Cassiar Asbestos Corporation Limited

Report of the Directors

To the Shareholders,
CASSIAR ASBESTOS CORPORATION LIMITED:

Your directors submit herewith the fifteenth annual report on the affairs of your company
including the consolidated balance sheet as at December 31, 1966, the 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

Pursuant to the authority granted by the shareholders at the special general meeting held in
Toronto, on October 26, 1966, Supplementary Letters Patent were obtained to increase the authorized
capital of the company from 5,000,000 shares without nominal or par value to 5,500,000 shares without
nominal or par value.

As set out in letters to the shareholders dated October 1, 1966, and January 30, 1967, and
subsequent to the year end, the company offered rights to its shareholders to subscribe for 477,500
additional shares of the company at a price of $12.00 per share, on the basis of one additional share for
each ten shares held. The rights were exercisable during the month of February, 1967 and pursuant
thereto subscriptions were received for 473,818 shares at the offering price of $12.00 per share. The
remainder of the offering not taken up in the amount of 3,682 shares were subsequently subscribed for
by Bell Asbestos Mines Ltd. at the current market price of $16.00 per share. Accordingly the entire
offering of 477,500 shares has been subscribed to provide the company with $5,744,728. After
completion of the financing there are outstanding 5,252,500 shares of capital stock.

It is now estimated that the final cost of the Clinton Mine plant and equipment and development
will approximate $24,000,000. The increase of $3,000,000 over previous estimates reflects the increased
cost of labour, materials and overhead charges. The source of the funds for the Clinton Mine project
is summarized below —

Capital stock issue in 1965 — 775,000 shares @ GND [OSE SMW . oo so esac ccna asee $ 9,300,000
Capital stock issue pursuant to rights offering February, 1967 — 477,500 shares ...... 5,744,728
Banksloankannan: cdiniraies ye getter ere rte eminent aways re eae ar egy 4,000,000

Funds generated or to be generated from operations in 1966 and 1967 in excess of
Gihvidlenal aimal Wer mI WIINOTNGHNS a oc eo ceo asco ote cessor anouencoaaaes 4,500,000
$23,544,728

Plans have been made to defer construction of some ancillary facilities until after the plant
reaches production. It is expected that the project will be completed with the financing now arranged.

The profit from operations was $9,841,812 before providing for depreciation, stripping, and
other write-offs aggregating $3,056,046 and the current years income taxes of $765,000. Of the
remaining $6,020,766 there was transferred to accumulated tax reductions applicable to future years
$1,875,000, leaving a net profit of $4,145,766 compared to $3,688,472 earned in the previous year.

Capital expenditures during the year at the Clinton Mine amounted to $10,209,859. At the
Cassiar Mine, equipment renewal and additional mill equipment totalled $1,078,439 and the cost of
waste removal was $2,508,192.

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