Raymond James Upgrades Timminco to 'Market Perform'

Andy Nasr isn't quite ready to jump in with both feet following Timminco Ltd.'s (TIMNF.PK) conference call to discuss the operational review of its facilities, but the Raymond James analyst is certainly feeling a little more confident about the company's prospects thanks in large part to higher-than-anticipated contract prices.

In a note to clients he wrote:

While [Tuesday's] conference call only modestly allayed our concerns regarding execution risk, we were admittedly surprised to learn that the company had and could enter into supply agreements to sell its solar-grade silicon at prices of greater than $60 per kilogram. We had previously assumed that solar-grade silicon shipments would be transacted at prices of approximately $45 per kilogram.

Mr. Nasr also noted that the independent review concluded that Timminco will be able to hit its production targets and increase its capacity from 3,600 metric tonnes to over 14.4 metric tonnes by mid-2009. As well, Timminco to produce between 5 to 10 thousand tonnes of solar grade silicon in 2009 and 12 to 20 thousand tonnes in 2010, with costs declining from C$16 to C$30 per kilogram in 2009 to C$13 to C$22 by 2010.

Nonetheless, Mr. Nasr remains cautious about further upside in the stock, which climbed another 7% to C$26.58 in morning trading on Thursday. He upgraded his rating on Timminco from "underperform" to "market perform," and raised his price target from C$19 to C$27.

We remain reluctant to recommend that investors buy the stock, given the execution risk and long-term silicon supply concerns that we previously highlighted.

Comments

[aquaculture:]

We live in exciting times.
As for myself the Timminco appreciation, indirectly, through AMG has been my funds most profitable stocktrade ever. But one also should know when to get out, and i did. There are other less risky opportunities in this field.

The situation with respect to silicon today has many parallels to the introduction of mass steel production of the second half of the 19th century. And we all know who came out as the winner of the Bessemer process: Carl Wittgenstein.

What defines solar grade si as a subgroup of electr. grade si is how good the solar cell will be that is manufactured from it -in other words what kind of cell efficiency you can get with your process.
If the best you can do is n=13%: forget it. EVEN IF YOUR SILICON IS FOR FREE, ITS TOO EXPENSIVE! On the other hand, if you can get n=15%, you can ask about 40 Euro/kg.
n = 14% is completely uncertain.
This just shows what a close call this is. And it is difficult to increase efficiency relative to the best you can do. It is even more difficult to achieve manufacturing n on par with lab n. Such is as things now stand for Q-cells AG.

There are now competing purification processes. I think its better not to discuss them (yet). But wether you make or loose huge amounts of money by going into the silicon business depends on many, many variables, most of wich you dont know at all well.
The race is on.
History shows us what kind of winner we can expect to come out of it.

2008 May 18 04:27 PM