Timminco Limited
TSX : TIM

Timminco Limited

November 10, 2009 16:53 ET

Timminco Reports Third Quarter Fiscal 2009 Results

TORONTO, ONTARIO--(Marketwire - Nov. 10, 2009) - Timminco Limited ("Timminco" or the "Company")(TSX:TIM) today reported its financial results for the three and nine-month periods ended September 30, 2009 (all figures are in Canadian dollars unless otherwise stated).

Third Quarter Fiscal 2009 Developments

- Consolidated sales were $19.1 million compared with $69.0 million for third quarter of 2008;

- Earnings before interest, taxes, depreciation and amortization (EBITDA)(1) were negative $7.7 million, compared with positive $6.9 million for the third quarter of 2008;

- Net loss was $18.5 million, or $0.15 per share, compared with a net loss of $13.7 million, or $0.13 per share, for the third quarter of 2008;

- Restarted two of three electric arc furnaces in response to increased customer demand for silicon metal;

- Completed a $25.0 million two-year subordinated term loan financing from Investissement Quebec;

- Settled a claim with a solar grade silicon customer regarding repayment of an outstanding deposit liability of US$3.9 million through the issuance of 3.4 million Timminco common shares;

- Issued 7.2 million Timminco common shares in payment of US$3.25 million of principal and accrued interest on a convertible note;

- Completed the wind down of operations at the magnesium extrusion facility in Aurora, Colorado; and

- Completed the sale of the principal components of the remaining magnesium business to Applied Magnesium International.

Developments Subsequent to the End of the Third Quarter Fiscal 2009

- Restarted the third of three electric arc furnaces for the production of silicon metal in response to improved customer demand for silicon metal;

- Settled a claim with a solar grade silicon customer regarding repayment of an outstanding deposit liability and accrued interest of $20.5 million through the issuance of 10.0 million Timminco common shares. The settlement concluded negotiations with all solar grade silicon customers who had advanced deposits against future shipments of solar grade silicon in 2008, and who had claimed earlier this year that their contracts were terminated; and

- Amended the Credit Agreement with Bank of America, N.A., to provide for revised financial covenants, requiring minimum EBITDA levels and maximum capital expenditure levels. As well, the minimum availability reserve will increase from US$2.0 million to US$7.0 million as of February 1, 2010 and for a period of 45 days, which will effectively reduce availability under the revolving credit facility by US$5.0 million during such period.

"Our financial results for the third quarter continued to reflect the extremely challenging conditions of our markets, which have severely impacted the financial results throughout 2009," said Dr. Heinz Schimmelbusch, Chairman of the Board and Chief Executive Officer of Timminco. "We are, however, experiencing improved demand for silicon metal products from Timminco's traditional chemical, aluminum and electronics customers and have responded by restarting all three of our silicon metal furnaces. Based on these developments, we expect, in December, to produce silicon metal at capacity on an annualized basis."

"We continue to make progress in our efforts to meet the higher quality demanded by our solar grade silicon customers in the current market environment where there appears to be a large supply of low-priced polysilicon. Ongoing refinements to our proprietary purification process and the development of ingoting techniques are advancing towards the goal of enabling our customers to produce wafers and cells with characteristics that are indistinguishable from those of wafers and cells made from polysilicon."

Financial Results

The Company believes that the extremely difficult conditions in its markets have eased subsequent to the end of the third quarter of 2009 for its silicon metal operations based upon demand from traditional customers for silicon metal products in both the fourth quarter of 2009 and in 2010. However, market conditions in the solar industry continue to adversely influence the development of the Company's solar grade silicon product line, including demand for its solar grade silicon products, and are expected to continue to impact its operations and financial results in the foreseeable future, thereby subjecting the Company to substantial liquidity risk and creating uncertainty as to the ability of the Company to continue as a going concern.

The Company's financial results for the three and nine-month periods ended September 30, 2009 include the performance of its Silicon Group, which includes the silicon metal and solar grade silicon product lines. The results for each of these periods also include the operations of the Company's Magnesium Group, which consisted of magnesium extrusion, fabrication and specialty metals product lines, until the completion of its divestiture on July 22, 2009.



