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November 2011. Disclaimer This presentation may contain statements that relate to future events and expectations and, as such, constitute "forward-looking.

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Presentation on theme: "November 2011. Disclaimer This presentation may contain statements that relate to future events and expectations and, as such, constitute "forward-looking."— Presentation transcript:

1 November 2011

2 Disclaimer This presentation may contain statements that relate to future events and expectations and, as such, constitute "forward-looking statements" within the meaning of the federal securities laws. These statements can be identified by the use of words such as “believes,” “expects,” “may,” “will,” “intends,” “plans,” “estimates” or “anticipates,” or other comparable terminology, or by discussions of strategy, plans or intentions. These statements are based on management’s current expectations and assumptions about the industries in which Globe operates. Globe disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those risks and uncertainties described in Globe’s most recent Annual Report on Form 10-K, including under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and Globe’s quarterly reports on Form 10-Q. These reports can be accessed through the “Investors” section of Globe’s website at All references to “MT” or “tons” mean metric tons, each of which equals 2,204.6 pounds. 1

3 Presenting Management Team Jeff Bradley, Chief Executive Officer Over 27 years experience in the metals industry Joined GSM in 2008 Prior roles include: CEO – Claymont Steel (former public company); Vice President and General Manager – Worthington Industries Malcolm Appelbaum, Chief Financial Officer Joined GSM in 2008 President of AppleTree Advisors, Inc. from 2000 until September 2008 – worked with various HIG Capital companies Prior roles include: Interim-Chief Financial Officer for several underperforming companies; Principal – Wand Partners; Financial Analyst – Goldman Sachs; and, Senior Consultant at Deloitte 2

4 3 GSM: The Leader in Silicon One of the world’s largest and lowest cost silicon metal producers − One of the lowest cost producers in the world − Estimated ~62% and ~11% share of capacity in US and the world, respectively (1) − Estimated 100% and ~15% share of “merchant” capacity in US and the world, respectively (1) − Silicon is a critical input in a number of industrial materials and has no substitute Leading global silicon-based alloy producer − Sole source relationships with many customers − 50%+ share of capacity in certain key alloys − One of two U.S. producers of FeSi and ~50% of U.S. FeSi capacity − Important provider of silicon-based alloys to steel producers and foundries Global reach with 9 facilities in 4 countries – U.S., Argentina, Poland and China − Significant raw materials ownership / proximity Strong profitability through the cycle with substantial leverage to price (1)Excludes 49% of Alloy, WV facility owned by Dow Corning Current economic environment improves this position

5 4 Global Production Source:Company information, CRU, Note:Parenthetical figures reflect CRU, 2011 cost curve rankings. *Alden Resources acquired on July 28, 2011 Beverly, OH (CRU #3) Silicon metal / 13,000 tons Silicon-based alloys / 52,000 tons Alloy, WV (CRU #2) Silicon metal / 68,000 tons - JV Globe 51% or 34,700 tons Dow Corning 49% or 33,300 tons Selma, AL (CRU #4) Silicon metal / 25,000 tons Niagara Falls, NY (CRU #5) Silicon metal / 27,000 tons Police, Poland Cored wire / 8 million meters Shizuishan, Ningxia Hui, China (“Yonvey”) Carbon electrodes / 10,000 tons New York, NY Headquarters San Luis, Argentina Cored wire / 24 million meters Mendoza, Argentina Silicon-based alloys / 26,000 tons Silicon alloys Silicon metal Cored wire UMG Product Electrodes Bridgeport, AL Silicon-based alloys / 42,000 tons Iceland (Expected 2013) Silicon metal / 40,000 tons Alden Resources* Specialty Grade Coal & Preparation plant (2.5 million tons) Coal & prep plant

6 Track Record of Growth Through Strategic, Accretive Acquisitions Today November 2009 Completed sale of Brazil plant - $75M JV with Dow Corning – Alloy, WV - $100M December 2005 GMI purchases largest silicon metal plant in the world (Alloy, West Virginia) from Elkem GMI raises capital June 2004 Alan Kestenbaum obtains control of GMI and leads a reorganization December 2002 Alan Kestenbaum purchases the debt of Globe Metallurgical (“GMI”) January 2007 GSM acquires Camargo Correa Metais S.A., a major Brazilian silicon metal producer, renames Globe Metais November 2006 GMI merges into IME and is renamed Globe Specialty Metals, Inc. (“GSM”) GSM acquires Stein Ferroaleaciones S.A., an Argentine specialty silicon alloys producer, renames Globe Metales January 2008 Acquires 81% of Solsil, Inc., a producer of upgraded metallurgical grade (“UMG”) silicon, from a related party May 2008 Acquires 70% of a Chinese carbon electrode manufacturer (“Yonvey”) 1874 Predecessor company founded in 1874 in Ohio August 2009 Completed successful IPO on NASDAQ Today One of the largest silicon metal & silicon-based alloys producers in the Americas One of the lowest cost silicon metal producer in the world April 2010 Completed acquisition of Core Metals Group - $52M February 2011 Entered agreements to build world class, low cost silicon plant in Iceland July 2011 Completed acquisition of Alden Resources

