DIRECTORS’ REPORT TO THE SHAREHOLDERS (Continued)

Cassiar Mine

Ore Mined Of 1,321,065 tons of ore delivered to the concentrator during
1977, 24% was rejected as waste leaving 1,002,288 tons of concentrated ore for
processing. The recoverable mine grade for 1977 was 8.18% compared with 8.43%
for 1976.

Fibre Production Fibre production of 107,060 tons from 993,076 tons of
concentrate represents a record in annual production.

Waste Removal The waste removal program referred to in the 1976 Annual

Report was continued in 1977 with the following accomplishments:

a) Footwall waste removal has been completed and the contractor released.

b) The removal of hangingwall waste, necessary to release ore for mining, is now in
phase with the requirements of long range planning.

c) The program of pit development incorporating wider roads and catchments and
improvement in access to benches is continuing.

During the year, 6,874,033 cubic yards of waste were removed at a cost of
$15,358,965 or $2.23 per cubic yard compared to a unit cost of $2.86 per cubic yard
for 1976. Of this quantity, Cassiar mine equipment removed 6,088,756 cubic yards
at a unit cost of $2.11 per cubic yard. The total waste removal cost charged to
operations during 1977 was $12,550,118 using an amortization rate of $9.50 per ton
of ore mined.

Ore Reserves At December 31, 1977, ore reserves mineable by open pit
methods were calculated at 16,277,000 tons. During 1977 1,321,065 tons of ore
were mined. Ore reserves were reduced by 424,935 tons based on the results of
the diamond drilling carried out this year.

Environment A continued improvement in airborne fibre counts is being
achieved with improved maintenance and dedicated efforts on the part of
employees and management to keep working places clean and free of dust.

The new air system for the mill has not yet come on stream due to some
construction deficiencies, but it is expected to be operational early in 1978. Once
the additional air is available, a further improvement in the working environment is
expected.

In May of 1977, the new change house for employees was completed, and has
been operating effectively since then.

Medical research indicates that the incidence of lung cancer in persons ex-
posed to asbestos dust is manyfold greater among smokers than in non-smokers.
A leading authority states that the likelihood of a non-smoker, occupationally ex-
posed to asbestos dust, of developing lung cancer is no greater than in the public at
large. A concerted effort is being made by the Company to encourage employees to
stop smoking. Courses on smoking cessation were conducted at all operations and
towards the end of the year, the Company published a booklet to assist individuals
who wished to break the smoking habit on their own.

The environmental committees that were established at the mine and in
Victoria continue to operate effectively.

Clinton Creek Mine

Ore Mined 1,978,318 tons of ore were mined; of this tonnage, 26% was
rejected as waste. The remaining 1,330,642 tons of concentrate were available for
processing. Recoverable mine grade for 1977 was 6.18% compared with 6.08% in
1976.

Fibre Production From 1,331,466 tons of concentrate, 105,224 tons of fibre
were produced.