Cassiar Asbestos Corporation Limited

Report of the Directors

To the Shareholders,
CASSIAR ASBESTOS CORPORATION LIMITED:

Your directors submit herewith the sixteenth annual report on the affairs of your company
including a consolidated balance sheet as at December 31, 1967, statements of consolidated operations,
earned surplus and source and application of funds for the year ended on that date and your Auditors’
report thereon.

FINANCIAL

The profit from operations was $10,116,004 before providing for depreciation, stripping and
other write-offs aggregating $3,290,819 leaving a net profit before income taxes of $6,825,185. Provision
for income taxes of $500,000 for current year and $2,150,000 deferred to future years, results in a net
profit for the year of $4,175,185 as compared to $4,145,766 earned in 1966.

As previously reported 477,500 shares of the capital stock of the company were issued pursuant
to a rights offering in February 1967, to provide the company with $5,744,728. A long term bank loan
was arranged to provide $4,000,000.

During the year, there was expended on capital account at Clinton on plant and equipment
$10,351,555 and on pre-production expense, including pre-stripping in the mine, $2,072,857. Total
expenditures to date for the Clinton mine on mine plant and equipment, development, pre-production
and other expenses and Transport Division equipment amounts to $24,203,660. It is estimated that a
further expenditure of approximately $2,200,000 will be required to complete the project.

At Cassiar, mine and mill equipment renewal cost $553,727 and waste stripping at the mine
cost $2,801,594.

SALES

Demand for all grades of Cassiar fibre was good throughout the year. The Cassiar mine
operated at a record production level of 92,000 tons of fibre and was able to meet sales commitments.
Inventories were maintained at minimum working levels. The selling price of fibre was increased by
approximately 3.75% on April 1, 1967. Now that the Clinton property is in operation, production
from the Cassiar mine during 1968, will be reduced to its normal operating rate of approximately
75,000 tons of fibre per year.

Test samples of the first fibre produced from the Clinton mine reached customers in late
November. Reports from customers have been excellent and confirm earlier indications of a high
quality, good filtering asbestos-cement fibre. Tentative orders for 1968, covering most of the 60,000
tons planned production from the Clinton mine have been received.

The growth in the asbestos-cement market, that was anticipated last year, did not fully materialize
as a result of restrictions on capital funds in various market areas. While the outlook for 1968 remains

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