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month of the mines production,
costing approximately $4 million.

In order to position Similco as a
long-term, competitive copper
producer, facilities at the mine are
being upgraded. Mine development
to accommodate the five-year mine
plan has also been initiated.
Production in the mill has been
improved and, at year-end, it was
operating at a level of 25,000 tons
per day — up 25 percent from the
average rate before our purchase.
Additional haulage and loading
equipment has been purchased to
increase mine production to match
the higher mill throughput.

Cassiar Mine Achieves Record
Production

Record production of 106,085
tonnes of fibre was obtained from
the Cassiar open pit mining
operation. Sales have increased by
about 10 percent over 1987 levels,
while operating costs for the year
were 11.5 percent lower than
plan. Cash flow from the mine
operation was 43% higher than in
1987.

An accelerated mining plan was
implemented to finalize ore
extraction from the open pit prior
to spring break-up. The additional
ore removed is being stockpiled
and will supply the mill feed until
late 1990, by which time the

McDame mine will be operating.
Because waste and ore mining will
be completed in early 1989,
mining costs will be reduced for
the balance of the year.

McDame Development
Underway

Development of the McDame
deposit began in May and is
proceeding on schedule and
slightly above budget. Additional
ground support being installed in
the main access headings is
projected to add approximately
$5.0 million to total development
costs. We expect this amount will
be offset by planned cost
reductions in other areas. During
1988, the Company spent $8.6
million on the project.
Arrangements for financing the
mine development have been
completed with the B.C.
Government and the bank.

Underground development is
expected to be finished in March,
1990, well ahead of the originally
projected completion date of
October, 1990. The mine should
achieve its full production rate of
5,500 tonnes per day by the end of
that year, making it one of the
largest underground mining
operations in the province.

Sixteen million tonnes of ore,
grading 5.6 percent recoverable
fibre, will be mined at McDame,
which will support the operation
to at least the year 2000.

Further exploration is to be carried
out to define additional reserves
indicated by drilling in 1984.

Wet Milling Plant in Production
In early August, the wet milling
pilot plant went into operation.
Costs for this test facility are being
shared with the Federal
Government, under an agreement
reached in 1987. A marketable
product is being produced from the
plant at a rate of 1,000 tonnes per
year. Additional equipment to be
installed in early 1989 will
increase the annual plant capacity
to 4,000 tonnes.

Rea Gold Investment

In January, 1989, the Company
entered into an agreement, subject
to regulatory approval, to invest in
Rea Gold Corporation through the
sale of our gold assets in Bissett,
Manitoba. Cassiar will receive 2.3
million common shares of Rea
Gold. At the time of the
transaction, the value received for
the sale of the Manitoba assets was
approximately $8.0 million.
Cassiar has arranged a loan of $4.0
million to Rea Gold for
development purposes, secured by
a convertible debenture bearing
interest at 10 percent.

If this loan is made and converted,
Cassiar will own approximately 22