CASTLEGAR NEWS, October 26, 1960 jeallat oi, ely ctany en Dear Shareholder: 2; The Board of Directors is pleased to report to you that your ur Company has now entered the coal industfy in’British Columbia in a very significant way acquisition of two-thirds interést in Kaiser Resources Ltd. (KRL). That it now complete, and, the purpose of this letter is to tell you what your Bodrd’Ha: "Ra: done and the reasons why we feel this acquisition is a very sound iny: ne BCRIC shareholders. © } On Septeniber 3rd, BCRIC, ‘KRL and Edgar Kaiser, Jr. signed an agreement. Ww - under which BCRIC agreed to maki'a'tender offer of $55 per share for al common: shares of KRL, conditional t léast 51 per cent of the KRL Shares (ets "t- 0 i being tendered. By the close of the tender offer ‘on October 7th, 12,065, 490 cna Popressading 66 per cent of the sharés issued and outstanding, had been tendered. The total i payment amounts to $665 ‘million. Japanese companies, which are the major customers of KRL and‘have.been - - significant shareholders and Fotitg sh in the company’s coal developments fora long period, retain 33 per cent o the s shares of KRL. and we welcome them in our coal mining enterprise. creel There have been a number of questions raised about’ ‘this acquisition and we believe this communication should answer those questions, We feel it is important to emphasize that BCRIC is a company owned by its shareholders, and the directors of BCRIC were elected by the shareholders and are primarily responsible to those,shareholders. BCRIC today is not an.extension of Provincial Government Policy and no amount of comment to the contrary will change that. The directors of: BCRIC make their decisions based on sound business judgement and not politica] ona The primary objective of the company is to invest in natural resource industries in Western Canada. By purchasing: control,of KRL, BCRIC at one stroke assures its shareholders of a dominant position in thie.development of the coal resources of Western Canada, and at theisdrme'tirive e brings this important company under - Canadian control. é The isition have acquired:" 1. Proven deposits of 1.3 billion long tons of metallurgical coal; 2. Projected and partially explored reserves of’an additional, 13 billion long tons; 3. Canada’s largest and most sophisticated coal mining operation—with ~the.equipment, the. skilled warkeys and,the towns.and, transportation | he . already in place; 4. Under contract, to work for us, one of the best coal marketing teams i in the world; 5. The Roberts Bank superport, which the Federal and Provincial Governments have agreed to expand. In the future the opportunity also exists to consider handling other commodities from that facility as well as coal; 6. Customers for our coal already under contract; 7. Further coal sales prospects already in the works, from KRL’s new Greenhills Mine and new thermal coal sales such as that recently. announced to Denmark for electric power generafion; 8. A coal company that will earn arvestimated $54 million in 1981, rising to projected earnings of $122 million in 1985. : : that the shareholders of BCRIC now control or The question has been raised as to why BCRIC did not exercise its option, acquired last spring from Kaiser Steel of Oakland; California, to buy 25 per cent of, KRUL's shares at $44 per share. The Simple answer is that we wanted control of KRL and we would not have achieved control at that price. Control was necessary to be able to organize a financial restructuring of the company to permit BCRIC direct .access to its share of the cash flow of KRL rather than just a return of normal ‘dividend income. Direct access to the cash flow could provide alternative funding for future BCRIC investments. _ The option to purchase 25 per cent of KRL came after a series of discussions and consideration by us of all the alternatives, including a possible open market bid for KRL. Management of KRL made it plain to us that $44 per share was too low a price for absolute control and that they would.fight vigorously and with considerable resources any attempt at majority control at $44. Had we proceeded regardless, other bids would certainly have been invited and the price would have risen. If we had succeeded then at acquiring control at the price we have now paid, we would not have had the support of very key KRL management who now are part of our mining operations nor the marketing expertise of Edgar Kaiser, Jr. and his associates. As well, certain other additional possibilities could have arisen: 1. We could have angered and alienated the Japanese shareholders, who are also KRL’s major customers; 2. In a potentially hostile environment, our chances of reorganizing the company financially—to BCRIC! 