Document 0g66ML8exVEVY4GLvY6yvowqJ

PLAINTIFF'S EXHIBIT GF-I127 ?:EIVS LETTER -no SPECIAL REPORTSt wicer -fi 6fcH?2CDye!ON paoa`3ii 1/jZ T.SuRCN 5LV3. P.O. BOX 6 TlSvRON, . ^ 3*. *- R*NCiCOh* hf Ivptr i*:d*f*s:rr.U`n; R% j Sf'rc:.^ Ptttticulafb, AUH\ l.i^cd C^r.-u.vj\*s jr;U j., > * (( A>dnl(liAftoll<AkiuL*>^Klt *<k!i:i''i('p Il''11 " Thotr.a [,. .S'or/A, r Pvbliif'fr Phor.c :.n. .>*1rv' R* _ajp..`iJjth. / _ .. 4 ^-'*20 .. IHt'o.'a a churned n ;hts obi3<rteti pr**naiiy liom trvc comoafly OI so*:ces close to tn ccr-.pany an: nas not Set' other.-..m venfies 3-:r*oui* oe:*e<eS to t* a-P-e** :. ^;cu3cy o* tr-s ir.Jorrrat'y '% net j.mteeo. nor j it lepreser.tei that all rr.atenat or avaU&e cata ye tftc*cCec. fnitsd AstsstoS/,Go^dcration Limited a: American. - ?cror.to and par) -- 6,ooo.::cshs; Stock Ivchanges _ L,91*9,133 shs. (Shares are exempt from list o: id.-el-?, securities under Ur.ited States ----------- _ ____ "Interest.Equalisation lax'1.) United Asbestos is a co-venturer with American Smelting L he fining ir. producing one of , the world's r.a^or asbestos nines, located near Slack Lahe in southeastern Quebec Asarco1s .lly ...r.iU subsidiary. ^ahe Asaestos of vuene;. in vr.ic:. 3-0 million ha.- beer, investee. -- U:.ite:'s share of earr.it.- is 3 . : later nay rur. as high as cCv ir. this highly successful venture, which last year csrr.ee *. .= joint venturers $1,525,000 before amortisation, up fror. 3', 331,000 in 1961. -- Ir. 1963, United amed 31: a share, up frbr. 22? in 1961.-----Of 1965 earnings, $1,3C1,CC0 or 2t> cane from asbestos operations, ar.d 3211,000,' or 3d, fron affiliated concrete products conpar.ies. -- 15?: earr.ir.es are projected at 53d a share of which 16? is expected fror. asbestos and ?' fror. concrete products.-----Ever, after contractual- repayr.er.t of Lake Asbestos' preproduction ecrcer.ses fror. yoir.t venture nine orofit, United's cash flow in 196? fror. asbestos was 331.?.COO, up brer. 313...000 in 156u and 3395,200 in 1963. -- Ir. 1963. demand for asbestos caught up with supply, firming up depressed priced by 55 to IC'5. Future outlook for asbestos denari ar.d prices is regarded as excellent with a further 3? price increase generally expected by 7 actember or October. This contrasts with t:.e unfavorable conditions fror. the time of the nine's opening in rid-1953 to 196?, particularly in 1963 ar.d l?6l, -- The nine expects produce ar.d ship 120,000 tors of fiber this year, up fror. shipments of 106,351 tens in 19?5, gradually stepping production up to present r.ill capacity of 150.000 tons. -- This plus lever unit costs could perr.it sharp increases in United's share cf earrings ar.d cash flew fror. the rite starting this year, reaching startling proportions by 1571, when pre- production -:t =r.ses are expected to be repaid. -- Ir. tha* year, cash flew to United could reach veil over 33,00*,Old before taxes. -- trover, reserves of the present eper. pit are .ion tens. This does r.ot include ore extensions ir. the present pit, other ?re reserves or. the property outside the eper. pit. -- United's policy of diversi- :'iw?-J' v ': *.c substantial cvr.e.-v.ir - rurber ?f plan*-- active ir concrete orocucts `rtirit and. ir. her.treal, where constructic-r. outl:?h c-r.tir.ues good, la-.t year, these operatic:.s grossed 312,352,200, ar.d earned about 3-50,200, cf which United's a. .are was 32..... 270. a 1?-' return or. United's equity investment of 31,293,000. -- Ur.ited's financial pt.v.ticr. is strong ar.d highly liquid, with but nominal liabilities and no borrowings, tending lit testier.. r.or debt guarantees. -- It gees without saying that United will have ampli each flew in the years ahead to pursue a program of diversified growth ir. mineral, CUS ' oT.u other areas v:h_h may offer attractive opportunities. -- .-.'orld wide demand for asbesv. * continues to grow rapidly, particularly in grades produced by the company.' This asbestos operation is unique in its ability to increase production substantially with relatively small catital outlays. THE A 22152'"'S CPEP.ATIOX :~.or~ ~f Operations--United Asbestos was incorporated ir. the ?rovince of ec entered ir.tc its original agreement with Ar.ericar. Smelting L r.efinin- C:. covering examination of Ur.ited's 3lack Lake asbestos area of southeast Quebec, about 3233 < i< S4c *.. Zc e. :v: e*.. :oc *.. w itL: j. t : z*'.f MICH06197 - -V-- .