Saturday, November 10, 2007

First Solar and Rare Metal Investments

I am a PGM metal bull. But I am also watching other stocks. I am also bullish on natural gas players. Recently I had been watching the solar sector and paying attention to First Solar, FSLR. While studying FSLR I became interested in a critical metal that FSLR uses, tellurium. Seeing that FSLR is ridiculously overpriced and that its future is confined by the extremely limited tellurium supply, I shorted FSLR, and doubled my shorts before the earnings release, believing that it's performance in past three quarters were lukeworm and there is no way they could have beaten the street. To my surprice, they did put out a smash out quarter, earning 58 cents per share. My shorts were quite under water. But I hold on and shorted more.

Why I hold on with the FSLR short? For one thing anything that raises in a hyperbolic fashion falls back down fast. But more importantly, the smashout quarter seems to be a one time aberration, the next few quarters will be much less impressive due to lower sales price and raising cost. Especially there seems to be some book cooking going on for Q3. I will dig out exactly how the book cooking was done. Here is the earnins conference call transcripts. FSLR is now under a NASD investigation for suspected insider trades.

The CFO of FSLR made a flat out LIE about "terrawatts levels of tellurium availability", on the Nov. 8th Pacific Growth Equities Clean Technology & Industrial Growth Conference. Here is the audio recording. The comment occured at 22'58". The exact words are "We have identified terrawatts levels of tellurium availability".

About tellurium, there are a few interesting articles. Invested in tellurium yet. And this one: Arizona Tellurium Rush. I think I might consider buying some physical tellurium. But this thing is toxic so caution is warranted.

Here are some good readings related to tellurium:
Global tellurium statistics by USGS.
Is There a Tellurium Rush in the Making?
Arizona Tellurium Rush.
An article on Mining Journal Review.
Phase change memory from Intel later this year
Panasonic says that its 100GB Blu-ray discs will last a century
Thermo material may replace heat sinks, fans in electronic gear
Imation HD DVD and Blu ray media
The New Indelible Memories

Do you know DVDs have something to do with tellurium? Read this.

Some one meantioned a tellurium metal vendor. I hope their door not be knocked down by the mobs of want-to-be tellurium investors tomorrow. (Update: They are sold out)
Some one on Seeking Alpha meantioned a list of tellurium vendors. Check it out.

A May 1st, 2007 article on Seeking Alpha: Forget Gold - What About Cobalt? Indium? It recommended a monthly Mining Journal Review, and even a Minor Metal Trade Association in Estonia. Estonia? Interesting! I found out by search "tellurium" on Seeking Alpha.

(to be finished)


Anonymous said...


You looked at the silicon supply prospect and hence made an exception case for FSLR. I am sorry to say you are completely wrong. FSLR faces a way much worse supply nightmare than silicon based solar players.

Silicon is the MOST abundant element on earth. Any silicon shortage is only temporary. It's only a matter of setting up new silicon factories to get new silicon supply. Long term, silicon shortage is not the fundamental factor.

FSLR, on the other hand, uses the cadmium telluride material. Cadmium is extremely toxic and extremely harmful to environment. But the worse problem is tellurium is one of the rarest elements on earth, rarer even than platinum. According to Arizona State Geologist, the global production is estimated to be only 215 tons per year. Some estimate put it even lower at 168 tons per year.

Global tellurium price raised from below $4 a pound to well over $100 a pound in just a few years, implying severe shortage, even without significant CdTe demand yet, as FSLR only start to ramp up production this year. Emerging demands include DVD and computer flash memory, among other things.

In comparison, FSLR consumes about 135 tons of tellurium per GW of solar panels. I do not know how they are going to find the tellurium source when their new factories start up in Malaysia. Even if they can get the tellurium, it's likely their own demand will drive tellurium price up to such high level that they are no longer profitable.

FSLR is a company whose profit margin and growth potential is tightly squeezed and capped by its own tellurium demand. There is no future for this company. It really does not deserve this kind of ridiculous valuation.

Beanieville said...

FSLR is the next Intel.

Gold Stock Bull said...

How to Invest in Rare Earth Metals...

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