply?
i am not sure whether fslr will respond to me. but even in last conference call and in recent solar conference the ceo told they are super comfortable with te supply. why respond to panic when probably there is none.

>>>>>&g... don't even currently hold any FSLR short for now. I am heavily in PAL and SWC on the precious metal play. I am hoping they run FSLR price up and I have in vested interest in seeing FSLR fall at this time. But truth must be told, and must be researched by all concerned parties in FSLR. Why is FSLR so secretive on their tellurium supply?
as i told why create panic when there is none. may 1st we will get more light from fslr.

if fslr continues to ramp up and assuming te supply is not an issue at all, let me tell one thing. 300 bucks for fslr is like 3 bucks. this baby is limitless with per wattage costs even challenging the dirty coal.

2008 Apr 20 11:19 PM

[tenflat:]

anyone keeping an eye on this Mexivada Mining Corp?? They have just discovered a tellurium deposit in Nevada. Could this be the help FSLR needs to meet their contracts??


On Apr 20 11:19 PM greencapital ist wrote:

> >>>>>&g... never claimed that FSLR is short on the demand side. Their
> production capacity for the next few years have already been fully
> booked into existing sales contracts. They have no spare capacity
> to expand into the North America even if they want to. But they are
> severely short on the SUPPLY side, tellurium supply. That's worse
> than demand shortage.
> i agree on this. their 4 plants sure is for existing contracts.
>

2008 Apr 21 02:06 PM

[Andrew Ling:]

Mark's entire argument hinges on the fact that FSLR consumes 8 grams Te per panel. I have no clue where he obtained this fact from since I have read every word from every official FSLR release and never heard any mention of the amount of Te consumed per panel, per plant, per quarter, or otherwise. I wouldn't be surprised if he just pulled the number out of thin air.

2008 Apr 21 05:14 PM

[James R.:]

This guy is a Yahoo message board spammer. He goes under the handle of tellurium_001. Check him out on the FSLR, SWC, and PAL boards. He even pimps his articles here on Seeking Alpha on his messages. Check out his messages/spam on the boards before you trust what he writes here on this site.

2008 Apr 21 05:47 PM

[Andrew Ling:]

Yup he's not even smart enough to realize he can't cause panic selling in a $25B stock. The more I look into it the more his 8 grams tellurium/panel number looks made up. I seriously doubt he's the only person outside of the company that knows how much Te is consumed.

2008 Apr 21 07:00 PM

[Mark Anthony:]

Andrew Ling:

Go talk to FSLR and they should be able to tell you exactly how much tellurium they use per panel. But then again probably they won't tell you either. They are keeping that information as a top nuclear secret. Makes you wonder why.

If you follow my the discussions on my previous tellurium article you should know where the estimate comes from. It's from the 3 micron thin film thickness, which was given by the CFO as well as documented in a lot of places:

seekingalpha.com/artic...

Don't forget, the high purity material do not get 100% deposited on the glass panels during vacuum deposition. There are some waste. Early NREL estimate says the waste is as much as 40%. I assume only 15$ waste, that means they need 0.25 grams of CdTe per watts, or 250 kilograms per MW. At more than $500 per kilogram CdTe, this cost alone already counts for $0.13 per watt in the cost. This number only needs to triple from here to basically eat out FSLR's profit margin totally.

2008 Apr 21 10:34 PM

[Andrew Ling:]

Well which one is it? .25 grams per watt is actually 15 grams per panel not 8. Remember the old article about Tellurium shortage by Scott Roberts seemingly the only other person in the world concered about te shortage?

seekingalpha.com/artic...

For some reason I tend to trust his annual production estimates of 400 tons/year over yours. He also has te costs at 1 cent per watt or 1% of overall costs.

BTW FSLR also does not allow any non authorized personel in their plants including media. Does that mean they're murdering people in there? In case you didnt notice FSLR management is the complete opposite of Nanosolar. More average people have probably heard of Nanosolar than FSLR. They don't hype constantly they just deliver. A good strategy considering before you know it they'll have silently dominated the market.

2008 Apr 22 12:02 AM

[Andrew Ling:]

Judging by how slowly the revenue is climbing it's obvious that you are overestimating VNP's te production at 25 tons a quarter. With Te prices rising according to your chart and the quoted $300/kg price Te would account for about 80% of VNPs revenues. If that were the case you'd see a much greater spike in revenues and profit margins.

2008 Apr 22 01:33 AM

[Mark Anthony:]

Andrew:

I could not believe you are so slow in learning things. The 8 grams per panel is the quantity of tellurium. The 0.25grams per watt is the quantity of CdTe needed, cadmium telluride. About half of the CdTe compound is tellurium, the other half is cadmium. FSLR purchases the high purity CdTe compound from VNP, not pure tellurium. The CdTe compound currently costs more than $500 per kilogram from VNP. Alfa Aesar sales the same 99.999% CdTe for $347 for just 100 grams, which is $3470 per kilogram. Item #14365.

