tim investor presentation - september 2010

8/8/2019 TIM Investor Presentation - September 2010

1/40

Investor Presentation

September 15th, 2010


2/40


3/40

Silicon Metal Industry

3

2008 Global Sales(pre-global recession)

$6.4B

Aluminum

Chemicals:Polysilicon

Chemicals:Silicones

50%

10%40%

Chemicals:Silicones

AluminumChemicals:Polysilicon

Industry Breakdown by Market:


4/40

Silicon Metal

The Backboneof Timminco

A leading producer for morethan 30 years

5th largest producer inWestern World

Generated revenue of $128Min 2008 the latest full year

of production Joint Venture with Dow

Corning Corporationannounced on August 10th,2010

4


5/40

Our quartz mining rightsprovide security of

supply.

Quartz is processedinto silicon metal using

electricity, coal andwood chips.

Can be used as theprimary input in the

production of our solargrade silicon product.

Sold to thechemicals andaluminumindustries.

Silicon Metal Production

5

Raw MaterialElectric Arc

Furnace Process

Quartz

Silicon Metal

Si


6/40

Grow ing Demand for Silicon Metal

Silicon world demand forecasted to grow by 26.6% from 2008 to 2014

Demand driven by macro-trends:

Increasing demand for new applications in silicones

Emergence of solar energy market

Increasing demand for aluminum

Growth in the Western World and China

0

500

1,000

1,500

2,000

2,500

3,000

2008 2009 2010 FC 2011 FC 2012 FC 2013 FC 2014 FC

000s MT

6

Source: CRU, 2010

World Consumption


7/40

Chemicals

Industry:Silicones

Construction-related products,

including sealants, adhesives,lubricants, paints, coatings

2-in-1 shampoo and conditioner

Chemical Industry Demand: Silicones

7

SiliconMetal

Increasingly being used as asubstitute for petroleum-basedplastics

Consumer products includingcosmetics and heat resistantcooking utensils


8/40

Polysilicon demand expected to grow by 15% 30% drivenprimarily by growth in solar PV market

Solar PV now accounts for half of polysilicon demand

Chemical Industry Demand: Polysilicon

8

Silicon

Metal

ChemicalsIndustry:

Polysilicon Source: European Photovoltaic Industry AssociationMay 2010

Solar M arket De velopment P otential

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

MWI

nstalled

33%Projected CAGR2009-2014


9/40

Aluminum Industry Demand

9

SiliconMetal

AluminumIndustry

Source: Ducker WorldwideNote: As a percentage of curb weight (based on 3,600 lbs)

77 lbs

326 lbs


10/40

Silicon Metal Pricing

10

Factors driving increasing nominal dol lar trend expected to continue

Pricing recovery continuing in 2010

Source: CRU, Mar 2010

Increasingly tight Western supply; consolidation

occurringInterruption of Chinese supply, or forecastedadditional supply does not materializeWeak U.S. dollarIncreases in input costs

Potential

additional

upside


11/40

Western Market Focus

11

The Western World relies on Chinese export

to meet almost half of its silicon demand

Source: CRU Mar 2010


12/40

Western supply is tightening

M&A transactions announced in past 12 months havecaptured 16% of Western silicon capacity for upstream

integration

12

Date Transaction Nameplate capacity(mt)

Nov 2009 DC acquires 100% Globe metals Brazil 44,000

Nov 2009 DC acquires 49% Globe WV Alloys 37,000

June 2010 Wacker acquires 100% Fesil Holla 55,000

August 2010 DC to acquire 49% Becancour Silicon 23,000

Total capacity captured 159,000

Percentage of total Western supply 16%

Source: Company Press Releases, CRU March 2010


13/40

Reliance on Chinese Silicon Supply Grow th

Chinese silicondemand is forecast toincrease

Chinese forecastdemand growth is

likely to materializebefore supply growth

13Source: CRU Mar 2010

Could Result inSilicon Shortage in the

Western World


14/40

Our Advantages

2. Competitive Costs

* Other includes maintenance, labour and SG&A

Power

Competitively priced source of electricity

Raw Materials

Own source of quartz

Proprietary electrode technology

3. Political Stability

4. High Capital Cost of Greenfield Construction

Capital cost of greenfield silicon plant $6,000 - $7,000 / mt

Long lead time for greenfield completion (3-5 years)

