##### 



CONFORMED

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

Commission file number 1-228

(ZEMEX LOGO)

ZEMEX CORPORATION(Exact name of registrant as specified in its charter)

|                                                                     |  |                                            
|-------------------------------------------------------------------- |  | -------------------------------------------
|Canada(State or other jurisdiction of
incorporation or organization) |  | None(I.R.S. employer
identification number)

95 Wellington Street West, Suite 2000
Toronto, Ontario, Canada M5J 2N7
(416) 365-8080(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)

Securities registered pursuant to Section 12(b) of the Act

|                                                   |  |                           
|-------------------------------------------------- |  | --------------------------
|Toronto Stock Exchange and New York Stock Exchange |  | Common Stock, no par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|    |  |     |  |    |  |      
|--- |  | --- |  | -- |  | -----
|YES |  | [X] |  | NO |  | [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. þ

The aggregate market value of the registrants voting stock (common shares, no
par value) held by non-affiliates as of March 25, 2003 (based on the closing
sale price of $8.69 on the New York Stock Exchange) was $37,701,070.

As of March 25, 2003, 7,902,105 shares of the registrants common shares, no
par value, were outstanding.





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##### 



FORM 10-K
ANNUAL REPORT

TABLE OF CONTENTS
AND
CROSS-REFERENCE SHEET

PART I

|         |  |                                                                                                |  |  |          |  |      |  | 
|-------- |  | ---------------------------------------------------------------------------------------------- |  |  | -------- |  | ---- |  | 
|         |  |                                                                                                |  |  |          |  | Page
|         |  |                                                                                                |  |  |          |  |     
|Item 1.  |  | Business                                                                                       |  |  | 1        | 
|Item 2.  |  | Properties                                                                                     |  |  | 7        | 
|Item 3.  |  | Legal Proceedings                                                                              |  |  | 7        | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  |  | 7        | 
|         |  |                                                                                                |  |  | PART II  |  |      |  | 
|Item 5.  |  | Market for the Registrants Common Equity and Related Stockholder Matters                      |  |  | 8        | 
|Item 6.  |  | Selected Financial Data                                                                        |  |  | 9        | 
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations          |  |  | 10       | 
|Item 7A. |  | Market Risk                                                                                    |  |  | 18       | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                    |  |  | 18       | 
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure           |  |  | 18       | 
|         |  |                                                                                                |  |  | PART III |  |      |  | 
|Item 10. |  | Directors and Executive Officers of the Registrant                                             |  |  | 19       | 
|Item 11. |  | Executive Compensation                                                                         |  |  | 21       | 
|Item 12. |  | Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters |  |  | 27       | 
|Item 13. |  | Certain Relationships and Related Transactions                                                 |  |  | 30       | 
|Item 14. |  | Controls and Procedures                                                                        |  |  | 30       | 
|         |  |                                                                                                |  |  | PART IV  |  |      |  | 
|Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |  |  | 30       | 



---

|(A) |  | Included in Part I, Item 1, Page 6, pursuant to Instruction 3 of Item
401(b) of Regulation S-K.
|--- |  | -----------------------------------------------------------------------------------------------





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PART I



|ITEM 1. |  | BUSINESS
|------- |  | --------

General

Zemex Corporation (the Corporation or Zemex), a company incorporated under
the Canada Business Corporations Act, is a producer of specialty materials and
products for use in a variety of industrial applications. Zemex operates
through two divisions: industrial minerals and aluminum recycling. Its major
products include feldspar, feldspathic minerals, kaolin, sand, mica, talc, and
aluminum dross derivatives. As at December 31, 2002, Zemex operated eleven
plants throughout Canada and the United States.

On March 3, 2003, the Corporation entered into an Arrangement Agreement
(Arrangement) with Cementos Pacasmayo S.A.A., (Pacasmayo) a cement company headquartered
in Lima, Peru, whereby, pursuant to the Arrangement and subject to shareholder
and court approval, Pacasmayo will acquire 100% of the issued and outstanding
common shares and options of the Corporation. The transaction is expected to
close in May of 2003. In connection with Arrangement, certain of the
directors, executive officers and other securityholders entered into
support agreements with Pacasmayo. These securityholders, directors
and officers own, in the aggregate, 3,562,674 common shares and
options to purchase 559,500 common shares, representing approximately 46% of the aggregate outstanding common shares and options.

Originally, Zemex was incorporated under the laws of the State of Maine in 1907
and was known as Yukon Gold Corporation. At its annual meeting of shareholders
on May 20, 1938, a resolution was passed to change its name to Yukon-Pacific
Mining Corporation. On November 8, 1939, Zemex reorganized and changed its name
to Pacific Tin Consolidated Corporation. Also in 1939, Zemex listed on the New
York Stock Exchange. In 1985, Zemex changed its name to its current form and
reincorporated under the laws of the State of Delaware as the successor to
Pacific Tin Consolidated Corporation. Effective January 21, 1999, Zemex
completed a reorganization pursuant to which shareholders of the predecessor
Delaware corporation became shareholders of a corporation incorporated under
the Canada Business Corporations Act.

On April 11, 2000, the Corporation completed the sale of the two subsidiaries
comprising the metal powders division, Pyron Corporation and Pyron Metal
Powders, Inc., to a subsidiary of Höganäs AB for gross proceeds of
approximately $42.0 million in cash. As a result of the sale of the Pyron
companies, the results of the metal powders division were reclassified as
discontinued operations in the Corporations consolidated statement of
operations for fiscal 2000.

Industrial Minerals

The Corporations industrial minerals division is comprised of The Feldspar
Corporation (''TFC), Suzorite Mica Products Inc. (''Suzorite), Suzorite
Mineral Products, Inc. (''SMP), Zemex Industrial Minerals, Inc., Zemex Mica
Corporation (ZMC) and Zemex Attapulgite, LLC (ZAL) (collectively, Zemex
Industrial Minerals or ZIM). Each of these companies is either directly or
indirectly a wholly-owned subsidiary of Zemex.

TFC has mining and processing facilities in Edgar, Florida; Monticello,
Georgia; and Spruce Pine, North Carolina. Using traditional methods, TFC mines
sodium feldspar from two different ore deposits in the Spruce Pine area.
Potassium feldspar is mined from two deposits close to the Monticello plant.
TFCs kaolin and sand products are recovered by dredging and wet separation at
the Edgar property. All mined and recovered products are subjected to
standard and proprietary milling and drying techniques.





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##### 



TFC produces numerous products at its operating plants, including sodium and
potassium feldspar, silica, low iron sand, muscovite mica and kaolin clay.
Feldspathic materials are key ingredients for the ceramic industry, and are
incorporated into the production of ceramic floor and wall tiles, dinnerware,
plumbing fixtures, glazes and electrical insulators. TFC supplies its products
primarily to the glass and ceramics industries. Feldspar and certain grades of
industrial sand are also used to manufacture bottles, jars, and other glass
containers, fibreglass, paints and plastics, and television picture tubes.
Industrial sand is used for filter, filler, beach sand, sand, blasting and
concrete applications. TFC also produces a low iron sand product for use in
highly specialized glass applications.

Suzorite mines phlogopite mica in an open pit mining operation in Suzor
Township, Québec, Canada, approximately 300 kilometres north of Montréal,
Québec. The ore is mined by standard open pit methods and delivered to a
siding for transportation by rail to the processing plant, which is located in
Boucherville, Québec, a suburb of Montréal. Because of its distinct thermal
stability advantage over competitive materials, phlogopite mica is used to
impart rigidity in technological and high temperature plastic applications.
Suzorites phlogopite mica is also used as a partial or complete substitute for
asbestos in fire retardation, in friction materials, oil well drilling needs,
caulking and molding compounds, coatings, plasters and plastics. The principal
markets served by Suzorite are the automobile, construction and oil drilling
industries. These products are marketed under the trade names Suzorite Mica
and Suzorex.

SMP produces barytes at Murphy, North Carolina and talc at Van Horn, Texas. The
Murphy plant purchases raw materials and produces baryte products, primarily
for the oil drilling and coatings industries. The production facility in Van
Horn processes talc mined in proximity to the plant for the coatings, plastics
and ceramics industries.

In February 1998, Industria Mineraria Fabi S.r.l. (''Fabi), a leading
European talc producer, became an investor in the Corporations talc facility
located in Benwood, West Virginia by acquiring a 40% interest in a new limited
liability company, Zemex Fabi-Benwood, LLC. As part of the transaction, Fabi
paid $3.4 million and provided access to its technology and to its premium talc
deposit in Australia. In March 2001, the Corporation sold its remaining 60%
interest in Zemex Fabi-Benwood, LLC and its talc processing plant located at
Natural Bridge, New York to its former partner in Zemex Fabi-Benwood, LLC.
Fabi paid $7.5 million. This transaction was recorded in the first quarter of
2001.

On February 1, 2002, the Corporation acquired, through Zemex Attapulgite, LLC,
a newly incorporated Georgia limited liability company, the assets of an
attapulgite clay producer from Milwhite, Inc. ZAL extracts clay from two
current mining areas owned in fee and processes this material in the adjacent
plant. ZALs primary market focus is the production of joint compounds. It
also serves the coatings, absorption, adhesives, fertilizer and fillers
industries. The Corporation paid $11.6 million to acquire the operation and
funded the purchase from its existing credit facility.

In January 1998, the Corporation acquired ZMC, formerly known as Aspect
Minerals, Inc., a muscovite mica producer in the Spruce Pine, North Carolina
area close to TFCs feldspar plant where by-product muscovite mica is produced.
A capital expenditure program to retrofit and expand these facilities was
completed at the end of 1999. Due to a shortage of appropriate feedstock, this
plant was placed on care and maintenance effective December 31, 2000. Goodwill
associated with the original purchase was written-off and a provision was made
for asset impairment in fiscal 2000.

The Corporations industrial mineral sales were $48.4 million in 2002, compared
to $39.9 million in 2001 and $51.4 million in 2000. Income generated from
operating activities for this group was $7.7 million in 2002, versus $7.2
million in 2001 and $5.7 million in 2000.

2



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##### 



Capital expenditures were $3.9 million in 2002 as compared to $2.7 million in
2001 and $2.8 million in 2000. The increase in capital spending in 2002 was
mainly due to capital improvements at the attapulgite clay operation acquired
in February 2002.

Aluminum Recycling

Zemexs aluminum recycling group is comprised of Alumitech, Inc., Alumitech of
Cleveland, Inc., Alumitech of Wabash, Inc., Alumitech of West Virginia, Inc.,
ETS Schaefer Corporation and AWT Properties, Inc. (collectively,
''Alumitech), all of which are direct or indirect wholly-owned subsidiaries.
Alumitech has four facilities: aluminum dross reprocessing plants in Cleveland,
Ohio; Wabash, Indiana; Friendly, West Virginia; and a heat containment
fabrication plant in Macedonia, Ohio. Alumitechs administrative office is
located in Macedonia, Ohio.

On March 27, 2002, the Corporation purchased the assets of Resource Recovery
Industries, LLC, an aluminum dross processor located in Friendly, West
Virginia. The purchase price was $3.1 million and was financed by a drawdown
on the Corporations credit facility.

Alumitech is an aluminum dross processor. Aluminum dross is the waste
by-product produced by primary and secondary aluminum smelters. Secondary
dross, which generally has a high salt content, forms the primary feedstock for
Alumitechs process. Dross processors recover aluminum metal and some oxides
from the dross and send the residue to landfill. The primary focus of
Alumitech was, for several years, the development of a closed-loop process
that would eliminate the necessity for land-filling any dross materials. While
the process has proven itself technically, the combination of production
difficulties and weak markets for the final products resulted in an inability
to generate a profit from the operation. Accordingly, the Corporation ceased
its efforts to operate the closed-loop system and wrote-off its investment in
the technology and equipment during the year ended December 31, 2000.

Sales for the aluminum recycling group increased to $25.5 million in 2002
versus $17.4 million in 2001 and $25.1 million in 2000. During 2002, the
aluminum recycling group recognized an operating income of $0.3 million, versus
an operating loss of $1.7 million and $1.3 million recorded in 2001 and 2000,
respectively.

Capital expenditures for the aluminum recycling group were $1.6 million in 2002
as compared to $0.8 million in 2001 and $1.4 million in 2000. Excluded the
effect of additional spending caused by the acquisition of the West Virginia
plant, the capital spending decreased slightly from fiscal 2001.

Metal Powders

The metal powders division consisted of two wholly-owned subsidiaries, Pyron
Corporation and Pyron Metal Powders, Inc. (together, ''Pyron). Pyron
operated plants located in Niagara Falls, New York; St. Marys, Pennsylvania;
and Greenback and Maryville, Tennessee. On April 11, 2000, the Corporation
completed the sale of its metal powders division for gross proceeds of
approximately $42.0 million. The sale resulted in a pre-tax gain of $15.7
million. These subsidiaries were reflected as discontinued operations in the
Corporations consolidated statement of operations for the year ended December
31, 2000.

