On behalf of the Board of Directors (the “Board” or “Directors”) of the Company, I am pleased to present the audited financial statements of the Company and its subsidiaries (collectively the “Group”) for the financial year ended 31 December 2008 to the shareholders of the Company.

REVIEW OF OPERATIONS

Year 2008 was a dramatic year marked with the outbreak of the US sub-prime mortgage crisis which grown into a global financial tsunami. This economic crisis affected not only the Company’s business performance but also the Company’s fund raising plan in Canada. The Company was dual-listed on the Toronto Stock Exchange in August 2008 but given the unfavorable capital market conditions, the Company has decided to postpone the financing part of this project. On the business side, the Company’s export sales started to suffer in the third quarter of 2008 when the PRC government imposed certain measures and restrictions on transportation and exporting during the Olympic Games in Beijing. Yet the Company was still able to achieve a slight year-to-year revenue growth in the third quarter and was hoping that when the restrictions were released after the Olympic Games, the exports sales business would back to normal. Unfortunately, the dramatic economic downturn in the fourth quarter has significant negative impact on the Company’s business in the overseas market. After reporting a revenue growth in six consecutive years from 2002 to 2007, the Company reported a decrease in gross revenue, for the first time, for the year ended 31 December 2008. Profit attributable to shareholders has also declined in 2008 as compared to previous year. Facing the unstable conditions of the zirconium chemicals market, the management has rescheduled the development plan of the new Binhai plant and postpone the commencement of operation to mid-2009.

Despite the decline in operating results, the Company continues to maintain a strong balance sheet. Although we are currently facing an extremely difficult market, our Company has a strong management team and a very healthy balance sheet that will allow it to take full advantage of the many opportunities that will appear. Corresponding to the PRC government measures in stimulating domestic market demands, the Company has adjusted its strategy by shifting its focus from export sales market to the PRC domestic market. The Company will actively adjust the product mix in response to the development trends of the domestic demand. It is expected that the potential expansion in local sales will neutralize the impact of the economic depression on export businesses. Having said that, the Company will continue to consolidate the overseas markets and strengthen its long-term relationship with the overseas customers.

PROSPECTS

Entering the first few months of fiscal year 2009, we are highly focused on our ongoing financial stability and strength. The start of the current year has coincided with a period of rapid deterioration in almost all economic benchmarks and there is uncertainty concerning the depth and duration of this downturn. The economic outlook is not a bright one given the global credit crunch is slowing growth in most industries. The maintenance of a strong balance sheet therefore becomes of primary importance. In commercial terms, the zirconium chemicals segment in the first quarter has shown a significant drop in sales and new orders when compared to the previous year. The other business segments also show signs of softness. We expect that, on present trends, our results will be lower in 2009 than those on which we are currently reporting. However, we are optimistic in the long-term prospect of the Company. The problems facing the world economy are being aggressively addressed by the governments of various countries including China, the United States, Japan, Australia, England and other European countries. We are confident that the steps being taken will achieve the desired goals over time. In the meantime, we will continue to operate defensively but will also consider opportunities which can be executed safely.

On behalf of the Board, I would like to extend my sincere appreciation to our shareholders, our customers and all our staff for their continuous support.

Yang Xin Min
Chairman