IRR on new construction sensitive to price and cost assumptions

25%

Power

40%

5%

30%

RawMaterials

Transport

Other*

14

1. Access to Stable Source of Electricity


15/40

Grow th Strategy

15

Restore demand and full production Full production achieved Nov. 2009 and

maintained to present 2010 production essentially sold out

Lower production costs Achieved lower cost per tonne in Q2/10

Explore expansion opportunities

2.

3.

1.


16/40

Future Opportunities: Solar Grade Silicon

16

~$3/ kgCurrent spot price

Silicon Metal

$36/ kgTimmincos average sellingprice for Q4/ 09

Solar Grade Silicon


17/40

Solar Energy Industry

17

0

100

200

300

400

500

600

700

800

80 85 90 95 0 5 10 15 20 25 30

Growingenergydemand

Projected

QuadrillionBtu

M

WI

nstalled

Industry will require quality,economic alternatives to polysilicon

Global energy consumption is expectedto rise by 50% from 2005 to 2030

Solar Market Development Potential

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

Source: European Photovoltaic Industry Association,May 2010

33%Projected CAGR2009-2014


18/40

Solar Grade Silicon: Market Dynamic w ith

Polysilicon

Solar grade silicon:

Substitute for polysilicon insolar cells

Demand increases as priceof polysilicon increases

Polysilicon demandforecasted to grow by 15%to 30% p.a. to 2013

2008 polysilicon spot price = $450/kg

2010 (Aug) polysilicon spot price = $70/kg

18

Polysilicon prices trending upward with increasing demand andtightening supply.

Spot prices could move up to higher-cost manufacturers cash cost,which fills last kg of demand.

Return of demand for solar grade silicon as a lower cost substitute

500

400

300

200

100

02005 2006 2007 2008 2009

Price($/Kg)

Spot Price for Polysilicon

8/2010


19/40

Our Solar Grade Silicon P rocess

Proprietary, Patent Pending Process

19

Solar EnergyIndustry

Customers turn our raw solargrade silicon into solar panels

SiliconMetal

Solar GradeSilicon

Solar GradeSilicon

SemiconductorGrade Silicon

Reverserefinement(doping)

Ingot

Brick

Wafer

Cell

Timminco propietarymetallurgical process

Conventional polysilicon process:chemical ultra-refinement

ConventionalProcess

TimmincoProcess


20/40

Economic Alternative to Conventional Process

Anticipated Capitaland Production CostAdvantages

20

Proprietary technology

Access to stable energy

supply

Access to own supply ofsilicon metal

7 purification lines installed

and production-ready


21/40

Solar Grade Silicon Strategy

Goal:

21

1. Refine production

process

2. Fine-tune ingotingprocess

Enable customersto manufacture

solar cells that areindistinguishablefrom those madewith polysilicon


22/40

Improving Y ield & Cell Efficiency

Doping Formula

Apply doping formula toremaining chunks of BatchABC (1,200 kg)

Batch ABC1,600 kg of chunks

Test Ingot X400 kg

Test Bricks60 kg

Accurate measurementof key brick data

Test Equipment

Production Ingot 1400 kg



22

Analytical Model


23/40

Progress

We are closing thegap between cellsmade with oursolar grade siliconand those madewith polysilicon.

23

Achieved cell efficiencies:

Customer A: 15.7%

Customer B: 16.2%

ISC Konstanz: 15.8%

Improved breakdown voltagesover 12V, the standard forelectronic grade silicon cells

Reduced light-induceddegradation to a levelcomparable with electronic

grade cells


24/40

Intro of Solar

Grade Silicon

2005 - 2006 re-stated to conform with 2007 and 2008 financial statement classifications.

*See Appendix regarding Non-GAAP financial measures.

