Cassiar Asbestos Corporation Limited

and its subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1972

Fixed assets

The basis of depreciation is as follows:
Buildings — 5% per annum on cost.
Equipment — 10% per annum on cost. Z F
Automotive equipment cost is charged to operations at uniform rates over the estimated useful life.
During the year the depreciation charged to operations amounted to $4,589,820 (1971 — $4,096,354).

Deferred Assets
The basis of amortization and write-off is as follows:
Amortization of waste removal costs ' Dees
Waste removal costs are charged to operations on a per ton of ore mined basis, the rate being determined by dividing
the cost of waste removal by the estimated tons of ore to be released.
During the year waste removal costs charged to cost of production amounted to $5,094,200 (1971 — $3,190,868).
Amortization of development and preproduction costs —
Preproduction costs for the Cassiar mine have been written off over prior periods. Preproduction costs for the
Clinton mine and development costs for both mines are amortized on a per ton of ore mined basis, the rate being
determined by dividing the cost by the estimated ore reserves.
During the year development and preproduction costs charged to cost of production amounted to $916,589 (1971 —
$877,635).
Write-off of exploration costs —
The companies’ policy is to write off all general exploration expenditures incurred during the year and to capitalize
the direct cost 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 operations.

Bank credit

The companies have established a line of credit secured pursuant to section 88 of the Bank Act by a general assignment of
accounts receivable and inventories of asbestos fibre, ore and supplies.

At the year end borrowings consisted of the following —

A Raip sok loretelveqraepe ete te me ear tg et weontrronon otis acme tics $ 5,000,000
Bankersigacce ptanCe mn OLcS merrier eaten eet rere 5,500,000
DemandSloantect: eee ers eae oe Tah eee nO 2,796,510

$13,296,510

The term loan is repayable in annual instalments of $1,000,000 each with a final payment in October 1976 of $2,000,000.
Interest is payable at the bank prime rate plus 34 of 1% on the first $1,000,000 and 1% on the remaining $4,000,000 of the
term loan. Interest expense on the term loan was $415,582 in 1972.

Income taxes

The companies follow the income tax allocation method of accounting for all differences in the timing of deductions for tax
and accounting purposes arising from depreciation, waste removal costs, and exploration, development and preproduction costs.
Income taxes deferred of $15,120,000 represents income tax reductions which have arisen to date from claiming such items
for tax purposes in excess of the amounts recorded in the accounts.

Consolidated subsidiaries

Cassiar Asbestos (Alaska) Inc. — 100% owned
Kutcho Creek Asbestos Company Limited — 100% owned
Territorial Supply Company Limited — 100% owned

The minority interest in Territorial Supply Company Limited was purchased from United Keno Hill Mines Limited at the
year end.

Remuneration of Officers and Directors

The aggregate direct remuneration paid by the companies during the year ended December 31, 1972:

Momthemthinteenadixeclorsmee eee $ 19,200
To the six officers of whom four are directors .. 159,560

To three others, deemed officers pursuant to the
OntaniomSecunitieseAC tara ene 81,250
$ 260,010

The aggregate cost to the companies during the year ended December 31, 1972 with respect to all pension benefits proposed
to be paid in the event of retirement at normal retirement age (65 years):

Directorspand MOlicens ean ene ee $ 22,800
Three others, deemed officers pursuant to the

OntanioMSecuniticswA\Ctme nny anes 10,950

$ 33,750

Pension plan

The present value of the unfunded portion of past service benefits is approximately $540,000 at December 31, 1972 based on
actuarial estimates made as at January 1, 1971. The amount is being funded and charged to operations by annual payments
of $47,900, including interest.

Subsequent to the year end an additional pension plan to cover employees not included in the existing plan is being established.
It is estimated that the present value of the past service liability under this plan will not exceed $200,000 and will be charged
to operations over the funding period.

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