Interim Consolidated Balance Sheets 1. Interim Consolidated Income Statements 2. Interim Consolidated Statements of Comprehensive Income 3

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1 Interim Consolidated Financial Statements March 31, 2011, December 31, 2010, March 31, 2010 and January 1, 2010 Expressed in Thousands of US Dollars (except per share amounts and number of shares)

2 Interim Consolidated Financial Statements March 31, 2011, December 31, 2010, March 31, 2010 and January 1, 2010 Contents Page number Interim Consolidated Balance Sheets 1 Interim Consolidated Income Statements 2 Interim Consolidated Statements of Comprehensive Income 3 Interim Consolidated Statements of Changes in Equity 4 Interim Consolidated Statements of Cash Flows

3 Interim Consolidated Balance Sheets As at March 31, 2011, December 31, 2010 and January 1, 2010 Assets Current March 31, 2011 December 31, 2010 January 1, 2010 Cash and cash equivalents $ 3,519 $ 495 $ 781 Trade and other receivables (note 3) 12,572 12,002 10,050 Inventories 21,372 19,259 17,181 Income taxes receivable ,463 31,756 28,596 Property, Plant and Equipment (note 11) 16,959 16,410 16,875 Intangible Assets (note 4) 29,650 29,255 31,735 Goodwill (note 4) 6,019 6,019 6,019 Deferred Income Tax Assets (note 13) 3,448 3,190 2,779 Liabilities Current $ 93,539 $ 86,630 $ 86,004 Trade and other payables (note 5) 9,286 9,126 6,803 Borrowings (note 12) 10,577 6,659 7,850 Provisions (note 6) 1,676 1,560 1,741 Other liabilities (note 8) Income taxes payable Preference shares ,517 18,068 16,969 Borrowings (note 12) 16,948 16,559 18,912 Derivative Financial Instrument (note 7) ,387 Other Liabilities (note 8) 1,486 1,486 1,813 Deferred Income Tax Liabilities (note 13) 3,556 3,251 2,509 Deferred Income Tax Liability on Intangible Assets (note 13) 8,534 8,510 9,213 Equity Attributable to the Shareholders of the Company Capital Stock Authorized unlimited common shares and preference shares without par value 53,781 48,766 50,803 Issued 18,039,154 (December 31, ,036,974, January 1, ,023,193) common shares 17,636 17,632 17,612 Contributed Surplus 2,879 2,781 2,301 Accumulated Other Comprehensive Loss (2,071) (2,440) (917) Retained Earnings 21,314 19,891 16,205 The accompanying notes are an integral part of these interim consolidated financial statements. Approved by the Board of Directors on May 5, ,758 37,864 35,201 $ 93,539 $ 86,630 $ 86,004 Jeremy Kendall Director Victor Hepburn Director 1

4 Interim Consolidated Income Statements March 31, 2011 March 31, 2010 Revenue $ 21,606 $ 17,931 Cost of Goods Sold 16,419 13,328 Gross Profit 5,187 4,603 Selling, General and Administrative Expenses 3,187 2,859 Other Expenses (Income) (444) 27 Operating Profit 2,444 1,717 Finance expense Profit for the Period Before Income Tax 2,031 1,277 Income tax expense (note 13) Profit for the Period Attributable to the Shareholders of the Company $ 1,423 $ 879 Earnings per share for the period - Basic and diluted (note 14) The accompanying notes are an integral part of these interim consolidated financial statements. 2

5 Interim Consolidated Statements of Comprehensive Income March 31, 2011 March 31, 2010 Profit for the Period Attributable to the Shareholders of the Company $ 1,423 $ 879 Other Comprehensive Income Unrealized gain (loss) on translation of foreign operations 272 (1,092) Unrealized gain on derivative financial instrument Other comprehensive income (loss), net of tax 369 (981) Comprehensive Income (Loss) Attributable to the Shareholders of the Company $ 1,792 $ (102) The accompanying notes are an integral part of these interim consolidated financial statements. Items in the statement above are disclosed net of tax. The income tax related to each component of other comprehensive income is disclosed in note 13. 3

