Cassiar Asbestos Corporation Limited

Report of the Directors

To the Shareholders,
Cassiar Asbestos Corporation Limited:

Your directors present herewith the twentieth annual report on the affairs of your company
including the consolidated balance sheet as at December 31, 1971, statements of consolidated operations,
retained earnings and source and application of funds for the year ended on that date and your auditors’
report thereon.

FINANCIAL

The operating profit was $15,102,173 before providing for depreciation, waste removal, and
other write-offs aggregating $8,334,027, leaving a net profit before income taxes of $6,768,146.
Provision for income taxes of $2,140,000 resulted in a net profit for the year of $4,628,146, or $.84
per share as compared to $7,140,312 or $1.31 per share earned in 1970.

The revenue from sales was $757,627 less than in 1970 and the net profit from the combined
operations was $2,512,166 lower. These differences can be largely attributed to the following:

1. Sales
Due to operating difficulties in the Cassiar Mill and lower recovery at the Clinton Mine,
referred to below, production fell short of sales commitments. The unfilled orders will be
shipped out of 1972 production.

ii)

. Taxes
The increase in taxes of $760,000 is basically the result of profits from the Clinton Mine
having become subject to Federal Income Tax on April 1, 1971, being the end of the
three-year tax free period.

3. Clinton Mine

The reduction in profits before income taxes of $1,524,315 is due to having mined a large
portion of the mill feed from the lower grade footwall zone. This resulted in an average
fibre recovery of 5.37% compared to the recovery of 7.06% in the previous year.

4. Cassiar Mine

The reduction in profit before income taxes was $163,266. An increase in sales of
$1,980,412 was offset by an equivalent increase in cost of production attributable to the
previously reported problems encountered in the new mill.

During the year the company’s line of bank credit was increased from $9,000,000 to $13,000,000
of which $6,000,000 was converted into a term loan, the details of which are explained in note 3 to
the financial statements.

During the year Clinton Mine capital expenditures for plant and equipment amounted to
$1,582,730, waste removal $4,358,912 and development $270,166.

At the Cassiar Mine, capital expenditures for plant and equipment renewal cost $947,568,
mill expansion $2,123,574, waste removal $3,464,235 and development $243,349.

At Whitehorse and North Vancouver $34,991 was realized from the sale of buildings and
equipment.

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