For the first three months of 2000, sales for the metal powders division were
$10.7 million while $1.4 million was recorded as operating income. The
division spent $0.2 million in capital expenditures during the same period in
2000.

3



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Research and Development

The Corporation carries on an active program of product development and
improvement. Research and development expense was $0.3 million in 2002, $0.5
million in 2001 and $0.5 million in 2000.

Financial information about continuing operations by industry segment is set
forth on pages F-23 to F-25 of this report. Financial information pertaining
to the metal powders division, which was disclosed as a discontinued operation,
is set forth on page F-21.

Environmental Considerations

Laws and regulations currently in force which do or may affect the
Corporations domestic operations include the Federal Clean Air Act of 1970,
the National Environmental Policy Act of 1969, the Solid Waste Disposal Act
(including the Resource Conservation and Recovery Act of 1976), the Toxic
Substances Control Act, CERCLA (superfund) and regulations under these Acts,
the environmental protection regulations of various governmental agencies (e.g.
the Bureau of Land Management Surface Management Regulations, Forest Service
Regulations, and Department of Transportation Regulations), laws and
regulations with respect to permitting of land use, various state and local
laws and regulations concerned with zoning, mining techniques, reclamation of
mined lands, air and water pollution and solid waste disposal. Each of the
Corporations operations strives to be environmentally sensitive. Currently,
the Corporation is not aware of any materially adverse environmental problems
or issues.

Employees

The approximate number of employees in the Corporation as of December 31, 2002
is set forth below:

|                    |  |  |     | 
|------------------- |  |  | --- | 
|Industrial Minerals |  |  | 227 | 
|Aluminum Recycling  |  |  | 143 | 
|Corporate           |  |  | 6   | 
|                    |  |  |     | 
|Total               |  |  | 376 | 
|                    |  |  |     | 

Approximately 16 employees at Suzorite are covered by a three-year collective
bargaining agreement that expires December 12, 2005.

At Alumitech, approximately 30 employees are covered by two collective
bargaining agreements, one agreement expiring April 30, 2004 and one agreement
expiring December 31, 2004.

At the industrial minerals group, approximately 104 employees are covered by
two collective agreements expiring April 30, 2003.

The Corporation considers its labor relations to be good.

Export Sales

The Corporations industrial minerals and aluminum recycling operations sell
their products internationally to a wide variety of customers including those
in the ceramics, glass and plastic industries. Export sales were 5.6% of the
total for the year ended December 31, 2002.

4



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Risk Factors

Raw Materials and Other Requirements

In past years, the Corporation has not experienced any substantial difficulty
in satisfying the raw materials requirements for its aluminum recycling
operations, which is the segment that consumes, rather than supplies, raw
materials. However, in 2001 and 2000, a decline in the secondary aluminum
industry and an undisciplined market for dross and saltcake resulted in an
industry wide shortage of acceptable feedstock. There can be no assurance that
this situation will not re-occur.

Seasonality

The efficiency and productivity of the Corporations operations can be affected
by unusually severe weather conditions. During the winter of 2000, there were
minor production outages at the Corporations operating facilities in North
Carolina, New York and Quebec due to inclement weather, but they were not
significant enough to materially affect the 2000 operating results.

Competition

All of the Corporations products are sold in competitive markets, which are
influenced by price, performance, customer location, service, competition,
material substitution and general economic conditions. The Corporation
competes with other companies active in industrial minerals and aluminum
recycling. No material part of the Corporations business is dependent upon
any single customer, or upon very few customers, the loss of any one of which
could have a material adverse impact on the Corporation.

Industrial mineral prices generally are not subject to the price fluctuations
typical of commodity metals. Demand for industrial minerals is primarily
related to conditions in the automotive, housing and construction industries.
Markets for industrial mineral products are sensitive not only to service,
product performance, and price, but also to competitive pressures and
transportation costs. In the United States, there are three major feldspathic
mineral producers, including the Corporation. The Corporation is the only
North American producer of phlogopite mica and one of many talc producers.

There are numerous aluminum dross processors in the United States. While the
Corporation competes for the supply of aluminum dross, the major factor
affecting the supply of dross is the level of activity of the secondary
aluminum smelting industry. In addition, as spec aluminum is one of the
products of aluminum dross reprocessing, commodity price fluctuations of
secondary spec aluminum will have an impact on the earnings of the
Corporation.

Foreign Operations

All of the Corporations operations are located in the United States and
Canada, countries whose institutions and governmental policies are generally
similar. Although there can be no assurance as to future conditions, the
Corporation has experienced no political activities, social upheavals, currency
restrictions or similar factors, which have had any material adverse effect to
date on the results of its operations or financial condition.

5



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Market Demand

Demand for Zemexs industrial minerals is related to the pace of the general
economy and, particularly, the residential and commercial construction, and
automotive industries. There can be no assurance that the markets for Zemexs
products will remain strong in the face of an economic downturn.

Executive and Other Officers of the Registrant

|                      |  |                                                                 |  |     |    |                |  |           |      | 
|--------------------- |  | --------------------------------------------------------------- |  | --- | -- | -------------- |  | --------- | ---- | 
|                      |  |                                                                 |  |     |    |                |  | Served in
|Officer               |  | Position                                                        |  | Age |    | Position Since
|                      |  |                                                                 |  |     |    |               
|Peter Lawson-Johnston |  | Chairman of the Board of Directors                              |  |     | 76 |                |  |           | 1975 | 
|                      |  |                                                                 |  |     |    |                |  |           |      | 
|R. Peter Gillin       |  | President and Chief Executive Officer                           |  |     | 54 |                |  |           | 2002 | 
|                      |  |                                                                 |  |     |    |                |  |           |      | 
|Allen J. Palmiere     |  | Vice President, Chief Financial
Officer and Corporate Secretary |  |     | 50 |                |  |           | 1993 | 
|                      |  |                                                                 |  |     |    |                |  |           |      | 
|Peter J. Goodwin      |  | President, Industrial Minerals                                  |  |     | 52 |                |  |           | 1994 | 
|                      |  |                                                                 |  |     |    |                |  |           |      | 
|Terrance J. Hogan     |  | President, Aluminum Recycling                                   |  |     | 47 |                |  |           | 1995 | 

There are no family relationships between the officers listed above. The term
of office of each executive officer is until his respective successor is
elected and has qualified, or until his death, resignation or removal.
Officers are elected or appointed by the board of directors annually at its
first meeting following the annual meeting of shareholders. The followings are
current officers of the Corporation and a description of their business
activities if less than five years in their present position.

Mr. R. Peter Gillin joined the Corporation as a director in 1999 and was
appointed by the Board of Directors as the President and Chief Executive
Officer in November 2002. He was Vice Chairman and Director of NM Rothschild &
Sons Canada Limited, investment bank, from 1996 to early 2002.

Cautionary Safe Harbor Statement Under the United States Private Securities Litigation Reform Act of 1995

With the exception of historical matters, the matters discussed in this report
are forward looking statements that involve risks and uncertainties that could
cause actual results to differ materially from targeted or projected results.
Factors that could cause actual results to differ materially include, among
others, fluctuations in aluminum prices, problems regarding unanticipated
competition, processing, access and transportation of supplies, availability of
materials and equipment, force majeure events, the failure of plant equipment
or processes to operate in accordance with specifications or expectations,
accidents, labor relations, delays in start-up dates, environmental costs and
risks, the outcome of acquisition negotiations and general domestic and
international economic and political conditions, as well as other factors
described herein or in the Corporations filings with the Securities and
Exchange Commission. Many of these factors are beyond the Corporations
ability to predict or control. Readers are cautioned not to put undue reliance
on forward looking statements.

6



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|ITEM 2. |  | PROPERTIES
|------- |  | ----------

The industrial minerals group has operations and mines in Edgar, Florida;
Monticello, Georgia; Attapulgus, Georgia; Boucherville, Quebec; Suzor
Township, Quebec; Murphy, North Carolina; Spruce Pine, North Carolina; and Van
Horn, Texas. This group owns approximately 347,755 square feet of office and
plant floor space. In addition to 4,484 acres of land being owned by this
group, 2,088 acres of land is being leased. The mineral deposits currently
operated by the industrial minerals group are estimated by the Corporation to
contain from 4 years to in excess of 100 years of raw materials at the current
rates of production.

The aluminum recycling group has operations in Cleveland, Ohio; Macedonia,
Ohio; Wabash, Indiana; and Friendly, West Virginia. The aluminum dross
processing plant in Cleveland, Ohio is located on 6.1 acres of land and has
buildings totaling 68,000 square feet. The Macedonia facility includes 72,210
square feet of plant of which 10,000 is designated office space and is situated
on 8 acres of land. The aluminum recycling operation in Wabash, Indiana sits
on approximately 25 acres of land and has 73,300 square feet of plant and
office space. The remaining aluminium dross processing plant, which is located
in Friendly, West Virginia, has 7.0 acres of land including an 88,000 square
foot facility and office trailer space of approximately 3,000 square feet.
Additionally, approximately 30,000 square feet of warehouse space is being
leased.

All facilities relating to the Corporations operations are maintained in good
operating condition.



|ITEM 3. |  | LEGAL PROCEEDINGS
|------- |  | -----------------

On November 17, 2000, a subsidiary of the Corporation (Zemex U.S.) entered
into a Stock Purchase Agreement with Hecla Mining Company (Hecla) whereby
Zemex U.S. agreed to purchase, subject to certain conditions precedent, the
shares of two of Heclas subsidiaries collectively known as K-T Clay. The
Corporation guaranteed the obligations of Zemex U.S. under the Stock Purchase
Agreement. As specifically permitted under the Stock Purchase Agreement, in
January 2001 Zemex U.S. notified Hecla that due to a material adverse change in
the business of K-T Clay, Zemex U.S. would not close the transaction
contemplated by the Stock Purchase Agreement in its then current form. On
January 22, 2001, Hecla filed suit in the United States District Court for the
Northern District of Illinois against the Corporation (but not Zemex U.S.)
alleging breach of the Corporations guarantee and seeking specific performance
and an award of damages. The claim for specific performance was subsequently
withdrawn. The Corporation was of the opinion that Heclas claims were without
merit; however, the Corporation determined that it was prudent to eliminate the
financial exposure arising from the uncertain outcome of litigation. In
January 2003, the dispute was settled for $3,950,000.



|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- |  | ---------------------------------------------------

None.

7



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PART II



|ITEM 5. |  | MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- |  | -------------------------------------------------------------------------

Zemex Corporations common shares are traded on the New York Stock Exchange and
the Toronto Stock Exchange, under the symbol ZMX. The price range in which the
shares have traded on the New York Stock Exchange for the past two years is
shown below:

Common Shares

|      |  |    |      |    |  |    |      |    |  |      |      |  |  |   |      |  |  |   |      | 
|----- |  | -- | ---- | -- |  | -- | ---- | -- |  | ---- | ---- |  |  | - | ---- |  |  | - | ---- | 
|2002  |  | Q1 |      | Q2 |  | Q3 |      | Q4 |  | Year
|      |  |    |      |    |  |    |      |    |  |     
|High  |  | $  | 7.30 |    |  | $  | 7.05 |    |  | $    | 6.20 |  |  | $ | 5.50 |  |  | $ | 7.30 | 
|Low   |  |    | 6.20 |    |  |    | 6.60 |    |  |      | 5.50 |  |  |   | 4.52 |  |  |   | 4.52 | 
|Close |  |    | 6.83 |    |  |    | 6.65 |    |  |      | 5.50 |  |  |   | 5.04 |  |  |   | 5.04 | 

|      |  |    |      |    |  |    |      |    |  |      |      |  |  |   |      |  |  |   |      | 
|----- |  | -- | ---- | -- |  | -- | ---- | -- |  | ---- | ---- |  |  | - | ---- |  |  | - | ---- | 
|2001  |  | Q1 |      | Q2 |  | Q3 |      | Q4 |  | Year
|      |  |    |      |    |  |    |      |    |  |     
|High  |  | $  | 6.65 |    |  | $  | 7.60 |    |  | $    | 7.30 |  |  | $ | 6.80 |  |  | $ | 7.60 | 
|Low   |  |    | 5.19 |    |  |    | 6.05 |    |  |      | 6.01 |  |  |   | 5.76 |  |  |   | 5.19 | 
|Close |  |    | 6.25 |    |  |    | 6.10 |    |  |      | 6.27 |  |  |   | 6.45 |  |  |   | 6.45 | 

As of March 21, 2003, there were approximately 1,344 holders of record of the
Corporations capital stock. This number includes shares held in nominee name
and, thus, does not reflect the number of holders of a beneficial interest in
the shares.

