Summary of Operations

Results for the fourth quarter and fiscal 2008 were reduced by a reorganization charge of $1.3 million and $11.9 million, respectively, relating to the closing of the Company’s Haley, Ontario magnesium manufacturing facility and $12.4 million relating to the impairment of the Company’s investment in Fundo Wheels AS during fiscal 2008. In the absence of these charges the Company would have reported a profit for both the fourth quarter and fiscal 2008.

Silicon Group

Sales of the Silicon Group were $58.5 million in the fourth quarter 2008, up 140% from $24.3 million in the fourth quarter 2007. For fiscal 2008, Silicon Group sales were $189.5 million compared to $103.7 million in fiscal 2007, an increase of 83%. The increase in sales for the fourth quarter 2008 compared to the same period of 2007 is due to increased sales volume of silicon metal and solar grade silicon and higher average selling prices for silicon metal sales. During fiscal 2008 and the fourth quarter 2008, solar grade silicon gross revenues were $64.6 million and $27.7 million, respectively. Net revenue for solar grade silicon, including a deduction for anticipated returns of scrap, for these periods was $61.8 million and $25.9 million, respectively. The Company shipped 424 metric tons of solar grade silicon material in the fourth quarter 2008, compared to 33 metric tons in the fourth quarter 2007 and 300 metric tons in the third quarter 2008. The average selling price for solar grade silicon sales in the fourth quarter was $65 per kilogram and $62 per kilogram for fiscal 2008, compared to $44 per kilogram during fiscal 2007. For fiscal 2008 and the fourth quarter 2008, respectively, the weakness of the Canadian dollar against the U.S. dollar and the Euro had a $6.5 million favourable and an $8.8 million favourable impact on sales, respectively, as the majority of the Silicon Group’s sales are denominated in these currencies. Production of silicon metal was negatively impacted throughout fiscal 2008 due to the reduced efficiency of one of the electric arc furnaces pending receipt of a repaired transformer in the fourth quarter. The Company has made a claim under its insurance policy to recover the income lost during this interruption, $1.0 million of which has been included as a recovery in cost of sales in the fourth quarter 2008. The transformer was fully operational by December 2008. Sales of regular silicon products for the fourth quarter 2008 were $32.6 million (fourth quarter 2007 – $22.8 million) and for fiscal 2008 were $127.7 million (fiscal 2007 – $99.9 million). The increase in regular silicon product sales in 2008 relates to both volume and increased average selling prices.

Gross profit for the fourth quarter 2008 was $15.4 million or 26.3% of sales, compared to a negative gross margin of $2.7 million or negative 11.1% of sales in the fourth quarter 2007. Cost of sales of the solar grade silicon product are comprised of raw materials, utilities, labour and an allocation of manufacturing overhead expenses, including depreciation. Utilities and labour represent a majority of the cost inputs, as the Company owns mining rights in respect of a quartz quarry, the primary raw material input. Total solar grade silicon product cost of sales for the fourth quarter 2008 and fiscal 2008 were $12.6 million and $33.0 million, respectively. The main contributor to the increase in margin of the Silicon Group was the increase in sales volume of solar grade silicon.

Gross margin for the solar grade silicon product for the fourth quarter 2008 was 54% and for fiscal 2008 was 48%. The gross margin percent increased in the fourth quarter 2008 compared to the gross margin of 42% in the third quarter of 2008 due to the higher average selling prices realized. The average cost of sale per metric ton of solar grade silicon continues to decline and was lower in the fourth quarter 2008 than previous quarters. Management expects the costs of production per metric ton of solar grade silicon to decrease as the expansion of the BSI facility progresses and additional production capacity is brought on stream.

EBITDA of $11.6 million for the fourth quarter 2008 increased significantly compared to the fourth quarter 2007 negative EBITDA of $2.1 million. Similarly, EBITDA of $31.9 million for fiscal 2008 was substantially higher than the negative $0.7 million for fiscal 2007. The increases reflect the shift in sales mix from metallurgical silicon to solar grade silicon, favourable conversion of the U.S. dollar and Euro to Canadian dollars and the stronger margins of the solar grade silicon.

Net income for the fourth quarter 2008 and fiscal 2008 ($7.5 million and $19.9 million, respectively) were higher than the net losses for the comparable periods of 2007 ($3.1 million and $1.6 million, respectively). The increase is due to higher profits from the solar grade silicon offset by increased amortization costs of the property, plant and equipment and income taxes.

Magnesium Group

For the fourth quarter 2008, sales of the Magnesium Group were $14.2 million, up 17% from $12.1 million in the fourth quarter 2007. For fiscal 2008, sales were $63.1 million compared to $62.4 million in fiscal 2007, an increase of 1%. Sales in the fourth quarter 2008 were unfavourably impacted by the weakening United States economy. However, a stronger gross profit percentage resulted from price increases across most of the Group’s product lines, initiated to recover large unfavourable magnesium metal cost increases. Sales volume in metric tons was down 37% compared to the fourth quarter 2007 and 28% for fiscal 2008 compared to fiscal 2007. The volume decrease relates primarily to a decline in North American new housing construction as the Magnesium Group’s principal product lines are new water heater anodes and construction tools. Sales softness in the Magnesium Group’s traditional markets of water heater anodes and construction tools were offset by increased volume in specialty metals markets. The change in exchange rates of the Canadian dollar against the U.S. dollar had an unfavourable impact on sales of $1.6 million in fiscal 2008 and a $2.5 million favourable impact in the fourth quarter 2008.

Gross profit for the fourth quarter 2008 was $1.2 million or 8.4% of sales, compared to $0.1 million or 0.9% of sales in the fourth quarter 2007. Gross profit for fiscal 2008 was $8.0 million or 12.6% of sales, compared to $5.6 million or 8.9% of sales in the fourth quarter 2007. Gross profit was positively impacted by price increases realized in the quarter and higher utilization of production facilities, offset by higher magnesium input prices.

Negative EBITDA of $2.3 million for the fourth quarter 2008 compared to negative EBITDA of $3.9 million in the fourth quarter 2007. For fiscal 2008, EBITDA was negative $2.0 million, compared to a negative EBITDA of $2.9 million for fiscal 2007. The decreased losses resulted from a rationalization of the Magnesium Group’s operations in order to lower raw materials and production costs.

For the fourth quarters 2008 and 2007 the net losses were $3.9 million and $2.7 million, respectively. For the fiscal years 2008 and 2007 the net losses were $14.7 million and $4.1 million, respectively. The net results of 2008 are impacted by reorganization costs resulting from the closure of the Haley facility. Due to historical asset impairment charges, depreciation is nominal in all of the reported periods.

Corporate and Other

Corporate and Other EBITDA primarily represents selling and administration expenses of $2.8 million and $8.7 million for the fourth quarter 2008 and fiscal 2008, respectively, compared to $1.4 million and $5.3 million, respectively, for comparative periods in 2007. The largest portion of the increase was related to higher professional fees and travel related to various strategic initiatives, in addition to smaller increases in various other expense categories.