CAssIAR ASBESTOS CORPORATION LIMITED

The basic plant, crushers, tramline, mill buildings and shops have been designed for
an annual fibre production of 80,000 tons, but the installation of power and milling equipment will
be limited to the requirements of 40,000 tons of fibre until further expansion is warranted. Current
forecasts of the fibre market suggest that the 80,000-ton capacity should be reached by 1970.

By agreement with the Department of Northern Affairs and National Resources. your
company undertook the construction of 26 miles of new road and a bridge over the Fortymile
Tiver to provide access to the mine from the Sixtymile road. The estimated cost of the work is
$1,100,000, of which the Government of Canada will pay two-thirds and your company one-third.
During the year under review, the road was 60% completed and at year end, the bridge was under
construction and scheduled for completion early in April 1966, prior to spring break-up. The
Department of Northern Affairs and National Resources has undertaken the expenditure of
$1,700,000 on improvements and necessary relocations of thirty seven miles of the Sixtymile
toad between Dawson and the mine access road, and on improved ferry facilities at Dawson.

The Federal Government has deferred a decision on the construction of a bridge across the
Yukon at Dawson, and it will therefore be necessary to rely on ferry and ice bridge crossings.
Consideration is being given to the erection of a skyline over the river capable of carrying twelve-ton
loads, to permit the movement of fibre and freight during the sixteen-week freeze-up and break-up
periods, when the other means of crossing are not available.

The total estimated cost to bring the Clinton mine to production is $18,000,000. During
the year, $9,300,000 was provided from the issue of 775.000 shares, and it is anticipated that
during the next two years a further $4,000,000 will become available from operations. The most
advantageous means of providing additional funds is being considered.

KUTCHO CREEK ASBESTOS COMPANY LIMITED

The Kutcho Creek property is located approximately sixty air-miles southeast of Cassiar.
Preliminary work has indicated a large serpentine body bearing good quality chrysotile asbestos
fibre. A geophysical survey and a preliminary drilling programme will be undertaken during 1966
to further explore the economic importance of the property.

ANDERSON OPTION

An option has been taken on a group of 96 mineral claims, one hundred miles southwest
of Cassiar. The claims are reported to contain a showing of asbestos fibre.

ACKNOWLEDGEMENTS

The co-operation your company has received from the Department of Northern Affairs
and National Resources and from the Yukon Territorial Government during the planning and
initial phases of the Clinton Creek operation is gratefully acknowledged.

The staff and employees at the mine, in the Transport Division and_at Vancouver are to
be commended for an excellent production record in the face of many difficulties, including the
rock slide and a work stoppage at Skagway on our main transportation route and for a notably
low accident frequency.

On Behalf of the Board,

F. M. CONNELL, J. D. CHRISTIAN,
Chairman. President.

Toronto, Canada,
March 8, 1966.

PAGE FOUR