8



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|ITEM 6. |  | SELECTED FINANCIAL DATA
|------- |  | -----------------------

|                                                                                |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |      | 
|------------------------------------------------------------------------------- | --------------------------------- | ---- | --------- | ----- | - | ---- | --------- | ---- |  | ---- | --------- | ----- | - | - | --------- | ---- |  | - | --------- | ---- | 
|(All amounts are in thousands of U.S. dollars, except share and per share data) |                                   | 2002 |           | 2001  |   | 2000 |           | 1999 |  | 1998
|                                                                                |                                   |      |           |       |   |      |           |      |  |     
|SUMMARY OF OPERATIONS                                                           |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|                                                                               
|Net sales                                                                       |                                   | $    | 73,869    |       |   | $    | 57,336    |      |  | $    | 76,480    |       |   | $ | 77,530    |      |  | $ | 68,338    |     
|(Loss) income before the undernoted                                             |                                   |      | (1,150    | )     |   |      | 1,854     |      |  |      | 602       |       |   |   | 7,015     |      |  |   | 6,202     |     
|Provision for asset impairment                                                  |                                   |      |          |       |   |      |          |      |  |      | 24,552    |       |   |   |          |      |  |   |          |     
|Other income (expense)                                                          |                                   |      | 56        |       |   |      | 615       |      |  |      | (3,017    | )     |   |   | (522      | )    |  |   | (840      | )   
|(Loss) income before discontinued
operations                                    |                                   |      | (1,815    | )     |   |      | 865       |      |  |      | (19,356   | )     |   |   | 1,847     |      |  |   | 2,652     |     
|Income from discontinued operations                                             |                                   |      |          |       |   |      |          |      |  |      | 11,385    |       |   |   | 3,934     |      |  |   | 2,713     |     
|Net (loss) income                                                               |                                   |      | (1,815    | )     |   |      | 865       |      |  |      | (7,971    | )     |   |   | 5,781     |      |  |   | 5,365     |     
|                                                                               
|FINANCIAL POSITION                                                              |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|Working capital                                                                 |                                   | $    | 16,218    |       |   | $    | 10,134    |      |  | $    | 4,831     |       |   | $ | 27,613    |      |  | $ | 14,810    |     
|Total assets                                                                    |                                   |      | 113,430   |       |   |      | 97,515    |      |  |      | 113,579   |       |   |   | 160,979   |      |  |   | 150,744   |     
|Long term debt (non-current
portion)                                            |                                   |      | 20,358    |       |   |      | 211       |      |  |      | 261       |       |   |   | 50,502    |      |  |   | 39,354    |     
|                                                                               
|COMMON SHARES                                                                   |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|Average common shares outstanding                                               |                                   |      | 7,907,760 |       |   |      | 8,190,194 |      |  |      | 8,466,988 |       |   |   | 8,425,561 |      |  |   | 8,286,178 |     
|Actual common shares issued and
outstanding at year end                         |                                   |      | 7,870,152 |       |   |      | 8,178,393 |      |  |      | 8,697,822 |       |   |   | 8,873,453 |      |  |   | 8,707,796 |     
|                                                                               
|PER COMMON SHARE                                                                |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|Basic  Continuing operations                                                   |                                   | $    | (0.23     | )     |   | $    | 0.11      |      |  | $    | (2.29     | )     |   | $ | 0.22      |      |  | $ | 0.32      |     
|Basic  Discontinued operations                                                 |                                   |      |          |       |   |      |          |      |  | $    | 1.35      |       |   | $ | 0.47      |      |  | $ | 0.33      |     
|                                                                                | Basic (loss) earnings per share   |      | $         | (0.23 | ) |      | $         | 0.11 |  |      | $         | (0.94 | ) |   | $         | 0.69 |  |   | $         | 0.65 | 
|                                                                               
|Diluted  Continuing operations                                                 |                                   | $    | (0.23     | )     |   | $    | 0.10      |      |  | $    | (2.29     | )     |   | $ | 0.22      |      |  | $ | 0.31      |     
|Diluted  Discontinued operations                                               |                                   |      |          |       |   |      |          |      |  | $    | 1.35      |       |   | $ | 0.46      |      |  | $ | 0.32      |     
|                                                                                | Diluted (loss) earnings per share |      | $         | (0.23 | ) |      | $         | 0.10 |  |      | $         | (0.94 | ) |   | $         | 0.68 |  |   | $         | 0.63 | 
|                                                                               
|U.S. GAAP                                                                       |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|(Loss) income before discontinued
operations                                    |                                   | $    | (3,467    | )     |   | $    | 897       |      |  | $    | (18,479   | )     |   | $ | 462       |      |  | $ | 1,595     |     
|Income from discontinued operations                                             |                                   |      |          |       |   |      |          |      |  |      | 11,385    |       |   |   | 3,934     |      |  |   | 2,713     |     
|Net (loss) income                                                               |                                   |      | (3,467    | )     |   |      | 897       |      |  |      | (7,094    | )     |   |   | 4,396     |      |  |   | 4,308     |     
|                                                                               
|FINANCIAL POSITION UNDER U.S. GAAP                                              |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|Total assets                                                                    |                                   | $    | 111,961   |       |   | $    | 96,023    |      |  | $    | 112,055   |       |   | $ | 158,380   |      |  | $ | 150,008   |     
|                                                                               
|PER COMMON SHARE UNDER U.S. GAAP                                                |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|Basic  Continuing operations                                                   |                                   | $    | (0.44     | )     |   | $    | 0.11      |      |  | $    | (2.18     | )     |   | $ | 0.05      |      |  | $ | 0.19      |     
|Basic  Discontinued operations                                                 |                                   |      |          |       |   |      |          |      |  | $    | 1.34      |       |   | $ | 0.47      |      |  | $ | 0.33      |     
|                                                                                | Basic (loss) earnings per share   |      | $         | (0.44 | ) |      | $         | 0.11 |  |      | $         | (0.84 | ) |   | $         | 0.52 |  |   | $         | 0.52 | 
|Diluted  Continuing operations                                                 |                                   | $    | (0.44     | )     |   | $    | 0.11      |      |  | $    | (2.18     | )     |   | $ | 0.05      |      |  | $ | 0.19      |     
|Diluted  Discontinued operations                                               |                                   |      |          |       |   |      |          |      |  | $    | 1.34      |       |   | $ | 0.46      |      |  | $ | 0.32      |     
|                                                                                | Diluted (loss) earnings per share |      | $         | (0.44 | ) |      | $         | 0.11 |  |      | $         | (0.84 | ) |   | $         | 0.51 |  |   | $         | 0.51 | 
|                                                                               
|COMMON STOCK PRICES                                                             |                                   |      |           |       |   |      |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|High                                                                            |                                   | $    | 7.30      |       |   | $    | 7.60      |      |  | $    | 10.00     |       |   | $ | 9.75      |      |  | $ | 10.44     |     
|Low                                                                             |                                   |      | 4.52      |       |   |      | 5.19      |      |  |      | 5.25      |       |   |   | 5.00      |      |  |   | 6.00      |     
|Year end                                                                        |                                   |      | 5.04      |       |   |      | 6.45      |      |  |      | 5.38      |       |   |   | 9.13      |      |  |   | 6.25      |     

9



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|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

The following is a discussion and analysis of the results of operations and
financial condition of the Corporation for the years ended December 31, 2002,
2001 and 2000, and certain factors that may affect the Corporations
prospective financial condition and results of operations. The following
should be read in conjunction with the Consolidated Financial Statements and
related notes thereto found on pages F-1 to F-33 of this Annual Report on Form
10-K.

CRITICAL ACCOUNTING POLICIES

Impairment of Long-Lived Assets and Valuation of Deferred Tax Assets

The fair value of the long-lived assets is dependant on the performance of the
operations which the Corporation owns. In assessing potential impairment for
these assets the Corporation will consider this factor as well as the
forecasted financial performance. If the forecast is not met and the outlook
does not provide for sufficient cash flow to recoup the book value of the
asset, the Corporation may have to record additional impairment charges not
previously recognized.

In assessing the recoverability of the Corporations goodwill and other
intangibles the Corporation must make assumptions regarding estimated future
cash flows and other factors to determine the fair value of the respective
assets. If these estimates or their related assumptions change in the future,
the Corporation may be required to record impairment charges for these assets
not previously recorded.

The carrying value of the Corporations net deferred tax assets assumes that
the Corporation will be able to generate sufficient future taxable income in
certain tax jurisdictions, based on estimates and assumptions. If these
estimates and related assumptions change in the future, the Corporation may be
required to record additional valuation allowances against its deferred tax
assets resulting in additional income tax expense in the Corporations
consolidated statement of operations. Management evaluates the realizability of
the deferred tax assets quarterly and assesses the need for additional
valuation allowance quarterly.

Use of Estimates

The preparation of financial statements in conformity with Canadian generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Examples include provisions for bad debts, inventory
reserves, reclamation reserves and pension liabilities. Actual results could
differ from those estimates.

Allowances for doubtful accounts are estimated based on estimates of losses
related to customer receivable balances. Estimates are developed by using
standard quantitative measures based on historical losses, adjusting for
current economic conditions and, in some cases, evaluating specific customer
accounts for risk of loss. The establishment of reserves requires the use of
judgment and assumptions regarding the potential for losses on receivable
balances. Though the Corporation considers these balances adequate and proper,
changes in economic conditions in specific markets in which the Corporation
operates could have a material effect on reserve balances required.

The Corporations inventories are valued at the lower of cost or net realizable
value. Under certain market conditions, estimates and judgments regarding the
valuation of inventory are employed by the

10



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##### 



Corporation to properly value inventory. These estimates could vary
significantly, either favorably or unfavorably, from actual requirements if
future economic conditions, customer inventory levels or competitive conditions
differ from our expectations.

Provisions for future reclamation costs have been established based upon
estimated future reclamation costs, allocated over the expected productive
lives of the Corporations quarries and mines. These future reclamation costs
are determined using mineral resource estimates which are imprecise and depend
partly on statistical inferences drawn from drilling and other data, which may
prove to be unreliable.

Pension assets and liabilities are determined on an actuarial basis and are
affected by the estimated market value of plan assets; estimates of the
expected return on plan assets and discount rates. Actual changes in the fair
market value of plan assets and differences between the actual return on plan
assets and the expected return on plan assets will affect the amount of pension
expense ultimately recognized. The postretirement benefits other than pension
liability are also determined on an actuarial basis and are affected by
assumptions including the discount rate and expected trends in health care
costs. Changes in the discount rate and differences between actual and expected
health care cost will affect the recorded amount of postretirement benefits
expense.

The Corporation considers certain accounting policies relating to impairment of
long-lived assets and valuation of deferred tax assets to be critical policies
due to the estimation processes involved in each.

OVERVIEW

The Corporation is a diversified producer of specialty materials and products
for use in a variety of industrial applications. The Corporation operates in
two principal business segments: (i) industrial minerals, which includes The
Feldspar Corporation, Suzorite Mica Products Inc., Suzorite Mineral Products,
Inc., Zemex Industrial Minerals, Inc., Zemex Mica Corporation and Zemex
Attapulgite, LLC and (ii) aluminum recycling, which includes Alumitech, Inc.,
Alumitech of Cleveland, Inc., Alumitech of Wabash, Inc., Alumitech of West
Virginia, Inc., ETS Schaefer Corporation and AWT Properties, Inc.



|1. |  | On March 27, 2002, the Corporation purchased through a newly formed
subsidiary, Alumitech of West Virginia, Inc., the assets of Resource
Recovery Industries, LLC, an aluminum dross processor located in Friendly,
West Virginia. The purchase price was $3.1 million and was financed by a
drawdown on the Corporations credit facility.                                                                                                                                                                                                                                                                                
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | On February 1, 2002, Zemex Attapulgite, LLC, a newly incorporated
subsidiary, acquired the assets of an attapulgite clay operation from
Milwhite, Inc. The Corporation paid $11.6 million for the acquisition and
funded it by a drawdown from its credit facility.                                                                                                                                                                                                                                                                                                                                                        
|  
|3. |  | On March 20, 2001, the Corporation sold its 60% interest in the Zemex
Fabi-Benwood, LLC, subsidiary of the industrial minerals group, and its
Natural Bridge, New York talc processing plant to Industria Minearia Fabi
S.r.l. (Fabi), a former partner of Zemex Fabi-Benwood, for $7.5 million.
A pre-tax gain of $0.3 million was recognized in the first quarter of
2001.                                                                                                                                                                                                                                             
|  
|4. |  | Zemex Mica Corporation, a muscovite mica producer, was placed on care and
maintenance effective December 31, 2000 as management reassessed the
process and markets. Due to a significant reduction of by-product feed
availability, more mined material had to be used. The mined material was
not of the quality and consistency desired resulting in the inability to
produce high quality, consistent product and causing higher than
acceptable costs. A write-down of goodwill of $2.2 million, a provision
for asset impairment of $2.0 million and a provision for care and
maintenance costs were recorded in 2000.

