“[Timminco] produced some dirty stuff. And they figured out how to make the dirty stuff go to the edges. They cut off the dirty stuff and they kept doing it,” Asensio said in an interview at his small Manhattan office. (Despite his dogged research skills and a strong track record, credibility has often been an issue for the Cuban-born American. During the course of the two-hour interview in June, Asensio continually steered discussion toward his battles with the American government. His six-pound chihuahua, Mia, sat curled up in his lap.)
“So at the end of the day, no matter how many times they did it, there was a physical limitation on the amount of boron and phosphorous they could remove from silicon,” Asensio said. “And that’s the way God did it. That’s the way God invented it. That’s the way God created it. God’s laws are not going to change.”
As critics started to question Timminco’s claims, the firm countered that the solar industry had endorsed and validated its product. It had, after all, won a series of supply contracts with solar-cell manufacturers including the world’s largest, Germany’s Q-Cells AG. In the March, 2008, press release announcing the Q-Cells deal, René Boisvert said the contract was “further evidence of the paradigm shift we are creating in the solar-grade silicon market.” The announcement included a statement from Q-Cells’ CEO, Anton Milner, who said that his company had tested unblended material from Timminco “extensively” and that it “obtained very good results in cell production.”
Another key Timminco doubter besides Asensio was Toronto fund manager Ravi Sood; Timminco’s deals did nothing to change his mind. Given the high price and short supply of polysilicon, Sood reasoned, there was no possible downside for solar manufacturers in placing an order to see if Timminco’s claims were true.
In 2008, Sood was managing money and running the top hedge fund at Lawrence Asset Management. A rock star of the investment world, Sood had joined Lawrence in his early 20s as a protégé of the firm’s founder, Jack Lawrence. Sood was just 31 when he inserted himself into the Timminco debate by calling the company’s shares “virtually worthless” during an interview on Business News Network (BNN). “There is no evidence that they have any sort of proprietary technology. There is no evidence that they can actually deliver on their claims,” Sood said.
Sood had done his research. When Timminco first caught his attention during its run-up in 2007, he thought that perhaps he had missed the boat on a truly innovative technology. But Sood spoke to a number of industry experts who said it was highly unlikely that Timminco had developed an economically feasible metallurgical process to produce silicon pure enough for the solar industry. “It was studied ad nauseam in the ‘80s–is there a way to do this metallurgically?” Sood said in a recent interview. “And it was proven on a bench scale that it does work. But the metallurgical process does not scale. So you can’t just make it 20 times as big. ...It just doesn’t work.”
When Sood spoke to BNN in April, 2008, he had already taken out a massive short position of 1.6 million Timminco shares at an average price of $22.01. The further Timminco stock fell–it was then around $25 and volatile–the more he and his hedge fund stood to gain.
Schimmelbusch seemed to view the activity of short sellers as personal attacks on him. “When you go up 7,000 per cent in the share price, what else is a short guy but attracted to you?” he said at Timminco’s AGM in May, 2008. “I’m not a short guy. I’m mostly long. It is an old, very wise thing, that in commodity markets you shouldn’t be short. It’s dangerous,” he warned ominously.
Timminco responded to Sood’s comments by filing a $6-million libel suit against him, alleging that Sood’s statements “meant or were understood to mean” that “Timminco conducts business in the same way as Bre-X did.” A similar legal action was filed against Manuel Asensio. The critics were muted.
But if Timminco had doubters, it also had believers willing to speak up. Sprott and his legion of fund managers weren’t shy about spreading the good news about Timminco. Sprott attended the company’s AGM in May, 2008, at the Royal York Hotel in Toronto–a presence that lent support to Schimmelbusch in the face of mounting skepticism. “To doubt is easy,” Sprott told me in April, 2008, when I asked about his firm’s enormous wager on Timminco. “What you get paid for in this business is figuring out if something is right early, while everybody else is doubting. That’s how you make money.”