Timminco Limited
TSX : TIM

Timminco Limited

March 17, 2009 16:30 ET

Timminco Reports Fourth Quarter and Year-End Fiscal 2008 Results

Solar Grade Silicon Contributes $64.6 Million to 2008 Revenue

TORONTO, ONTARIO--(Marketwire - March 17, 2009) - Timminco Limited ("Timminco" or the "Company") (TSX:TIM), today announced its financial results for the fourth quarter and fiscal year ended December 31, 2008.

Fourth Quarter 2008 Highlights

- Shipped 424 metric tons of solar grade silicon at an average selling price of $65 per kilogram, generating gross revenue of $27.7 million.

- Consolidated sales were $72.7 million, an increase of 100% from $36.4 million for the fourth quarter of 2007.

- Earnings before interest, taxes, depreciation, and amortization (EBITDA)(1) increased to $6.4 million from an EBITDA loss of $7.3 million for the fourth quarter of 2007.

- Net loss was $1.3 million, or $0.01 per share, compared with a net loss of $8.8 million, or $0.08 per share, for the fourth quarter of 2007.

- Adjusted net income(2) was $1.9 million.

- Received $4.4 million in deposits from solar grade silicon customers under long- term contracts.

- Amended credit agreement with Bank of America to increase the maximum revolving line of credit to US$50 million from US$32.8 million.

Fiscal 2008 Highlights

- Signed long-term agreements to supply solar grade silicon to leading solar cell manufacturers.

- Commissioned six solar grade silicon purification lines at its Becancour, Quebec facility.

- Shipped 1,045 metric tons of solar grade silicon at an average selling price of $62 per kilogram, generating gross revenue of $64.6 million.

- Consolidated sales were $252.6 million, an increase of 52% from $166.2 million for 2007.

- EBITDA was $21.3 million compared to an EBITDA loss of $8.9 million for 2007.

- Net loss was $22.6 million, or $0.22 per share, compared with a loss of $18.0 million, or $0.20 per share, for 2007.

- Adjusted net income was $10.4 million.

Highlights Subsequent to Year End

- Commissioned our seventh solar grade silicon purification line.

- Completed an equity offering by way of a private placement to AMG Advanced Metallurgical Group N.V. ("AMG") and several other investors, generating net proceeds of $24.2 million.

- Signed a non-binding letter of intent to merge the principal components of the Company's magnesium business with Winca Tech Limited, a China-based producer of magnesium products.

- Commenced an orderly wind down of operations at the Company's magnesium extrusion facility in Aurora, Colorado.

Global economic conditions have deteriorated rapidly over the last several months as a result of the financial crisis and recession that negatively impacted markets in North America, Europe and Asia during 2008. These developments are having and will likely continue to have a broad-reaching impact on the Company's businesses and the industries in which they operate. The severity, duration and impact of these developments are not yet fully understood. Many of the Company's customers are experiencing financial constraints and have reduced or deferred their purchases. In response to this current environment, the Company has subsequent to the year end announced certain initiatives in both its Silicon and Magnesium Groups, including those noted above and a cost containment plan as separately announced today, to reduce expenditures and accelerate reduction of working capital.

"2008 was a transformational year for Timminco marked by significant progress in the build out of our solar grade silicon product line, which contributed nearly $65 million to revenue," said Dr. Heinz Schimmelbusch, Chairman of the Board and Chief Executive Officer of Timminco. "Based on our proprietary purification process in the production of UMG Si, Timminco is positioned to capitalize on the long-term opportunity in the solar industry. In the near term, however, the rapid deterioration of global economic and credit conditions and its profound impact on demand for solar energy installations have caused many of our customers to reduce orders. However, with a low-cost purification process for producing solar grade silicon, we remain confident about our prospects as market conditions improve. Moreover, through our relationship with AMG, we are exploring opportunities to leverage our position as a leading supplier of UMG Si to further improve the value proposition of our product."

Financial Results

Timminco has two reporting segments: the Silicon Group, which includes the silicon metal and solar grade silicon product lines, and the Magnesium Group, which includes the magnesium extrusion, fabrication and specialty metals product lines.

Consolidated sales for the fourth quarter of 2008 were $72.7 million, an increase of 100% from $36.4 million for the fourth quarter of 2007. Consolidated sales for the 2008 year were $252.6 million, an increase of 52% from $166.2 million for 2007. The increases were primarily attributable to higher sales for the Company's Silicon Group, specifically its solar grade silicon and silicon metal products.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2008 increased to $6.4 million from an EBITDA loss of $7.3 million for the fourth quarter of 2007. EBITDA for the 2008 year increased to $21.3 million from an EBITDA loss of $8.9 million for 2007.