11



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|5. |  | On April 11, 2000, the Corporation completed the sale of its metal
powders division, which included Pyron Corporation and Pyron Metal
Powders, Inc., for $42.0 million to North American Höganäs Holdings, Inc.,
a subsidiary of Höganäs AB. The Corporation recognized a pre-tax gain of
$15.7 million in fiscal 2000; the after-tax gain from this sale
transaction was $10.5 million, or $1.24 per share. The sale proceeds were
applied to the Corporations credit facilities. Because of the sale, the
metal powders division was disclosed as a discontinued operation and the
prior period figures were reclassified accordingly.                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|6. |  | To effect the disposition of Pyron Corporation and Pyron Metal Powders,
Inc., on March 8, 2000 the Corporation redeemed its outstanding Senior
Secured Notes. The redemption was financed by a bridge facility
structured as an amendment to the Corporations pre-existing credit
facility, bearing interest at the same rate and was secured by the same
security package as the pre-existing credit facility. The bridge facility
was fully repaid by October 31, 2000. The redemption necessitated a
make-whole payment to the noteholders of $1.2 million, which was recorded
as other expense in the first quarter of 2000. Additionally $0.3 million
was paid out in related transaction expenses and $1.7 million in deferred
financing expenses related to the issuance of the Senior Secured Notes
were written-off.

RESULTS OF OPERATIONS

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Net Sales

|                              |  |      |        |      |  |        |        |          |  |   |        |  |  |  |      |  
|----------------------------- |  | ---- | ------ | ---- |  | ------ | ------ | -------- |  | - | ------ |  |  |  | ---- | -
|(All amounts are in '000 US$) |  | 2002 |        | 2001 |  | Change |        | % Change
|                              |  |      |        |      |  |        |        |         
|Industrial minerals           |  | $    | 48,410 |      |  | $      | 39,942 |          |  | $ | 8,468  |  |  |  | 21.2 | %
|Aluminum recycling            |  |      | 25,459 |      |  |        | 17,394 |          |  |   | 8,065  |  |  |  | 46.4 | %
|                              |  |      |        |      |  |        |        |          |  |   |        |  |  |  |      |  
|                              |  | $    | 73,869 |      |  | $      | 57,336 |          |  | $ | 16,533 |  |  |  | 28.8 | %
|                              |  |      |        |      |  |        |        |          |  |   |        |  |  |  |      |  

The Corporations net sales from operations for 2002 were $73.9 million, an
increase of $16.5 million, or 28.8%, from 2001. In fiscal 2002, sales in the
industrial minerals group and the aluminum recycling group improved by $8.5
million and $8.0 million, respectively.

Net sales from the industrial minerals group were $48.4 million in fiscal 2002
as compared to $39.9 million in fiscal 2001. The increase of $8.5 million, or
21.2%, over 2001 was mainly due to the revenue generated from the attapulgite
clay operation which was acquired by the Corporation in February 2002. The
increased revenue from feldspar and mica contributed $1.7 million and $0.7
million, respectively, to the improvement in revenues in 2002. A decline of
$1.9 million in net sales from the talc operations partially offset the
increase. The decline in 2002 talc revenues reflects the fact that sales
revenue for 2001 included three months of activity from talc plants which were
disposed of in the first quarter of 2001.

Net sales of the aluminum recycling group improved 46.4% to $25.5 million in
2002. Of the $8.0 million increase, $5.6 million is attributable to the West
Virginia aluminum dross processor which was acquired in the first quarter of
2002. Net sales from the Cleveland and Wabash locations increased by 31.5% and
27.9%, respectively, over the same period in 2001. The decrease of $0.8
million, or 11.3%, in net sales from the heat containment system operation
partially offset the increase in revenue generated from the aluminum plants.

12



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Cost of Goods Sold

Cost of goods sold for 2002 was $51.0 million, an increase of $13.1 million or
34.6%, compared to the corresponding period in 2001. The increase was due to
several factors: the acquisitions that occurred in the first quarter of 2002;
increased overall production in 2002; and, offset by the disposition of the
talc plants in 2001. Of the $13.1 million increase, the industrial minerals
group and the aluminum recycling group accounted for $7.6 million and $5.5
million, respectively. Gross margin as a percentage of net sales for the
industrial minerals group decreased from 39.2% in 2001 to 34.1% in 2002, while
the gross margin percentage from the aluminum recycling group improved from
21.8% in 2001 to 25.1% in 2002. Overall gross margin as a percentage of sales
decreased from 33.9% in 2001 to 31.0% in 2002.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses increased 17.0% from
$11.8 million in 2001 to $13.8 million in 2002. The increase was mainly due to
a one-time charge of $1.3 million arising from the accounting impact of changes
to employment contracts between the Corporation and its former president and
chief executive officer, and two other executives. In addition, expenses
arising from the acquisitions completed in the first quarter of 2002 and higher
pension expenses also contributed to the increased SG&A expense in 2002. As a
percentage of sales, SG&A expense decreased from 20.6% in 2001 to 18.7% in 2002
reflecting a significant improvement in 2002 sales performance.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization (DD&A) was $6.2 million in 2002, an
increase of 8.4%, over the comparable period in 2001. This reflects charges
resulting from the acquisitions of Zemex Attapulgite, LLC and Alumitech of West
Virginia, Inc. in the first quarter of 2002 offset by the elimination of all
goodwill amortization.

Other Expense

In 2001, Hecla Mining Corporation filed a lawsuit alleging failure to close a
contract to purchase certain assets. While the Corporation felt the lawsuit
was without merit, the risk of litigation loss was such that the Corporation
settled the lawsuit for $3.9 million. The Corporation recorded this amount in
December 2002.

(Loss) Income Before the Undernoted

For the reasons discussed above, the Corporation recorded a loss before the
undernoted of $1.2 million for fiscal 2002 as compared to income of $1.9
million during fiscal 2001. Excluding the one time charges arising from the
employment contracts and litigation settlement, the income generated from
operations would have improved to $4.1 million in 2002, an increase of $2.2
million, or 120.7%, over the same period in 2001.

Interest Income

Interest income for the year ended December 31, 2002 was $0.2 million as
compared to $0.1 million for the corresponding period in 2001. The recognition
of interest earned from funds held in escrow in connection with the Hecla
litigation contributed to the increase in 2002 interest income.

13



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Interest Expense

Interest expense for the fiscal year ended December 31, 2002 increased by $0.2
million, or 23.1%, to $1.1 million. The increase was due to increased
indebtedness levels in 2002 as a result of acquisitions that closed in the
first quarter of 2002. The increased level of bank indebtedness was partially
offset by lower interest rates throughout 2002. Total bank indebtedness was
$26.0 million as of December 31, 2002 as compared to $11.0 million as of
December 31, 2001.

Other Income

In 2002, the Corporation recognized other income of $0.1 million as compared to
$0.6 million in the same period of 2001. The 2001 other income arose from the
disposition of the talc facilities in the first quarter and insurance proceeds
received in the second quarter.

(Recovery of) Provision for Income Taxes

The Corporation recognized an income tax benefit of $0.2 million in fiscal
2002, versus an income tax expense of $0.8 million in fiscal 2001.

Net (Loss) Income and (Loss) Earnings Per Share

As a result of the factors discussed above, the Corporation recorded net loss
for the year ended December 31, 2002 of $1.8 million, compared to a net income
of $0.9 million in 2001.

|                                                        |           |      |        |       |   |   |     |      | 
|------------------------------------------------------- | --------- | ---- | ------ | ----- | - | - | --- | ---- | 
|(All amounts are in '000 US$, except per share amounts) |           | 2002 |        | 2001 
|                                                        |           |      |        |      
|Net (loss) income                                       |           | $    | (1,815 | )     |   | $ | 865 |     
|(Loss) earnings per share                               |  basic   |      | $      | (0.23 | ) |   | $   | 0.11 | 
|                                                        |  diluted |      | $      | (0.23 | ) |   | $   | 0.10 | 

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Net Sales

|                              |  |      |        |      |  |        |        |          |  |   |         |   |  |  |       |   
|----------------------------- |  | ---- | ------ | ---- |  | ------ | ------ | -------- |  | - | ------- | - |  |  | ----- | --
|(All amounts are in '000 US$) |  | 2001 |        | 2000 |  | Change |        | % Change
|                              |  |      |        |      |  |        |        |         
|Industrial minerals           |  | $    | 39,942 |      |  | $      | 51,422 |          |  | $ | (11,480 | ) |  |  | (22.3 | %)
|Aluminum recycling            |  |      | 17,394 |      |  |        | 25,058 |          |  |   | (7,664  | ) |  |  | (30.6 | %)
|                              |  |      |        |      |  |        |        |          |  |   |         |   |  |  |       |   
|                              |  | $    | 57,336 |      |  | $      | 76,480 |          |  | $ | (19,144 | ) |  |  | (25.0 | %)
|                              |  |      |        |      |  |        |        |          |  |   |         |   |  |  |       |   

The Corporations net sales from continuing operations for 2001 were $57.4
million, a decrease of $19.1 million, or 25.0%, from 2000. Sales in the
industrial minerals group and the aluminum recycling group were down by $11.5
million and $7.6 million, respectively.

The sales revenue from the industrial minerals group was $39.9 million in
fiscal 2001 as compared to $51.4 million in fiscal 2000. The disposal of the
Natural Bridge, New York facility and the 60% interest in Zemex Fabi-Benwood,
LLC in the first quarter of 2001, the closure of the muscovite mica facility
effective December 31, 2000 and the lower sales revenue generated from the mica
operations were the primary factors that caused the decline in sales revenue in
2001.

14



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##### 



Net sales of the aluminum recycling group decreased 30.6%, or $7.6 million, to
$17.4 million in 2001. The decrease was due to the closure of the calcium
aluminate plant effective December 31, 2000, ongoing depressed metal prices and
lower process volumes.

Cost of Goods Sold

Compared to 2000, cost of goods sold declined by 32.0%, or $17.8 million, to
$37.9 million in 2001. Of the $17.8 million decrease, the industrial minerals
group and the aluminum recycling group accounted for $11.0 million and $6.8
million, respectively. As a result, the corresponding gross margins improved
from 27.2% in 2000 to 33.9% in 2001.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for 2001 were $11.8
million, a $0.6 million decrease from 2000. The decrease was mainly due to the
closure of facilities in 2000 and sales of operations owned during fiscal 2001,
offset by a $0.2 million increase in pension expense and a $0.4 million
increase in professional fees due to costs of litigation. As a percentage of
sales, SG&A expense increased from 16.2% in 2000 to 20.6% in 2001.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization (DD&A) decreased by $2.0 million, or
26.1%, from $7.8 million in 2000 to $5.8 million in 2001. The decrease was due
to the closure and sales of facilities that occurred in the twelve months ended
December 31, 2001.

Income Before the Undernoted

For the reasons discussed above, income before the undernoted improved to $1.9
million for fiscal 2001 from $0.6 million in fiscal 2000. The closure of the
muscovite mica plant and the calcium aluminate operations at the end of fiscal
2000 had a positive impact on 2001 operating income.

Provision for Asset Impairment

The Corporation recorded a $24.6 million provision for asset impairment in
fiscal 2000. The closure of the muscovite mica operation and non-metallic
product facility accounted for $5.2 million and $17.6 million, respectively, in
the industrial minerals and aluminum recycling groups. The costs associated
with the unsuccessful attempt to purchase certain assets of Hecla Mining
Company accounted for another $1.5 million in 2000.

Interest Income

Interest income for the year ended December 31, 2001 was $0.1 million, compared
to $0.2 million for the corresponding period in 2000 reflecting the
Corporations stronger cash balances.

Interest Expense

Interest expense for the fiscal year ended December 31, 2001 was $0.9 million,
$1.5 million, or 61.9%, lower than the same period in 2000. The decrease
reflected lower levels of debt and lower interest rates. Total bank
indebtedness was $11.0 million as of December 31, 2001 as compared to $17.1
million as of December 31, 2000.

15



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##### 



Other (Income) Expense

In 2001, the Corporation recognized other income of $0.6 million versus $3.0
million of other expense that was recorded in 2000. Of the $0.6 million of
other income, gains on the disposition of the Natural Bridge, New York facility
and the 60% interest in Zemex Fabi-Benwood, LLC in the first quarter of 2001
contributed $0.3 million. The settlement of a long outstanding business
interruption insurance claim relating to the previously sold metal powders
group contributed the other $0.3 million. The $3.0 million of other expense
recorded in 2000 was mainly due to the redemption of Senior Secured Notes
necessitated by the sale of the metal powders group.

Provision for (Recovery of) Income Taxes

The Corporation recorded an income tax expense of $0.8 million in fiscal 2001,
compared to an income tax benefit of $10.0 million recognized in fiscal 2000.
The differences in effective tax rates reflect differences in the nature and
location of taxable income in each year.

Net Income (Loss) and Earnings (Loss) Per Share before Discontinued Operations

As a result of the factors discussed above, the Corporation recorded net income
from continuing operations for the year ended December 31, 2001 of $0.9
million, compared to a net loss of $19.4 million in 2000.

|                                                        |           |      |     |      |  |   |         |       |  
|------------------------------------------------------- | --------- | ---- | --- | ---- |  | - | ------- | ----- | -
|(All amounts are in '000 US$, except per share amounts) |           | 2001 |     | 2000
|                                                        |           |      |     |     
|Net income (loss) before discontinued operations        |           | $    | 865 |      |  | $ | (19,356 | )    
|Earnings (loss) per share                               |  basic   |      | $   | 0.11 |  |   | $       | (2.29 | )
|                                                        |  diluted |      | $   | 0.10 |  |   | $       | (2.29 | )

LIQUIDITY AND CAPITAL RESOURCES

The Corporation has historically funded its extraction and processing
activities through cash flow from operations, bank debt and sales of capital
stock and warrants. During the most recent three-year period ended December
31, 2002, the Corporation funded all capital expenditures, acquisitions and
debt reduction from a combination of additional debt, cash flow from operations
and the sale of certain operations. Should it be necessary, the Corporation
has sufficient cash flows and borrowing ability to fund necessary capital
expenditures and acquisitions going forward.