6 Interim Consolidated Statements of Changes in Equity Number of Shares - Capital Stock Capital Stock Contributed Surplus - Share-based Payments AOCI* - Cash Flow Hedge AOCI* - Foreign Currency Translation Reserve Retained Earnings Total Equity At January 1, ,036,974 $ 17,632 $ 2,781 $ (596) $ (1,844) $ 19,891 $ 37,864 Comprehensive Income Profit for the period ,423 1,423 Unrealized gain on translation of foreign operations Unrealized gain on financial derivative designated as a cash flow hedge Total Comprehensive Income ,423 1,792 Transactions with Shareholders Employee share purchase plan 2, Share-based payment expense Total Transactions with Shareholders 2, At March 31, ,039,154 $ 17,636 $ 2,879 $ (499) $ (1,572) $ 21,314 $ 39,758 At January 1, ,023,193 17,612 2,301 (917) - 16,205 35,201 Comprehensive Income (Loss) Profit for the period Unrealized loss on translation of foreign operations (1,092) - (1,092) Unrealized gain on financial derivative designated as a cash flow hedge Total Comprehensive Income (Loss) (1,092) 879 (102) Transactions with Shareholders Employee share purchase plan 3, Share-based payment expense Total Transactions with Shareholders 3, At March 31, ,027,074 $ 17,616 $ 2,368 $ (806) $ (1,092) $ 17,084 $ 35,170 *AOCI Accumulated Other Comprehensive Income The accompanying notes are an integral part of these interim consolidated financial statements. 4

7 Interim Consolidated Statements of Cash Flows March 31, 2011 March 31, 2010 Cash Provided by (Used in) - Operating Activities Profit for the period $ 1,423 $ 879 Items not affecting cash: Depreciation of property, plant and equipment Amortization of intangible assets Share-based payment expense Finance expense on finance lease 5 - Deferred income taxes (note 13) (86) (336) 2,456 1,617 Changes in non-cash working capital Trade and other receivables (458) (1,018) Inventories (2,115) 718 Trade and other payables (207) (565) Provisions 116 (87) Income taxes receivable and payable Financing Activities Proceeds from issuance of common shares net of issuance costs 4 4 Proceeds from borrowings (note 12) 3, Repayment of finance lease liability (note 12) (32) - Repayment of borrowings (note 12) (659) (350) Investing Activities 3, Additions to property, plant and equipment (301) (440) Additions to intangible assets (59) (21) (360) (461) Foreign Exchange Gain (Loss) on Cash Held in Foreign Currency 58 (28) Increase in Cash and Cash Equivalents 3,024 1,075 Cash and Cash Equivalents Beginning of Period End of Period $ 3,519 $ 1,856 Additional Cash Flow Information: Interest paid $ 416 $ 510 Income taxes paid The accompanying notes are an integral part of these interim consolidated financial statements. 5