-.coo *tor _f i_ob;.c, A.sarcc's subsidiary, compris-:s abcut 6C0 cores under and adjoining Hath dake, 'cl vhich United hea been granted outright ownership iron the Quebec government, and other mining'ccncassior.s and development licenses in or near Black lake. Sore $10,160,000 har beer, -spent by Asarco in bringing these deposits under production, and United has spent over $2,000,DOG. The capital debt advance, under tens oi the agreement, is being repaid without interest during the cperaticn. Virile earnings are basicly divided 5C~50 between lake A she sacs and United, the two ccrpar.ies are securing return oi their advances on a pro rata basis iron 75? of such earrings (_s defined by the agreement' 'until repayment is correlate. Thereafter, net proceeds iron ths asbestos operation are allocated net less than 53 aur.c not r.ore than 60? to United. As oi Tec. 31, 1965, the renair.ing balance owing lake Asbestos was $22,2Cu,CCO, ar.d cvir.g United, $1,379,CIO. Aitcr such payout, r.cv: projected in lo'd. United is to recurve ci.i cl the net proceeds il the net proceeds per ton oi ore nilled in any lisc&l year exceed $?.G0, arc a lesser proportion ii the net proceeds are less than 65.00, scaling devr. to $3.00, but in no case is United to receive less than 50? oi the proceeds. A prospectus assued by United Asbestos in 1953 shoved ore reserves oi -.2,525,60S tons containing 6.66? asbestos liber (25.000,000 tons have since been discovered by ciar.cr.d drilling lining ccmenced in mid-1955. Up to Tec. 31. 1565 tonnage Killed was Udol.llQ vtth a liber recovery oi cad,173 -tons, or 1.73?. -he lesser recovery is largely due to the tact that the upper portions cl the open pit vhich are lirst mined, contained a lover liber content than the overall grace cl the reserve. As oi Jar.. 1, 1966 ecor.cr.ic open pit reserves stood at sore 60 rillitr. tens containing 2-5 million tens asbestos liber. About .1. rillicn tons are high grade ar.d 16 r.illicr. tcr.s are lesser grade raterial. latter is being her.eficiated by concentration ar.d upgrading. The reserve estivates do not include extension oi ore in the pit limits ar.d other ere reserves or. property outside the open pit. Starti... in 1563, ere values to the rill vers increased by rejection by r.agr.atic separation cl low grade and worthless rock alter crashing. Luring 1961, sore 27? cl tonnage r.ir.ed and crashed vas rejected (up iron 20,7 in 1963) and ere values to the rill were in creased by 3ci. In 1965, 37? cl tons crashed were rejected increasing ore values to the r.ill by nearly 60?. It is anticipated that process oa' rock rejection could be lurcher increased, -emitting ninir.g ol lover content asbestos ore and lover costs, thereby extending the life cl the present know, reserves. Johr.s-Xar.ville and others have recently irplerer.ted similar procedures. , lake Asbestos apparently has a determined policy to mine all ore in the open pit benches Lake Asbestos 1561 15o3 1962 \ 1961 1960 1959 .or.s o: Ore Filled Pd'-I.O'O 2,169,000 1,691,000 1,665,000 1.752,000 1,650,000 1,297.000 Tons ol Fiber Produced ' p'V. 103,552 90,066 100,015 93,696 56,621 56,890 7ons of Fiber Shinned 106,551 115,325 e9,629 96,071 92,361 90,693 17,830 From Fine* :3,2-'.L202,680,75'- 2,336,311 3,267,5-1, 3,630,669' 2,931.727 (858,133) Mining - arted ir. the seco;r.d hall of 155S. During 1959, the mine produced 22.799 tcr.s - of fiber, s.._ aped 11,205 tons, and had a loss of $866,816. .......... As calc dated under joint venture a greener.-!:, before disbursement of profits ar.d re- payment oi pr:auction ej~er.se to Lake Asbestos ar.d United. Before addition ol expenditures ar.d deferred development deducted in arriving at r.et proceeds (under United:s r.uu method cl accounting), anc'anting to $1,275,593 in 1965 and $1,253,392 in 1961 (such figures unavailable, far prior years). It is believed that $1,526,000 lor 1565 and $3,931,000 for 1961, ar.d similarly higher amounts for prior years would more realistically portray ths profitability of the mine, before depreciation and amortization (which are taken by each cc-venturer ir. their cm accounts). MICH06198 3239 . ,:r san- - .