Cash Flow from Operations

The Corporation had $16.2 million of working capital at December 31, 2002,
compared to $10.1 million at December 31, 2001. The improvement of working
capital reflects a number of factors:

Pursuant to an amendment, the credit facility was divided into a $10.0 million
364 day tranche and a $20.0 million two year tranche. Compared to $11.0
million borrowings recorded as bank indebtedness in 2001, the drawdown of $6.0
million under the 364 day tranche and $20.0 million under the two year tranche
were recorded as bank indebtedness and long term debt, respectively, in 2002.

Increased sales resulted in a corresponding increase in accounts receivable;
increased inventories in light of acquisitions made during the year; and
increased future tax benefits reflecting the Hecla settlement that will be
deductible for tax purposes in 2003. In conjunction with these items, the
Corporation has

16



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##### 



effectively been able to finance these movements through the use of its long
term debt facility. However, the Hecla settlement will be effected through a
drawdown of the 364 day tranche.

Financing Agreements

The Corporation restructured the $30.0 million credit facility with the banks
in August 2002. Under the amended and restated credit agreement, the $10.0
million tranche matures on August 15, 2003 and the $20.0 million tranche
matures on August 15, 2004. The credit facility bears interest at LIBOR plus
1.25% to LIBOR plus 1.75% in the case of LIBOR loans or at base rate plus 0.25%
to 0.75% in the case of prime and base rate loans. The actual margin is
determined by certain financial ratios.

Capital Expenditures

The Corporations primary capital investment activities involve the acquisition
and development of industrial mineral and metal processing properties and
facilities, and capital investments to expand its facilities, increase
operating efficiencies, and meet environmental, health and safety standards at
its existing operations. During 2002, capital expenditures for operations were
$5.5 million compared to $3.6 million and $4.4 million for continuing and
discontinued operations for the years ended December 31, 2001 and 2000,
respectively. The capital expenditures were funded by cash flows from
operations and indebtedness.

In aggregate, 2003 capital expenditures are anticipated to be approximately
$4.1 million for the existing operations. The Corporation plans on funding
these expenditures from cash flows from operations.

Although the Corporations capital budgets provide for certain reclamation and
environmental compliance activities, management does not believe that the cost
of the Corporations environmental compliance will have a material adverse
effect on the Corporations results of operations or financial condition in
2003.

During 2002, the Corporation purchased, pursuant to the stock repurchase
program, 21,000 common shares for an aggregate cost of $125,000 and 340,000
common shares at a cost of $2.4 million pursuant to an agreement with the
former president and chief executive officer, compared to 589,000 common shares
for $3.8 million in 2001 and 242,000 common shares for $1.9 million in 2000.

SEASONALITY AND INFLATION

Although the Corporations results from continuing extraction and processing
operations are cyclical due to fluctuations in industrial minerals and aluminum
recycling demands, sales of the Corporations products are generally not
seasonal. Inflation in recent years has not adversely affected the
Corporations results of operations and it is not expected to adversely affect
the Corporation in the future unless it increases substantially and the markets
for industrial minerals and aluminum recycling suffer from a negative impact on
the economy in general.

17



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##### 





|ITEM 7A. |  | MARKET RISK
|-------- |  | -----------

Market risk represents the risk of loss that may impact the consolidated
financial statements of the Corporation due to adverse changes in financial
market prices and rates. The Corporations market risk is primarily the result
of fluctuations in interest rates and aluminum prices. Management monitors the
movements in interest rates and performs sensitivity analysis on aluminum
prices and, on that basis, decides on the appropriate measures to take. Prices
and interest rates are such that management believes no measures need be taken
at this time.

The Corporation does not hold or issue financial instruments for trading
purposes. A discussion of the Corporations financial instruments is included
in the financial instruments note to the Consolidated Financial Statements.



|ITEM 8. |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- |  | -------------------------------------------

Financial statements responsive to this Item are set forth on pages F-1 through
F-33 of this Annual Report on Form 10-K. The Supplementary Schedule required
by this Item is set forth on page S-2 of this Annual Report on Form 10-K. See
Item 15.



|ITEM 9. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- |  | ------------------------------------------------------------------------------------

None.

18



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##### 



PART III



|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- |  | --------------------------------------------------

Following summarizes the information about the directors of the Corporation for
year 2002.

|                |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |      | 
|--------------- |  | --- | -- | -------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---- | 
|                |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Director
|Name            |  | Age |    | Position with the Corporation; Principal Occupation and Business Experience During Past Five Years |  | Since                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Paul A. Carroll |  |     | 62 |                                                                                                    |  | Member of the Corporate Governance
Committee; Member of the Executive
Compensation/Pension Committee up
to February 2002; President of Carnarvon Capital Corporation; Counsel to
Gowling Lafleur Henderson LLP
(Toronto law firm) from May 1999 to February 2003;
Chairman and Chief Executive
Officer, World Wide Minerals Ltd.
(Toronto-based mining company)
since January 1997; Counsel, Smith
Lyons (Toronto law firm) from
1997-1999 and prior thereto Partner
of Smith Lyons since 1973;
Chairman, Juno Limited; Director,
Dundee Bancorp Inc. |  |          | 1991 | 
|                |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |      | 
|Morton A. Cohen |  |     | 68 |                                                                                                    |  | Member of the Executive
Compensation Committee since
November 2002; Member of the Audit
Committee since June 2002;
Chairman, President and Chief
Executive Officer, Clarion Capital
Corporation (Cleveland-based
venture capital company);
Director, Cohesant Technologies,
Inc.; Director, DHB Capital Group                                                                                                                                                                                                                                         |  |          | 1991 | 
|                |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |      | 
|John M. Donovan |  |     | 75 |                                                                                                    |  | Chairman of the Audit
Committee until Mr. MacRae was
appointed Chairman in June 2002;
Mr. Donovan remained as a member on
the Audit Committee; Member of the
Executive Compensation/Pension
Committee; Member of the Executive
Committee; Chartered Accountant;
Director, Philex Gold Inc.
(Toronto-based mining company)                                                                                                                                                                                                                             |  |          | 1991 | 
|                |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |      | 
|R. Peter Gillin |  |     | 54 |                                                                                                    |  | President and Chief Executive
Officer of the Corporation since
November 2002; Chairman of the
Corporate Governance Committee;
Chairman of the Executive
Compensation/Pension Committee
for the period from March 2002 to
November 2002; Chairman of the
Executive Committee; Financial
Consultant; Vice Chairman and
Director, N M Rothschild & Sons
Canada Limited (investment bank)
from 1996 ~ 2002; Director,
Canadian Stage Company (Non-Profit)                                                                                                 |  |          | 1999 | 

19



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##### 



|                      |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |          |      | 
|--------------------- |  | --- | -- | -------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- | ---- | 
|                      |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Director
|Name                  |  | Age |    | Position with the Corporation; Principal Occupation and Business Experience During Past Five Years |  | Since                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                      |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Jonathan Goodman      |  |     | 41 |                                                                                                    |  | Chairman of Executive
Compensation Committee since
June 2002; President and
Chief Executive Officer,
Dundee Resources Ltd.
(resource holding company);
Director of Dundee Bancorp
Inc. (merchant banking and
financial services company),
Dundee Precious Metals Inc.
(investment company) and
Dundee Wealth Management Inc.
(financial service company);
Director, Major Drilling
Group International Inc.
(mineral exploration drilling
company); Director of
Breakwater Resources Ltd.,
Diagem International Resource
Corp., Hope Bay Gold
Corporation, Odyssey
Resources Ltd., Repadre
Capital Corporation and
Tahera Corporation (natural
resource companies) |  |          | 2002 | 
|                      |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |          |      | 
|Peter Lawson-Johnston |  |     | 76 |                                                                                                    |  | Chairman of the Board of
Directors, Member of the
Executive Compensation /Pension
Committee up to
February 2002; Member of
Executive Committee; Honorary
Chairman and Trustee, Solomon
R. Guggenheim Foundation;
Chairman of the Board, The
Harry Frank Guggenheim
Foundation; Senior Partner,
Guggenheim Brothers;
President and Director,
Elgerbar Corporation;
Director, National Review,
Inc.; Limited Partner
Emeritus, Alex Brown & Sons, Inc.                                                                                                                                                                                                               |  |          | 1960 | 
|                      |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |          |      | 
|Garth A.C. MacRae     |  |     | 69 |                                                                                                    |  | Member of the Audit Committee
and appointed as Chairman in
June 2002; Member of the
Executive Compensation /Pension
Committee for the
period from February 2002 to
June 2002; Member of the
Executive Committee; Vice
Chairman and Director, Dundee
Bancorp Inc.; Chairman and
Director, Breakwater
Resources Ltd.; Director,
ChondroGene Limited;
Director, Dundee Precious
Metals Inc.; Director,
Dynamic Global Fund
Corporation; Director, Black
Hawk Mining Inc.; Director,
Dimethaid Research Inc.;
Director, Eurogas
Corporation; Director, Dundee
Wealth Management Inc.                                                                                   |  |          | 1998 | 

20



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##### 



|                         |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                           |  |          |      | 
|------------------------ |  | --- | -- | -------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---- | 
|                         |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                           |  | Director
|Name                     |  | Age |    | Position with the Corporation; Principal Occupation and Business Experience During Past Five Years |  | Since                                                                                                                                                                                                                                                                                                                                                    
|                         |  |     |    |                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                          
|William J. vanden Heuvel |  |     | 73 |                                                                                                    |  | Member of the Audit Committee
until June 2002; Member of
the Corporate Governance
Committee; Of Counsel,
Stroock, Stroock & Lavan
(attorneys at law, New York);
Senior Advisor, Allen &
Company Inc. (investment
bankers); Co-Chairman,
Council of American
Ambassadors; Chairman,
Franklin and Eleanor
Roosevelt Institute;
Chairman, Amromco Energy LLC |  |          | 1989 | 

Information about the executive officers of the Corporation required by this
item appears in Part I, Item 1, Page 6, of this Annual Report on Form 10-K.

Reports Required by Section 16(a)

Section 16(a) of the Securities Exchange Act of 1934requires the Corporations
directors and executive officers, and persons who own more than 10% of the
Corporations common shares to file reports of ownership and changes in
ownership of the Corporations common shares with the Securities and Exchange
Commission and any exchange on which the Corporations common shares are
traded. Based solely on its review of the copies of Forms 3, 4 and 5 received
by the Corporation, or written representations from certain reporting persons
that no Form 5s were required for such persons, the Corporation believes that,
during the fiscal year ended December 31, 2002, all Section 16(a) filing
requirements applicable to its officers, directors and 10% shareholders were
complied with.