8 1. General Information Opta Minerals Inc. and its subsidiaries (together the Company or Opta) were incorporated by Articles of Incorporation under the Business Corporations Act on July 8, The Company is a public company with its common shares listed on the Toronto Stock Exchange and is incorporated and domiciled in Canada. The Company s parent company is SunOpta Inc., which owns 66.4% of the common shares and is listed on both the NASDAQ and Toronto Stock Exchanges. The address of the Company s registered office is 407 Parkside Drive, P.O. Box 260, Waterdown, Ontario, Canada. The Company is a vertically integrated provider of custom process optimization solutions and related materials for use primarily in the steel, foundry, loose abrasive cleaning and municipal water industries and recycles inorganic materials under special permits from government authorities at both its Waterdown, Ontario and Norfolk, Virginia sites. The Company services much of the east coast of North America, with production facilities in Texas, Florida, Louisiana, South Carolina, Virginia, Maryland, New York, Indiana, Michigan, Ontario and Quebec and services locations in Europe with its production facilities in Kosice, Slovakia and Romans, France. The Company also generates revenue from the sale of specialty sands sourced, processed and packaged from the Company's quarry in St. Bruno de Guigues, Quebec, as well as from the sale of related products and services. The Company's assets, operations and employees are located in the United States, Canada and Europe. 2. Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these unaudited condensed interim consolidated financial statements (interim consolidated financial statements) are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. The Board of Directors does not have the power to amend the issued interim consolidated financial statements. Basis of Preparation The Company prepares its interim consolidated financial statements in accordance with Canadian generally accepted accounting principles (GAAP), as set out in the Handbook of the Canadian Institute of Chartered Accountants (CICA Handbook). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards (IFRS) and requires publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, Accordingly, the Company has commenced reporting on this basis in these interim consolidated financial statements. In these interim consolidated financial statements, all future references to the term Canadian GAAP refer to Canadian GAAP before the adoption of IFRS. These interim consolidated financial statements have been prepared in accordance with IFRS applicable to interim financial statements, including IAS 34, Interim financial reporting (IAS 34), and IFRS 1, First-time adoption of IFRS. These interim consolidated financial statements comply with IAS 34. Subject to certain transition exemptions and exceptions disclosed in note 16, the Company has consistently applied the same accounting policies in its opening IFRS consolidated balance sheet at January 1, 2010 and throughout all periods presented, as if these policies had always been in effect. Note 16 discloses the impact of the transition to IFRS on the Company s reported financial position, financial performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company s consolidated financial statements for the year ended December 31, Comparative figures in these interim consolidated financial statements have been restated to give effect to these changes. 6

9 2. Summary of Significant Accounting Policies, cont d The policies applied in these interim consolidated financial statements are based on IFRS, which were required to be applied for annual periods beginning on or after January 1, 2010, which were issued and effective as of May 5, 2011, the date the Board of Directors approved the financial statements. Any subsequent changes to IFRS that are given effect in the Company s annual consolidated financial statements for the year ending December 31, 2011 could result in a restatement of these interim consolidated financial statements, including the transition adjustments recognized on changeover to IFRS. These interim consolidated financial statements should be read in conjunction with the Company s Canadian GAAP annual consolidated financial statements for the year ended December 31, Changes in Accounting Policy and Disclosure Standard that is not yet effective and has not yet been early adopted by the Company IFRS 9, Financial Instruments (IFRS 9), was issued in November 2009 and contains requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39, Financial Instruments Recognition and Measurement (IAS 39), for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments and such instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends are recognized in profit or loss; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely. Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39 except that fair value changes due to credit risk for liabilities designated at fair value through profit or loss would generally be recorded in other comprehensive income. This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early. Consolidation These interim consolidated financial statements incorporate the assets and liabilities of Opta Minerals Inc. and its wholly owned subsidiaries, Opta Minerals (USA) Inc.; Virginia Materials Inc. (Virginia Materials); International Materials & Supplies Inc. (International Materials); Temisca Inc. (Temisca); Magnesium Technologies Corporation (Magtech); MTI Inc.; OPM Inc.; Bimac, Inc. (Bimac); Newco, a.s. (Newco); Opta Minerals a.s.; Opta Minerals AB; and Opta Minerals Europe S.A.S. as at March 31, 2011, December 31, 2010 and January 1, 2010 and the results of these subsidiaries for the three months ended March 31, 2011 and March 31, Subsidiaries are all those entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Company and de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealized gains/losses on transactions between group companies are eliminated. 7