Divestiture of

MagnesiumOperations (July)

24

Historical Financial Review(millions)

Silicon Metal Revenue

Solar Grade Silicon Revenue

Magnesium Revenue

Adjusted Income (Loss)*

$184.4

$(7.8)

$99.3

$85.1

$181.8

$(10.1)

$107.3

$74.5

$166.2

$(15.8)

$99.9

$62.4

$3.9

$252.6

$10.4

$61.7

$127.7

$63.1

$104.6

$(81.6)

$69.4

$30.1

$5.1

2006 2007 2008 20092005


25/40

$252.6

$104.6

2008 2009

$22.3$34.3

Q2/09 Q2/10

Revenue(millions)

25

Recent Performance

Silicon Metal Revenue

Magnesium Revenue

$30.1

$63.1

Solar Grade Silicon Revenue


26/40

$(50.9)

2008

$21.3

2009

$(134.2)$(22.6) $(81.6)$10.4

*See Appendix for more details about these Non-GAAP financial measures.

2008

2009

2008

2009

EBITDA*(millions)

Net Loss(millions)

Adjusted Income

(Loss)*(millions)

26

Recent Performance

H1/2010

$(7.0)

H1/2010

$(20.6) $(20.3)

H1/2010


27/40

Q2/09 Q2/10

EBITDA*(millions)

Net Loss(millions)

Adjusted Income

(Loss)*(millions)

Q2/09 Q2/10 Q2/09 Q2/10

$(3.1)$(9.9) $(24.0) $(9.7) $(17.2) $(9.5)

Achieved positive EBITDA in Silicon Group in Q2/10*See Appendix for more details about these Non-GAAP financial measures.

27

Recent Performance


28/40

(millions)

Bank Debt (June 30, 2010) $ 31.2

Long-term Debt (June 30, 2010) 27.9Due to Affiliated Companies Convertiblenotes (June 30, 2010)

5.4

Market Capitalization 195.7 million common

shares issued and outstanding*

79.3

*As of September 8, based on TSX closing price of $0.41 per share

Total Capitalization $143.8

28

Consolidated Capitalization


29/40

Joint Venture w ith Dow Corning

29

Becancour Silicon Inc. (BSI) totransition silicon metal assets toJoint Venture, known as QuebecSilicon

Dow Corning (DC) purchases a49% interest in Quebec Silicon

Silicon metal is sold to BSI and

DC in quantities proportional toownership %

BSI retains existing customerrelationships and ships itsproduction allocation to third

party customers

Byproducts are sold by BSI asagent

51% of

output sold

to BSI

Timminco

BSI

Quebec

Silicon

Dow Corning

51% equity 49% equity

49 % of

output sold

to DC


30/40

Liquidity and Capital Resources

As at June 30 th, 2010:

Working capital of $20.3 million, excluding cash items and interestbearing debt

Cash of $1.5 million

Credit facilities with Bank of America totaling US$45 million:

US$39 million revolving credit facility (subject to borrowing

base and availability reserve) US$6 million term loan facility

Term loan with Investissement Quebec of $25 million

Subsequent Events:

US$39.7 million in net cash proceeds expected upon closing JVtransaction, plus potentially up to US$10.0 subject to achievingcertain performance metrics

30


31/40

Turnaround Strategy

31

Stabilize balance sheet

Restore demand and fullproduction of silicon metal

Reposition solar grade silicon operations

2.

3.

1.


32/40

32

StabilizeBalance Sheet

Balance sheet activities

since January 1, 2009:

Announced a 51%-owned JV with Dow CorningCorporation in return for net cash proceeds ofUS$39.7 million upon closing and up topotentially an additional US$10.0 million subjectto achieving certain performance objectivesrelating to production cost and capacityimprovements

Raised $56.6M through issuance of commonequity

Converted $10.6M in convertible notes to equity

Converted $44.7M of customer deposit/otherliabilities to equity

Completed $25M term loan with Province ofQuebec

Raised $5.3M in convertible debt

Liquidated $13M of net working capital related tomagnesium


33/40

33

Restore demand

and full productionin silicon metaloperation

Improved demand as customermarkets recover

Restarted all three silicon metalfurnaces

Reached full production in

November 2009

2010 capacity essentially sold out

Signed long-term contracts for

90,000 mt over next 5 years Return to EBITDA positive

operations


34/40

34

Restore demand

and full productionin silicon metaloperation

Q2/10 Silicon Metal Sales

293% 389%

Value ($)Volume (MT)