7 Well-Diversified Business Mix Current Capacity Mix End-markets Customers 6 Note: All data exclude the 49% of the joint venture owned by Dow Corning Revenue by region

8 Western World’s Lowest Cost Silicon Metal Producer 2011 Western World Silicon Metal Cost Curve Source:CRU, Note:Red line denotes median operating cost per ton. Argentina and Bridgeport facilities not currently researched by CRU. Costs are Ex-works and exclude depreciation expense (1) Breu Branco, Brazil was sold to Dow Corning Corporation in November, 2009; 49% of Alloy, WV capacity sold to Dow Corning Corporation 7

9 Power (36%) – requires stable, long-term supply of low cost electricity Raw materials (40%) −Proximity to high purity, low cost raw materials – GSM owns quartz and wood chips supply −Freight costs are significant – 6.6:1 ratio of inputs to output Low ash, specialty coal – best carbon source Electrodes – quality is critical – GSM owns supply - China Capital cost of greenfield construction − $180 million for a two-furnace operation − GSM has 17 furnaces Long lead time to build greenfield plant − Permitting is a long and complicated process − 3–5 years from concept to commissioning Silicon metal primarily produced in: − North America, South Africa, Brazil, Western Europe, Australia, China Technology and operational capability Strong Barriers to Entry with Consolidated Supply Base tons of raw materials 1 ton of silicon metal Source:CRU, Globe supply excludes 49% of the Alloy, WV facility owned by Dow Corning. Merchant supply excludes Dow Corning and Wacker captive capacity of 207,000 and 55,000 metric tons, respectively. Strong Barriers to EntryConsolidated Supply Base Western World Silicon Metal “Merchant” Production Top 4 producers = 60% Pro Forma for Iceland, GSM market share will increase to 19% Raw materials are emerging as the most significant barrier to entry

10 Strong demand continues to drive silicon metal prices Prices Resilient / Substantial Leverage to Price 9 $1.58 Source: Metal Bulletin. Costs are stable and facilities are some of the most efficient in the world Control of inputs through ownership or long- term contracts Each 1¢/lb ($22/mt) increase in silicon & silicon based alloy price leads to ~$4.6 million more in EBITDA at full capacity GSM has Substantial Leverage to PriceSilicon Metal Price Movement ($/lb.) Note: EBITDA impact estimated based on assumed $0.01/lb increase on all 90,000 and 120,000 tons of silicon metal and silicon-based alloys capacity, respectively.

11 End Markets Auto / commercial vehicles Engine parts Wheels Transmission Other Marine Railway Machinery & equipment Electrical Oils Cosmetics Hydraulics Textiles Polishes Mechanical fluids Resins Insulators Waterproofing Paints Rubber Automotive Insulators Consumer items Auto / Commercial OtherSiliconesCoatingsElectronics Aluminum (40% of market) Chemicals (50% of market) Solar Coatings Adhesives Sealants Rubber Thermoplastics Fiberglass Semiconductors for integrated circuits (chips) for: Mobile telephones DVD recorders Computers Calculators Video games Televisions Radios Auto electronics Medical electronics Communications Weapons 600,000 tons consumed by aluminum industry Aluminum content in autos has increased over the past 20 years 750,000 tons consumed by chemical industry GDP + 4% growth Driven by increasing demand from the growing middle-class of BRIC countries and from global demand for renewable energy Solar / Electrical (10% of market) Photovoltaic cells for solar energy systems providing clean power to homes, buildings and industry 10 Note:% of sales figures represent industry estimates of western world consumption

12 Aluminum Production Trending Higher 11 Silicon metal is required in aluminum as a strengthener and alloying agent to improve castability and minimize shrinking and cracking Aluminum provides a lighter weight alternative to steel Aluminum demand has increased at a 5%+ CAGR for the past 20 years North American light vehicle aluminum content as a percent of curb weight Source:Ducker Worldwide. Note:Based on 3,600 lbs of curb weight. Global primary aluminum demand (000s tons) Source:Bloomberg, Brook Hunt and Street research. 326 pounds 77 pounds Approx. 10kg of silicon metal per car

13 Solar Demand is New Large-Scale Opportunity 12 Rapidly growing demand for polysilicon due to solar industry growth − Increased electricity consumption − Demand for alternative energy sources − Availability of government financing programs 1.4 tons of metallurgical grade silicon required for every 1 ton of polysilicon Source:EPIA May 2011 and management estimates.