10 2. Summary of Significant Accounting Policies, cont d The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Company s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the interim consolidated income statements. The Company records contingent consideration agreements at fair value, where the agreement provides for the payment of cash, the financial liability is classified at fair value through profit or loss with movements in the fair value being recognized within finance expense in the consolidated income statements. The Company includes contingent consideration within other liabilities on the consolidated balance sheets. Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. Foreign Currency Translation Foreign currency transactions Foreign currency transactions are translated into the respective functional currencies of the Company s subsidiaries using the exchange rates at the dates of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation, using the exchange rates at the reporting date, of monetary assets and liabilities denominated in foreign currencies are recognized in the interim consolidated income statements. Translation of the interim consolidated financial statements into the presentation currency Where the Company s presentation currency of US dollars differs from the functional currency of a subsidiary, the assets and liabilities of the subsidiary are translated from the functional currency into the presentation currency at the exchange rate at the reporting date. The income and expenses of the subsidiaries are translated at rates approximating the exchange rates at the dates of the transactions. Exchange differences arising on the translation of the interim consolidated financial statements of the Company s subsidiaries are recognized in other comprehensive income. The Company has a functional currency of Canadian dollars and the functional currency of each subsidiary is the currency commonly used in their respective countries. Financial Assets and Liabilities A financial asset or liability is recognized if the Company becomes a party to the contractual provisions of the asset or liability. A financial asset or liability is recognized initially (at trade date) at its fair value plus, in the case of a financial asset or liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the instrument. Financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the interim consolidated income statements. 8

11 2. Summary of Significant Accounting Policies, cont d After initial recognition, financial assets are measured at their fair values except for loans and receivables and held to maturity financial assets, which are measured at amortized cost. After initial recognition, financial liabilities are measured at amortized cost, except for financial liabilities at fair value through profit or loss, which are measured at fair value. The Company classifies its financial assets and liabilities according to their characteristics and management's choices and intentions related thereto for the purposes of ongoing measurement. Classification choices for financial assets include: a) Fair value through profit or loss - measured at fair value with changes in fair value recorded in the consolidated income statements; b) Held to maturity - recorded at amortized cost with gains and losses recognized in the consolidated income statements in the period that the asset is no longer recognized or impaired; c) Available for sale - measured at fair value with changes in fair value recognized in other comprehensive income for the current period until realized through disposal or impairment; and d) Loans and receivables - recorded at amortized cost with gains and losses recognized in profit in the period in which the asset is no longer recognized or impaired. Classification choices for financial liabilities include: a) Fair value through profit or loss - measured at fair value with changes in fair value recorded in the consolidated income statements; and b) Other financial liabilities - measured at amortized cost with gains and losses recognized in the consolidated income statements in the period in which the liability is no longer recognized. The Company's financial assets and liabilities are generally classified and measured as follows: Assets/Liabilities Category Measurement Cash and cash equivalents Loans and receivables Amortized cost Trade and other receivables Loans and receivables Amortized cost Trade and other payables Other financial liabilities Amortized cost Borrowings Other financial liabilities Amortized cost Derivative financial instrument Derivative used for hedging Fair value Preference shares Other financial liabilities Amortized cost Other liabilities Fair value through profit or loss Fair value Financial assets are derecognized if the Company s contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognized if the Company s obligations specified in the contract expire or are discharged or cancelled. 9

12 2. Summary of Significant Accounting Policies, cont d Impairment of Financial Assets The Company assesses, at the end of each reporting period, whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The asset s carrying amount is reduced and the amount of the loss is recognized in the consolidated income statements. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the reversal of the previously recognized impairment is recognized in the consolidated income statements. Derivative Financial Instruments and Hedging Activities Derivatives are initially measured at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The Company s derivative contract qualifies as a cash flow hedge. The Company documents, at the inception of the transaction, the relationship between the hedging instrument and the hedged item, as well as its risk management objectives and strategy for undertaking the hedging transaction. The Company also documents its assessment, both at inception and on an ongoing basis, of whether the derivative that is used has been highly effective in offsetting cash flows of hedged items. The Company entered into a cash flow hedge in The hedge pertains to an interest rate swap contract that was entered into in order to manage the Company's exposure to interest rate risks. The changes in fair value of this contract are included in other comprehensive income to the extent the hedge continues to be effective. The related other comprehensive income amounts are allocated to the consolidated income statements in the same period in which the hedged item affects net earnings. For the cash flow hedge, to the extent the change in cash flows of the derivative is not completely offset by the change in the cash flows of the hedged item, the ineffective portion of the hedging relationship is recorded immediately in the consolidated income statements and classified within finance expense. The fair value of the hedging derivative is estimated based on the standard swap valuation methodology. That is, the value of the swap is calculated as the difference between the present values of the future cash flows associated with the floating-receive leg and the fixed-pay leg. The Company enters into interest rate swap contracts with approved creditworthy counterparties to manage the Company's current and anticipated exposure to interest rate risks. Neither the notional principal amounts nor the current replacement value of these outstanding financial instruments is carried on the consolidated balance sheets. The Company does not hold or issue derivative financial instruments for trading or speculative purposes, and controls are in place to detect and prevent these activities. 10

