LITIGATION

Certain personal injury actions are continuing in the United States naming
Cassiar Asbestos Corporation Limited and others as defendants.

As of December 1, 1976, Cassiar had been named as one of the defendants in
ten cases in Connecticut, five cases in New Jersey, three cases in South Carolina
and one case in Texas. In February 1977 the plaintiffs agreed to dismiss Cassiar
from the ten cases in Connecticut voluntarily without any payment by Cassiar. At
this time one additional case has been filed in South Carolina.

Plaintiffs are asbestos workers, or members of their families, who claim
substantial damages for alleged injuries to health by reason of inhalation or inges-
tion of asbestos fibres or dust.

In each of these cases, Cassiar has moved to dismiss on the grounds of lack of
jurisdiction. In the three New Jersey actions, Cassiar’s motions have been denied.

The alleged injuries would have occurred after Cassiar had sold asbestos fibre
in Canada, and had thereby relinquished all control to its customers, who then
imported such fibre into the United States. Cassiar’s customers in the United States
are users with many years of experience in the handling of asbestos and the
manufacturing of commercial products containing asbestos.

The Company is defending each of these actions. Neither the existence of
liability, nor the extent of any possible damages, has been determined at this time
for any of the cases. Product liability insurance has been carried until 1975, butit has
been unavailable since then. The current sales agreements provide for a degree of
indemnification by the customer.

EMPLOYEE RELATIONS

Your Company has increased and improved family accommodation at Cassiar;
has successfully recruited tradesmen overseas; and has created a healthier work-
ing environment at both mines.

The annual turnover rate at Cassiar for 1976 was 119% compared with 157%
for 1975. This was achieved in spite of the disrupting influence of the two-month
strike last summer. At Clinton Creek the annual turnover rate dropped from 125% in
1975 to 95% in 1976.

During 1976 nine separate Collective Agreements were negotiated, eight of