-e:-a__ ..--woes or . r.cck bus beer, probably high -l--_ - - - V - sue rime. Ratio of '.or.; ninea so uaec-a ir. future years, and the sane my be true o: removal and - stripping of overburden. Latter ran 3,68?,000 tons ir. 196? vs. 1, Cl2, COO ir. I? 61 , This'year's mir.ir.g is expected tc approximate 2,700,000 tons with a waste to ora ratio c:' 2* to 1, about the sane as 196? but tell belt.: 1961. This excludes ore Iren the low grads stockpile already nlr.ee, which will be upgraded. Overburden removal of 2,100,000 tcr.s at $1.COO,COO cost i3 expected, ccvn sharply iron 196?. This year's total connate millsd should be higher, ar.d company should benefit by utilizing a higher proportion cf its milling capacity, which had beer, increased by ?0? frer. its femsr 100,000 ter. of tubers level two years ago. Production ar.d sales level this year nay reach or exceed 120,000 tens of fiber. Enlargement of nine productive capacity is continuing. During 1966, five ?C-tcr. trucks are to be purchased tc replace five 22-tcr. 'unit.-, adding further trucking capacity, increased 2?? ever the last tuc years. Conveyor driv~_ wall be strengthened tc har.ele auuutuor.al tonnages trended by the second urinary cr-sher (-.00 tcr.3 an hour) which be earn operative early this year. Additional fiber packing nachir.es are to be installed. Outlook Per Asbestos--Asbestos fibers are the reinforcing sinews for thousands of ceulir.gs, ir. clutch facings and brake linings, ir. adhesives ar.d paints. Asbestos insulates pipes and electric wires and banters sound in ductworks. Asbestos cement pipe is widely 'used in water systene throughout the world. Asb'-. cos * - ufei dr. prote-*'*'? <'. `r.,- ' r- - w'g beard covers, roof ar.d siding shingles, gaskets arc filters, as a filler and reenforcement ir. plastics. Research and technology are discovering new -uses and applic-tior.s far asbestos every year. From 1??0 to l?cl, -world production cf asbestos fiber has increased fa-on 1,115,111 tcr.s to 3,603,000 tcr.s., cf :hich Canadian production was 1,2?3,CCQ tons. Annual ccnpo'ur.d growth ir.crer.ant ove"r J`vis carded averaged 60. Over the S years preceding 196?, there were no price increases and excess supply sources tended to act as a price depressant, te er. uf IS61. constantly increasing canard caught up with supply and price increases cf ?:C tc 111 becir.e effective Jan. 1, l?c?. iiscour.t allowances iron posted prices were also reduced by 1?? .arly ir. 196?. The growing derand has been particularly strong in the asbestos cer.er.t graa.u, in which lake Asbestos is a major supplier. The 1966 outlook for nor.-resider.tial construction is for a 10? increase ir. the united States ar.d 1?? in Canada, and residential construction appears to be strengthening after weakening in 1961-?. This, along with the high level of free world industrial activity indicates another strong increase in fiber use ir. 1966. The United Asbestos orebody yields fibers which produce primarily the asbestos cer.er.t grades, which are ir. strongest derand with the largest growth potentials. This etcratier, enjoys perhaps a unique positicr. ir. that it car. expand production sub stantially with relatively small capital expenditures. Some of the older nines in the Canadian asbestos industry are faced with continuing operational problems ar.d rising costs, while others r_y be faced with enormous capital expenditures of preparing new ere far future i-->`et proceeds from the asbestos Joint venture operation in 196? were . up fren $2,bc0,000 in 1961, as calculated 'ar.der terns of the joint venture agree.-, add:!'.- capital expenditures ar.d deferred development deducted in arriving- -- cf 11,276,000 in 196? ar.d 11,253,000 ir. 1961. net profit of ' ration was $1,?2,000 vs. 3,931,000. (Ir. 196?, United ............. accounting present tion retroactively to nore neanir.gfully portray the true profitab ility of the nine than the method previously used), let profit to United Asbestos, taker, 50? of the latter fig-arcs was 12,263,000, up fror. 1,96?,OCO. After expenses, ar.d amortisation cf :921,000 vs $953,000, r.at -.cans was $1,303.