13 2. Summary of Significant Accounting Policies, cont d As at March 31, 2011, the Company had a contract that exchanged a net notional amount of CA$17,200 from a floating to fixed rate of 5.25% plus a margin based upon certain financial ratios of the Company, until August Accordingly, for the three months ended March 31, 2011, finance expense does not include any net payments relating to interest rate swaps. This contract hedges the Company's net consolidated balance sheet interest rate sensitivity position. Cash and Cash Equivalents Cash and cash equivalents consist of cash and short-term deposits with a maturity at acquisition of less than 90 days. Trade and Other Receivables Trade and other receivables are amounts due for goods sold in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. Inventories Raw materials and finished goods inventories are recorded at the lower of cost and estimated net realizable value. Cost is determined on a first-in, first-out basis. Property, Plant and Equipment Owned assets Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition of items. Subsequent costs are included in the asset s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Company and the cost can be measured reliably. The carrying amount of any replaced part is derecognized. All other repairs and maintenance are charged to the consolidated income statements during the period in which they are incurred. Leased assets Assets under finance leases, to which substantially all of the risks and benefits inherent in ownership are transferred, are recognized as part of property, plant and equipment. These assets are initially measured at their fair value, or if lower, at the present value of the minimum lease payments. A corresponding liability is established and each lease payment is allocated between the liability and interest expense using the effective interest rate method. The assets recognized are depreciated on the same basis as equivalent property, plant and equipment. When there is no reasonable certainty that the Company will exercise its buyout option, the asset is depreciated over the life of the lease, if it is shorter than the asset s useful life. 11

14 2. Summary of Significant Accounting Policies, cont d Leases that are not finance leases are classified as operating leases and the assets are not recognized on the Company s consolidated balance sheets. Operating lease payments are recognized as an expense on a straight-line basis over the period of the lease. Depreciation Land is not depreciated. Depreciation on other assets is calculated on a straight-line basis to allocate the cost of the asset, less any residual value, over its estimated useful life. The range of estimated useful lives for each class of property, plant and equipment is as follows: Buildings and leasehold improvements Machinery and equipment Office furniture and equipment 8-30 years 5-7 years 3-10 years The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted, if appropriate. Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other expenses in the consolidated income statements. Borrowing Costs Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognized as a finance expense in the consolidated income statements in the period in which they are incurred. Decommissioning Obligations On an annual basis, the Company reviews its assets and lease commitments to determine if there are any decommissioning obligations and associated costs to provide for. Management has determined that no such provision is required. Intangible Assets Goodwill Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and intangible assets acquired at the date of acquisition. The Company assesses at least annually, or at any time if an indicator of impairment exists, whether there has been an impairment loss in the carrying value of goodwill and it is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. 12