Net loss for the fourth quarter of 2008 was $1.3 million, or $0.01 per share, compared to a net loss of $8.8 million, or $0.08 per share, for the fourth quarter of 2007. Net loss for the fourth quarter of 2008 included updated charges for provisions related to reorganization, environmental remediationand capital asset impairments Excluding these items, adjusted net income for the fourth quarter of 2008 was $1.9 million. Net loss for the 2008 year was $22.6 million, or $0.22 per share, compared to a net loss of $18.0 million, or $0.20 per share for 2007. The increase in the net loss for the 2008 year was primarily the result of charges relating to the closure of the Magnesium Group's Haley, Ontario manufacturing facility and an asset impairment charge relating to the Company's investment in Fundo Wheels. Excluding the Haley costs, impairment charges, and the equity in the loss of Fundo Wheels, adjusted net income for the 2008 year was $10.4 million.

During the fourth quarter of 2008, Timminco invested approximately $20.0 million to support the expansion of its solar grade silicon production facility to 14,400 metric tons of nominal annual production capacity. Total investment in the Company's solar grade silicon production facility for the 2008 year was approximately $67.0 million.

Cash and short-term investments at December 31, 2008 were $4.6 million compared to $34.6 million at December 31, 2007. During the fourth quarter of 2008, the Company received deposits of $4.4 million from customers under solar grade silicon supply contracts. At December 31, 2008, the Company had funds available to it through its revolving credit facility of US$6.2 million. Subsequent to the year-end, Timminco completed an equity offering of 7.04 million common shares at a price of $3.55 per share for aggregate gross proceeds of $25.0 million. The Company believes it will have sufficient liquidity to finance its working capital needs, based on its revolving credit facility, expected cash flow from operations and cash on hand.

Silicon Group

Sales for the Silicon Group for the fourth quarter of 2008 were $58.5 million, an increase of 140% from $24.3 million for 2007, and accounted for 80% of Timminco's total sales. Sales for the 2008 year were $189.5 million, an increase of 83% from $103.7 million for 2007 and accounted for 75% of Timminco's total sales. The increases were due to higher sales volumes for each of the solar grade silicon and silicon metal product lines, as well as higher average selling prices for silicon metal. The weakness of the Canadian dollar relative to the US dollar and the Euro had a favourable impact on sales of $6.5 million for the fourth quarter of 2008 and $8.8 million for the 2008 year.

The Silicon Group shipped 424 metric tons of solar grade silicon in the fourth quarter, an increase of 41% from 300 metric tons shipped in the third quarter of 2008, generating revenue of $27.7 million. For the 2008 year, the Silicon Group shipped 1,045 metric tons of solar grade silicon, generating revenue of $64.6 million.

Gross profit for the fourth quarter of 2008 increased to $15.4 million, or 26.3% of sales, from negative $2.7 million, or negative 11.1% of sales, for the fourth quarter of 2007. Gross profit for the 2008 year increased to $40.1 million, or 21.2% of sales, from $0.9 million, or 0.9% of sales, for 2007. 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 increases in gross profit were primarily the result of higher sales volumes of solar grade silicon.

EBITDA for the fourth quarter of 2008 increased to $11.6 million from an EBITDA loss of $2.1 million for the fourth quarter of 2007. EBITDA for the 2008 year increased to $31.9 million from an EBITDA loss of $0.7 million for 2007. The increases are the result of the change in the sales mix to a higher proportion of solar grade silicon, the favourable impact of translation of U.S. dollar and Euro denominated sales to Canadian dollars and higher margins on solar grade silicon.

Net income for the fourth quarter of 2008 increased to $7.5 million from a net loss of $3.1 million for the fourth quarter of 2007 and net income for the 2008 year increased to $19.9 million from a net loss of $1.6 million for 2007.

Magnesium Group

Sales for the Magnesium Group for the fourth quarter of 2008 were $14.2 million, an increase of 17% from $12.1 million for the fourth quarter of 2007. The increase is attributable to price increases across most product lines in response to higher magnesium metal costs, which were partially offset by lower sales volumes due to the weak US economy. Sales for the 2008 year were $63.1 million compared to $62.4 million for 2007.