You wonder why VNP's sales revenue is not increasing as fast as FSLR's, that's the whole point I was trying to argue in the whole article! FSLR is not acquiring enough raw material from VNP!

Why FSLR is so secretive with their production facility, even media members can not get close to the production lines? I don't see a good reason for that. FSLR might intend to protect its technology secret. But note due to the extreme toxicity of cadmium, the whole production line is completely sealed to prevent cadmium from leaking out. Therefore even if some one is allowed to be close by the machine, he/she could not see anything inside the machine and could not discover any technology secret. The only good reason to prevent media from approaching the machines is to prevent them from learning the real production volume, or that the production lines may actually be just idling.

2008 Apr 22 02:11 AM

[Andrew Ling:]

ITs really very simple. The only reason to give more information than required is to pump the stock. Any additional information can be used against you. Take Nanosolar's case. If they keep blabbing about how great their CIGS tech is, maybe a large player will get into their industry, such as sharp or fslr. When you strike gold you keep you mouth shut.

2008 Apr 22 04:08 PM

[Andrew Ling:]

According to this article your world production numbers are completely wrong since they are based on the production of only Canada Japan and Peru, which account for 1/6 of total world copper production. Total world production is likely 700-800 tons/year.

www.resourceinvestor.c...

Also, production is increase. Just yesterday new tellurium was discovered

" Mexivada discovers porphyry molybdenum, silver-tellurium, and gold systems at Moly Dome, Nevada; begins tellurium exploration program "

2008 Apr 23 03:05 AM

[Mark Anthony:]

Andrew:

Jack Lifton on Resource Investor lost all his credibility by releasing two articles on completely contradicting opinions, within a time span of only 30 days. Please read his first article first:
www.glgroup.com/News/T...

Why do you think Japan and Belgium, two small countries with virtualy no natural resource of their own, are two of the world's major tellurium suppliers? Because they run tellurium high tech refinery facilities. Mid to small size copper mines all over the world send in their copper anode slime for them to process. So these two country already accounted for all the world's tellurium production except for a few major countries.

Chile produces a whole 1/3 of the world's tellurium but they currently produce virtually no tellurium, because the tellurium content is just too low. This I learned from Jim Guilinger himself, the guy who authored the original NREL research on tellurium. Not every copper mine in the world contains significant tellurium content.

Mexivana's discovery is nothing new, Jim Guilinger himself already meantioned it 9 years ago. They are just doing a PR news piece. Their tellurium is insignificant, barely twice the amount of the gold, valued a hundred times cheaper than gold. It's even questionable whether it is economically worthy to recover. The waste dump from decades of copper mining probably contains more tellurium content than Mexivana mines, but it is not economical to go back to the waste dump to try to extract tellurium, unless the price reaches gold price level.

Bottom line, why are you so scared of just give FSLR a call and ask them to provide specific information. Whether they give out information is NOT optional. If there is information that critically impact the company's operation and hence has a great impact on the valuation of the company, they MUST publically disclose it. That is SEC law. If they refuse to provide information you can file a SEC complaint. I would file a SEC complaint if I still hold FSLR shorts today. But I am coming back to short FSLR soon and I will demand answers and will file SEC complaints if they still refuse to talk to me.

2008 Apr 23 04:32 AM

[msd10004:]

Mark, where is your CdTe data coming – 15 grams per panel - .25 grams/watt? According to the study by Fthenakis and Moskowitz, a 10 megawatt (MW) PV facility employing vapor transport deposition of CdTe is estimated to use 197.8 kg/MW of Te. If we do the math your estimate at 70 watts per panel is roughly 114 kg of Te per MW of PV production. From FSLR’s 10K they only mention their use of a proprietary vapor transport deposition of CdTe. Your estimate is reasonable considering the Fthenakis and Moskowitz study are dated and efficiencies certainly improve over time, but where is your estimate derived?

2008 Apr 23 09:25 AM

[Andrew Ling:]

Mark, it's irrelevant what Jack's opinions are he's drawing attention to simple important facts. Jack point is not about current tellurium production. It's based on potential output from copper production. It doesn't matter where the Te is produced. He illustrated that the estimates are based on 1/6 of the copper.

msd, his cdte data is also wrong. At 3 micros fslr uses 6.5g/panel. This is calculated by using the density of te. Since we're talking about future supply not current, let's assume FSLR is using 6g/80 watt panel by the end of the year. The gains will mostly be from efficiency gains but thinning the te layer may also be possible. That would be 12 MW production/ton te. With 800 tons te potentially available that would equate to 9.6 GW or $19.2 billion in sales/$6.4 billion in earnings. Even with a growth rate moderated by the growth in te production, these earnings would justify a $200B market cap.