15 2. Summary of Significant Accounting Policies, cont d Goodwill is allocated to cash-generating units (CGUs), or groups of CGUs, that are expected to benefit from the business combination for the purpose of impairment testing. A group of CGUs represents the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than an operating segment before aggregation criteria. Customer relationships Contractual customer relationships acquired in a business combination are recognized at fair value at the acquisition date. The contractual customer relationships have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the customer relationship. The customer relationships are recorded in the mill and foundry products and services segment. Profit-sharing agreements Profit-sharing agreements acquired in a business combination are recognized at fair value at the acquisition date. The profit-sharing agreements have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the asset. Other intangible assets Other intangible assets relate to the non-monetary proceeds received as a result of the sale of the property, plant and equipment of a former facility in Attica, New York in exchange for a release of the Company s obligations under a lease and service agreement. The other intangible assets have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the asset. Computer software Acquired computer software licences are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. Costs associated with developing or maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Company, and that will generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Costs include the employee costs incurred as a result of developing software and an appropriate portion of relevant overheads. The Company's finite lived intangible assets are amortized on a straight-line basis as follows: Customer relationships Profit-sharing agreements Computer software Other intangible assets 8-25 years 15 years 3 years 6 years 13

16 2. Summary of Significant Accounting Policies, cont d Impairment of Non-financial Assets Assets that have an indefinite useful life, including goodwill, are not subject to amortization and are tested for impairment at least annually, or at any time if an indicator of an impairment exists. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the estimated recoverable amount of an asset is less than its carrying amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognized in the consolidated income statements. The recoverable amount of an asset is the higher of its fair value less costs to sell, and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Trade and Other Payables Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Borrowings Borrowings are initially recognized at fair value net of any transaction costs. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for more than 12 months. After initial recognition, borrowings are carried at amortized cost with any difference between the proceeds (net of transaction costs) and the redemption value recognized in the consolidated income statements over the period of the borrowing using the effective interest method. Provisions Provisions are recognized only in those circumstances where the Company has a present legal or constructive obligation as a result of a past event, when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The change in the provision due to the passage of time is recognized as a finance expense in the interim consolidated income statements. The change in the provision due to a change in estimate is recognized as a selling, general and administrative expense in the consolidated income statements. Income Taxes Income tax expense for the period comprises current and deferred income tax. Income tax is recognized in the consolidated income statements except to the extent it relates to items recognized in other comprehensive income or directly in equity. Levies other than income taxes, such as taxes on real estate, are included in cost of goods sold or selling, general and administrative expenses. 14

17 2. Summary of Significant Accounting Policies, cont d Current income tax Current income tax expense is based on the results of the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the interim consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the consolidated balance sheet dates and is expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The measurement of deferred income tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority where there is an intention to settle the balances on a net basis. Share Capital Common shares are classified as equity. Incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction, net of income tax, from the proceeds. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable, net of returns, discounts and allowances. The Company recognizes revenue when the risks and rewards of ownership have transferred to the customer, the amount of revenue can be reliably measured, the receipt of economic benefit is probable, the associated costs and possible return of goods can be estimated reliably and there is no continuing managerial involvement with the goods. The transfer of the title and risk and rewards of ownership occurs either upon delivery of goods to the customer or when goods are picked up by the customer. 15

18 2. Summary of Significant Accounting Policies, cont d Share-based Payments The Company operates an equity-settled, share-based payment compensation plan, under which the Company receives services from employees as consideration for equity instruments of the Company. The plan is open to directors, officers, employees and consultants of the Company. The fair value of the services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting date, the Company revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. The Company recognizes the impact of the revision to original estimates, if any, in other comprehensive income, with a corresponding adjustment to equity. The fair value of share options is estimated using the Black-Scholes option pricing model. This model requires the input of a number of assumptions, including expected dividend yield, expected share price volatility, expected time until exercise and risk-free interest rates. Although the assumptions used reflect management s best estimates, they involve inherent uncertainties based on conditions outside of the Company s control. Changes in these assumptions could significantly impact share-based payment compensation. The share-based payment reserve, included in contributed surplus within equity, is reduced as the options are exercised or when the options expire unexercised. If the share options are exercised, cancelled or forfeited, the amount initially recorded for the options in share options is credited to common shares or contributed surplus, along with the proceeds received on the exercise. If the share options expire unexercised, the amount initially recorded for the options in share options remains in contributed surplus. Critical Accounting Estimates and Judgements The Company makes estimates and judgements concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below: Impairment Determining whether goodwill, finite lived intangible assets and property, plant and equipment are impaired requires an estimation of the fair value less costs to sell of the cash generating unit or group of cash generating units in which the assets are included. The fair value less costs to sell calculation requires the Company to estimate the future cash flows expected to arise from each cash generating unit and a suitable discount rate in order to calculate present value. The significant estimates and assumptions used in the goodwill and other impairment tests performed at December 31, 2010 and January 1, 2010 are disclosed in note 4. 16