Consolidated Results Highlights

($000's except per share amounts)
Three Months Ended (unaudited) Nine Months Ended (unaudited)
Sept. 30, 2009 Sept. 30, 2008 Sept. 30, 2009 Sept. 30, 2008

Sales 19,063 68,990 79,100 179,835
Gross
profit
(loss) (5,425) 13,465 (23,772) 31,440
Gross
profit
(loss)
percentage (28.5%) 19.5% (30.1%) 17.5%
EBITDA (7,692) 6,889 (33,499) 14,856
Net loss (18,522) (13,727) (64,819) (21,331)
Loss per
common
share,
basic and
diluted (0.15) (0.13) (0.56) (0.20)
Working
capital
(excluding
available
cash and
bank
indebtedness) 190 58,351 190 58,351
Total assets 280,449 242,547 280,449 242,547
Cash, cash
equivalents
and short-
term
investments 5,335 2,525 5,335 2,525
Bank debt 43,421 24,349 43,421 24,349
Total
long-term
liabilities 70,529 48,594 70,529 48,594
Weighted
average
number of
Common shares
outstanding,
basic and
diluted 122,925 104,147 116,607 104,076


Net loss for the third quarter of 2009 ("Q3-09") was $18.5 million, or $0.15 per share, compared with a net loss of $13.7 million, or $0.13 per share, for the third quarter of 2008 ("Q3-08"). Net loss for Q3-09 included a loss of $2.2 million related to the disposal of the magnesium business. Net loss for the first nine months of fiscal 2009 ("YTD-09") was $64.8 million, or $0.56 per share, compared with a net loss of $21.3 million, or $0.20 per share, for the corresponding period of 2008 ("YTD-08"). Net loss for YTD-09 included a loss of $2.2 million related to the disposal of the magnesium business, reorganization costs of $3.8 million related to closure of the Magnesium Group's Aurora, Colorado facility, an additional write down of $0.7 million on the impairment of the Fundo Wheels investment and environmental remediation costs of $0.4 million and future income tax expenses of $1.8 million.

Cash, cash equivalents and short-term investments at September 30, 2009 were $5.3 million compared with $4.5 million at December 31, 2008. The Company had US$0.2 million of availability under its revolving credit facility at September 30, 2009.

During Q3-09, the Company received the proceeds of a two-year subordinated term loan in the principal amount of $25.0 million from Investissement Quebec ("IQ").

Silicon Group

During Q3-09, the Silicon Group faced challenging market conditions for both its silicon metal and solar grade silicon products.

Silicon Group sales for Q3-09 were $17.1 million compared with $51.1 million for Q3-08. For Q3-09, the weakness of the Canadian dollar against the U.S. dollar and the Euro had a favourable impact on sales of $0.4 million compared to Q3-08. Sales for YTD-09 were $47.7 million compared with $130.9 million for YTD-08. For YTD-09, the weakness of the Canadian dollar against the U.S. dollar and the Euro had a favourable impact on sales of $3.7 million compared to YTD-08. The decreases in sales were due to lower sales volumes and reduced average selling prices for both silicon metal and solar grade silicon.

Silicon metal product sales for Q3-09 were $16.6 million compared with $35.6 million for Q3-08. Sales of silicon metal for YTD-09 were $40.0 million compared with $95.1 million for YTD-08. The decreases in silicon metal product sales resulted from lower volumes in 2009 due to weak demand for silicon metal globally.

Solar grade silicon net revenues for Q3-09 were $0.4 million (16 mt) compared with $15.6 million (300 mt) for Q3-08. Shipment of 80 mt of solar grade silicon to AMG Conversion was accounted for as deferred revenue. Solar grade silicon net revenues for YTD-09 were $9.0 million (171 mt) compared with $35.8 million (621 mt) for YTD-08.

The average selling price for solar grade silicon shipped for Q3-09 was $39 per kg compared with $62 per kg for Q3-08 and the average selling price of solar grade silicon shipped for YTD-09 was $48 per kg compared with $59 per kg for YTD-08. The decreases in the average selling price for solar grade silicon reflect the weaker market conditions in 2009.