|ITEM 11. |  | EXECUTIVE COMPENSATION
|-------- |  | ----------------------

21



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##### 



Summary Compensation Table

|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|----------------------------- |  | ---- | ---- | --- |  | ------------------- | ------- | ---------------------- |  | --------- | ------- | --------- |  | ------- | ------ | ---------- |  | -------- | ------ | ------- |  | ---------- | ------- | --------- |  |  | - |  |  |  | --------- | ---
|                              |  |      |      |     |  | Annual Compensation |         | Long-Term Compensation |  |           |         |          
|                              |  |      |      |     |  |                     |         |                        |  |           |         |          
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  | Awards   |        | Payouts |  |            |         |          
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |          
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  | Securities |         |           |  |  |   |  |  | 
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  | Other   |        |            |  |          |        | Under-  |  |            |         |           |  |  |   | 
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  | Annual  |        | Restricted |  | Lying    |        |         |  |            |         | All Other
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  | Compen- |        | Stock      |  | Options/ |        | LTIP    |  | Compen    
|Name and                      |  |      |      |     |  | Salary              |         | Bonus                  |  | sation(6) |         | Awards(1) |  | SARs(2) |        | Payouts    |  | -sation 
|Principal Position            |  | Year |      | ($) |  | ($)                 |         | ($)                    |  | ($)       |         | (#)       |  | ($)     |        | ($)       
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |           
|R. Peter Gillin               |  |      | 2002 |     |  |                     | 37,500  |                        |  |           |        |           |  |         |       |            |  |          |       |         |  |            | 10,000  |           |  |  |  |  |  |  | 39,253    | (3)
|President & Chief             |  |      | 2001 |     |  |                     |        |                        |  |           |        |           |  |         |       |            |  |          |       |         |  |            | 5,000   |           |  |  |  |  |  |  | 23,000    | (3)
|Executive Officer             |  |      | 2000 |     |  |                     |        |                        |  |           |        |           |  |         |       |            |  |          |       |         |  |            |        |           |  |  |  |  |  |  | 15,400    | (3)
|From November 18,
2002        |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|Richard L. Lister             |  |      | 2002 |     |  |                     | 300,000 |                        |  |           | 115,000 |           |  |         | 42,183 |            |  |          | 30,000 |         |  |            | 165,000 |           |  |  |  |  |  |  | 1,141,800 | (4)
|President & Chief             |  |      | 2001 |     |  |                     | 292,068 |                        |  |           | 131,200 |           |  |         | 33,128 |            |  |          | 30,000 |         |  |            | 100,000 |           |  |  |  |  |  |  | 152,940   | (5)
|Executive Officer             |  |      | 2000 |     |  |                     | 284,755 |                        |  |           | 151,200 |           |  |         | 22,925 |            |  |          | 30,000 |         |  |            |        |           |  |  |  |  |  |  | 245,050   | (5)
|To November 18, 2002          |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|Peter J. Goodwin              |  |      | 2002 |     |  |                     | 225,000 |                        |  |           | 100,000 |           |  |         | 6,210  |            |  |          | 22,500 |         |  |            |        |           |  |  |  |  |  |  |          |    
|President,                    |  |      | 2001 |     |  |                     | 225,000 |                        |  |           | 82,000  |           |  |         | 8,458  |            |  |          | 22,500 |         |  |            | 30,000  |           |  |  |  |  |  |  |          |    
|Industrial Minerals           |  |      | 2000 |     |  |                     | 204,000 |                        |  |           | 41,000  |           |  |         | 10,436 |            |  |          | 18,744 |         |  |            | 25,000  |           |  |  |  |  |  |  |          |    
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|Allen J. Palmiere             |  |      | 2002 |     |  |                     | 168,142 |                        |  |           | 54,136  |           |  |         | 41,221 |            |  |          |       |         |  |            |        |           |  |  |  |  |  |  | 150,000   | (7)
|Vice President,               |  |      | 2001 |     |  |                     | 154,948 |                        |  |           | 48,744  |           |  |         | 38,916 |            |  |          |       |         |  |            | 20,000  |           |  |  |  |  |  |  |          |    
|Chief Financial               |  |      | 2000 |     |  |                     | 161,572 |                        |  |           | 46,788  |           |  |         | 40,735 |            |  |          |       |         |  |            | 60,000  |           |  |  |  |  |  |  |          |    
|Officer & Corporate
Secretary |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|                              |  |      |      |     |  |                     |         |                        |  |           |         |           |  |         |        |            |  |          |        |         |  |            |         |           |  |  |   |  |  |  |           |    
|Terrance J. Hogan             |  |      | 2002 |     |  |                     | 185,000 |                        |  |           | 77,000  |           |  |         | 1,564  |            |  |          | 17,200 |         |  |            |        |           |  |  |  |  |  |  |          |    
|President,                    |  |      | 2001 |     |  |                     | 177,399 |                        |  |           |        |           |  |         | 2,408  |            |  |          | 17,200 |         |  |            | 37,000  |           |  |  |  |  |  |  |          |    
|Alumitech, Inc.               |  |      | 2000 |     |  |                     | 172,000 |                        |  |           |        |           |  |         | 1,985  |            |  |          | 17,200 |         |  |            |        |           |  |  |  |  |  |  |          |    



---

|(1) |  | Represents benefits under our Employee Stock Purchase Plan whereby
employees may elect to invest up to 10% of their earnings and we match
funding for the purchase of our common shares. Common shares purchased
under this plan are held for a one-year vesting period. Amounts shown for
Mr. Lister do not include imputed interest of $19,694, $74,803 and $99,827
in 2002, 2001 and 2000, respectively, on a loan Mr. Lister received under
our Key Executive Stock Purchase Plan. We did not reimburse Mr. Lister
for any tax consequences arising from this loan.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | On July 26, 2000 and May 11, 2000, Messrs. Goodwin and Palmiere were
granted options for 25,000 and 60,000 common shares at exercise prices of
$7.5625 and $8.1875, respectively. On February 14, 2001, Messrs. Gillin,
Lister, Goodwin, Palmiere and Hogan were granted options for 5,000,
100,000, 30,000, 20,000 and 15,000 common shares respectively at an
exercise price of $5.21. On May 24, 2001, Mr. Hogan was granted options
for 22,000 common shares at an exercise price of $7.25. On June 14, 2002,
Mr. Gillin was granted options for 10,000 common     

22



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##### 



|    |  | shares at an exercise price of $6.83. On August 7, 2002, Mr. Lister was
granted options for 165,000 common shares at an exercise price of $6.96.                                                                                                                                                                                                                                                                           
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Represents directors fees.                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) |  | Represents $885,000 bonus payment and $256,800 for the repurchase for
cancellation of an aggregate of 220,000 options pursuant to an agreement
with Mr. Lister relating to his retirement.
The Corporation also entered into a consulting agreement with Mr. Lister under
which the Corporation will pay Mr. Lister $210,000 on an annual basis for
consulting services provided to the Corporation until January 15, 2004.
|   
|(5) |  | Represents the portion of Mr. Listers retroactive salary adjustment paid
in fiscal 2000. The remaining portion of the retroactive adjustment was
paid in 2001.                                                                                                                                                                                                                                                            
|   
|(6) |  | Constitutes premiums for term life insurance exceeding amounts eligible
to most employees, automobile benefits, memberships/dues, and employer
matched contributions to a group registered retirement plan.                                                                                                                                                                                                                
|   
|(7) |  | Reflects a one-time payment arising from the negotiations of an
employment agreement.                                                                                                                                                                                                                                                                                                                                      

During 2002, the Corporation negotiated comprehensive employment agreements with Messrs.
Goodwin and Palmiere. These Agreements replaced all existing employment
related agreements and arrangements. The intent was to provide equitable
employment contracts that provide us with the long-term commitment of the
executives and the executives with comprehensive and competitive employment
arrangements. Agreements with each of Terrance J. Hogan,
Peter J. Goodwin and Allen J. Palmiere provide for certain benefits in the
event such officer is no longer employed by us or our subsidiaries following a
change in control transaction. If, within two years after the arrangement, the
officer is dismissed without cause or the officer terminates his employment
following a triggering event (which includes a specified adverse change in
duties, benefits, title, reporting, or regular work location), he is entitled
to payment of twice his then current annual base salary, benefits and average
annual bonus over the prior two years, immediate vesting of stock options and
shares purchased pursuant to our employee stock purchase plan and certain
outplacement services. These agreements, which expire on December 31, 2004
unless extended, were filed as exhibits to our Form 10-Q for the fiscal quarter
ended September 30, 2002, in the case of Messrs. Goodwin and Palmiere and our
Form 10-K for the fiscal year ended December 31, 1999, in the case of Mr.
Hogan, and reference is made thereto for further information. In
addition, Terrance J. Hogan,
Peter J. Goodwin and Allen J. Palmiere
also have entered into change of control agreements pursuant to which
they will receive cash payments in an amount not to exceed $25,000
individually and $75,000 in the aggregate upon completion of the Arrangement.

In November, 2002, the Corporation entered into an employment with Mr. Peter
Gillin for a term from November 18, 2002 until May 1, 2003 pursuant to which
Mr. Gillin is paid $25,000 per month. Upon completion of the Arrangement, Mr.
Gillin will receive a success bonus in the amount of $500,000. The amount of
Mr. Gillins bonus was negotiated subsequent to determination of the final
terms of the Arrangement based upon guidelines established in his employment
agreement with us and consideration of his engagement as chief executive
officer to provide broad strategic planning advice to us. His employment
agreement provided that the bonus arrangement would be consistent with the
customary bonus arrangements for our chief executive officer, adjusted to
reflect that Mr. Gillin would not participate as chief executive officer in our
stock option plans or in our employee stock purchase plan.

Compensation for Directors

During the fiscal year ended December 31, 2002 each director who is not one of
our salaried employees was paid $15,000 per annum on a semi-annual basis for
his services as a director. Directors were also paid a fee of $1,000 for each
board and committee meeting attended, and reimbursement of their travel related
expenses. From time to time, directors may, at the discretion of our board or
any committee thereof, be paid a per diem fee, approximating the meeting fee,
for special assignments. In 2002, our directors were paid an aggregate of
$279,000 in directors and other fees.

On June 14, 2002, two directors who were not our salaried employees were
granted options under our 1999 Stock Option Plan to acquire 10,000 of our
common shares, and one director who was not one of our salaried employees was
granted options under our 1999 Stock Option Plan to acquire 37,500 of our
common shares exercisable at $6.83 per share, the market price at the time of
the grant. These options are exercisable as to half on June 14, 2003 and are
fully exercisable on June 14, 2004. They expire on June 14, 2008.

In 2002, we purchased directors and officers liability insurance with a
liability limit of $15,000,000 for which we paid an annual premium of $157,000.
The policy provides for a deductible payable by us of $100,000.

Option Exercises and Year-End Values Table

With respect to the Named Officers, the following table sets forth the number
of options exercised and the value realized upon exercise and the value of
outstanding options at December 31, 2002, using $5.04, the closing price of our
common shares on the New York Stock Exchange on December 31, 2002.

23



---



##### 



AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

|                   |  |             |    |          |  |                       |    |                   |  |                       |               |                      |  |                      |       | 
|------------------ |  | ----------- | -- | -------- |  | --------------------- | -- | ----------------- |  | --------------------- | ------------- | -------------------- |  | -------------------- | ----- | 
|                   |  |             |    |          |  |                       |    |                   |  |                       |               |                      |  | Value of Unexercised
|                   |  |             |    |          |  |                       |    |                   |  | Number of Unexercised |               | In-The-Money Options
|                   |  | Shares      |    |          |  |                       |    | Options at Fiscal |  | at Fiscal Year-End   
|                   |  | Acquired on |    | Value    |  | Year-End Exercisable/ |    | Exercisable/     
|Named Officer      |  | Exercise    |    | Realized |  | Unexercisable         |    | Unexercisable    
|                   |  |             |    |          |  |                       |    |                  
|R. Peter Gillin    |  |             |  |          |  |                       |  |                   |  |                       | 25,000/12,500 |                      |  |                      | $0/$0 | 
|Richard L. Lister* |  |             |  |          |  |                       |  |                   |  |                       | 245,000/0     |                      |  |                      | $0/$0 | 
|Allen J. Palmiere  |  |             |  |          |  |                       |  |                   |  |                       | 95,000/10,000 |                      |  |                      | $0/$0 | 
|Peter J. Goodwin   |  |             |  |          |  |                       |  |                   |  |                       | 75,000/15,000 |                      |  |                      | $0/$0 | 
|Terrance J. Hogan  |  |             |  |          |  |                       |  |                   |  |                       | 58,500/18,500 |                      |  |                      | $0/$0 | 



---

|* |  | Mr. Lister resigned as president and chief executive officer in November
2002.
|- |  | ------------------------------------------------------------------------------

Option Grants to Named Officers

In the year ended December 31, 2002, the following options were granted to our
Named Officers pursuant to our 1999 Stock Option Plan.

OPTIONS/SAR GRANTS DURING THE MOST RECENTLY
COMPLETED FINANCIAL YEAR

|                  |  |            |         |            |  |          |      |            |  |    |      |     |  |                   |   |                  |         |                      |   |   |         |  |   | 
|----------------- |  | ---------- | ------- | ---------- |  | -------- | ---- | ---------- |  | -- | ---- | --- |  | ----------------- | - | ---------------- | ------- | -------------------- | - | - | ------- |  | - | 
|                  |  |            |         |            |  |          |      |            |  |    |      |     |  |                   |   |                  |         | Potential Realizable
|                  |  |            |         |            |  | Percent  |      |            |  |    |      |     |  |                   |   | Value At Assumed
|                  |  | Number of  |         | of Total   |  |          |      |            |  |    |      |     |  | Annual Rates of  
|                  |  | Common     |         | Options    |  |          |      |            |  |    |      |     |  | Stock Price      
|                  |  | Shares     |         | Granted to |  |          |      |            |  |    |      |     |  | Appreciation For 
|                  |  | Underlying |         | Employees  |  |          |      |            |  |    |      |     |  | Option Term*     
|                  |  | Options    |         | in Fiscal  |  | Exercise |      | Expiration |  |   
|Name              |  | Granted    |         | Year       |  | Price    |      | Date       |  | 5% |      | 10%
|                  |  |            |         |            |  |          |      |            |  |    |      |    
|R. Peter Gillin   |  |            | 10,000  |            |  |          | 5.7  | %          |  | $  | 6.83 |     |  | June 14, 2008     |   | $                | 23,229  |                      |   | $ | 52,698  | 
|Richard L. Lister |  |            | 165,000 |            |  |          | 94.3 | %          |  | $  | 6.96 |     |  | December 31, 2004 |   | $                | 117,711 |                      |   | $ | 241,164 | 
|Allen J. Palmiere |  |            |        |            |  |          |     |            |  |    |     |     |  |                   |  |                  |         |                      |  |   |         |  |  | 
|Peter J. Goodwin  |  |            |        |            |  |          |     |            |  |    |     |     |  |                   |  |                  |         |                      |  |   |         |  |  | 
|Terrance J. Hogan |  |            |        |            |  |          |     |            |  |    |     |     |  |                   |  |                  |         |                      |  |   |         |  |  | 



---

|* |  | Potential realizable values are net of exercise price and are before
taxes and market values of the common shares underlying the options are
based on the assumption that our common shares appreciate at the annual
rates shown, compounded annually, from the date of grant until the
expiration of the option term. These numbers are calculated based on the
requirements of the Securities and Exchange Commission and do not reflect
our estimates of future stock price growth.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

1999 Employee Stock Purchase Plan

The table below discloses benefits that were received in fiscal 2002 by each of
the following under the Employee Stock Purchase Plan.

