Brinco Limited and Subsidiaries

Report to the Shareholders

R. B. Dale-Harris,
Chairman of the Board
(standing)

H. R. Snyder,
President and
Chief Executive Officer

The year 1981 was one of growth and
consolidation for the company. The
acquisition of Cassiar Resources Limited and
the Loftis coal mine in late 1980 changed
the nature of Brinco and established it as
an active operating resource development
company. Consistent with this new
direction was the development of the San
Antonio gold mine during 1981 which came
into production in early 1982 and the
negotiation of two joint ventures with
Brinco as operator, one with Weldwood and
one with Suncor in the valuation of
development opportunities of steam coal
projects in British Columbia and Nova Scotia
respectively.

As a result of these and other activities,
our assets increased from $141 million at
the end of 1979 to $233 million at the end
of 1980 and to $299 million at the end of
1981. Financing for this growth was largely
provided for by a Preferred Shares Issue
which netted $40 million in late 1980, and
a term bank loan of $70 million arranged in
1981.

Following a good first half year,
deteriorating economic conditions in Canada
and elsewhere resulted in a diminished
demand for mineral products, including
asbestos, and this had a severe impact on
the level of sales from the Cassiar mine and
on our net earnings. In the Canadian oil and
gas industry markets for natural gas
remain depressed. Moreover, the Energy
Pricing Agreements negotiated between
the federal and provincial governments
allocate a disproportionate share of cash
flow to government, although this was
moderated by the new Alberta Royalty Tax
Credit which provides some cash relief to
junior oil and gas companies such as Brinco
Oil & Gas. Finally, the high cost of funds
borrowed to finance the expansion of the
company has added significantly to our
operating costs.

Revenues for 1981 were $92.0 million
compared with $18.0 million in 1980. The
1981 revenues include the first full year of
revenues from the Cassiar asbestos mine.
Net earnings for 1981 were $1.1 million
compared with $0.9 million in 1980, in both
cases after extraordinary items. However,
after payment of Preferred share dividends
the loss attributable to the common shares
was 20¢ per common share compared with
earnings of one cent per common share a
year earlier.