Gross profit for Q3-09 was negative $5.4 million (negative 32% of sales) compared with positive gross profit of $10.1 million (20% of sales) for Q3-08. Gross profit for YTD-09 was negative $23.8 million (negative 49% of sales) compared with positive $24.7 million (19% of sales) for YTD-08. The negative margin for the Silicon Group is primarily attributable to the low volume of both silicon metal and solar grade silicon produced relative to available production capacity, Cost of sales of the solar grade silicon product are comprised of raw materials, utilities, labour and an allocation of manufacturing overhead expenses, including depreciation. Total solar grade silicon product cost of sales for Q3-09 and YTD-09 were $4.9 million and $35.3 million, respectively.

EBITDA for Q3-09 was negative $9.9 million compared with positive EBITDA of $8.8 million for Q3-08. EBITDA for YTD-09 was negative $29.5 million compared with $20.4 million for YTD-08.

Net loss for Q3-09 was $13.5 million compared with a net income of $5.6 million for Q3-08. Net loss for YTD-09 was $42.5 million compared with net income of $12.4 million for YTD-08. The net losses were due to lower revenues from both the silicon metal and solar grade silicon product lines, as well as higher cost of production for solar grade silicon, amortization costs related to property, plant and equipment and income taxes in Q3-09 and YTD-09.

Magnesium Group

During Q3-09, Timminco completed the sale of the principal components of its remaining magnesium business to Applied Magnesium International Limited, in which Timminco acquired a 19.5% equity interest. The Company also completed the closure of its former magnesium extrusion facility in Aurora, Colorado. The financial results for the Magnesium Group for Q3-09 and YTD-09 reflect the completion of the divestiture of the Magnesium Group as of July 22, 2009.



Summary of Operations

----------------------------------------------------------------------------
($000's, except per share amounts)
----------------------------------------------------------------------------
Third Quarter (unaudited) Nine Months (unaudited)
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------
Sales
Silicon 17,050 51,162 48,974 130,917
----------------------------------------------------------------------------
Magnesium 2,013 17,828 30,126 48,918
----------------------------------------------------------------------------
Total 19,063 68,990 79,100 179,835
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Gross Profit(1)
----------------------------------------------------------------------------
Silicon (5,442) 10,107 (23,796) 24,681
----------------------------------------------------------------------------
Magnesium 17 3,358 24 6,759
----------------------------------------------------------------------------
Total (5,425) 13,465 (23,772) 31,440
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Gross Profit Percentage(1)
----------------------------------------------------------------------------
Silicon (31.9%) 19.8% (48.6%) 18.9%
----------------------------------------------------------------------------
Magnesium 0.8% 18.8% 0.1% 13.8%
----------------------------------------------------------------------------
Total (28.5%) 19.5% (30.1%) 17.5%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net Income (Loss)
----------------------------------------------------------------------------
Silicon (13,473) 5,603 (41,973) 12,365
----------------------------------------------------------------------------
Magnesium (3,536) (830) (9,909) (10,766)
----------------------------------------------------------------------------
Corporate / Other (1,513) (18,500) (12,937) (22,930)
----------------------------------------------------------------------------
Total (18,522) (13,727) (64,819) (21,331)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
EBITDA(1)
----------------------------------------------------------------------------
Silicon (9,929) 8,770 (29,490) 20,379
----------------------------------------------------------------------------
Magnesium (1,118) 134 (3,354) 325
----------------------------------------------------------------------------
Corporate / Other 3,355 (2,015) (655) (5,848)
----------------------------------------------------------------------------
Total (7,692) 6,889 (33,499) 14,856
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Adjusted Income (Loss)(1)
----------------------------------------------------------------------------
Silicon (13,473) 7,233 (40,749) 16,030
----------------------------------------------------------------------------
Magnesium (1,167) 24 (3,482) (90)
----------------------------------------------------------------------------
Corporate / Other (1,513) (2,833) (11,739) (7,425)
----------------------------------------------------------------------------
Total (16,153) 4,424 (55,970) 8,515
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Loss per common share,
basic and diluted (0.15) (0.13) (0.56) (0.20)
----------------------------------------------------------------------------
Weighted average number
of common shares
outstanding, basic
and diluted 122,925 104,147 116,607 104,076
----------------------------------------------------------------------------

(1) See "Non-GAAP Accounting Definitions".
----------------------------------------------------------------------------


Timminco will file its unaudited consolidated financial statements for the third quarter ended September 30, 2009 and related management's discussion and analysis (MD&A) with securities regulatory authorities within the applicable timelines. Such financial statements, MD&A and related documents will be available through SEDAR at www.sedar.com as well as through Timminco's website, www.timminco.com.

