The cash deficiency accounts for the increased bank indebtedness and is the
reason that dividends have not been paid since early 1974.

The Directors expect that the financial position of the Company will improve
upon the completion of the development and capital expenditure programs cur-
rently underway.

ASBESTOS SALES
A summary of sales for 1976 and 1975 is as follows:

1976 1975
Tons $000 Tons $000
Gassiahillhems aa. 63,995 33,704 87,542 40,900
Glimntonpiibre ws sas ae 111,466 44,582 111,862 38,591
175,461 78,286 199,404 79,491

The reduction in sales in 1976 was mainly due to the disruptive effects of the
two-month strike at the Cassiar mine in mid-year plus the residual effects of a
three-week work stoppage in December, 1975.

While the demand for asbestos cement fibre grades remains strong, the
demand for textile grade fibres has softened.

CASSIAR MINE

Ore Mined During 1976 there were 923,551 tons of ore delivered to the
concentrator of which 211,197 tons were rejected, leaving 712,354 tons of concen-
trate available for refinery processing. The recoverable mine grade for the year was
8.43% compared with 8.93% in 1975.

Fibre Refined From 687,654 tons of concentrate 77,858 tons of fibre were
produced. A slow recovery in production was expected after the strike. Post-strike
production, however, exceeded expectations. As a result, year end inventory of
Cassiar fibre increased by approximately 14,000 tons. This increased inventory will
ensure regular shipments of fibre during 1977, when normal operations in the mill
will be disrupted by the installation of equipment and modifications to the plant, for
environmental and process improvements.

Waste Removal As reported for 1975, there was a need to accelerate the
waste removal program during 1975 and 1976. This and other open pit improve-
ment programs have been vigorously pursued and by the end of 1976 the following