14 Polysilicon Capacity & Pricing Demand from the solar industry is driving an expansion of polysilicon production capacity Polysilicon pricing has dropped from a peak of $415/kg in mid 2008 to a current range of $30-40/kg Approximately 12,000 tons of silicon are required to produce 1GW of solar power. EPIA estimates that approximately 15GW of solar power will be installed in 2012 Note: Total & Additional Polysilicon capacity excludes China Source:Credit Suisse, CRU, Photon Consulting and management estimates. 13

15 Silicon Alloys Are Key Ingredients in Steel and Foundry Products Ductile IronPipe Ferrosilicon (FeSi) Calcium Silicon (CaSi) Magnesium Ferrosilicon (MgFeSi) Steel Only 6 producers in Western World ~18% global market share and ~50% U.S. share 14 CommoditySpecialty Foundry High grade specifications Requires technical know- how Used in applications where strength and formability are required − Automotive components Often sole supplier Short lead times and variety of grades discourage imports Water transmission Used in production of carbon steels, stainless steels and other steel alloys ~50% share of the magnesium ferrosilicon market in the Americas and 20% in the Western World Competitive advantage in providing technical advice and service by tailoring composition to customers’ requirements 1 of 2 U.S. producers ~50% U.S. capacity and ~40% North American capacity 1 of 2 U.S. producers ~50% U.S. capacity and ~40% North American capacity

16 Supply / Demand Imbalance Limited new supply Little additional capacity is expected beyond GSM’s Iceland plant Chinese government has been closing plants that are energy inefficient or do not comply with environmental standards Barriers to entry are high Global demand continues to increase Two new polysilicon plants will come online in the US, one in 2012 and another in 2013 with demand of 40,000MT of silicon metal Growth in silicones market driven by an expanding middle class in developing nations and novel applications of silicones across all industries 15

17 Iceland Plant Overview Approximate 85% ownership interest, with 15% minority partner. Capacity of approximately 40,000 MT of silicon metal annually. Two 30 MW furnaces. 18 year long-term, competitively priced power agreement. Total construction cost of approximately €115 million. Financing of €79 million. Expected to be operational in calendar Local tax incentives, including low corporate tax rate, employee training credits and accelerated depreciation. Significant projected returns including accretive impact to earnings, substantial cash-on-cash IRR and significant annual returns on cash investment. 16

18 Alden Resources Acquisition Acquisition overview: The leading North American supplier of specialty metallurgical coal to the silicon and silicon-based alloy industries with approximately 21 million tons of reserves and 15 million tons of inferred resources Allows Globe to secure a stable, long-term and low-cost supply of this key raw material to support its continued growth worldwide Owns and operates a newly upgrade coal preparation plant in eastern Kentucky that is capable of processing over 2.5 million tons of coal per year. Also supplies all North American and some international silicon and silcon-based alloy producers Globe is funding growth capex to expand and improve output 17

19 Alden Coal Advantage Carbon sources: 1. Central Appalachian Coal – Alden 2. Colombian Coal (needs to be separated, washed in Europe and then shipped) 3. Charcoal Charcoal prices are now over $550/MT Charcoal shortages is China Tighter restrictions on Brazilian charcoal Columbian coal is a mixture requiring segregation and significant transport expense through Europe Markets: − Low ash coal – key raw material in production of silicon metal and specialty ferrosilicon − Medium ash coal − Ferrosilicon – commodity grade − Pulverized coal injections (PCI) – 1 ton of PCI displaces 1.4 tons of coking coal − Water purification – carbon filters − Thermal coal – high BTU/ low sulfur 18

20 Financial Highlights Production and input costs uncorrelated to silicon metal prices – yields substantial leverage to price Highly variable cost structure and low overhead – raw materials and power accounts for 75% of production costs Control over inputs – lease and operate quartz mines and entered multi-year power contracts Conservative capital structure with flexibility to pursue growth opportunities Declared $0.20 annual dividend payable in October 2011 As of September 30, 2011: Cash balance of $152 million, total debt of $106 million, availability under credit facilities of $48 million 19