Conference Call

Timminco will host a conference call today (November 10, 2009) at 5:00 pm ET to discuss its financial results for the third quarter ended September 30, 2009.

To access the conference call by telephone, dial 416-644-3423 or 1-800-732-0232. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Tuesday, November 17, 2009 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 4176634#.

A live audio webcast of the conference call will be also available at www.timminco.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be available for replay at www.timminco.com following the live presentation.

About Timminco

Timminco produces silicon metal for the chemical (silicones), aluminum and electronic / solar industries. Timminco also produces solar grade silicon, using its proprietary technology for purifying silicon metal, for the solar photovoltaic energy industry.

Cautionary Notes

This news release contains "forward-looking information", as such term is defined in applicable Canadian securities legislation, concerning Timminco's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". In this news release, such information includes statements regarding: Timminco's liquidity; silicon metal production; and enabling customers to create wafers and cells that are indistinguishable from solar cells made from polysilicon. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Timminco operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Timminco cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Timminco's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to: global economic conditions; customer commitments under long-term contracts for solar grade silicon; limitations under existing credit facilities; cost of solar grade silicon production; protection of intellectual property rights; increasing and maintaining the purity of solar grade silicon; selling prices for solar grade silicon; price volatility for silicon metal; pricing and availability of raw materials for silicon metal and solar grade silicon production; expansion of solar grade silicon production and sales; production capacity expansion at the Becancour facilities; limited history with solar grade silicon production; dependence upon power supply for silicon metal production; closure of magnesium facilities and execution of proposed joint venture for the magnesium business; price volatility for magnesium metal; magnesium supply chain interruptions; dependence upon key customers of magnesium extruded and fabricated products; financing requirements for capital expenditures; foreign currency exchange; dependence upon key executives and employees;
customer concentration; completion and integration of potential acquisitions, partnerships or joint ventures; risks with foreign operations and suppliers; environmental, health and safety laws and liabilities; equipment failures; transportation disruptions; conflicts of interest; intellectual property infringement claims; new regulatory requirements; labour disputes; and changes in tax laws. These factors are discussed in greater detail in Timminco's Annual Information Form for the year ended December 31, 2008, and in Timminco's most recent Management's Discussion and Analysis, each of which is available via the SEDAR website at www.sedar.com. Although Timminco has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this news release is made as of the date of this news release and Timminco disclaims any intention or obligation to update or revise such information, except as required by applicable law.

Non-GAAP Financial Measures

(1) EBITDA is not a recognized measure under Canadian generally accepted accounting principles ("GAAP"). Management believes that, in addition to net income (loss), EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution prior to debt service, past pension service obligations, capital expenditures, income taxes and restructuring cash payments. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other companies and, accordingly, EBITDA may not be comparable to measures used by other companies. EBITDA is calculated as follows:



----------------------------------------------------------------------------
EBITDA
----------------------------------------------------------------------------
($000's)
----------------------------------------------------------------------------
Three Months Ended (unaudited) Nine Months Ended (unaudited)
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net loss (18,522) (13,727) (64,819) (21,331)
----------------------------------------------------------------------------
Add back(subtract):
----------------------------------------------------------------------------
Income taxes 17 2,035 1,794 4,087
----------------------------------------------------------------------------
Loss on disposal
of Magnesium
Division 2,180 - 2,180 -
----------------------------------------------------------------------------
Impairment of
Fundo Wheels AS - 13,845 698 13,845
----------------------------------------------------------------------------
Equity in the
loss (earnings)
of Fundo Wheels AS - 1,822 - 1,660
----------------------------------------------------------------------------
Impairment of
property, plant
and equipment - - - 326
----------------------------------------------------------------------------
Loss (gain) on the
sale of property,
plant and equipment 40 (375) 29 (375)
----------------------------------------------------------------------------
Interest 2,372 549 5,136 814
----------------------------------------------------------------------------
Amortization of
intangible assets 1,085 138 1,755 413
----------------------------------------------------------------------------
Amortization of
property, plant
and equipment 3,008 1,509 9,632 4,351
----------------------------------------------------------------------------
Reorganization costs - - 3,751 1,659
----------------------------------------------------------------------------
Environmental
remediation costs 132 824 397 4,044
----------------------------------------------------------------------------
Pension curtailment
costs - - 0 4,600
----------------------------------------------------------------------------
Stock-based
compensation 1,996 269 5,948 763
----------------------------------------------------------------------------

