Timminco Limited
TSX : TIM

Timminco Limited

February 18, 2009 16:30 ET

Timminco Completes Next Phase of Magnesium Business Strategy With Proposed Merger With Winca and Closure of Aurora Facility

TORONTO, ONTARIO--(Marketwire - Feb. 18, 2009) - Timminco Limited ("Timminco")(TSX:TIM) announced today that, consistent with its strategy of positioning its magnesium business for profitability and strategic divestiture, it has entered into a non-binding letter of intent with Winca Tech Limited, a leading Chinese-based producer of magnesium products ("Winca"), to merge the principal components of Timminco's magnesium and specialty metals business, including its manufacturing facility in Nuevo Laredo, Mexico, with all of Winca's magnesium operations. Timminco expects to retain a minority equity interest in the combined business, which will be known as Applied Magnesium International ("AMI"). The head office of AMI is expected to be in Denver, Colorado. The proposed merger is subject to a number of conditions, including financing and the negotiation and execution of definitive agreements, and is expected to be completed in the second quarter of 2009.

Timminco also announced today that it will immediately start winding down production operations at its existing magnesium extrusion facility in Aurora, Colorado, and close this facility later this year. This facility currently employs 52 people. Some of the existing staff and management are expected to be transferred to AMI, along with certain assets and technology.

"The merger of Timminco's and Winca's magnesium operations will allow the two companies to leverage Timminco's pure magnesium and extrusion technology, quality, service and market presence in extruded products with Winca's low cost production base, recently modernized manufacturing facilities and strong market position in magnesium cathodic protection," said John Fenger, President - Light Metals of Timminco. "The closure of our magnesium extrusion operations in Aurora, Colorado, although difficult, is consistent with the divestiture strategy of our magnesium business."

"Incorporating Timminco's magnesium production and extrusion technology into our recently upgraded Chinese operations will allow us to further extend our technical and quality leadership with minimal capital, making us one of the lowest cost producers in the world," said Dr. He Xu, Chairman of Winca. "It will certainly differentiate Applied Magnesium International from our competition and, most importantly, allow us to provide excellent products and services to our customers for many years to come." Established in 1996, Winca specializes in the production and sales of magnesium alloy sacrificial anodes for electro-chemical corrosion control, high purity magnesium, magnesium alloys, and magnesium extrusions. The Winca College of Magnesium, located in Hebi, Henan province of China, was co-established by Winca, the Hebi Institute of Technology and the China Magnesium Association.

The closure of the Aurora magnesium extrusion operations will result in severance payments and other cash closure costs of approximately $3 million, which will be incurred in 2009. Timminco expects to record charges in the first half of 2009 relating to these costs. The majority of the production assets of the Aurora facility were deemed to be impaired during 2006 and written down to fair market value at that time. To the extent that estimated proceeds of disposition, if any, are less than the carrying value of such assets, a charge will be taken in the first half of 2009. Timminco currently expects to recover a significant portion of its investment in working capital as the business is transitioned to AMI. Timminco expects to generate net cash proceeds from these announced plans during 2009.

About Timminco

Timminco is a leader in the production of low cost solar grade silicon for the rapidly growing solar photovoltaic energy industry. Using its proprietary, patent pending technology, Timminco purifies silicon metal into solar grade silicon (also known as upgraded metallurgical silicon) for use in the manufacture of solar cells. Timminco also produces silicon metal, magnesium extrusions and other specialty metals for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

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: the scope, structure, timing, completion and financial impacts of the proposed merger of Timminco's and Winca's magnesium operations; the scope, timing and financial impact of the closure of the Aurora, Colorado facility; the future growth and profitability of AMI; and the recovery of working capital and generating net cash proceeds from the announced events. 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: rapid deterioration of global economic conditions resulting from the financial crisis; limited history with solar grade silicon production; expansion of solar grade silicon production and sales; production capacity expansion at the Becancour facilities; protection of intellectual property rights; increasing and maintaining the purity of solar grade silicon; long-term contracts for supplying 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; dependence upon power supply for silicon metal production; cost of solar grade silicon production; price volatility for magnesium metal; magnesium supply chain interruptions; dependence upon key customers of magnesium extruded and fabricated products; manufacturing cost reduction initiatives; financing requirements for capital expenditures; limitations under existing credit facilities; 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, 2007, and 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.

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Contact Information

  • Timminco Limited
    Robert Dietrich
    Executive Vice President - Finance and CFO
    (416) 364-5171
    (416) 364-3451 (FAX)
    Email: rdietrich@timminco.com
    or
    The Equicom Group Inc.
    Lawrence Chamberlain
    (416) 815-0700 ext. 257
    (416) 815-0080 (FAX)
    Email: lchamberlain@equicomgroup.com