2008 Apr 23 02:46 PM

[Andrew Ling:]

Obviously Jack's March article is his new stance on Te over the old stance from Feb. As I recall back in December you went from short FSLR to long FSLR and now you're leaning short again. Does this cost you your credibility as well? People are allowed to chance their position with new information.

2008 Apr 23 04:07 PM

[Mark Anthony:]

Andrew:

Stop making rumor about me. I have never once longed FSLR. Jack's new stance is wrong. First he did not realize that the NREL data has been exagerated. Read the paper by Prof. Martin Green, an award winning scientist. It's paid access but it should be a $20 well worth spending if you are so heavily invested in FSLR:
www3.interscience.wile...

In summary, Martin Green concluded, using actual samples collected from all over the world, that not all copper mines contain the same tellurium content. The average content is 100 grams per ton of copper. The current technology extracts just about 1/3, or 33 grams, after a pretty complicated process. If copper mines decide to use the cheaper leaching method to produce copper, instead of electrolytic process, then no tellurium can be obtained.

Consider that one ton of copper is worth $8800, and the tellurium extracted is barely worth $10. There will be absolutely NO incentive for any copper mining company to try to invest time, money and effort to get more tellurium out. It's just not worth it unless tellurium is as expensive as gold.

2008 Apr 23 05:52 PM

[Mark Anthony:]

Claims Of A Dramatic Increase In Thermoelectric Efficiency:

www.carbonfree.co.uk/c...

Interesting news story on tellurium used in the thermoelectric applications.

2008 Apr 27 03:03 AM

[Mark Anthony:]

For the record, FSLR posted a job related to tellurium. In the job description they revealed a so called Tellurium Initiative Department whose task is trying to extract residue tellurium from "mined sources", i.e., mining waste. That is pretty disturbing in my opinion. FSLR has since quietly removed the job posting from their own web site. But it can still be found some where else:

hotjobs.yahoo.com/job-...

Read it and make a judgement by yourself. I attempted to seek a comment from FSLR but got no response from them except that they quietly removed link to the job description from their web site.

2008 May 28 03:12 PM

[fxtrader07:]

@Andrew: your increasingly hostile barking at mark reveals how high your emotions are running. calm down, emotional investing guarantees losses down the road. Rationalizing one's decisions and shooting the messenger of potentially disturbing news to your investment thesis is very common among retail investors as well as institutional fund managers. But in fact, you should welcome articles like that of mark because they could serve as a warning flag before things go bad - or they could serve to further strengthen your investment thesis upon genuine dismissal.
As i see it, Mark may be really on to something. (by the way, there are hundreds of smaller and larger companies out there that do respond to inquiries even when they do not come from Fidelity or Wellington. If FSLR doesn't - even after analysts ask, then this smells big time.)
And can't you see the contradictions lining up at FSLR?
first, they state in their filings that Te-prices have gone up 3-fold (btw, itself incorrect for the mentioned timeframe as the increase was much larger) but that this did not significantly affect them. a sentence later they admit that they break with their established practice and now entered into lonmg-term contracts to secure supplies.
then, and only upon analysts' requests an officer of fslr states in a cc that they 'identified' terrawatts of te-supply. READ CAREFULLY! 'identified' does not equal secured. nor does it say if or when they would be available
then comes the ominous job-offer along. Now, if that does not scream 'Te-supply problems ahead', i don't know what will. Again, the problem is NOT the price FSLR has to pay. The problem is that EITHER they do NOT GET the Te that they need OR that in order to sufficiently boost production and hence supply the price would have to rise to levels where it WILL make a huge difference to FSLRs bottom line. What is so hard about that to understand?
If I were you, rather than attacking Mark, I might try to genuinely counter his arguments - or upon failing so, you might think of reducing your position.
disclosure: i am slightly short fsl. i hold some other solar stock longs against a part of that position. My short thesis is not based on the te-issue, but simply because fslr is as overvalued and priced-for-perfection a stock (and that in an industry with high potential for disruptive technologies) as there is currently in the market

2008 Jun 12 07:47 AM

[sistah43:]

I have written to plenty of companies as an investor and gotten responses from IR. If FSLR is not responding, that is cause for concern.

