Cassiar Asbestos Corporation Limited

Notes to Consolidated Financial Statements December 31, 1978

1. Accounting Policies:

Principles of consolidation —

The consolidated financial statements include the ac-
counts of the Company and its wholly-owned sub-
sidiaries, Kutcho Creek Asbestos Company Limited and
Territorial Supply Company Limited.

Inventories —

Inventories of asbestos fibre and ore stockpiled are
valued at the lower of cost and net realizable value; cost
is determined on a first-in, first-out basis. Supplies are
valued at the lower of cost and replacement cost; cost
is determined principally on a moving-average basis.
Fixed assets —

The basis of depreciation, except for Clinton Creek
Mine noted below, is as follows:

Buildings — straight-line at 5%

Equipment — straight-line at 10%

Leasehold improvements — straight-line over the
seven-year lease period.

Automotive equipment — charged to operations
on a unit of use basis.

At Clinton Creek Mine, the undepreciated costs of
remaining surplus equipment and buildings have been
adjusted to reflect their estimated net realizable values
as at December 31, 1978 of $1,988,263. (See also Note
3.)

Deferred charges —
The basis of amortization and write-off is as follows:

Waste removal —
Waste removal costs are charged to production on
a per ton of ore mined basis, the rate being deter-
mined by dividing the sum of the projected cost of
waste to be removed and the unamortized balance
of costs incurred, by the estimated ore reserves.

Exploration and development —

General exploration expenditures are charged to
operations during the year incurred. The direct cost
of acquisition of mining properties and exploration
expenditures thereon are initially capitalized. When
disposal or abandonment of an area is effected or
considered probable, the resulting net gain or loss
is reflected in the consolidated statement of
operations. Development costs are amortized ona
per ton of ore mined basis, the rate being deter-
mined by dividing the costs accumulated by the
estimated ore reserves.

MZ

Taxes —

The Company follows the tax allocation method of
accounting for all differences in the timing of de-
ductions for tax and accounting purposes arising
with respect to mining claims and land, depreci-
ation and waste removal, exploration, develop-
ment and preproduction costs. Taxes deferred of
$29,464,000 have arisen to date from claiming
such items for tax purposes in excess of the
amounts recorded in the accounts.

2. Bank Indebtedness:

The Company's bank indebtedness is secured by a
general assignment of accounts receivable and inven-
tories of asbestos fibre, ore stockpiled and supplies,
together with a first floating charge on its assets and
undertakings.

3. Mine Closure:

The Company's asbestos mine at Clinton Creek ceased
production in August, 1978. Additionally, as a result of
this mine closure and the commencement of transpor-
tation of Cassiar mine fibre through Stewart, B.C., the
Transport Division and related facilities were also
closed.

Certain of the assets at Clinton Creek, usable at the
Cassiar mine, have been retained. Assets considered
surplus to the Company's operations either have been
sold, written off or will be disposed of subsequently.
The remaining surplus assets are included in the con-
solidated balance sheet at their estimated net realizable
values.

Included in Cost of sales, as a net reduction, are the
following amounts relating to the closure of the Clinton
Creek mine and the Transport Division and related
facilities —

Proceeds from sales of surplus assets ... $2,916,787
Net credit adjustment to carrying
value of surplus assets ............. 661,979
Disposal of surplus assets .............. 3,578,766
Less: Severance pay and other costs
OlMCIOS UTED Sanaa as nena ae ee eee 1,474,000
$2,104,766

In the opinion of Management, the Company will not
incur significant additional net costs to complete the
shutdown of the Clinton Creek mine.