With all the positive and exciting changes occurring at the Deloro Stellite Group here and around the world we felt it would be informative to share with you a summary update on some of the key elements of our global enhancement initiatives.

The most apparent change may be the visual representation of our various brands via our company logo. This change illustrates the importance we attribute to consistently delivering the highest quality products and services which our customers have come to expect and which is supported by a wide range of service enhancing initiatives across all Stellite sites worldwide.  These initiatives will greatly benefit our customers who purchase from multiple Stellite locations, but also offer advantages to our customers dealing with just one of our facilities as well.  Some of the key changes to improve our manufacturing services are:

• Rapid and large increase in manufacturing capacity:  We have nearly doubled the capacity of our Italian operation and our German and Canadian facilities are both expanding by 30-40%. However, capacity expansion is also occurring to various extents in all our factories. Most of the increase in capacity is nearly complete and will be coming on stream during the second half of 2007.  Additionally, we are already planning for further expansion in 2008 and beyond. We, like so many others in the manufacturing industry, have experienced a substantial increase in customer demand which has led to increased lead times.  We want to reassure you that we view this as the highest priority issue to address and we have already invested a significant amount of resources to reduce lead times.

• Increased capabilities throughout the Group:  For example  larger and more complex Industrial Gas Turbine (IGT) components in Italy, a new casting operation in China, a new DuraStellTM coating process and landing gear High Velocity Oxygenated Fuel (HVOF) coating shops at multiple locations.  In addition, we have increased our investment in Research & Development efforts in order to continue our strong tradition of innovation.

• Improved global coordination: The first phase of investment in a company-wide Customer Relationship Management system has just been completed.  The new system will allow us to better support our customers, especially those served by multiple Deloro Stellite sites.

• Factory infrastructure investments:  A wide range of process improvement projects have been launched in 2007 to help to further improve quality, reduce bottlenecks, cycle and lead times.  Further industry accreditations such as ISO 13485 in the medical industry in Europe, ISO 14000 and 18000 in China, and aerospace approval AS9100 in the UK have recently been achieved by our operations.

• Extended footprint: New plants recently established in Perm, Russia and Montreal, Canada; New manufacturing sites are currently planned for India and Houston, Texas. Additionally, we are in the planning phase for a major expansion in China for bespoke components.

• Value added services: The following are examples of value added services developed in conjunction with key customers: Rapid product development of cast components in Canada, final assembly of power generation valves in Germany, supply of fully machined IGT parts from Italy, local coating services in Montreal and Houston and we have recently integrated polishing into our operation in Menars in France.

The future direction of Deloro Stellite is to continue to be a premier global provider of wear-resistant, alloy-based materials and components. Our mission will remain - to deliver innovative solutions to challenging wear problems with our specialist products and services to help extend the life of components in demanding environments where heat, corrosion and abrasion limit their life. We truly appreciate not just your business but also your involvement in helping us further develop products, processes and services to help meet your current and future needs.

Yours sincerely,

Hans Nilsson               
CEO                                       
Deloro Stellite Group