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Ravi Sood (right) thcought Timminco’s technology couldn’t work. Eric Sprott (left) thought it couldn’t miss (Sean Sprague (left) and Tim O’Rourke (right) For Report on Business magazine)
Ravi Sood (right) thcought Timminco’s technology couldn’t work. Eric Sprott (left) thought it couldn’t miss (Sean Sprague (left) and Tim O’Rourke (right) For Report on Business magazine)

ROB Magazine

Timminco: How Eric Sprott got solar burn Add to ...

Sprott’s stake in Ceramic peaked at 17.2 per cent in July, 2005, according to a regulatory filing. By the end of May, 2006, that stake had been reduced to 8.2 per cent of the company, regulatory filings show. (The filings do not show when or if Sprott sold the rest of its stake.) The timing of the sale was good: In September, 2006, a major customer of Ceramic’s cancelled a supply deal, triggering a downward spiral for the stock. Ceramic, which eventually changed its name to Protective Products of America Inc., filed for Chapter 11 bankruptcy protection in January, 2010, and most of its assets were later sold off to a private equity firm for a mere $8-million (U.S.).

In December, 2006, shortly after things started to go south at Ceramic, Walsh was named CEO of Timminco. Schimmelbusch, meanwhile, had taken the role of chairman. That year, Timminco’s stock had traded as low as 20 cents and the company remained cash-strapped: On two occasions, it borrowed from its controlling shareholder, Safeguard. In September of 2006, Safeguard loaned Timminco $3-million (U.S.) in exchange for the right to buy an equal amount of shares at 40 cents each. Safeguard made a similar loan in February, 2007, providing the company with $4.5-million (Canadian) for the right to buy an equal amount of stock at 42 cents a share. According to regulatory filings, on April 30, 2007, Safeguard received about 5.75 million Timminco shares by converting $2.3-million of the loan money into shares at 40 cents apiece.

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The press release that would alter the course of Timminco’s history and set off a bruising battle between the company’s supporters and detractors was issued on March 15, 2007. At the time, Timminco shares were changing hands for about 40 cents.

Out of the blue, the company announced it had won a contract with an unnamed solar cell manufacturer to supply 4,000 tonnes of “high purity” silicon over five years.

One of the architects of the new process was René Boisvert, an electrical engineer and long-time employee of Timminco’s Bécancour Silicon subsidiary. As president of Bécancour, it was Boisvert, not Schimmelbusch, who became Timminco’s public face when it came to explaining how the tiny metals firm had come up with a world-beating process. In the press release, Boisvert said that the company had been working with solar-cell manufacturers over the past year to develop a metallurgical process to “purify” the chemical-grade silicon it produced in Quebec. Timminco “has a patent-pending process which enables it to produce high-purity or solar-grade silicon,” Boisvert said in the release. (“High purity” was defined as 99.999 per cent pure.) This represented a “tremendous breakthrough” for the Bécancour research and development team, he added. Talks regarding “long-term commitments” were already under way with other solar cell makers.

For anyone who followed Timminco at the time–given its size and stock performance, there were likely few who did–this was an astounding and completely unexpected announcement. Until that moment, the company had never publicized any plans to develop solar-grade silicon.

Even former Timminco executives concede that Bécancour’s sudden switch in focus from producing metallurgical-grade silicon for use in caulking and other low-grade applications to making highly pure solar-grade silicon was unexpected. “There wasn’t even a solar strategy when I joined there,” said one senior employee. “We were trying to fix the magnesium business.”

But Schimmelbusch, Spector and Safeguard knew about Boisvert’s promising R&D project when they made the loans to Timminco in exchange for stock in 2006 and 2007. In an interview in 2008, Spector explained that while Safeguard was aware at the time that Timminco was working on the solar project, it didn’t know if it would win the contract with the solar cell maker.

“What is, is,” Spector said.

For Safeguard, there was one more move to make regarding its stake in Timminco. On March 29, 2007, just two weeks after the “breakthrough” announcement, Safeguard transferred its Timminco holdings to an affiliate company, AMG Advanced Metallurgical Group NV.

In addition to Timminco, AMG controlled several other metals businesses. But none would generate the hype and headlines that Timminco would. In July of that year, with the help of investment bankers from Credit Suisse (a firm that owned a minority stake in Safeguard), AMG conducted an initial public offering on the Euronext exchange in Amsterdam. The IPO raised $433-million (U.S.), including almost $190-million (U.S.) for Safeguard and its investors. Whatever business reasons were behind this new corporate configuration, it also had the effect of allowing Schimmelbusch, Spector and any other investors in Safeguard to cash out of Timminco without ever directly selling any stock in Canada, which would risk depressing the company’s share price.

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