2008 Jun 12 08:34 AM

[David White:]

As a side note, I think FSLR has strong head winds coming its way even without the CdTe problems. The CIGS technology is cheaper. There are Nanosolar (already producing) and Miasole (scheduled to start production in October). When I talked to one of their engineering directors recently, he confirmed that this was still their expectation. Beyond these two there is Best Solar, which the LDK CEO is starting in China. He claims Best Solar will be producing 1 GW of thin film solar within two years. Then there is Q-cells which is starting a $3.5 billion thin film plant in Mexico. Beyond that there is the new UMG technology for polysilicone (i.e. so you can use less pure and much cheaper polysilicone to make approximately 14% efficient solar wafers). CSIQ has already started this. I think there are a few startups too. It is almost a certainty that LDK, TSL, etc. will expand their offerings to include these lower cost, less efficient wafers.
FSLR (PE = 107) is simply too highly priced. This PE may come down within the next year, but not if the price of the stock rises. Beyond the next year, the competition looks increasingly stiff in the low cost solar area.

2008 Jun 12 11:59 AM

[speedyg999:]

First Solar is or will be getting tellurium from Anglo Gold's Cripple Creek mine. They have a good supply of it there. New tellurium discovery programs are in place by one or two companies, including Mexivada Mining Corp. (MNV.V); mexivada.com

2008 Jun 12 03:39 PM

[Mark Anthony:]

It looks right after I provided the link to FSLR's tellurium job posting at the hotjobs web site, it's been promptly removed. The link below no longer works. So for the record I an posting content I saved early on so people can read it and make their own judgements:

hotjobs.yahoo.com/job-...
(Link no longer works)

Manager, Metals Refining Development
Location: Perrysburg, OH
Job Code: 655
# of openings: 1


----------------------... ---------------------------

Description
First Solar is a leader in the development and manufacturing of thin film solar modules used in grid-connected solar power plants. Our high growth and position in the renewable energy industry offers outstanding opportunities to individuals seeking an exciting work environment in one of the most important industries for the 21st century. Our culture is one where teamwork, continuous improvement, achievement of results, and environmental responsibility are core values. We are seeking new associates that are motivated to contribute their talents to making cost effective solar energy an important part of the world’s energy mix.

Basic Job Functions

The Manager will lead the initiative on recovery of tellurium from mined sources and non-traditional material containing tellurium. The manager will help to build a group that will have capability in hydro- and pyro-metallurgy skills to be applied in meeting the objective of tellurium recovery. The Manager and the group will develop processes at the bench scale, expertise to scale up to operation level, capacity to work with external (metallurgical) labs, select and optimize equipment and deliver on tellurium units ready for use in the manufacture of CdTe.

Qualification Requirements:

· Bachelor’s degree in an Engineering discipline
· Advanced degree in metallurgical or chemical engineering
· Specific and demonstrated experience working in process development environment
· Five (5) years experience in a lead role (process or project development)
· Proven problem solving skills.
· Proven Organizational and Managerial Skills.

Essential Job Functions:

· Develop team containing associates of A players to move the metals purification initiative to level capable of supporting deployment of processes/operations for tellurium recovery
· Responsible for interviewing, hiring and coaching process engineering personnel to meet assigned objectives.
· Manage process and equipment selection, evaluate analytical support to group, ensure process improvement activity relating to installing a plant to produce tellurium.
· Responsible for and providing oversight for documenting and reporting development work in high quality/scholarly format.
· Works with others in Tellurium Initiative Department to support efforts to locate and develop additional tellurium sources.
· Assist in department expense and capital budget activity and help to adhere to budget
· Responsible for effective communication of activity and outcomes
· Foster team-building of group
· Ensure adherence to safety procedures and good housekeeping standards.
· Serve as a resource for tellurium/cadmium metallurgical processes.

2008 Jun 12 04:37 PM

[aquaculture:]

youtube.com/watch?v=nA...

????? FSLR FSLR
$CLINK $CLINK $CLINK

2008 Jun 18 08:11 AM

[Mark Anthony:]

An update. 5N Plus Inc. released latest earnings for the quarter ending May 31, 2008. It does not surprise me that the cost actually goes down a bit (meaning less raw material purchased) while sales revenue grows significantly:
www.prweb.com/releases...

If you listen to the conference call, their cost basis (cost per unit of raw material) does NOT go down. So total cost going down really implies that amount of raw material used in production, in terms of kilograms, goes down (listen to the time spot at 46:38 of the recording):
podcast.newswire.ca/me...

It is absolutely stunning to me that a novel company, which I knew since its founding, American Elements, now gets into the business of producing Cadmium Telluride:
www.prweb.com/releases...

A very interesting development if you know the original background of American Elements Inc.

More over this news item is also extremely interesting:
biz.yahoo.com/prnews/0...

I shall discuss these new developments in a new article.

2008 Aug 23 01:06 PM

[Mark Anthony:]

Regarding the background of American Elements it is worth reading Jack Lifton's article on July 3, 2008:
www.resourceinvestor.c...

2008 Aug 23 01:12 PM