Q2/09 Q2/10

5.8

22.8

Q2/09 Q2/10

7.0

34.3


35/40

Investment Summary

Significantly strengthened balance sheet (post closing ofDow Corning JV transaction)

Leading provider of silicon metal

Silicon metal operations at full capacity

Established, core operation in silicon metal

Market demand recovering and price growth driven by macro-

trends

JV partner is a global leader in silicon metals business

Solar grade silicon product line provides additional longer-term opportunity

Progressing towards goal of indistinguishability ofcells manufactured with solar grade silicon compared to thosemade with polysilicon.

35


36/40

Appendix


37/40

Non-GAAP Financial Measures

EBITDA and Adjusted Income (Loss) are not recognizedmeasures under Canadian generally accepted accounting

principles and are unlikely to be comparable to similarmeasures provided by other issuers.

Timminco believes that EBITDA and Adjusted Income(Loss) are useful performance measures as they approximatecash generated from operations, before capital expendituresand debt service obligations, as well as representing measuresof profitability from ongoing operations.

37


38/40

38

Reconciliations for Non-GAAP Financial MeasuresEBITDA BY QUARTER

($000s)

2010 2010 2009 2009 2009 2009 2008 2008

Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3

Net loss (9,704) (10,905) (69,403) (18,522) (23,980) (22,317) (1,278) (13,727)

Add back (subtract):

Income taxes - - (14) 17 6,653 (4,876) 1,611 2,035

Impairment of Fundo - - - - - 698 (1,415) 13,845

Equity in the loss of Fundo - - - - - - 1,415 1,822

Loss on disposal of MagnesiumGroup

- - 3,006 2,180 - - - -

Impairment of property, plant andequipment - - 39,039 - - - 1,025 -

Loss (gain) on the sale ofproperty, plant and equipment

14 - (19) 40 (11) - 5 (375)

Interest 1,678 2,113 2,298 2,372 1,830 934 796 549

Amortization of intangible assets 707 707 707 707 435 235 170 138

Amortization of property, plantand equipment

1,935 2,026 3,203 3,386 3,090 3,534 2,355 1,509

Reorganization costs - - 542 - (1) 3,752 970 824

Environmental remediation costs 161 161 1,230 132 133 132 (136) -

Pension curtailment costs - - - - - - (326) -

Stock-based compensation 2,094 2,042 1,979 1,996 1,991 1,961 1,215 269

EBITDA (3,115) (3,856) (17,432) (7,692) (9,860) (15,947) 6,407 6,889


39/40

Reconciliations for Non-GAAP Financial Measures

39

ADJUSTED INCOME (LOSS) BY QUARTER

($000s)

2010 2010 2009 2009 2009 2009 2008 2008

Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3

Net loss (9,704) (10,905) (69,403) (18,522) (23,980) (22,317) (1,278) (13,727)

Add back (subtract):

Income taxes - - (14) 17 6,653 (4,876) 1,611 2,035

Impairment of Fundo - - - - - 698 (1,415) 13,845

Equity in the loss of Fundo - - - - - - 1,415 1,822

Impairment of property, plantand equipment

- - 39,039 - - - 1,025 -

Loss on disposal of MagnesiumGroup

- - 3,006 2,180 - - - -

Loss (gain) on the sale ofproperty, plant and equipment

14 - (19) 40 (11) - 5 (375)

Reorganization costs - - 542 - (1) 3,752 970 824

Environmental remediation costs 161 161 1,230 132 133 132 (136) -

Pension curtailment costs - - - - - - (326) -

Adjusted Income (Loss) (9,529) (10,744) (25,619) (16,153) (17,206) (22,611) 1,871 4,424


40/40

Investor Presentation

September 15th, 2010

tim investor presentation - september 2010

Documents