24



---



##### 



BENEFITS UNDER
1999 EMPLOYEE STOCK PURCHASE PLAN

|                                     |  |               |         |        |  |  |        | 
|------------------------------------ |  | ------------- | ------- | ------ |  |  | ------ | 
|                                     |  | Dollar Value* |         |        |  | 
|Name and Position                    |  | ($)           |         | Shares
|                                     |  |               |         |       
|Richard L. Lister                    |  |               | 30,000  |        |  |  | 9,980  | 
|Peter J. Goodwin                     |  |               | 22,500  |        |  |  | 7,485  | 
|Allen J. Palmiere                    |  |               |        |        |  |  |       | 
|Terrance J. Hogan                    |  |               | 17,200  |        |  |  | 5,755  | 
|Executive Group                      |  |               | 69,700  |        |  |  | 23,220 | 
|Non-Executive Director Group         |  |               |        |        |  |  |       | 
|Non-Executive Officer Employee Group |  |               | 223,180 |        |  |  | 74,629 | 



---

|* |  | Represents the amount of our contribution which matches the contribution of
the employee.
|- |  | -----------------------------------------------------------------------------------------

Indebtedness of Directors, Named Officers and Senior Officers

The table below summarizes any indebtedness owed to us as at December 31, 2002
of our directors and Named Officers entered into in connection with a purchase
of our common shares, excluding routine indebtedness.

TABLE OF INDEBTEDNESS OF DIRECTORS, NAMED OFFICERS AND SENIOR OFFICERS
UNDER SECURITIES PURCHASE PROGRAMS

|                            |  |             |  |             |           |              |  |             |   |                |  |           |   |           |  |  |          |  |  | 
|--------------------------- |  | ----------- |  | ----------- | --------- | ------------ |  | ----------- | - | -------------- |  | --------- | - | --------- |  |  | -------- |  |  | 
|                            |  |             |  |             |           |              |  |             |   | Amount         |  | Financial |   | Number of
|                            |  |             |  |             |           | Largest      |  | Outstanding |   | Assisted       |  | Common   
|                            |  | Involvement |  | Amount      |           | as at        |  | Securities  |   | Shares Held As
|                            |  | of the      |  | Outstanding |           | December 31, |  | Purchased   |   | Security for  
|Name and Principal Position |  | Corporation |  | During 2002 |           | 2002         |  | During 2002 |   | Indebtedness  
|                            |  |             |  |             |           |              |  |             |   |               
|Richard L. Lister           |  | Lender      |  | $           | 1,259,300 |              |  |             |  |                |  |           |  |           |  |  | 176,000* | 
|President & CEO             |  |             |  |             |           |              |  |             |   |                |  |           |   |           |  |  |          |  |  | 
|                            |  |             |  |             |           |              |  |             |   |                |  |           |   |           |  |  |          |  |  | 
|Richard L. Lister           |  | Guarantor   |  | $           | 600,000   |              |  |             |  |                |  |           |  |           |  |  | 85,700   | 
|President & CEO             |  |             |  |             |           |              |  |             |   |                |  |           |   |           |  |  |          |  |  | 



---

|* |  | Jointly secured this debt and the $500,000 debt described in the next
table. This security was released when the debt was repaid by Mr. Lister
in August 2002.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The following chart summarizes any indebtedness to us as at December 31, 2002
of our directors and Named Officers not entered into in connection with a
purchase of our common shares, excluding routine indebtedness.

25



---



##### 



TABLE OF INDEBTEDNESS OF DIRECTORS, NAMED OFFICERS AND SENIOR OFFICERS
OTHER THAN UNDER SECURITIES PURCHASE PROGRAMS

|                            |  |                    |  |                    |         |                   |  |                    |         |  |  | 
|--------------------------- |  | ------------------ |  | ------------------ | ------- | ----------------- |  | ------------------ | ------- |  |  | 
|                            |  |                    |  |                    |         | Largest Amount    |  | Amount Outstanding
|                            |  | Involvement of the |  | Outstanding During |         | as at            
|Name and Principal Position |  | Corporation        |  | the Year           |         | December 31, 2002
|                            |  |                    |  |                    |         |                  
|Richard L. Lister           |  | Lender             |  | $                  | 500,000 |                   |  |                    |        | 
|President & CEO             |  |                    |  |                    |         |                   |  |                    |         |  |  | 
|                            |  |                    |  |                    |         |                   |  |                    |         |  |  | 
|Paul A. Carroll             |  | Lender             |  | $                  | 110,851 | *                 |  | $                  | 101,829 | 
|Director                    |  |                    |  |                    |         |                   |  |                    |         |  |  | 



---

|* |  | This loan bears interest at a rate equal to the average cost of borrowing
under our credit facilities, is supported by a promissory note and secured
by a pledge of 9,500 of our common shares. All directors fees paid in
cash are applied to reduce the loan.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pension Plan

Pursuant to our pension plan, employees are entitled to pension benefits after
five years of service with us. The amount of such benefits depends upon salary
and length of service as shown in the table below. The service factor is 1.5%
per year. Benefits for US employees are coordinated with US Social Security
retirement benefits by reducing the service factor to 0.9% with respect to
average salary less than or equal to the average covered Social Security wages
($43,968 for an employee who retires at age 65 during 2003). As of January 1,
2003, the number of credited years of service and the compensation covered by
the pension plan for the Named Officers are: Richard L. Lister, 18.5 and
$200,000; Peter J. Goodwin, 10.1 and $200,000; and Allen J. Palmiere, 11.2 and
$196,682. As of January 1, 2003, Mr. Goodwin is a US employee; neither Mr.
Lister nor Mr. Palmiere are US employees.

ZEMEX CORPORATION RETIREMENT PENSION PLAN
Estimated Pension Benefits

|                                     |  |                                                       |        |        |  |    |        |        |  |    |        |        |  |   |        |        |  |   |        |        | 
|------------------------------------ |  | ----------------------------------------------------- | ------ | ------ |  | -- | ------ | ------ |  | -- | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                     |  | Credited Service as of Normal Retirement Date ("NRD")
|                                     |  |                                                      
|Average Final Compensation as of NRD |  | 15                                                    |        | 20     |  | 25 |        | 30     |  | 35
|                                     |  |                                                       |        |        |  |    |        |        |  |   
|$50,000                              |  |                                                       | $      | 7,293  |  |    | $      | 9,724  |  |    | $      | 12,155 |  |   | $      | 14,586 |  |   | $      | 17,017 | 
|$75,000                              |  |                                                       | $      | 12,918 |  |    | $      | 17,224 |  |    | $      | 21,530 |  |   | $      | 25,836 |  |   | $      | 30,142 | 
|$100,000                             |  | $                                                     | 18,543 |        |  | $  | 24,724 |        |  | $  | 30,905 |        |  | $ | 37,086 |        |  | $ | 43,267 |       
|$125,000                             |  | $                                                     | 24,168 |        |  | $  | 32,224 |        |  | $  | 40,280 |        |  | $ | 48,336 |        |  | $ | 56,392 |       
|$150,000                             |  | $                                                     | 29,793 |        |  | $  | 39,724 |        |  | $  | 49,655 |        |  | $ | 59,586 |        |  | $ | 69,517 |       
|$175,000                             |  | $                                                     | 35,418 |        |  | $  | 47,224 |        |  | $  | 59,030 |        |  | $ | 70,836 |        |  | $ | 82,642 |       
|$200,000                             |  | $                                                     | 41,043 |        |  | $  | 54,724 |        |  | $  | 68,405 |        |  | $ | 82,086 |        |  | $ | 95,767 |       
|$225,000                             |  | $                                                     | 41,043 |        |  | $  | 54,724 |        |  | $  | 68,405 |        |  | $ | 82,086 |        |  | $ | 95,767 |       



---

|Note: |  | All benefits shown were estimated using the 2003 Social Security Law and
assume the employee terminates employment during 2003 on his NRD (age 65).
The benefits shown are payable at NRD as a Five Year Certain and Life
Annuity, the normal form for an unmarried participant. All amounts are
annual.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26



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##### 



ZEMEX CORPORATION RETIREMENT PENSION PLAN
Estimated Pension Benefits (Canadian employees only)

|                                     |  |                                                       |        |        |  |    |        |        |  |    |        |        |  |   |        |        |  |   |         |        | 
|------------------------------------ |  | ----------------------------------------------------- | ------ | ------ |  | -- | ------ | ------ |  | -- | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ------ | 
|                                     |  | Credited Service as of Normal Retirement Date ("NRD")
|                                     |  |                                                      
|Average Final Compensation as of NRD |  | 15                                                    |        | 20     |  | 25 |        | 30     |  | 35
|                                     |  |                                                       |        |        |  |    |        |        |  |   
|$50,000                              |  |                                                       | $      | 11,250 |  |    | $      | 15,000 |  |    | $      | 18,750 |  |   | $      | 22,500 |  |   | $       | 26,250 | 
|$75,000                              |  |                                                       | $      | 16,875 |  |    | $      | 22,500 |  |    | $      | 28,125 |  |   | $      | 33,750 |  |   | $       | 39,375 | 
|$100,000                             |  | $                                                     | 22,500 |        |  | $  | 30,000 |        |  | $  | 37,500 |        |  | $ | 45,000 |        |  | $ | 52,500  |       
|$125,000                             |  | $                                                     | 28,125 |        |  | $  | 37,500 |        |  | $  | 46,875 |        |  | $ | 56,250 |        |  | $ | 65,625  |       
|$150,000                             |  | $                                                     | 33,750 |        |  | $  | 45,000 |        |  | $  | 56,250 |        |  | $ | 67,500 |        |  | $ | 78,750  |       
|$175,000                             |  | $                                                     | 39,373 |        |  | $  | 52,500 |        |  | $  | 65,625 |        |  | $ | 78,750 |        |  | $ | 91,875  |       
|$200,000                             |  | $                                                     | 45,000 |        |  | $  | 60,000 |        |  | $  | 75,000 |        |  | $ | 90,000 |        |  | $ | 105,000 |       
|$225,000                             |  | $                                                     | 45,000 |        |  | $  | 60,000 |        |  | $  | 75,000 |        |  | $ | 90,000 |        |  | $ | 105,000 |       



---

|Note: |  | All benefits shown were estimated using the 2003 Social Security Law and
assume the employee terminates employment during 2003 on his NRD (age 65).
The benefits shown are payable at NRD as a Five Year Certain and Life
Annuity, the normal form for an unmarried participant. All amounts are
annual.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS
|-------- |  | ---------------------------------------------------------------------------------------------

Information relating to the equity compensation plan is as follows:

EQUITY COMPENSATION PLAN INFORMATION

|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|---------------------------------------------------------- |  | ----------------- | --------- | ---------------- |  | --------------------- | ---- |  |  | -------------------- | ------- | 
|                                                           |  |                   |           |                  |  |                       |      |  |  | Number of securities
|                                                           |  | Number of         |           | Weighted-        |  | remaining available  
|                                                           |  | securities to be  |           | average exercise |  | for future issuance  
|                                                           |  | issued upon       |           | price of         |  | under equity         
|                                                           |  | exercise of       |           | outstanding      |  | compensation plans   
|                                                           |  | outstanding       |           | options,         |  | (excluding securities
|                                                           |  | options, warrants |           | warrants and     |  | reflected in         
|                                                           |  | and rights        |           | rights           |  | column (a))          
|Plan Category                                              |  | (a)               |           | (b)              |  | (c)                  
|                                                           |  |                   |           |                  |  |                      
|Combined 1995 and
1999 Stock
Option Plans                  |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Equity compensation
plans approved by
security holders     |  |                   | 1,047,150 |                  |  | $                     | 7.37 |  |  |                      | 215,850 | 
|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Equity compensation
plans not approved
by security holders |  |                   |         |                  |  |                       |    |  |  |                      |       | 
|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Total                                                      |  |                   | 1,047,150 |                  |  | $                     | 7.37 |  |  |                      | 215,850 | 
|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Employee Stock Purchase Plan                               |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Equity compensation
plans approved by
security holders     |  |                   |          |                  |  |                       |    |  |  |                      | 82,438  | 
|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Equity compensation
plans not approved
by security holders |  |                   |         |                  |  |                       |    |  |  |                      |       | 
|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 
|Total                                                      |  |                   |          |                  |  |                       |    |  |  |                      | 82,438  | 
|                                                           |  |                   |           |                  |  |                       |      |  |  |                      |         | 

The following table sets forth, as of March 25, 2003, information concerning
the shares beneficially owned by each person who, to our knowledge, is the
holder of 5% or more of our common shares, each director and each officer who
was an executive officer as of that date, and all of our executive officers and
directors as a group. Except as otherwise noted, each beneficial owner has
sole investment and voting power with respect to the listed shares.