----------------------------------------------------------------------------
EBITDA (7,692) 6,889 (33,499) 14,586
----------------------------------------------------------------------------


(2) Adjusted income (loss) is not a recognized measure under GAAP. However, management believes that, in addition to net income (loss), adjusted income (loss) is a useful supplemental measure as it provides investors with an indication of the ongoing profits generated on products sold to customers after corporate overhead expenses. Management defines adjusted net income as net income before income taxes, loss on disposal of magnesium division, impairment of investment in Fundo Wheels, equity in the loss of Fundo Wheels, environmental remediation costs, reorganization costs and pension curtailment costs. Adjusted income (loss) is calculated as follows:



----------------------------------------------------------------------------
ADJUSTED INCOME (LOSS)
----------------------------------------------------------------------------
($000's)
----------------------------------------------------------------------------
Three Months Ended (unaudited) Nine Months Ended (unaudited)
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net loss (18,522) (13,727) (64,819) (21,331)
----------------------------------------------------------------------------
Add back(subtract):
----------------------------------------------------------------------------
Income taxes 17 2,035 1,794 4,087
----------------------------------------------------------------------------
Loss on disposal
of Magnesium
Division 2,180 - 2,180 -
----------------------------------------------------------------------------
Impairment of
Fundo Wheels AS - 13,845 698 13,845
----------------------------------------------------------------------------
Equity in the loss
(earnings) of Fundo
Wheels AS - 1,822 - 1,660
----------------------------------------------------------------------------
Impairment of
property, plant
and equipment - - - 326
----------------------------------------------------------------------------
Loss (gain) on the
sale of property,
plant and equipment 40 (375) 29 (375)
----------------------------------------------------------------------------
Reorganization costs - - 3,751 1,659
----------------------------------------------------------------------------
Environmental
remediation costs 132 824 397 4,044
----------------------------------------------------------------------------
Pension curtailment
costs - - - 4,600
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Adjusted income (loss) (16,153) 4,424 (55,970) 8,515
----------------------------------------------------------------------------


(3) Gross profit is not a recognized measure under GAAP. Management believes that in addition to net income (loss), gross profit is a useful supplemental measure as it provides investors with an indication of the profits generated on products sold to customers before corporate overhead expenses. Investors should be cautioned, however, that gross profit should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of the Company's profitability. The Company's method of calculating gross profit may differ from other companies and accordingly, gross profit may not be comparable to measures used by other companies. Gross profit is calculated as follows:



----------------------------------------------------------------------------
GROSS PROFIT
----------------------------------------------------------------------------
($000's)
----------------------------------------------------------------------------
Three Months Ended (unaudited) Nine Months Ended (unaudited)
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Sales 19,063 68,990 79,100 179,835
----------------------------------------------------------------------------
Cost of goods sold 24,488 55,525 102,872 148,395
----------------------------------------------------------------------------
Gross profit (loss) (5,425) 13,465 (23,772) 31,440
----------------------------------------------------------------------------


Timminco Limited

Consolidated Balance Sheets
(unaudited)

As at
September 30 December 31
2009 2008
----------------------------------------------------------------------------
(in thousands of Canadian dollars)

ASSETS
Current Assets
Cash and cash equivalents $ 5,335 $ 4,512
Short term investments - 116
Accounts receivable 12,164 37,243
Due from affiliated companies 733 -
Inventories 42,700 95,920
Finished goods consigned to affiliated
companies 8,730 -
Prepaid expenses and deposits 1,712 2,353
Future income taxes - 3,235
---------- ----------
71,374 143,379
---------- ----------