's benefit as purchaser—may have been impossible; 3. And finally, we might not have succeeded in ‘acquiring control of KRL, and would have been left. with a minority position ina company where we were not wanted as a shareholder. : ‘When we decided that a control bid was out of the question at that time, we secured the option from Kaiser Steel to keep a line of communication open with KRL. The purpose was to see if some alternative form of investment with the company was possible and principally centered on an examination of the Greenhills project. Nothing came of it and our discussions and contacts with KRL in relation to that option ended in mid-May. We did not expect any further contacts with the company. Circumstances changed that. Guisition is = But that change in circumstances would not have taken place, i in our view, if we ae “had-exercised our option and added the KRL shares to an investment portfolio. Had done that, we wolild ‘have relieved Kaiser Steel—which had a very great need for cash—of its problem at that time, without BCRIC acquiring majority ownership of Kl Consequently there would have been no reason for KRL management to . . ‘consider a bid for control. : We began discussions again with KRL on August 21st, 1980, and subsequently igteement was worked out and.our bid announced. The $55 share price was not arrived at arbitrarily. We were aware at the time that another potential bidder was'negotiating with KRL. That company has been correctly identified by others as Alberta Energy Company Ltd. We knew that we had - to.make a fair and reasonable offer or invite competitive bids that could well have "pushed the price higher: ae tne There has been some. suggestion thatiwe a ed’ ‘atithat offering price without ~ an evaluation. That is not correct. Through’ o pion périod of last spring and prior, . we.were able to work for two months studyii alu Of the KRL assets and we . did.so with our own expert staff and the assistance’ of outside corisultants skilled in the.coal industry. * Pemberton Securities. Limited, who acted‘fo négotiations, became aware then ofthe substane been carried out on KRL. We had basically thi February, one in March-April and thé:third last used an outside consulting firm of ¢ ological Associates of Toronto and also Wrig inginee! technical aspects of our analysis. For;thé seco! internal information when we were 'considering ‘ Greenhills Project and in the third study,’ generated financial projections. In the opinion of. outside evaluation was not only unnecessary, uat-co! the assessment already generated. We knew what KRL was worth, and we knew that $55 a share was within our range of value. As part of our agreement, Mr. Kaiser i is buying back KRLs United States oil and _ gas assets for $23 million. The non-cash assets were appraised by Ryder Scott ‘Company of Houston, Texas, an independent petroleum engineering company which is expert in its field, and on the basis of that appraisal the value of those assets was roughly $10 million less than the amount-Mr. Kaiser will be paying for them. We have also agreed to sell back to Mr. Kaiser’s new company an aircraft, office leases and other KRL property, for which we will have no use, for $15 million’in cash. _._). The agreement also provides for a.contract-with Mr.'Kaiser’s company:to actas:r our ‘marketing agent for a 34/2 per ‘cént commission on coal sales: The coinniission;, ~ reflecting an exclusive contract, is fair and reasonable. Mr. Kaiser's company will pay all costs associated with marketing out of that 34 per cent. As proposed to a recent joint hearing by the B.C. Superintendent of Brokers and the Ontario Securities Commission, a further independent appraisal will be made of the sales assets and the U.S. oil and gas assets, and the marketing arrange- ment ig now subject to a 90-day cancellation clause at BCRIC’s option. Those changes were agreed upon to make it clear beyond any doubt that Mr. Kaiser was not receiv- ing any special benefit over any other tendering a shareholder of KRL. Those changes were made to remove the necessity of a public hearing at which highly confidential marketing strategies and arrangements would have been made public and that would have harmed BCRIC's competitive position in relation to other coal companies. The nature of BCRIC as a resource-based company, together with the growing importance of B.C. coal in world markets, make it important for us to be in the coal business. By acquiring majority ownership and control of KRL, we have gained a dominant position in coal and have done so by the quickest and most attractive means available to us: Considering the quantity of coal acquired in the perspective of projected world coal requirements that suggest demand will triple in the next twenty years, it is evident that this is an asset of very significant value. Included in the assets we have acquired is participation in oil and gas properties in the Brae Field in the North Sea arid off Sable Island in Canada’s Atlantic region. AS a result of recent negotiations, KRL has agreed in principle to dispose of part of its holdings iri the Brae Field. That move will be positive. KRL will have a .2.3 per cent interest in the Brae Field with no requirement to make additional investment. Before the proposed transaction, KRL held a 7.7 per cent interest but had - an obligation to put up as much as $300 million towards development. We want to assure our shareholders that only after a great deal of analysis and . deliberation did the Board decide to make the offer for KRL at $55 per share. We are of the strong belief and knowledge that this is a good, sound and beneficial transaction for BCRIC and its shareholders. This acquisition enhances significantly the long-term potential of BCRIC. 1 a iu are our August evaluation work that had inéers,. David’S. Robertson & Ltd. of’ Vancouver for certain rton Securities, a further not have added anything to . Acquiring majority control of KRL ‘required $315 million ‘from BCRIC’s cash reserves, along with $350 million in borrowings. We still retain some $50 million in cash reserves, as well as a financial structure strong enough to permit other major acquisitions as opportunities arise. ‘ Sincerely, = On behalf of the Board of Directors \ David L. Helliwell ae British Columbia Resources Investment Corporation Shareholder information Service WRITE: - BCRIC 2600 - 1177 West Hastings Street “ . (112) 800-663-9123 Vancouver, B.C. V6E 3Y3 PHONE: Vancouver area, 669-4443 Outside Vancouver, toll free ov foot main chimney. Holland, Glad that feb is done! - CELGAR PULP DIVISION'S project engineer, . Dou: Henning (left) discusses with Ken Holland (centre) an Pete Youngblut progress on the new liner in the’ 240- who came to the job from and. r are job superi | for the , Custodis Chimney’ Co. of Toronto. The ' stack went into operation this weekend for the first time since the liner collapsed in May. Sevsrariehi easter 26 tol eohrrotey Tara Hn Don’ t expect any ‘By KIiTy McKINSEY OTTAWA (CP) — Busi- nessmen, bankers and grape growers have all asked Fi- nance Minister Allan Mac- Eachen for breaks in ‘Tues- day's budget, but tle dour Nova Scotian has promised only higher taxes and higher energy prices. : This summer, as Mac-- Eachen played political strip- tease with the date for his first major economic state- ment, lobby groups tried to convince him to make ari ex- ception. for them in what threatens to be a belt-tight- ening budget. Businessmen — especi- ally bankers who fear a sur- tax on the high profits banks made when. interest, rates soared to record levels this year — have tried to head off expected tax increases. Small businesses agree the government doesn’t have Are By Joe Ma The Canadian Press | To be a Liberal in Western Canada these days takes courage. . The Liberals do not have a seat, federal or provincial, in the three westermost pro- vinces. The only elected Liberals west of Ontario are in Manitoba — two members of Parliament and one mem- ber of the provincial legisla- ture. The Liberal fortunes are such that the Manitoba Li- - berals have been without a leader for two years. The Manitoba party, ‘will hold its annual convention at the end of this month but little interest has been shown in the party leadership. It wasn’t until Tuesday that a candidate for. the job, Bill Jackson, former head of the Manitoba Government Employees Association, step- ped forward. . and help pull the any money to spare, but they want a break in the form of low-interest loans underwrit- ten by the government. The construction indus- try says tax should be re- moved from building. mat- erials to perk up the ailing housing industry. Grape growers and brewers want excise taxes on wine and beer. to go down: — and taxes on liquor to go up. Provincial finance min, isters, at a meeting last month, had.contradictory re- quests: They wanted the government to create jobs CASTLEGAR NEWS, October 26, 1960 “AS Celgar stack puffing away © I you ‘ve noticed puffs of smoke coming from the tallest chimney at Celgar Pulp, don't get the idea they're hosting a corjélave of cardfhals set on + electing a new pope. They're not. What's happening, is they've cranked up the 250-foot chimney whose . brick liner collapsed for unexplainable reasons last May 4. They've tied into the