Gross profit for the fourth quarter of 2008 increased to $1.2 million, or 8.4% of sales, from $0.1 million, or 0.9% of sales, for the fourth quarter of 2007. Gross profit for the 2008 year increased to $8.0 million, or 12.6% of sales, from $5.6 million, or 8.9% of sales for the 2007 year.

EBITDA loss for the fourth quarter of 2008 was $2.3 million compared to an EBITDA loss of $3.9 million for the fourth quarter of 2007. EBITDA loss for 2008 was $2.0 million compared with an EBITDA loss of $3.0 million for 2007. The decrease in EBITDA loss was the result of the rationalization of the Magnesium Group's operations to lower raw material and production costs.

Net loss for the fourth quarter of 2008 was $3.9 million compared with a net loss of $2.7 million for the fourth quarter of 2007 and net loss for the 2008 year was $14.7 million compared with a net loss of $4.1 million for 2007. The increase for the 2008 year is primarily the result of the reorganization charge relating to the closure of the Haley, Ontario manufacturing facility.

Subsequent to year end, the Company undertook the next phase of its divestiture of the Magnesium Group by signing a non-binding letter of intent to merge its principal components with Winca Tech Limited, a China-based producer of magnesium products, and commencing the orderly wind down of operations at the Company's magnesium extrusion facility in Aurora, Colorado.



Financial Highlights
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
($000's except per
share amounts)
Sales $ 72,728 $ 36,439 $ 252,563 $ 166,156

Gross profit 16,583 (2,588) 48,023 6,506

Gross profit
percentage 22.8% (7.1%) 19.0% 3.9%

EBITDA 6,407 (7,336) 21,263 (8,910)

Net income (1,278) (8,836) (22,609) (18,036)

Loss per common share,
basic and diluted (0.01) (0.08) (0.22) (0.20)
Working capital
(excluding
available cash items) 49,326 32,363 49,326 32,363
Total assets 303,022 187,281 303,022 187,281
Cash and marketable
securities 4,628 34,614 4,628 34,614
Bank debt 51,439 21 51,439 21
Total long term
liabilities 52,561 26,196 52,561 26,196
Weighted average number
of common shares
outstanding,
basic and diluted 104,275 103,978 104,126 90,080


Summary of Operations

Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
(000's, except per share
amounts)
Sales
Silicon $58,535 $24,339 $189,452 $103,748
Magnesium 14,193 12,100 63,111 62,408
Total 72,728 36,439 252,563 166,156

Gross Profit(3)
Silicon 15,387 (2,693) 40,068 939
Magnesium 1,196 105 7,955 5,567
Total 16,583 (2,588) 48,023 6,506

Gross Profit
Percentage
Silicon 26.3% (11.1%) 21.2% 0.9%
Magnesium 8.4% 0.9% 12.6% 8.9%
Total 22.8% (7.1%) 19.0% 3.9%

EBITDA
Silicon 11,556 (2,050) 31,935 (677)
Magnesium (2,324) (3,875) (1,999) (2,880)
Corporate / Other (2,825) (1,411) (8,673) (5,353)
Total 6,407 (7,336) 21,263 (8,910)

Net Income (Loss)
Silicon 7,499 (3,098) 19,864 (1,590)
Magnesium (3,902) (2,712) (14,668) (4,142)
Corporate / Other (4,875) (3,026) (27,805) (12,304)
Total (1,278) (8,836) (22,609) (18,036)

Loss per common share,
basic and diluted (0.01) (0.08) (0.22) (0.20)

Weighted average number
of common shares
outstanding, basic and
diluted 104,275 103,978 104,126 90,080


Timminco will file its audited consolidated financial statements for the year ended December 31, 2008, and related management's discussion and analysis (MD&A) with securities regulatory authorities within the applicable timelines. Such financial statements, MD&A and related documents will be available through SEDAR at www.sedar.com as well as through Timminco's website, www.timminco.com.

Conference call

Timminco will host a conference call today (Tuesday, March 17, 2009) at 5:00 pm ET to discuss its financial results for the fourth quarter and year ended December 31, 2008. To access the conference call by telephone, dial 416-644-3417 or 1-800-732-9303. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Tuesday, March 24, 2009 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21297430#.

A live audio webcast of the conference call will be also available at www.timminco.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be available for replay at www.timminco.com following the live presentation.

About Timminco

Timminco is a leader in the production of low cost solar grade silicon for the solar photovoltaic energy industry. Using its proprietary, patent pending technology, Timminco purifies silicon metal into solar grade silicon (also known as upgraded metallurgical silicon) for use in the manufacture of solar cells. Timminco also produces silicon metal, magnesium extrusions and other specialty metals for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.