Long term receivables 1,311 1,329
Long term inventories 34,698 -
Property, plant and equipment 133,325 130,847
Investment in Applied Magnesium
International Inc. 4,382 -
Employee future benefits 795 510
Future income taxes 9,155 5,825
Intangible assets 8,582 4,305
Goodwill 16,827 16,827
---------- ----------
$ 280,449 $ 303,022
---------- ----------
---------- ----------

LIABILITIES
Current Liabilities
Bank indebtedness $ 43,421 $ 51,439
Accounts payable and accrued liabilities 27,504 61,087
Current portion of long term liabilities 3,922 -
Liability related to customer advances 19,906 25,568
Deferred revenue 9,720 -
Due to affiliated companies 6,287 7,661
Current portion of long term provisions 2,965 2,501
---------- ----------
113,725 148,256

Long term liabilities 34,889 195
Advances from customers - 18,036
Employee future benefits 20,093 19,080
Future income taxes 9,155 9,284
Long term provisions 6,392 5,966
---------- ----------
184,254 200,817
---------- ----------

SHAREHOLDERS' EQUITY
Capital stock 252,684 199,688
Equity component of convertible notes 1,688 2,521
Contributed surplus 11,017 5,069
Deficit (169,024) (104,205)
Accumulated other comprehensive loss (170) (868)
---------- ----------
96,195 102,205
---------- ----------
$ 280,449 $ 303,022
---------- ----------
---------- ----------



Timminco Limited

Consolidated Statements of Operations and Comprehensive Loss
(unaudited)

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
----------------------------------------------------------------------------
(in thousands of Canadian
dollars, except for loss
per share information)
----------------------------------------------------------------------------

Sales $ 19,063 $ 68,990 $ 79,100 $ 179,835
Expenses
Cost of goods sold 24,488 55,525 102,872 148,395
Selling and
administrative 8,034 5,576 21,766 15,580
Amortization of property,
plant and equipment 3,008 1,509 9,632 4,351
Amortization of
intangible assets 1,085 138 1,755 413
Interest 2,372 549 5,136 814
Foreign exchange (gain)
loss (3,771) 1,269 (6,091) 1,767
------------ ------------ ------------ ------------

Income (loss) before the
undernoted (16,153) 4,424 (55,970) 8,515

Gain (loss) on sale of
property, plant and
equipment (40) 375 (29) 375
Environmental remediation
costs (132) - (397) -
Reorganization costs - (824) (3,751) (10,629)
Equity in the earnings of
Fundo Wheels AS - (1,822) - (1,660)
Impairment of investment
in Fundo Wheels AS - (13,845) - (13,845)
Loss on disposal of
Magnesium Division (2,180) - (2,180) -
Realized foreign exchange
loss on Fundo investment
bankruptcy - - (698) -
------------ ------------ ------------ ------------

Loss before income taxes (18,505) (11,692) (63,025) (17,244)
Income tax expense
Current 17 30 70 47
Future - 2,005 1,724 4,040
------------ ------------ ------------ ------------
17 2,035 1,794 4,087

------------ ------------ ------------ ------------
Net loss $ (18,522) $ (13,727) $ (64,819) $ (21,331)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Other comprehensive income,
net of income taxes
Unrealized gain (loss)
on translating financial
statements of
self-sustaining foreign
operation - Fundo
Wheels AS - (958) - (17)

Realized foreign exchange
loss on Fundo investment
bankruptcy - - 698 -

------------ ------------ ------------ ------------
Comprehensive loss $ (18,522) $ (14,685) $ (64,121) $ (21,348)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Loss per common share
- basic and diluted $ (0.15) $ (0.13) $ (0.56) $ (0.20)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Weighted average number
of common shares
outstanding - basic
and diluted 122,924,569 104,146,561 116,606,669 104,076,072
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

The accompanying notes are an integral part of these consolidated financial
statements.


