Strategy

Timminco is focused on creating a profitable, high growth business from the development of its solar grade silicon product line. Building upon its metallurgical silicon operations, the Company purifies metallurgical silicon using a proprietary process to supply solar cell manufacturers with solar grade silicon, also known as upgraded metallurgical silicon (“UMSi”), which is a lower cost alternative to polysilicon. The Company’s strategy has the following key elements:

• Low cost production based upon a proprietary metallurgical process that consumes significantly less energy than traditional silicon purification methods
• Internal supply of silicon feedstock for purification process to secure supply and control quality and cost
• Lower capital investment for equivalent capacity
• Expansion of productive capacity to meet committed customer demand
• Development of a customer base focused on the use of UMSi to lower the total cost per watt of solar cells delivered into the market
• Ongoing collaboration with customers and the Company’s controlling shareholder, AMG, to develop state-of-the-art techniques for transforming UMSi into high quality ingots for processing into silicon wafers, and allowing customers to lower their total cost per watt by implementing such know-how

During 2008 the Company made progress on all of the key elements of its strategy. Production ramped up sequentially throughout 2008 and the average cost of production dropped sequentially despite one-time costs incurred in bringing on new production capacity. Acquisition of new long term customers for UMSi in the first half of the year supported the business case for proceeding with an expansion of production capacity. By year end, the Company had installed one third of the incremental planned capacity. Work progressed on securing new sources of high quality raw materials for silicon feedstock production and the Company installed an ingoting furnace that enabled commencement of research and development activities on this downstream activity in the fourth quarter.

Key factors for the Company in further executing its strategy include: continued reduction of unit costs of production, improved quality of UMSi (in terms of parts per million of impurities) and development of a “recipe” for the production of high quality ingots from its UMSi that can be shared with its customers. This last factor will be driven by research and development activities by the Company at its Bécancour site and in collaboration with its key equipment suppliers.

The Company has decided to reduce its investment in its magnesium business, and has been pursuing a divestiture and other strategic alternatives during 2008. Given the low manufacturing cost environment in China, the Company successfully commenced sourcing magnesium from China prior to the mid-2008 closure of the Haley, Ontario magnesium manufacturing facilities. In addition, high labour content activities related to water heater anodes, formerly undertaken in the Company’s Aurora, Colorado facility, were successfully moved to the Company’s manufacturing facility in Nuevo Laredo, Mexico supported by the Chinese supply chain. These moves have provided the Magnesium Group with a competitive core to be leveraged by a strategic purchaser. Subsequent to year end, the Company announced the closure of its Aurora facility and the signing of a letter of intent with Winca, its primary China-based supplier, to transfer the Company’s magnesium business to a new merged business that would include all of Winca’s magnesium operations and would be majority owned by Winca. Upon closing of this proposed transaction, the Company will have significantly reduced its exposure to the magnesium market, holding only a minority interest in the merged business.