Cassiar Asbestos Corporation Limited

NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1958

1. At September 30, 1958 the company’s fibre inventories were valued at cost. At September 30, 1957 the fibre
inventories were valued at selling price. Due to this change the inventories at September 30, 1958 are
stated $1,401,750 lower than they would have been under the former method and net profit for the 1958
year is reduced $542,762. The reduction in the value of the inventory at September 30, 1957 due to the
change in basis is $808,988 and is shown as a reduction of earned surplus as at that date.

2. During the fiscal year, the company increased the rate of write-off to production in respect of stripping costs.
The increase applicable to production for the period prior to September 30, 1957 is $53,046 and is shown
as a reduction of earned surplus at that date.

3. Under an agreement dated August 30, 1957 Conwest Exploration Company Limited granted to the company
an option to purchase the total interest of Conwest in three groups of mineral claims known as the Letain
group, the Caley group and the Clinton Creek group for a total consideration of $500,000 cash and
200,000 shares of the capital stock of the company payable at the option of the company over a period
of years. At September 30, 1958 $100,000 cash has been paid and by agreement subsequent to that date
Conwest Exploration Company Limited has agreed to accept on or before December 31, 1958 160,000
shares of the capital stock of the company in full settlement of the balance of the option price.

Under the terms of the option agreements from the original vendors the following amounts are payable and
the shares noted hereunder are issuable in companies to be formed at the option of the company:

Letain group — 32,000 shares of a company now formed which may be purchased by the
company for a total consideration of $52,000 payable over three
years.

Caley group — $35,000 payable over two years and 300,000 shares of the 3,000,000 authorized

share capital of a company to be formed by December 31, 1959.

Clinton Creek group — $45,000 payable over three years and 300,000 shares of the 3,000,000 author-
ized share capital of a company to be formed by December 31,
1960.

4. Under the Income Tax Act, the company was exempt from federal taxation for the three years ended June
30, 1958. However, provincial tax exemption under the Mining Tax Act of British Columbia has only
been granted to July 5, 1957. The tax applicable for the period to September 30, 1957 has not yet been
determined. Provision for liability in this regard has been made in the amount of $70,000 and has been
charged to earned surplus.

Pact E1cuHt