No, } boiler and plan to hook up the exhaust fom. the scrubber on Tuésday. Don't expect the phew to leave the ir, Division officials say the repaired stack. never was in'the business of removing the rotten-cabbage odor , associated with pulp mills. Purpose of the chimney is to in- crease the efficiency of the main boiler and the recovery system whereby most chemicals used in converting trees to paper pulp are recovered and pumped back through the system, A Toronto-based contractor — Custodis Chimney Co, — ‘got the * contract to rebuild the $900,000 liner after the first 40 feet, collapsed less than 24 hour’ before’ a’ crew of six was scheduled to go inside May 6 and repair eracks already spotted by Celgar en- gineers. there it's brick all the way up. To be exact, 110,000 bricks with a few left over that would make dandy bookshelf fee supports, ‘ - Officials say the chimney may cut’ down on the. amount of fog seen at times in the area — since it's 150 feet taller than the: temporary stack used since the May incident — but it won't clear up the odor. They note the plant, gives off less sodium hydroxide and - sulphide (stinky) gas than It took more than. two months to g° many ‘Other, x» bigger, pulp’ mills. But cléhr out the 800 tons of debris and q they're-ai liner bricks by hand — from the top down, all the way to the bottom. Now,’ stainless stee) has ‘been added to the first fom 40 feet ayerten brick ; in the new liner. From e-acti ely working on ridding the “uals of ge many people can't even Manager wilt Sweeney is 2 good man for his job. He says he can’t even detect when a dog has been skunked. CP crews book off sick REVELSTOKE NOP) — CP Rail train crews in the Rockies are booking off-work to attend at, ‘Canada Labor iz, bringing train traffic to a'virtual standstill near this -east-central B.C. community, railway lawyer Norman Mullins told the hear- ing Friday. : A passenger train from Eastern Canada had to be stopped-at Field Friday morning because all the crews » had booked ‘off work, Mullins told the + hearing. “, However, lawyer Don Rosen- bloom, representing the Brotherhood of Locomotive Engineers and United Transportation Union, said there were several crews available to operate --trains, The board is hearing complaints that the unions began a work slowdown March 12 and started taking sdveniaee of a contract clause allowing time off for a hot meal during working hours. CP Rail says shipments of bulk commodities through the mountains ‘ have been cut almost in half. The railway wants the lunch breaks de- clared an illegal strike, ‘claiming the . campaign is calculated to force the company to renogotiate the workers’ wages. Their current contract expires in December, 1981. . CITIES DELAYS Bill Tripp, former superintendent of CP Rail’s Revelstoke division, said the hot meal breaks delay trains up to 90 minutes. The unions didn’t dispute these figures. However, Tripp said he has ‘not noticed trains travelling any slower since March 12 when‘ engineers, ‘who * regularly exceeded posted cal “im. its, began obeying them religiously, on the e f the Canadian Railway peel Co which i In refuting charges of a’: Rosenbloom said the” posted -speed* limits in eastern B.C. are lower than - - many other parts of ‘the country. a de- railment ‘at Glacier -Hill, just cant of ‘ Revelstoke on Nov. 26, 1977. . “With the TOR we are more aware The Revelstoke ared : As;the. most‘j Of;.speeding infractions and verbal atics line in Canada sad contains, the poe Ott metres in length, are Canada. a Both the’ railway and thie! untién agreed the Revelstoké-Glacier run w: . Aigcipline: has increased,” Tripp said. , Don, Knuff, a locomotive engineer with 36° years experience, complained of a multitude of rules from CP Rail and one of the heaviest’ ‘annostsiaowtalls incl) ‘the J Canadian transport connalaaton the country. The unions wanted to know whe- ther more engineers have been dis- ciplined for speeding since the railway installed black boxes or train oper- ations recorders (TOR) in locomotives in 1977. MONITORSPEED _ * The boxes, which monitor train * speed -and--other- safety-related : data, dusteleg os which the workers must respect. He said if an accident occurs, a worker must prove he didn't, violate those rules. Knuff said morale is low on the railway, but said local union officials haven't, called for a slowdown. He said they're trying to protect their men by . having them adhere to speed and aries regulations. Miter bbs breaks in budget tribute. On the contrary, new" taxes may hit everyone from the working poor to oil companies. John Crosbie, former Progressive Conservative fi- nance minister, ‘predicts the .budget will resemble his own hardtimes