1987 PROSPECTS

As of the beginning of 1987, the Cassiar open pit
had mineable reserves of 4.6 million tonnes. At the
rate of production that prevailed in 1985 and 1986,
these reserves will support the operation to mid
1991. Mining costs will continue at a relatively
low level, as compared to historical costs, due to
the reduced quantities of waste that must be re-
moved. The waste rock that has to be removed
during the next four years is 3.5 million bank cubic
metres in total. This compares with an average
waste removal volume of 3.1 million bank cubic
metres per year over the preceding 10 years. The
lower waste removal requirement for the balance of
mine life will have a positive effect on cash flow.

Collective bargaining agreements with the two
major unions representing employees at the mine
are in effect until the end of June 1988.

Management's focus in 1987 will be to evaluate
and advance the McDame project. The preliminary
feasibility study on development of the McDame
deposit completed in early 1987 indicates a full
feasibility study is warranted. The first portion of
this study has been commissioned and it is
anticipated that the feasibility study will be
completed by late 1987.

On the basis of the 1986 program, the geological
proven and probable McDame underground reserves
above the 1200 metre level are 32.45 million
tonnes grading 5.57%. Additional diamond drilling
from a decline below the 1415 metre level is
planned for 1987 in order to increase the proven
portion of the reserves. It is anticipated that $2.2
million will be raised from the exercising of Series
Il Warrants and the issue of ‘‘flow-through’’ shares
to cover the expense of this work.

Series II Warrants that entitle holders to subscribe
to 1,646,471 ‘‘flow-through”’ shares were issued on
April 30, 1986. The warrant holder, upon payment
of $1.50 on or before April 30, 1987, will receive a
‘flow-through’? Common Share. The ‘‘flow-
through”’ share entitles the owner to certain
Canadian Income Tax deductions during 1987.

All Series II Warrants expire on April 30, 1987.

Although sales revenues have decreased, operating
cost reductions have allowed the Company to
maintain a healthy cash flow. The Company has
applied more than $80 million over the past five
years to debt and debt servicing costs reducing the
outstanding balance from $81.7 million in 1981 to
$34.6 million at the present time. The following
graph represents the year end outstanding debt
position net of short-term deposits.

CASSIAR MINING CORPORATION

$ millions

$100 millions

DEBT NET OF SHORT-TERM DEPOSITS

1982 1983 1984 1985

The funds available for debt service and debt
reduction on an annual basis are shown on the
graph below.

1986

FUNDS AVAILABLE FOR DEBT SERVICING

40

interest [So

30

20

1982

1983

1984 1985 1986

We expect the positive cash flow to continue thus
enhancing the Company’s position for the future
funding of McDame.

Any future equity financing that may be required
for the development of McDame will also benefit
from proposed changes to the outstanding Class B
Preferred Shares of the Company. The proposed
changes in the attributes of the Class B Preferred
Shares, which are subject to the approval of share-
holders, will suspend for eleven years the retraction
rights and the potential $7 million drain on cash
flow if the right of retraction is exercised by pre-
ferred shareholders. It is also proposed that the
Class B Preferred Shares be convertible into Com-