Outlook

Timminco’s strategy in 2009 is to organically grow its solar grade silicon product line through increased production from the completion of the expansion of its Bécancour, Québec production facilities.

The long term growth of the Company’s solar grade silicon product line is dependent upon the quality of the product and the manufactured cost of the product relative to competing materials. The Company has ongoing initiatives to improve its performance in both of these key metrics. With respect to product quality, improvements are a function of (i) the impurity level of raw materials used to produce silicon metal feedstock, (ii) suppliers’ ability to provide consistent quality of these raw materials over time, and (iii) the knowledge and experience of and recipe used by the Company’s customers in producing ingots. The Company has procured raw materials for its silicon metal production that meet the quality requirements for UMSi feedstock, and it is working with its suppliers to ensure consistent quality in each delivery. Additionally, the Company is undertaking research and development efforts in the area of ingot making processes, which the Company believes will assist its customers in achieving optimal outcomes in using UMSi. With respect to manufactured cost of the product, the Company achieved an average cost for the fourth quarter 2008 of $30 per kilogram. The Company expects further improvement in cost beyond the level achieved in the fourth quarter 2008 primarily from the elimination of one re-melt step from the current three step re-melt process. The primary impact of one less re-melt is a reduction in the amount of silicon required per unit of final production (an increase in yield). Costs will also improve further through minor adjustments to the process (industrial learning) that is expected to further improve yield and through spreading of fixed overhead across larger volumes (labour and capital efficiency).

The Company shipped 424 mt of solar grade silicon in the fourth quarter 2008, an increase of 41% over levels achieved in the third quarter 2008. The Company will continue to ramp-up production of solar grade silicon in 2009 as new productive capacity is installed in keeping with customer orders. The Company exited 2008 with six production lines in operation and commissioned a seventh line in the last week of January 2009. When the expansion is completed, the Bécancour plant will comprise 12 production lines in total with a cumulative nominal capacity of 14,400 metric tons per year.

The global economic downturn that began in 2008 has negatively impacted demand for and installations of solar power systems. Demand for solar power systems, whether large scale industrial power plants or small scale residential systems, is dependent upon financial incentives and project financing. The liquidity crunch in international banking and financial markets has constrained available financing for new solar projects which in turn has created a surplus of inventory throughout the solar value chain. In this environment it is difficult to judge short term shipment volume for the Company’s solar grade silicon product as the Company’s customers manage inventory and demand levels downstream from the Company. During 2008 the Company shipped 1,045 metric tons of solar grade silicon generating revenue of $65 million. Given the current industry environment the Company is working closely with its customers to monitor the progress of their business development plans so that the Company and its customers can ramp up volumes shipped into the market in a cost effective manner. As a result of this environment, the Company has deferred the completion of its expansion project beyond the targeted timeframe of mid-2009. There is also the potential that customer contracts may be amended to reduce volumes committed during 2009 and 2010 and/or adjust the timing and amount of customer deposits owing to the Company.

While the Company is focused on the high-value opportunity presented by the solar grade silicon market, the Company is reducing its investment in the Magnesium Group. The closure of the Haley, Ontario facility in July 2008 was a milestone event in reducing such investment. Morever, the impact of the recession in the United States throughout 2008 as reflected in lower volumes shipped in each successive quarter led the Company to conclude that the extruded products manufactured in the Aurora, Colorado facility were not providing sufficient margin to cover the overhead costs associated with that facility. Accordingly the Company has subsequent to the year end announced its intention to close the Aurora facility. Additionally the Company concurrently announced the signing of a letter of intent with Winca, its primary China-based supplier, to transfer its magnesium business to a new merged business in which the Company would hold only a minority interest, representing a significant reduction in the Company’s investment in and exposure to the magnesium market. The Company will wind down its Aurora operations over the first half of 2009 in conjunction with an integrated plan with Winca to support extruded products customers from alternative low-cost locations.

For 2008 as a whole the Company achieved operational profitability (net income before charges for reorganization costs, the equity in the loss of Fundo Wheels and the impairment of investment in Fundo Wheels). Provided that economic conditions stabilize in the course of 2009, the Company expects that the revenue from its solar grade silicon product line will enable the Company to maintain this operational profitability in 2009 as a whole.