Cassiar Asbestos Corporation Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1967

1. Depreciation and amortization:

The basis of amortization and depreciation is as follows:
Depreciation —
Buildings —5% per annum on cost
Equipment — 10% per annum on cost

Automotive equipment cost is charged to operations at a uniform rate over the estimated
useful life applied on a unit basis.

During the year the depreciation charge to operations amounted to $1,492,336 (1966 —
$1,439,523).

Amortization of stripping expenditures —

Stripping costs are charged to operations on a per ton of ore mined basis, the rate being
determined by dividing the cost of stripping by the estimated tons of ore released.
During the year stripping costs charged to cost of production amounted to $1,729,516
(1966 — $1,539,972).

Amortization of preproduction expenditures —

Preproduction expenditures are to be amortized on a per ton basis, the rate being
determined by the estimated ore reserves. As the preproduction expenditures at
December 31, 1966 and 1967, relate entirely to mines not yet in production no
amortization has been written in the current year.

Ne

Exploration expenditures:

The company’s policy is to write off all general exploration expenditures incurred during the year
and to capitalize the direct costs of acquisition and expenditure thereon in mining properties which
were in good standing at the year end. Upon disposal or abandonment of such interest the net gain
or loss is reflected in the statement of income.

3. Bank indebtedness:

The bank indebtedness is secured by a general assignment of accounts receivable and pledge of
inventories of asbestos fibre, ore stockpiled at mill, and supplies.

4. Income taxes deferred:

The deferred income taxes of $2,150,000 is the amount by which income taxes otherwise payable in
respect of the year have been reduced by claiming for tax purposes capital cost allowances, stripping
costs, and exploration and development expenditures, in excess of the amounts recorded in the
accounts. This difference is applicable to those future periods in which the amounts claimed for tax
purposes will be less than the depreciation, stripping costs, and exploration and development
expenditures, recorded in the accounts and is accordingly included in the balance sheet in the item
“Income taxes deferred”.

5. Capital:

The issued share capital of the company was increased by 477,500 shares through a rights offering
to the shareholders on the basis of one share for each ten shares held as at the close of business
January 31, 1967, at the price of $12.00 per share. Subscriptions were received for 473.818 shares
and the remaining 3,682 shares not subscribed for under the terms of the offering were sold to Bell
Asbestos Mines Ltd. at the then current market price of $16.00 per share. Accordingly the total
offering of 477,500 shares was allotted and issued for a total consideration of $5,744,728.

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