Essential Power…Infinite Possibilities

October 23, 2008

Formation Capital Update on Operations

NOTE: This update was sent to the Company’s list of shareholders and interested parties via email on October 23, 2008.

This is Not an Official Company News Release - For the Information of Shareholders & Interested Parties Only

Dear Shareholder,

Management would like to provide its shareholders and interested parties with an update on the Company’s activities, and how the current world financial crisis has affected its operations. As a result of the declining liquidity and credit crunch of the financial markets, management is aggressively taking steps to preserve existing capital and protect its shareholders in the event the current financial crisis continues for a prolonged period of time. It is worthy of note that the Company has no debt that could expose it to crippling settlement conditions.

In early October the Company announced that the Record of Decision (ROD) on the company’s Idaho Cobalt Project (ICP) was remanded by the Regional Forester and it would be necessary for the Salmon Challis National Forest to issue a new ROD. Management understands that a new ROD will be issued in mid November, 2008 and remains confident that this new ROD will, this time, be upheld by the Regional Forester. As well, the new ROD is expected to better protect the Forest Service from any potential future litigation, and as a consequence, help ensure a continued uninterrupted production schedule for the ICP in the years to come. As reported in the Company’s news release, the Forest Service noted “the importance of the project to the community and pledged to address the clarification issues outlined in the remand as promptly as possible”. This delay in the upholding of the ROD also provides the Company additional time to work with any potential appellants with the goal of having the new ROD issued with no appeals, thus avoiding a possible additional 45 day appeal resolution period.

The overturning of the ROD was not expected by the Company and was an extremely disappointing turn of events. The Company had been aggressively pursuing mine financing in the hopes of beginning mine construction earlier this fall. With the ROD overturned the Company had no alternative but to put the financing on hold until the New Year when the new ROD is expected to be upheld. At that time the Company intends to resume its efforts to finance the construction of the ICP.

The delay in the ROD could be viewed as having a silver lining. One thing is certain; the financial lending markets and equity markets are in a tumultuous down turn the likes of which have never been seen before. As markets are invariably cyclical, more favorable debt and equity finance terms can be expected to be negotiated at some time in the future. Another positive outcome of the delayed ROD is the Company’s in house team of mining engineers, metallurgists and other professionals are now afforded the luxury of additional time to review the ICP’s detailed engineering and procurement of mining equipment to assess where changes can be made to save time and money.

Although falling commodity prices are proving detrimental for those companies already in production, it can be expected to be advantageous for those companies, such as ourselves, that require the same commodities to build their facilities. Our team is monitoring the commodity prices for such items as steel with the intent of reducing cash outlays for construction materials.

Perhaps one of the most significant cost savings measures of the capitalization expenditures for the ICP is the avoidance of winter construction. Construction under the harsh conditions of winter are estimated to be twice the cost, with half the productivity, and is also considered quite dangerous for workers where there is a much higher probability of workers being seriously injured or worse.

As at August 31,2008 and reported in the Company’s latest available financial statements, the Company reported just over $14 million in current assets, with $5.6 million of that in cash and an additional $4.4 million in precious metals inventory. As previously mentioned, management has implemented procedures to conserve this cash. In addition, as of August 31, 2008, the Company reported total assets of approximately $72.7 million, with total liabilities of approximately $2.5 million.

The economics of the ICP remain very positive. Despite falling commodity prices, cobalt, and in particular high purity cobalt metal, has remained relatively resilient with prices in the mid US $30 per pound vicinity making us more attractive than a number of other potential commodity producers seeking construction financing. In addition, our location in Idaho remains an attractive and stable one for financiers, compared to some other projects outside of North America in less stable political environments.

Although the delay in the ROD coupled with the current financial crisis has had a direct effect on our ability to secure an immediate mine financing, there are several openings in this cloud of worldwide financial crisis as pointed out above. Management will continue to do all in its power to move the ICP forward, conserve cash and protect its shareholders during these uncertain times.

Formation Capital Corporation

“Mari-Ann Green”

Mari-Ann Green, C.E.O.

October 23, 2008
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October 6th, 2008, Formation Capital Confident Record Of Decision Will Be Quickly Corrected
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November 17th, 2008, Formation Resolves Appeals with Environmental Groups on Idaho Cobalt Project