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Monday, August 27, 2007

Timminco Limited: O Canada! Solar Grade Silicon, Eh? – Part 1

Dr. Heinz C. Schimmelbusch now Chief Executive Officer in addition to Chairman of the Board

Released after the market close on Friday, August 24, 2007, Timminco Initiates Strategic Business Reorganization announced the reorganization of Timminco Limited (TSE:TIM) into separate Magnesium and core Silicon and Solar Silicon businesses and management realignments. Heinz Schimmelbusch was the CEO of Metallgesellschaft AG until an oil forward contracts and hedging scheme went awry in 1993.

For Solar Grade Silicon, the last news was Timminco Announces Ground-breaking for Becancour Solar Silicon Facility on July 30, 2007. Timminco began construction of the Bécancour Solar Silicon Facility consisting of three production lines each yielding an expected minimum of 1,200 metric tons of Solar Grade Silicon per year. The first line should begin operation in the fourth quarter of 2007 with the second and third lines coming online in the first quarter of 2008. Solar Grade Silicon capacity should then ramp to an annual run rate of at least 3,600 metric tons per year by the second quarter of 2008.

Timminco entered the silicon metal (metallurgical silicon) business in earnest with the acquisition of Bécancour Silicon Inc. in September 2004. The Bécancour Silicon Inc. (BSI) subsidiary has 50,000 metric tons of silicon metal and ferrosilicon production capacity per year. BSI’s customers for silicon metal are purported to include five of the largest silicon and polysilicon producers in Western Europe.

In March 2007, BSI announced their entry into the solar grade silicon market with TIMMINCO LIMITED ANNOUNCES FIRST COMMERCIAL CONTRACT FOR HIGH PURITY SILICON. At this time, BSI disclosed it had developed a patent-pending process to produce 99.999% (5N or 5 nines) pure silicon for solar applications and had 300 metric tons of annual pilot production capacity in place. The contract with an unnamed solar cell manufacturer was for shipments of over 4,000 metric tons of high purity silicon over a 5 year initial term. A few weeks later, TIMMINCO LIMITED ANNOUNCES SECOND COMMERCIAL CONTRACT FOR HIGH PURITY SILICON:

Becancour Silicon Inc.(“BSI”), has reached agreement to sell high purity silicon to a solar cell manufacturer. The agreement provides for a minimum of 1,500 metric tons (“mt”) and up to 5,000 mts over an initial term of 5 years subject to BSI’s increased production capacity and customer agreement.

By May 31, 2007, TIMMINCO LIMITED PROVIDES UPDATE ON ITS SOLAR GRADE SILICON METAL BUSINESS said 20 metric tons of solar grade silicon had been delivered to the two contractual customers and as solar grade silicon samples to potential customers.

I first heard of Timminco Limited at the PV Industry Forum 2007 from Carolina Vargas, a Research Analyst with Clarus Securities Inc. Since then, Ms. Vargas has shared an investment research report on Timminco titled “Here Comes the Silicon” published May 9, 2007. In the report, Clarus initiated coverage on Timminco:

with a BUY recommendation and a 12-month target price of $6.00 [Ed. Note: CAD] per share. We recommend risk-tolerant investors own shares of Timminco to participate in its tremendous growth opportunity as a silicon supplier to the solar industry.

Please note that Clarus Securities helped to underwrite the April 2007 TIMMINCO LIMITED ANNOUNCES COMPLETION OF BOUGHT DEAL FINANCING, and I do not know if follow up client research has been released by Clarus.

In Part 2, I will examine the relationship between Timminco, Safeguard International, and AMG Advanced Metallurgical Group N.V.

I must have had my head in the quartz to have missed this company for so long! René Boisvert (now President and Chief Executive Officer), Bécancour Silicon Inc., presented “The Silbec Process for the production of solar grade silicon” at the PHOTON EXPO 4th Solar Silicon Conference.

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