1.

Cassiar Asbestos Corporation Limited

and its subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1971

Depreciation and amortization
The basis of depreciation and amortization is as follows:
Depreciation —
Buildings — 5% per annum on cost.
Equipment — 10% per annum on cost. Fi
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 $4,096,354 (1970 — $3,939,274).

Amortization of waste removal costs — F i t
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 $3,190,868 (1970 —
$3,170,197).

Amortization of preproduction costs — ; . retain
Preproduction costs are amortized on a per ton of ore mined basis, the rate being determined by dividing
the cost by the estimated ore reserves.

Dunne the year preproduction costs charged to cost of production amounted to $877,635 (1970 —
666,235).

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

eoueumen or accounts receivable and inventories of asbestos fibre, ore and supplies, in the aggregate amount of
3,000,000.

At the year end borrowings consisted of the following —

AUS darks otal pean ans cmpy mats Rie ey rege ako Med gentnyes aed es ore $ 6,000,000
Banker’s acceptance notes ........................... 5,500,000
Demand aloan my re. reese yee ye eee ed ete ee 1,078,892

$12,578,892

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 $2,000,000 and 1% on the
remaining $4,000,000 of the term loan. Interest expense on the term loan was $76,384 in 1971.

Income taxes

The provision for income taxes for the 1971 and 1970 years reflects the fact that under the Income Tax Act the
income from the Clinton Mine was exempt from income taxes for the three year period ended March 31, 1971.
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 $12,445,000 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 — 75% owned

Remuneration of Officers and Directors
The aggregate direct remuneration paid by the companies during the year ended December 31, 1971:—

Mopthesthirteenkdirectorsseee eee eee $ 18,925

To the six officers of whom four are directors .. 158,440
To three others, deemed officers pursuant to the

Ontario Securities Act .................. 80,700

$ 258,065

The aggregate cost to the companies during the year ended December 31, 1971 with respect to all pension benefits
proposed to be paid in the event of retirement at normal retirement age (65 years) :—

iRewdirectorssandiofficersm eee eee ein $ 21,100
Re three others, deemed officers pursuant to the

Ontario Securities Act .................. 10,400

$ 31,500

Pension Plan

The present value of the unfunded portion of past service benefits is approximately $540,000 at December 31, 1971
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, to December 31, 1988.

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