Cassiar Asbestos Corporation Limited

Report of the Directors

To the Shareholders,
Cassiar Asbestos Corporation Limited:

Your directors present herewith the twenty-second annual report on the affairs of your Company
including the consolidated balance sheet as at December 31, 1973, statements of consolidated operations,
retained earnings and source and application of funds for the year ended on that date and your auditors’
report thereon.

FINANCIAL

The financial statements clearly indicate that 1973 was a difficult year for the Cassiar Mine and
consequently for the Company. The net profit dropped from $4,323,158 or 78.6 cents per share in
1972 to $3,048,474 or 55.4 cents per share. As set out in the summary of consolidated operations
(page 11) the profit before income taxes for 1973 was $4,628,474 compared to $7,198,158 in 1972.
The Clinton Mine shows an increase in profit of $254,488 before taxes, while the before tax profit at
Cassiar Mine dropped by $2,837,918. A provision for income taxes of $1,580,000 in 1973 compared
to $2,875,000 in 1972 resulted in the net profits noted above.

In 1973, fibre production at Cassiar reached a record level of 108,479 tons. The grade of the
ore milled however, was approximately 1% below normal, and in order to achieve this production an
additional tonnage of ore had to be mined and milled. This increase in tonnage, together with extremely
wet mining conditions exceeded the capacity of the drying plant and ore deliveries to the dry rock
storage fell short of the tonnage milled by 45,282 tons. The shortfall was made up from ore stockpiles
accumulated in the past in the mill area. The cost of mining and processing the additional ore is
estimated at $1,215,000. Increases in cost of labour, materials, transportation and other items approxi-
mated $2,933,000. The waste amortization rate was increased in 1973 from $1.68 to $3.50 per ton
of ore mined, adding a further $1,796,000 to the above costs. The total increases in costs of $5,944,000
were offset in part by increased revenue from fibre sales of $3,107,000 and resulted in a net reduction
in profit before tax from the Cassiar Mine of approximately $2,837,000.

The diamond drilling that has been carried out over the past three years at Cassiar has assured
another twenty years of open pit life. The programme to up-date the whole operation to the standards
required for an efficient operation started with the mill expansion and will be continued in 1974 and
1975. The electrification of the pit is nearly completed and an eleven cubic yard shovel, a large rotary
drill and six 75-ton trucks are scheduled to be in operation on waste removal by the end of June 1974.
This equipment has the capacity to move the larger tonnages now required by the higher waste to ore
ratios and at a considerably reduced unit cost. The capacity of the drying plant is being doubled by the
addition of a new 60’ by 742’ dryer and dust collecting system. The addition will be operative in April
1974 and will relieve the drying problems encountered during the past year, which were a factor in
limiting the tonnage of ore that could be treated in the mill. An aerial tramway, designed to handle
300 tons of ore per hour, is scheduled for completion in June 1975. It will replace the present costly
movement by the existing tramline and trucks. A new, more efficient concentrating plant located at the
mill will be commissioned in ample time to handle material from the tramway.

The cost of the above items was estimated in November 1973 to be approximately $9,000,000.
Prices of materials and labour are escalating rapidly, and it is probable that some over-runs will occur.
Every effort is being made to control and minimize the effect of this escalation. To finance these
expenditures the company, subsequent to the year end, has arranged with its bankers to increase its line
of credit secured pursuant to Section 88 of the Bank Act to $18,000,000 as set out in Note 3 to the
financial statements.

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