19 2. Summary of Significant Accounting Policies, cont d Fair value of derivative The fair value of the derivative that is not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period (note 7). Income taxes The Company computes an income tax provision. However, actual amounts of income tax expense only become final upon filing and acceptance of the tax return by the relevant taxation authorities, which occur subsequent to the issuance of these interim consolidated financial statements. Additionally, estimation of income taxes includes evaluating the recoverability of deferred income tax assets based on an assessment of the ability to use the underlying future tax deductions before they expire against future taxable income. The assessment is based upon existing tax laws and estimates of future taxable income. To the extent estimates differ from the final tax return, earnings would be affected in a subsequent period (note 13). Other liabilities The other liability balance relates to the fair value of the contingent consideration as a result of the acquisition of the outstanding shares of Bimac. Pursuant to the purchase agreement, additional consideration, not to exceed $3,850, may be payable based on the achievement of certain predetermined earnings targets between October 1, 2006 and September 30, The calculation of the fair value requires the use of estimates. At March 31, 2011, the significant estimates used in the fair value calculation are as follows: As at March 31, 2011 As at December 31, 2010 Forecasted EBITDA 1,600 1,600 Discount rate 5.5% 5.5% Further disclosure on this liability is provided in note 8. Functional currency of Opta Minerals AB The Company has exercised judgement in determining the functional currency of one of its subsidiaries, Opta Minerals AB, which is located in Sweden. The functional currency has been determined to be the Euro as Opta Minerals AB is a holding company and does not have any significant transactions in the Swedish Krona, therefore the subsidiary is considered to be an extension of the Company s operations in Europe. 17

20 (Notes 3 to 10 represent additional IFRS information for the year ended December 31, 2010) 3. Trade and Other Receivables As at December 31, 2010 Trade receivables $ 11,916 Less: provision for impairment of trade receivables (453) Trade receivables less provision for impairment 11,463 Prepayments 539 Total trade and other receivables $ 12,002 Year ended December 31, 2010 Movement in the provision for impairment of trade receivables Opening balance $ 357 Impairment losses recognized during the period 265 Utilization of the impairment provision (100) Reversal of impairment losses to profit during the period (69) Closing balance $ 453 The creation and release of the provision for impaired trade receivables have been included within selling, general and administrative expenses. Amounts charged to the provision account are generally written off, when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets. 18

21 4. Intangible Assets and Goodwill Goodwill Computer Software Customer Profit-sharing Relationships Agreements Other Intangible Assets Total At January 1, 2010 Cost $ 6,019 $ 65 $ 35,050 $ 1,088 $ 1,394 $ 43,616 Accumulated amortization and impairment - (21) (5,168) (281) (392) (5,862) Net book value 6, , ,002 37,754 Year ended December 31, 2010 Opening net book value 6, , ,002 37,754 Additions Amortization charge - (63) (1,554) (73) (207) (1,897) Net foreign exchange differences - 11 (1,072) - 44 (1,017) Closing net book value 6, , ,274 At December 31, 2010 Cost 6, ,858 1,088 1,457 42,932 Accumulated amortization and impairment - (84) (6,602) (354) (618) (7,658) Net book value $ 6,019 $ 426 $ 27,256 $ 734 $ 839 $ 35,274 Impairment Tests for Goodwill The Company performed its annual impairment test for goodwill at January 1, 2010 and December 31, 2010 in accordance with the accounting policy described in note 2. In addition to the goodwill impairment tests, the Company also tested two further CGUs for impairment. The Newco CGU was tested for impairment given the significant customer relationship intangible assets included in its carrying value. The Opta Minerals S.A.S. CGU was tested for impairment given the existence of impairment indicators. There were no other indicators of impairment identified for any other non-financial assets. Goodwill was allocated to the following CGUs, or group of CGUs, aggregated to the level that the goodwill is monitored by management: As at December 31, 2010 As at January 1, 2010 Virginia Materials $ 3,552 $ 3,552 Bimac 1,337 1,337 Magtech 1,130 1,130 $ 6,019 $ 6,019 19