budget, the one that led to the defeat of the minority Conservative gov- ernment last December. In. fact, the “Liberals’ re-introduced most of Cros- bie’s budget provisions — the same ones they voted against four months earlier — in a so-called .mini-budget in political consequences,” Cros- bie says. “He's ‘going to have to bring in tough solutions. He's suffering from eight years of ever-increasing deficits and tax cuts before every el- ection.” Hemmed in by soaring + costs of imported oil, a record deficit and a campaign pledge to reduce government spend- ing, MacEachen is hungrily looking for new sources of revenue. ° ENDING INDEXING? The most controversial measure under consideration of i of his convoluted, evasive * answers in the Commons — has consistently refused tor rule out de-indexing. Inflation-indexing is an expensive scheme that has cost the government $8 bil- lion since it was introduced in But everyone — labor and business groups, econ- omists and editorial’ writers - — has said elimination of in- dexation would unfairly allow the government to profit from would see its tax bill increase by 31.3 per cent next year if indexation were removed, while the tax bill for a family earning $100,000 would in- crease by only three per cent. Because the proposal has been so widely condemned, some observers are begin- ning to think MacBachen set it up as a straw man so he can appear magnanimous in re- jecting it when he brings down his first budget. The money-hungry fed- eral g sees the an- groups see indexation as a valuable curb on government out of recession without in- creasing the $14.2-billion budget deficit. FEW GOODIES : But the minister, dubbed “The Celtic Oracle” because of his silence on matters economic, has made it clear he has few goodies. to dis- ’ Last month, Ted a d his : + Eachen’s) ‘April: C ly missing was an increase 'in the excise tax on gasoline which was widely blamed for the Con- servative election defeat. “Since they (Liberals) have a majority, his (Mac- thrust will be largely'the same as ours, but they won't have to fear the came ‘in 1979 and- 1980, leader of the Saskatchewan Liberals, effective Nov. 23. There are no declared leader- ship candidates. In Alberta and British Columbia, two. men, with losers’ records remain as party | leaders, largely be- cause of. the ‘absence of serious challengers who rep- resent viable alternatives. Nick Taylor holds on as Alberta leader although his party hasn't had legislature representation since 1969. Federally, the Alberta Li- berals have been wiped out by the Progressive Conser- vatives in every election since 1972, DOWNHILL SKID The British Columbia Liberals have-also been on a downhill skid. Annihilation of the provincial and federal wings, as far as elected “representation is concerned, The way Tom Robson sees’ it, the Liberals have . been the casualty of polari- ’ zation between the left and the right — in the case of Manitoba, betweeri the New Democratic Party and the Conservatives, Robson, a former On- tario civil servant, was hired by the Manitoba party early this year as its executive director. He sayd Gov.-Gen. Ed Schreyer was a popular fi- gure when he was premier of Manitoba and attracted sup- port, to the NDP. But things should start to change now. “Our own appraisal of voting patterns has shown us that the public is growing dissatisfied with the Con- servatives and the NDP," Robson said in an ihterview. “The general public in this province is very much. annual increases in tax de- ductions and tax tables that ensure the government doesn’t benefit if a taxpayer's wages rise only enough to keep pace with inflation, MacEachen — whom Crosbie calls the master of, the soft-shoe dance because rits dead i interested in looking, for an alternative and I think it’s up to the Liberal party to pre- sent this alternative.” GOOD OLD DAYS Things haven't been the same for the Saskatchewan Liberals since Ross That- cher died a few months after his Liberal government was defeated by Allan Blakeney and the New Democrats in 1971. q Thatcher's successor as provincial Liberal leader was Dave Steuart, who quit after he failed in his bid to become premier in 1975. Malone de- feated Tony Merchant, bro- ther-in-law of former federal transport minister Otto Lang, in the N ls 1976, lea- Opposition Leader Joe Clark has called the proposal a “back-door secret tax on the poor” because it would hit low-ii -income taxpayers hardest. WIDE DIFFERENCE A family - of four with taxable income. of $10,000 swer to many of its problems in the vast oil and gas wealth of the West. MacEachen and Energy Minister Mare Lalonde have been eyeing provincial ‘en-" ergy revenues enviously, aware that a grab will provoke an explosive con- . . frontation. Lalonde’s new- energy package, to be unveiled along with the budget, will reveal whether the government thinks $10 billion over the next four years —~ from an export tax on natural gas — is worth the risk of breaking up the country. ~ Alberta Premier Peter Lougheed has warned he would consider such a tax a’ “declaration of war” by the federal government. OUT OF QUESTION - An excise tax on gas- oline is out of the question because the Liberals brought down the Conservative gov- ernment for trying it. But MacEachen is con- sidering other measures .