Consolidated Statements of Deficit

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
----------------------------------------------------------------------------
(in thousands of Canadian
dollars)

Deficit at beginning of
period $ (150,502) $ (89,200) $ (104,205) $ (81,596)
Net loss (18,522) (13,727) (64,819) (21,331)
------------ ------------ ------------ ------------
Deficit at end of period $ (169,024) $ (102,927) $ (169,024) $ (102,927)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------



Timminco Limited

Consolidated Statements of Cash Flows
(unaudited)

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
----------------------------------------------------------------------------
(in thousands of Canadian
dollars)

Cash flows from (used in)
operating activities
Net loss $ (18,522) $ (13,727) $ (64,819) $ (21,331)
Adjustments for items not
requiring cash
Amortization of property,
plant and equipment 3,008 1,509 9,632 4,351
Amortization of
intangible assets 1,085 138 1,755 413
Accretion of convertible
debt 214 172 627 495
Stock based compensation 1,996 269 5,948 763
Financing costs expensed 250 - 250 -
Reorganization costs - 824 3,751 10,629
Environmental remediation
costs 132 96 397 169
Benefits plan expense 588 621 2,840 2,183
Unrealized foreign
exchange (gain) loss (1,083) (152) (1,864) 225
Future income taxes - 2,005 1,724 4,040
Loss on disposal of
Magnesium Division 2,180 - 2,180 -
Equity earnings of
Fundo Wheels AS - 1,822 - 1,660
Impairment of investment
in Fundo wheels AS - 13,845 - 13,845
Realized foreign exchange
loss on Fundo investment
bankruptcy - - 698 -
Loss (gain) on disposal
of property, plant and
equipment 40 (375) 29 (375)
Advances from customers - 33,262 - 41,119
Defined benefit pension
plan contributions (880) (629) (2,397) (1,921)
Expenditures charged
against provision for
reorganization (1,293) (1,079) (1,893) (1,285)
Expenditures charged
against other long term
provisions (470) (251) (878) (318)

Change in non-cash
working capital items
(Increase) decrease in
accounts receivable 6,325 (6,575) 20,057 (16,612)
(Increase) decrease
in inventories (6,185) (20,379) (3,091) (41,066)
(Increase) decrease in
prepaid expenses and
deposits (280) 215 (286) (182)
(Decrease) increase in
accounts payable and
accrued liabilities (7,674) (125) (6,149) 2,727
Decrease in advances
from customers - (585) (206) (1,017)
Deferred revenue 3,129 - 13,559 -
------------ ------------ ------------ ------------

(17,440) 10,901 (18,136) (1,488)
------------ ------------ ------------ ------------

Cash flows from (used in)
investing activities
Capital expenditures (5,605) (22,729) (37,653) (51,599)
Development costs
capitalized - - (5,656) -
Decrease in short term
investments 117 91 116 15,151
Investment in
convertible notes - (1,670) - (4,020)
Decrease in long term
receivables - 12 - 116
Proceeds on disposal of
property, plant and
equipment - 386 4,821 386
Other (55) (30) (52) (57)
------------ ------------ ------------ ------------
(5,543) (23,940) (38,424) (40,023)
------------ ------------ ------------ ------------
Cash flows from (used in)
financing activities
Issuance of common shares - 54 38,856 116
(Decrease) increase in
bank indebtedness 1,758 14,346 (8,018) 24,328
Term loan, net 24,750 - 24,750 -
(Decrease) increase in
other liabilities and
long term debt 158 (28) 110 (74)
Increase in loans from
affiliated company 535 237 2,052 203
------------ ------------ ------------ ------------
27,201 14,609 57,750 24,573
------------ ------------ ------------ ------------

Net increase (decrease)
in cash during the
period 4,218 1,570 1,190 (16,938)

Cash and cash equivalents
assumed by Applied
Magnesium International (367) - (367) -

Cash and cash equivalents
at beginning of period 1,484 955 4,512 19,463

------------ ------------ ------------ ------------
Cash and cash equivalents
at end of period $ 5,335 $ 2,525 $ 5,335 $ 2,525
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Supplemental cash flow
information
Cash paid (received)
during the period:
Interest $ 1,193 $ 335 $ 2,323 $ 45
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Income taxes $ 5 $ 10 $ 63 $ 57
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------


Sedar File Profile #00000838

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