Outlook

Economic projections for 1982 indicate a
continuing slow demand for mineral
products including asbestos. Consequently,
sales are likely to continue at the same
depressed level as in 1981. To conserve cash
in these difficult market conditions a one
month shutdown of operations at the
Cassiar asbestos mine in mid-year is
planned together with a reduction in the
waste removal program. Sales
commitments will be met from inventory
which is currently at an all time high.

Revenues from our San Antonio gold
mine should increase as the mine and mill
meet their production targets in 1982.
International gold prices will, of course,
affect these revenues and the mine’s
profitability.

We continue to regard energy coal
development opportunities favourably. In
1982, we expect increased earnings from
our Loftis coal mine as markets are
expected to remain firm for the high
quality Loftis coal and as production targets
are met. By the middle of the 1980's
revenues from the Quinsam Coal project
could add significantly to net earnings if a
positive government decision on the
project is forthcoming by the end of 1982.

Our Loftis operation provides a window
on the eastern United States coal industry
which presently produces approximately
four hundred million tons of steam coal per
year. As consumers demand a higher
quality product, and as safety standards
become more stringent, more of the
production capacity in the eastern United
States is likely to become available to those
corporations which have technical and
financial depth. We regard Loftis as being
an ideal base from which to participate in
this shift in the industry. The Quinsam and
Stellarton projects, both adjacent to
tidewater, could provide low cost access to
international steam coal markets in both
Europe and southeast Asia.

6

The depressed outlook in the oil and gas
industry in Canada and elsewhere dictates
that we proceed with extreme caution at
the present time. Consequently our
exploration expenditures will be kept to a
minimum in 1982. We shall, however,
continue to review opportunities to expand
our present asset base in a significant way
through acquisitions.

Throughout 1982, management will
concentrate on maximizing cash flow from
existing operations and will minimize
exploration expenditures. We shall focus on
activities which have significant potential
for earnings and cash flow in the near term
and which would complement our present
operations.

With an experienced and competent
management team in place, we are
preparing to take advantage of new
opportunities which may arise as a result of
the distressed conditions which now exist
in the mineral industry. We expect that
these conditions will improve over the next
few years and we will be well placed to
participate in new projects as they become
available.

Acknowledgements

Difficult times require difficult decisions
now to survive the short term in order to
enjoy the opportunities which will be
available in the longer term in the mineral
and oil and gas industries. These decisions
place heavy demands on management and
require patience on the part of our Board
members. We should like to express our
appreciation to both groups for their
cooperation in the past and their
encouragement for the future.

UX. Que Use

R.B. Dale-Harris,
Chairman

We;

Hugh R. Snyder,
President and
Chief Executive Officer

March 15, 1982