Accounting Changes

Effective January 1, 2008, the Company has adopted the new recommendations of the CICA Handbook Section 3031, “Inventories”, Section 1535, “Capital Disclosures”, Section 3862, “Financial Instruments – Disclosures”, Section 3863, “Financial Instruments – Presentation” and Section 1400, “General Standards on Financial Statement Presentation”. The impact that the adoption of these sections has had on the Company’s financial statements is outlined below.

Inventories

CICA Section 3031, “Inventories”, was issued in June 2007 and replaces existing Section 3030 of the same title. It provides guidance with respect to the determination of cost and requires inventories to be measured at the lower of cost and net realizable value. Reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories is now required. The cost of the inventories should be based on a first-in, first-out or a weighted average cost formula. Techniques used for the measurement of cost of inventories, such as the standard cost method, may be used for convenience if the results approximate cost. The new standard also requires additional disclosures including the accounting policies used in measuring inventories, the carrying amount of the inventories, amounts recognized as an expense during the period, write-downs and the amount of any reversal of any write-downs recognized as a reduction in expenses. The adoption of this section had no material impact on the Company’s consolidated financial statements. The Silicon Group uses a weighted average cost methodology and the Magnesium Group applies a standard cost methodology on a FIFO basis that approximates actual cost. See Notes 2 and 5 to the Company’s consolidated financial statements.

Capital Disclosures

CICA Handbook Section 1535, “Capital Disclosures”, requires disclosure of an entity’s objectives, policies and processes for managing capital, quantitative data about what the entity regards as capital and whether the entity has complied with any capital requirements and, if it has not complied, the consequences of such non-compliance. See Note 19 to the Company’s consolidated financial statements regarding these disclosures.

Financial Instruments Disclosures

CICA Handbook Section 3862, “Financial Instruments – Disclosures”, increases the disclosures currently required that will enable users to evaluate the significance of financial instruments for an entity’s financial position and performance, including disclosures about fair value. In addition, disclosure is required of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about liquidity risk and market risk. The quantitative disclosures must also include a sensitivity analysis for each type of market risk to which an entity is exposed, showing how net income and other comprehensive income would have been affected by reasonably possible changes in the relevant risk variable. See Note 17 to the consolidated financial statements.

Financial Instruments Presentation

CICA Handbook Section 3863, “Financial Instruments – Presentation”, replaces the existing requirements on presentation of financial instruments which have been carried forward unchanged to this new section. See Note 17 to the Company’s consolidated financial statements.

General Standards on Financial Statement Presentation

CICA Handbook Section 1400, “General Standards on Financial Statement Presentation”, has been amended to include requirements to assess and disclose an entity’s ability to continue as a going concern. This section had no impact on the Company’s consolidated financial statements.

Transitional Adjustment

Adoption of these standards was on a prospective basis without retroactive restatement of prior periods.