Cautionary Note on Forward-Looking Information

This news release contains "forward-looking information", as such term is defined in applicable Canadian securities legislation, concerning Timminco's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". In this news release, such information includes statements regarding Timminco's liquidity and capital resources and future production capacity. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Timminco operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies.

Timminco cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Timminco's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to: global economic conditions; customer commitments under long-term contracts for solar grade silicon; limitations under existing credit facilities; cost of solar grade silicon production; protection of intellectual property rights; increasing and maintaining the purity of solar grade silicon; selling prices for solar grade silicon; price volatility for silicon metal; pricing and availability of raw materials for silicon metal and solar grade silicon production; expansion of solar grade silicon production and sales; production capacity expansion at the Becancour facilities; limited history with solar grade silicon production; dependence upon power supply for silicon metal production; closure of magnesium facilities and execution of proposed joint venture for the magnesium business; price volatility for magnesium metal; magnesium supply chain interruptions; dependence upon key customers of magnesium extruded and fabricated products; financing requirements for capital expenditures; foreign currency exchange; dependence upon key executives and employees; customer concentration; completion and integration of potential acquisitions, partnerships or joint ventures; risks with foreign operations and suppliers; environmental, health and safety laws and liabilities; equipment failures; transportation disruptions; conflicts of interest; intellectual property infringement claims; new regulatory requirements; labour disputes; and changes in laws. These factors are discussed in greater detail in Timminco's Annual Information Form for the year ended December 31, 2007, and in Timminco's most recent Management's Discussion and Analysis, each of which is available via the SEDAR website at www.sedar.com.

Although Timminco has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this news release is made as of the date of this news release and Timminco disclaims any intention or obligation to update or revise such information, except as required by applicable law.

Non-GAAP Financial Measures

(1) EBITDA is not a recognized measure under Canadian generally accepted accounting principles ("GAAP"). Management believes that, in addition to net income (loss), EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution prior to debt service, past pension service obligations, capital expenditures, income taxes and restructuring cash payments. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of the Company's profitability. Also, EBITDA should not be construed as an alternative to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other companies and, accordingly, EBITDA may not be comparable to measures used by other companies. EBITDA is calculated as follows:



----------------------------------------------------------------------------
EBITDA (Earnings Before Interest Taxes
Depreciation and Amortization)
----------------------------------------------------------------------------
($000's)
----------------------------------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------------------------------
Q4 Q4 Year Year
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net loss (1,278) (8,836) (22,609) (18,036)
----------------------------------------------------------------------------
Add back (subtract):
----------------------------------------------------------------------------
Income taxes 1,611 (1,299) 5,698 (1,210)
----------------------------------------------------------------------------
Impairment of Fundo Wheels AS (1,415) - 12,430 -
----------------------------------------------------------------------------
Equity in the loss of Fundo
Wheels AS 1,415 1,376 3,075 3,798
----------------------------------------------------------------------------
Impairment of property, plant and
equipment 1,025 - 1,351 -
----------------------------------------------------------------------------
Loss (gain) on the sale of property, plant
and equipment 5 15 (370) (26)
----------------------------------------------------------------------------
Interest 796 573 1,610 2,684
----------------------------------------------------------------------------
Amortization of intangible assets 170 137 583 550
----------------------------------------------------------------------------
Amortization of property, plant and
equipment 2,525 986 6,706 3,146
----------------------------------------------------------------------------
Reorganization costs (recovery) 970 (397) 2,629 (363)
----------------------------------------------------------------------------
Environmental remediation costs (136) - 3,908 78
----------------------------------------------------------------------------
Pension curtailment costs (326) - 4,274 -
----------------------------------------------------------------------------
Stock-based compensation 1,215 109 1,978 469
----------------------------------------------------------------------------
EBITDA 6,407 (7,336) 21,263 (8,910)
----------------------------------------------------------------------------


(2) Adjusted net income is not a recognized measure under GAAP. However, management believes that, in addition to net income (loss), adjusted net income is a useful supplemental measure as it provides investors with an indication of the ongoing profits generated on products sold to customers after corporate overhead expenses. Management defines adjusted net income as net income before income taxes, impairment of investment in Fundo Wheels, equity in the loss of Fundo Wheels, gain on sale of property, plant and equipment, impairment of capital assets, defined benefit plan curtailment costs, environmental remediation costs and reorganization costs. Adjusted net income is calculated as follows:



----------------------------------------------------------------------------
Adjusted Net Income
----------------------------------------------------------------------------
($000's)
----------------------------------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------------------------------
Q4 Q4 Year Year
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net loss (1,278) (8,836) (22,609) (18,036)
----------------------------------------------------------------------------
Add back (subtract):
----------------------------------------------------------------------------
Income taxes 1,611 (1,299) 5,698 (1,210)
----------------------------------------------------------------------------
Impairment of Fundo Wheels AS (1,415) - 12,430 -
----------------------------------------------------------------------------
Equity in the loss of Fundo
Wheels AS 1,415 1,376 3,075 3,798
----------------------------------------------------------------------------
Impairment of property, plant and
equipment 1,025 - 1,351 -
----------------------------------------------------------------------------
Loss (gain) on the sale of property, plant
and equipment 5 15 (370) (26)
----------------------------------------------------------------------------
Reorganization costs (recovery) 970 (397) 2,629 (363)
----------------------------------------------------------------------------
Environmental remediation costs (136) - 3,908 78
----------------------------------------------------------------------------
Pension curtailment costs (326) - 4,274 -
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Adjusted Net Income 1,871 (9,141) 10,386 (15,759)
----------------------------------------------------------------------------


(3) Gross profit is not a recognized measure under GAAP. Management believes that in addition to net income (loss), gross profit is a useful supplemental measure as it provides investors with an indication of the profits generated on productions sold to customers before corporate overhead expenses. Investors should be cautioned, however, that gross profit should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of the Company's profitability. The Company's method of calculating gross profit may differ from other companies and accordingly, gross profit may not be comparable to measures used by other companies. Gross profit is calculated as follows:



----------------------------------------------------------------------------
Gross Profit
----------------------------------------------------------------------------
($000's)
----------------------------------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------------------------------
Q4 Q4 Year Year
----------------------------------------------------------------------------
Sales 72,728 36,439 252,563 166,156
----------------------------------------------------------------------------
Cost of Goods Sold 56,145 39,027 204,540 159,650
----------------------------------------------------------------------------
Gross Profit 16,583 (2,588) 48,023 6,506

Timminco Limited

Consolidated Balance Sheets

As at December 31 2008 2007
----------------------------------------------------------------------------
(in thousands of Canadian dollars)

ASSETS
Current Assets
Cash and cash equivalents $ 4,512 $ 19,463
Short term investments 116 15,151
Accounts receivable 37,243 19,086
Inventories 95,920 40,082
Prepaid expenses and deposits 2,353 1,841
Future income taxes 3,235 3,923
----------------------
143,379 99,546
----------------------

Long term receivables 1,329 1,012
Property, plant and equipment 130,847 43,591
Investment in Fundo Wheels AS - 11,502
Employee future benefits 510 3,940
Future income taxes 5,825 5,975
Intangible assets 4,305 4,888
Goodwill 16,827 16,827
----------------------
$ 303,022 $ 187,281
----------------------
----------------------

LIABILITIES
Current Liabilities
Bank indebtedness $ 51,439 $ 21
Accounts payable and accrued liabilities 61,087 31,750
Current portion of deposits 25,568 -
Due to affiliated companies 7,661 5,897
Future income taxes - 40
Current portion of long term provisions 2,501 779
----------------------
148,256 38,487

Other long term liabilities 195 300
Deposits 18,036 -
Employee future benefits 19,080 18,026
Future income taxes 9,284 4,470
Long term provisions 5,966 3,400
----------------------
200,817 64,683
----------------------

SHAREHOLDERS' EQUITY
Capital stock 199,688 199,281
Equity component of convertible notes 2,521 2,521
Contributed surplus 5,069 3,243
Deficit (104,205) (81,596)
Accumulated other comprehensive loss (868) (851)
----------------------
102,205 122,598
----------------------
$ 303,022 $ 187,281
----------------------
----------------------

Timminco Limited

Consolidated Statements of Operations and
Comprehensive Loss

----------------------------------------------------------------------------
Years ended December 31 2008 2007
----------------------------------------------------------------------------
(in thousands of Canadian dollars, except for
loss per share information)

Sales $ 252,563 $ 166,156

Expenses
Cost of goods sold 204,540 159,650
Selling and administrative 23,747 16,557
Amortization of property, plant and
equipment 6,706 3,146
Amortization of intangible assets 583 550
Interest 1,610 2,684
Foreign exchange loss (gain) 4,991 (672)
----------------------------