22 4. Intangible Assets, cont d The recoverable amount of each CGU, or group of CGUs, is determined based on fair value less costs to sell calculations. These calculations use cash flow projections based on financial budgets approved by management covering a 5-year period. Cash flows beyond the 5-year period are extrapolated using the estimated growth rates stated below. The key assumptions used for the fair value less costs to sell calculation at December 31, 2010 were as follows: Growth rate Discount rate Virginia Materials 1.5% 16.5% Bimac 2.0% 13.5% Magtech 2.0% 14.5% Newco 2.5% 15.0% Opta Minerals S.A.S. 1.5% 15.0% The key assumptions used for the fair value less costs to sell calculation at January 1, 2010 were as follows: Growth rate Discount rate Virginia Materials 1.5% 16.5% Bimac 2.0% 13.5% Magtech 2.0% 14.5% Newco 2.5% 15.0% Opta Minerals S.A.S. 1.5% 15.0% The growth rates used are consistent with forecasts developed by management. The discount rates used reflect the specific risks relating to the relevant CGUs. The impairment tests performed resulted in no impairment at December 31, 2010 and at January 1, Trade and Other Payables As at December 31, 2010 Trade payables $ 3,476 Accruals 5,650 $ 9,126 20

23 6. Provisions Recycling Provision Legal Claims Total At January 1, 2010 $ 411 $ 1,330 $ 1,741 Charged/(credited) to the interim consolidated income statements: Additional provisions Used during the year (567) - (567) Exchange differences 15 (99) (84) At December 31, 2010 $ 329 $ 1,231 $ 1,560 Recycling Provision The Company recycles inorganic materials under special permits from government authorities at both its Waterdown, Ontario and Norfolk, Virginia sites. The Company provides for the costs related to the proper disposal of material on hand. Legal Claims The amounts represent legal claims brought against the Company by a former employee and a former vendor. The claims relate to the operations in Romans, France and existed at the time of acquisition. In management s opinion, after taking appropriate legal advice, the outcome of these legal claims will not give any rise to a significant loss beyond the amounts provided. 7. Derivative Financial Instrument As at December 31, 2010 Notional Principal Amount Asset/ (Liability) Interest rate swap cash flow hedge $ 17,200 $ ($892) The ineffective portion recognized in the consolidated income statements that arose from the cash flow hedge is a gain/loss of $Nil for the year ended December 31,

24 8. Other Liabilities On October 4, 2006, the Company acquired the outstanding shares of Bimac. Pursuant to the purchase agreement, additional consideration, not to exceed $3,850, may be payable based on the achievement of certain predetermined earnings targets between October 1, 2006 and September 30, An amount of $1,913 was recognized at December 31, 2010 as the fair value of contingent consideration based on management's estimates. During the year ended December 31, 2010, $477 of contingent consideration has been paid, resulting in a cumulative total of $1,517. The fair value movement during the year was an expense of $46 which has been recognized within finance expense in the consolidated income statements. The different levels of fair value hierarchy are defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Inputs for asset or liability that are not based on observable market data. The contingent consideration is measured at fair value based on level 3 inputs. The contingent consideration is not based on observable inputs and is measured using a discounted cash flow analysis of expected payments in future periods. Contingent Consideration At January 1, 2010 $ 2,344 Payment made (477) Change in expected payment recorded in finance expense 46 1,913 Less: current portion 427 $ 1,486 22