21 20 Adjusted EBITDA (1) ($ in millions) Revenue Strong Financial Results Through Challenging Times ($ in millions) Note:Historical data is not pro forma for the Dow Corning transactions. (1)Adjusted EBITDA for fiscal 2009 is EBITDA plus goodwill and asset impairment charges of $69.7 million, deferred offering costs of $2.5 million, restructuring costs of $1.7 million, prior period power penalty of $1.0 million and inventory write-downs of $5.8 million. Adjusted EBITDA for fiscal 2010 is EBITDA plus, prior period power adjustment of ($0.5) million, fixed asset impairment of $0.7 million, transaction expenses of $0.7 million and start-up costs of $10.0 million, less a gain on the sale of Globe Metais of $19.7 million. Adjusted EBITDA for fiscal 2011 is EBITDA plus, transaction expenses of $5.0 million, start-up costs of $3.2 million, and gain on the sale of business of $4.2 million, less net settlements of $5.1 million. Adjusted EBITDA for LQA (the quarter ended Sept 30, 2011) is EBITDA plus transaction expenses of $1.7 million and gain on the sale of business of $(0.4) million annualized. (2)Fiscal 2009 EPS adjusted for goodwill and asset impairment charges of $69.7 million, deferred offering costs of $2.5 million, restructuring costs of $1.7 million, prior period power penalty of $1.0 million and inventory write-downs of $5.8 million. Fiscal 2010 EPS adjusted for prior period power adjustment of ($0.5) million, fixed asset impairment of $0.7 million, transaction expenses of $0.7 million and start-up costs of $10.0 million, less a gain on the sale of Globe Metais of $19.7 million. EPS for fiscal 2011 is adjusted for, transaction expenses of $5.0 million, start-up costs of $3.2 million, and gain on the sale of business of $4.2 million, less net settlements of $5.1 million. EPS for LQA (the quarter ended Sept 30, 2011) is adjusted for transaction expenses of $1.7 million and gain on the sale of business of $(0.4) million annualized, annualized. Adjusted EPS (2) ($ per share) Capital expenditures ($ in millions)

22 21 Conservative Capital Structure Positions the Company for Growth ($ in millions) Share information 75,035,177 basic shares outstanding 4,314,249 options outstanding Note:LTM adjusted EBITDA of $153.4 million.

23 22 Summary Highlights Leading global market share in silicon metal One of the world’s lowest cost producer High barriers to entry in an already consolidated industry Large cash position and unlevered balance sheet – poised for accretive acquisitions Improving trends in key end-markets and new growth markets Substantial leverage to price Experienced and cost conscious management team with unique operational skills and proven history of growth by acquisition Globe Specialty Metals is a business with strong fundamentals that presents a unique opportunity for accretive growth

24 Appendix

25 Strong and Experienced Management Team 24 Alan Kestenbaum Executive Chairman Founder / >20 years in industry Jeff Bradley Chief Executive Officer 2008 / >25 years in industry Malcolm Appelbaum Chief Financial Officer 2008 / >25 years of experience Stephen Lebowitz Chief Legal Officer 2008 / 19 years of experience

26 GSM’s Board of Directors is comprised of seasoned executives with strong management, metals, finance and international experience Alan Kestenbaum (Executive Chairman) Stuart Eizenstat −Partner, Covington & Burling LLP; Former Deputy Secretary of the United States Department of the Treasury; International Advisory Board Member of Coca-Cola, Board Member of UPS Franklin Lavin −Chairman of the Public Affairs practice for Asia-Pacific at Edelman; Former Managing Director and Chief Operating Officer of Cushman & Wakefield Investors Asia; Former Under Secretary for International Trade at the United States Department of Commerce Thomas Danjczek −President of the Steel Manufacturers Association; former senior executive at Wheeling-Pittsburgh Steel Corporation Donald Barger, Jr. −Former Chief Financial Officer at YRC Worldwide, Worthington Industries and Hillenbrand Industries; Board Member and Audit Chair of Gardner Denver and Quanex Board of Directors 25

27 EBITDA Reconciliation (1)EBITDA and Adjusted EBITDA include non-cash share-based compensation expense of $5.1 million, $5.7 million, $6.4 million, $8.2 million and $0.5 million for the latest twelve months ended March 31, 2011, and the fiscal years ended June 30, 2010, June 30, 2009, June 30, 2008, and June 30, 2007, respectively. Note: LQA represents the last quarter ended September 30, 2011, annualized 26


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