Income (loss) before the undernoted 10,386 (15,759)

Environmental remediation costs (3,908) (78)
Reorganization (costs) recovery (2,629) 363
Defined benefit plan curtailment costs (4,274) -
Gain on sale of property, plant and
equipment 370 26
Equity in the loss of Fundo Wheels AS (3,075) (3,798)
Impairment of capital assets (1,351) -
Impairment of investment in Fundo Wheels
AS (12,430) -
----------------------------

Loss before income taxes (16,911) (19,246)
Income tax expense (recovery)
Current 89 146
Future 5,609 (1,356)
----------------------------
5,698 (1,210)

----------------------------
Net loss $ (22,609) $ (18,036)
----------------------------

Other comprehensive income (loss), net
of income taxes

Loss on foreign exchange forwards
realized in net loss
in the period - 979

Unrealized loss on translating
financial statements of
self-sustaining foreign operation (17) (493)

----------------------------
Comprehensive loss $ (22,626) $ (17,550)
----------------------------
----------------------------

Loss per common share - basic and
diluted $ (0.22) $ (0.20)
----------------------------
----------------------------
Weighted average number of common shares
outstanding - basic and diluted 104,126,099 90,079,950
----------------------------
----------------------------

Consolidated Statements of Deficit

----------------------------------------------------------------------------
Years ended December 31 2008 2007
(in thousands of Canadian dollars)
----------------------------------------------------------------------------

Deficit, beginning of year $ (81,596) $ (63,560)
Net loss (22,609) (18,036)
----------------------------

Deficit, end of year $ (104,205) $ (81,596)
----------------------------
----------------------------


Timminco Limited

Consolidated Statements of Cash Flows

----------------------------------------------------------------------------
Years ended December 31 2008 2007
----------------------------------------------------------------------------
(in thousands of Canadian dollars)

Cash flows from (used in) operating activities
Net loss $ (22,609) $ (18,036)
Adjustments for items not requiring cash
Amortization of property, plant and equipment 6,706 3,146
Amortization of intangible assets 583 550
Accretion of convertible debt 681 825
Stock-based compensation 1,978 469
Reorganization costs 2,629 (363)
Environmental remediation costs 3,908 78
Defined benefit plan curtailment costs 4,274 -
Benefits plan expense 4,362 2,913
Gain on disposal of property, plant and equipment (370) (26)
Unrealized foreign exchange loss 1,591 -
Future income taxes 5,609 (1,226)
Equity in the loss of Fundo Wheels AS 3,075 3,798
Impairment of capital assets 1,351
Impairment of investment in Fundo Wheels AS 12,430 -
Deposits from customers 45,534 -
Defined benefit pension plan contributions (4,365) (4,303)
Expenditures charged against provision for
reorganization (1,921) (2,004)
Expenditures charged against other long term
provisions (436) (228)

Change in non-cash working capital items
(Increase) decrease in accounts receivable (18,275) 810
Increase in inventories (55,882) (7,145)
(Increase) decrease in prepaid expenses
and deposits (512) 319
Increase in accounts payable and accrued
liabilities 12,954 369
Decrease in deposits (1,930) -
----------------------------
1,365 (20,054)
----------------------------

Cash flows from (used in) investing activities
Capital expenditures (80,134) (22,611)
Development costs capitalized - (1,176)
Decrease (increase) in short term investments 15,035 (15,151)
Investment in Fundo Wheels AS - (1,838)
Investment in convertible notes (4,020) (4,782)
Increase in long term receivables (199) (939)
Proceeds on disposal of property, plant and equipment 434 772
Other (86) (12)
----------------------------
(68,970) (45,737)
----------------------------

Cash flows from (used in) financing activities
Issuance of common shares 255 111,863
Increase (decrease) in bank indebtedness 51,418 (26,222)
Repayment of other liabilities and long term debt (102) (4,403)
Increase in loans from affiliated company 1,083 3,212
----------------------------
52,654 84,450
----------------------------

Net increase (decrease) in cash during the year (14,951) 18,659

Cash and cash equivalents, beginning of year 19,463 804

----------------------------
Cash and cash equivalents, end of year $ 4,512 $ 19,463
----------------------------
----------------------------
Supplemental cash flow information
Cash paid during the year:
Interest $ 509 $ 1,507
----------------------------
----------------------------
Income taxes $ 58 $ 219
----------------------------
----------------------------

Contact Information