-761, or 26f a ihare, against $899,000, or luf. Ihsas cSti fig --A r:a do r.ot include at $211,000, c. ?f United' share cf earnings o- share, vs. $195,000, or of concrete If. products aff es, :.o ir;,.cc:.-i taxes vers ir.aurred on the asbestos operations. Company assumes that .it can c_: ; a negation of taxable ir.ccr.e until total praproductior. expenses have been retired. median Income Tax Act provides ar. allowance for depreciation of capital assets `.s is a Jains rir.ir.g venture, each party provides for its cur. treatment of a recurr. of MICH06199 210 ''-`.look For 1966--Pe-n-.d for asbestos appears strong for Ipcb. Shipr.sr.t3 fror. the i-A . "_/:(7 Asbestos props;ties were up 30? -- the 1966 jirst quarter over the liks 1965 period-- u . *thic s no criterion for the full year, as pOjJ to 60? of the 7ear*s shi.ur.ant3 r.omlly fal fc Li the Iasi fpur months.. Demand is definitely stronger, and a $% price increase is generally, expected in* leptereherjor,October,.innsdistaly.affecting nabout 50? of the venture :s_ total shipments^ "If sanctions against.P-hodesiun'asbestos fibers are deposed'(Rhodesia*s_.annual'/_' -fiber production approximates.200.000-tonsXj^Canadiantproducersnight" be~expecte_4_0-.havft 'ft'.yi -further 10? increase 5~dernhd~t6: ghka-u^for-th3-biqcScSg~sud51y. Worldwide denand for .. "' asbestos is clinblngi>at_an annual average rate of 6to 8?, against 3j? to U? in the ...... United States. "' __ ~ .-.efleeting higher prices, higher production .and sales, and Icvsr'unim costs^`"United-^ share of-earn ings~frorflake Asbestos is expected to increase sharply in I?co over 2965, rising to about 2-.- a share fror. 26$. Total earnings for 1966 including construction products are projected an 52? vs. 31$. .. ..------ - ......... .......... Financei--As of Iso. 31, 1955, current assets were 22,235,C-CO, including .>55,000 of -- cash iters. Total liabilities, all current, vere 212,000. Total assets were spaced at "513,123,C" ar.d r.ec worth at 213,110,000. Last --vidends were in 1962 and 1961, when 10$ per share plus stock was paid in each year. New company by-laws have increased - -- authoriced capital to. 6,000,000 shares fror. 5.CX30 , CbJ. The comer, shares .nay r.ot be issued at a premium of less than 25 per share above ~\ their 21 par value, except when rights to purchase are granted the shareholders. rpncrsce Products A ffi1 ia t a s - - Throuah ins wholly-owr.ee subsidiary, Detir.u Holdings Lnd., .'r.iaed owns a ~Z% interest in General Concrete led. Or. Feb. 1, 1565, C-er.eral Concrete pur chased nhe eperaning asseps of other companies in nr.is operating greup in which 'Juiced also i.^2 g~~~ o~31 Triis is i*ss\i!L^in^ in z long-sought si.plificapior. of cperapior.s. Ir. Irt5, General Gcncrete's sales approximated .c.,c.j, ... ar.a its earnings oi.j.0,CuG. ~nc.tec al.;r. cun.- cut-' cf T.ur.sit Mixed Gor.erete . --1 Supply 1united, which last year earned c;?,...- -r. sales of 22,300,000. .'he above companies now have In plants and/ cr locations in southern Ontario and in Montreal affording a market coverage placing then in a scror.g positicr. to take advantage of the c;-.ti'.ued good outlook for the construction b---i.esi in the area. An increase in sales of cor _?:> itr. a curt.ner iuorove- r.ir.t nr. pro cits. M.-.r.a.? er.ar.n-- .nloiu, Fres. Montreal; P:ichard F. Cooley, 7. ?. 4 Dir., Chicago (Proprietor, Richard F. Dooley 4 Co.); V. H. Falter, C.J., Sec.. Other Directors are: J. Arthur Tupont, Partner of Craig Forget 4 Co. Ir.vest.ner.n Bankers, Montreal; Gaston Hie, I res., Transit Tankers 4 Terminals Ltd., and Joseph Zlie Ltd., Montreal; Bartlett Pinkhar., Investment Banker and associate of Allen 4 Company, New York; Ocnille Taylor, Partner, Taylor, .Miller, Magr.er, Sprowl 4 Hutchings, i Attorneys, Ch_cr.go. Newly elected as a Director is T. .-.cos Moore, Chm. and Pres, of Price MICH06200 brothers 4 Company, Limited, Montreal. Head C ..los: 1155 Dorchester 31vd. Vest, Montreal 2, P.C. :ar._da. ' U-S.A. Al:.'. ccj( zzz ci ?l: sjie Dy i: 'i:a ir.z.-.r. :.*e ::;nt o? report . , 'js .'o.*tn*s N*.-.s Letts/ zz district* 3i?5 co;.e* :ms report to me fmanci3` community it regjUr rates phis . crjige ?e: easy nailsi. ____________ ________ _-