— such as a tax at the refinery level — that would increase the price of gasoline at the pumps more than Crosbie’s budget would haye.. A battle is reported in cabinet ‘between those who see budget should in- clude dramatic measures to. give Canadians 50-per-cent ownership of the Canadian oil and gas industry by 1990, and others, including MacEachen, who favor a slower approach to .achieving this Liberal campaign promise. Business lobby groups jhave urged the government to quickly increase the do- mestic price of oil to world levels, a move that would increase government reven- ues. It would also cut out the major cost of compensating oil companies in eastern Can- ada for the difference be- tween the domestic-price and the world price they pay for imported oil. Business groups have said this ‘makes more sense than increasing personal and _corporate taxes now, a mea- sure they say would only make the recession worse. Western Canada? opened in 1975, but no Liberal MLAs remained after the 1978 election was over. When Malone announced he said he win Alberta you have to have an outside income.” Taylor's last attempt for a seat, in the Barrhead tech in Ne b aaa t have the zeal needed to continue on the job. He is leaving a party with only two full-time employees and a deficit of more than $600,000. The eyes’ fell on Mer- chant — but all he would say is that the leadership’ con- vention, expected in late Feb- ruary, is too far away for bim to make a decision, ETERNAL OPTIMIST . * Alberta's Taylor, who has failed in three attempts to get himself elected since he became leader in 1975, dership convention. - Party sources say the split between Malone and Merchant has proved fatal to the Liberals. There were 11 Liberal MLAs when the fall session of the legislature to sound optimis- tic. But Taylor, a Calgary oil millionaire, admits that his money has allowed him to remain afloat on the political scene, “To bea Libera! leader 1979, was his best showing to date. He ran a close second to Conservative winner Ken Kowalski in a riding that has. been a traditional Conserva- tive stronghold. That gave Taylor hope. ° “I will stay on as leader * as long as our party is making progress,” says Tay- lor. He pointed out that when he became leader five years ago, the Liberals held only three per cent of the popular vote. A public-opinion survey conducted by his party shows that if an election were:called today, the Liberals would likely get 20 per cent of the popular vote. In British Columbia, both the federal and provincial wings of the party started - the decade of the 1970s in “farily good shape, but wound ” up having no seats in either the federal house. Jev Tothill took over a provincial party leader in 1978. Tothill, who had been defeated in five previous attempts to gain a seat, lost or _ Provincial again in the 1979 election g wher the Liberals were wiped out, getting only one per cent of the popular vote. The federal Liberals have devised means to keep in touch with Western Canada, including hiring party work- ers to specialize in western issues and “twinning” sitting members of Parliament with western ridings. Prime Minister Trudeau has also appointed Liberal " Axworthy, one of the two Manitoba Liberals elected in February, as cabinet minis- ters. However, some western provincial. Liberals do not consider it to their advantage to be closely identified with the federal Liberals, Taylor, for example, be- lieves that independence * from the federal Liberals will eventually pay off for him and his party, which broke with the federal wing in 1977. He says the provincial Libera! wings, with the ex- ception of those in Quebec, Ontario and Alberta, are “nothing more than branches of the federal Liberal party.” The problem of national senators from the three westernmost, provinces to the cabinet. Ray Perrault of British Columbia, Bud Olson of Alberta and Hazen Argue of Saskatchewan join Lloyd is by no means restricted to the Li- berals. The federal Conser- vatives have only one of. Quebec's 75 MPs, while the NDP has no MPs east of Oshawa, Ont.