27



---



##### 



Ownership Table

|                                                                            |  |                     |           |                                 |                    |  |      |  
|--------------------------------------------------------------------------- |  | ------------------- | --------- | ------------------------------- | ------------------ |  | ---- | -
|                                                                            |  | Shares Beneficially |           |                                 | Percentage        
|Name of Beneficial Owner(1)(2)                                              |  | Owned(4)            |           |                                 | Beneficially Owned
|                                                                            |  |                     |           |                                
|The Dundee BankPO Box 2506 GT
George Town, Grand Cayman
Cayman Islands, BWI |  |                     | 3,055,176 | (3)(13)                         |                    |  | 38.7 | %
|Paul A. Carroll                                                             |  |                     | 42,050    | (5)(7)(13)                      |                    |  | *    |  
|Morton A. Cohen                                                             |  |                     | 331,386   | (5)(6)(13)                      |                    |  | 4.2  | %
|John M. Donovan                                                             |  |                     | 44,846    | (5)(13)                         |                    |  | *    |  
|R. Peter Gillin                                                             |  |                     | 38,500    | (5)(13)                         |                    |  | *    |  
|Jonathan Goodman                                                            |  |                     | 37,500    | (5)(7)(13)                      |                    |  |     |  
|Peter Lawson-Johnston                                                       |  |                     | 112,018   | (5)(8)(13)                      |                    |  | 1.4  | %
|Richard L. Lister                                                           |  |                     | 341,834   | (5)(9)(10)(12)(13)              |                    |  | 3.9  | %
|Garth A.C. MacRae                                                           |  |                     | 37,500    | (5)(7)                          |                    |  | *    |  
|William J. vanden Heuvel                                                    |  |                     | 57,522    | (5)(13)                         |                    |  | *    |  
|Allen J. Palmiere                                                           |  |                     | 110,510   | (10)(13)                        |                    |  | 1.4  | %
|Peter J. Goodwin                                                            |  |                     | 120,154   | (10)(12)(13)                    |                    |  | 1.4  | %
|Terrance J. Hogan                                                           |  |                     | 135,990   | (10)(11)(12)(13)                |                    |  | 1.7  | %
|All Directors and Named
Officers as a group (12 persons)                    |  |                     | 1,506,150 | (4)(5)(7)(8)(9)(10)(11)(12)(13) |                    |  | 17.3 | %



---

|*   |  | Denotes less than 1% of common shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | A Schedule 13G, prepared for Merrill Lynch & Co., Inc. (on behalf of
Merrill Lynch Investment Managers (MLIM)), was filed with the Securities
and Exchange Commission indicating that MLIM could be construed to be a
beneficial owner of 821,410 (10.43%) common shares as of January 13, 2003.
However, MLIM disclaims any beneficial ownership of the common shares
because they are held in proprietary trading accounts.                                                                                                                                          
|   
|(2) |  | Franklin Resources, Inc. (Franklin) has filed a Schedule 13G with the
Securities and Exchange Commission indicating that Franklin could be
deemed to be a beneficial owner of 511,100 (6.5%) common shares as of
February 12, 2003. However, Franklin disclaims any beneficial ownership
of the common shares as they are owned by one or more open or closed-end
investment companies or held in discretionary accounts managed by
Franklin.                                                                                                                          
|   
|(3) |  | The Dundee Bank has filed a Schedule 13D with the Securities and Exchange
Commission indicating that it was the beneficial owner of 3,055,176 of our
common shares as of August 15, 2002.                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) |  | Computed in accordance with Rule 13d-3(d)(1) of the Securities Exchange
Act of 1934, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(5) |  | On April 21, 1997, Messrs. Carroll, Cohen, Donovan, Lawson-Johnston and
vanden Heuvel were each granted options for 10,000 shares at $7.00 per
common share exercisable in two instalments of 5,000 each beginning on
April 21, 1998 and April 21, 1999, respectively. These options would have
expired April 21, 2003 but will pursuant to the arrangement and as
determined by the board have been extended to July 1, 2003. On May 15,
1998, Messrs. Carroll, Cohen, Donovan, Lawson-Johnston and vanden Heuvel
were granted options for an additional 7,500 shares at

28



---



##### 



|     |  | $10.1875 per common share exercisable in two instalments of 3,750 each
beginning on May 15, 1999 and May 15, 2000, respectively. These options
expire May 15, 2004. On May 15, 1998, Mr. Lister was granted options for
an additional 80,000 shares at $10.1875 per common share exercisable in
two instalments of 40,000 each beginning on May 15, 1999 and May 15,
2000, respectively. On October 1, 1998, upon joining the board, Mr.
MacRae was granted options for 15,000 shares at $6.50 per share
exercisable in two instalments of 7,500 each beginning on October 1, 1999
and October 1, 2000, respectively, and expiring on October 1, 2004. On
January 15, 1999, upon joining the board, Mr. Gillin was granted options
for 15,000 common shares at $6.5625 per common share exercisable in two
instalments of 7,500 each beginning on January 15, 2000 and January 15,
2001, respectively, and expiring on January 15, 2005. On May 26, 1999,
stock options for 15,000 common shares at $6.2625 per common share were
granted to Messrs. Cohen, Donovan, Lawson-Johnston and vanden Heuvel
exercisable in two instalments of 7,500 each beginning on May 26, 2000
and May 26, 2001, respectively, and expire on May 26, 2009. On May 26,
1999, stock options for 7,500 common shares at $6.2625 per common share
were granted to Messrs. Carroll, Gillin and MacRae; exercisable in two
instalments of 3,750 each beginning on May 26, 2000 and May 26, 2001,
respectively, and expiring on May 26, 2009. On February 14, 2001,
Messrs. Carroll, Cohen, Donovan, Gillin, Lawson-Johnston, MacRae and
vanden Heuvel were granted options for 5,000 common shares at $5.21 per
common share exercisable in two instalments of 2,500 each beginning on
February 14, 2002 and February 14, 2003, respectively, and expiring on
February 14, 2007. On June 14, 2002, Messrs. Gillin, Goodman and MacRae
were granted options for 10,000 shares, 37,500 shares and 10,000 common
shares respectively at $6.83 per share exercisable in two instalments of
5,000 common shares, 18,750 common shares and 5,000 shares, respectively
beginning on June 14, 2003 and June 14, 2004, and expiring on June 14,
2008. All options were granted at the market value at the time of grant.
All options that have not vested shall be deemed to vest pursuant to the
Arrangement and as determined by resolution of
the board. Note that at the meeting of our board of directors held on
March 3, 2003, the expiration date of the options which expired on
February 18, 2003, and those which will expire on April 21, 2003, was
extended to July 1, 2003. Said options were otherwise unchanged.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(6)  |  | Includes 288,040 common shares owned by Clarion Capital Corporation, a
company of which Mr. Cohen may be deemed to be the beneficial owner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|(7)  |  | Messrs. Carroll, Goodman and MacRae are directors of Dundee Bancorp Inc.
of which The Dundee Bank is an indirect wholly-owned subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(8)  |  | Includes 18,733 common shares beneficially owned by Elgerbar Corporation.
Mr. Lawson-Johnston is president and director of Elgerbar Corporation and
has shared voting and investment power with respect to the common shares
held by it.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|(9)  |  | Mr. Lister resigned as president and chief executive officer in November
2002. Pursuant to an agreement dated August 7, 2002, Mr. Lister is
required to vote his shares pursuant to a voting trust with The Dundee
Bank in a manner consistent with the recommendation of the board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(10) |  | Includes common shares issuable upon exercise of options including
options that are deemed vested pursuant to the Arrangement and as
determined by the board as follows: Mr. Lister, 245,000 common shares;
Mr. Palmiere, 105,000 common shares; Mr. Goodwin, 90,000 common shares;
Mr. Hogan, 77,000 common shares; and all named officers and directors as a
group, 804,500 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

29



---



##### 



|(11) |  | On May 24, 2001, Mr. Hogan was granted options for 22,000 shares at $7.25
exercisable in two instalments of 11,000 common shares each beginning on
May 24, 2002 and May 24, 2003 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(12) |  | Includes shares purchased from January 1, 1995 to December 31, 2002 in
accordance with the terms and conditions of our employee stock purchase
plan as follows: Mr. Lister, 59,010 common shares; Mr. Goodwin, 34,880
common shares; and Mr. Hogan, 26,719 common shares.                                                                                                                                                                                                                                                                                                                                                             
|    
|(13) |  | In connection with Arrangement, certain of the directors, executive officers
and other securityholders entered into support agreements with Pacasmayo. These securityholders, directors and officers own, in
the aggregate, 3,562,674 common shares and options to purchase 559,500 common
shares, representing approximately 46% of the aggregate outstanding common
shares and options. Pacasmayo has filed a Schedule 13D with the
Securities and Exchange Commission indicating that Pacasmayo may be
deemed to beneficially own 4,122,174 common shares as of
March 3, 2003 by virtue of the execution of the support
agreements.

All of our outstanding options have been vested, subject to completion of the
Arrangement.



|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- |  | ----------------------------------------------

The Corporation provides management services to a company owned by its largest
shareholder, Dundee Bancorp, Inc. (Dundee). The Corporation charged $68,000,
$69,000 and $67,000 in 2002, 2001 and 2000, respectively. The fee has been
established based upon fees charged for comparable services provided by a
consultant operating on an arms length basis. This contract was terminated
effective December 31, 2002.

During the year the Corporation paid $63,000 (2001  $74,000 and 2000 
$87,000) to a subsidiary of Dundee for services provided as a financial advisor
for the management of the Corporations pension plan.



|ITEM 14. |  | CONTROLS AND PROCEDURES
|-------- |  | -----------------------

The Corporations Chief Executive Officer and Chief Financial Officer have
conducted an evaluation of the effectiveness of disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as
amended, as of a date within 90 days of the filing of this annual report.
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures are effective in
ensuring that all material information required to be filed in this annual
report has been made known to them in a timely fashion. There have been no
significant changes in internal controls, or in factors that could
significantly affect internal controls, subsequent to the date the Chief
Executive Officer and Chief Financial Officer completed their evaluation.

PART IV



|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                   
|-------- |  | -----------------------------------------------------------------------------------
|        
|(a)1.    |  | Financial statements and independent auditors report filed as part of
this report:



| | (a) |  | Consolidated Balance Sheets at December 31, 2002 and 2001, which
information is found on page F-4 of this report;                                  
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Consolidated Statements of Shareholders Equity for the three years
ended December 31, 2002, which information is found on page F-5 of this
report;

30



---



##### 





| | (c) |  | Consolidated Statements of Operations for the three years ended
December 31, 2002, which information is found on page F-3 of this
report;    
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| | (d) |  | Consolidated Statements of Cash Flows for the three years ended
December 31, 2002, which information is found on page F-6 of this
report; and
|
| | (e) |  | Notes to the Consolidated Financial Statements, which information is
found on pages F-7 to F-33 of this report.                              



|2. |  | Financial statement schedules and independent auditors report filed
as part of this report:
|-- |  | --------------------------------------------------------------------------------------------

|                |  |                                                          
|--------------- |  | ---------------------------------------------------------
|Schedule Number |  | Description                                              
|                |  |                                                          
|Schedule II     |  | Valuation and Qualifying Accounts and Reserves (page S-2)



|         |  | All other financial statements and schedules not listed have been
omitted since the required information is included in the consolidated
financial statements or the related notes thereto, or is not
applicable or required.                                                                                                                                      
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|3.       |  | Exhibits                                                                                                                                                                                                                                                                                                                                                           
|        
|(3)(a)   |  | Articles of Continuance (Incorporated by reference from Exhibit 3.1 of
the Corporations Registration Statement on Form S-4, Registration No.
333-65307, which was declared effective on December 10, 1998)                                                                                                                                                        
|        
|(3)(b)   |  | Articles of Amendment to the Articles of Continuance (Incorporated by
reference from Exhibit 3.2 of the Corporations Registration Statement
on Form S-4, Registration No. 333-65307, which was declared effective on
December 10, 1998)                                                                                                                           
|        
|(3)(c)   |  | By-Law No. 1 (Incorporated by reference from Exhibit 3.3 of the
Corporations Registration Statement on Form S-4, Registration No.
333-65307, which was declared effective on December 10, 1998)                                                                                                                                                                   
|        
|(4)(a)   |  | Amended and Restated Credit Agreement dated as of August 15, 2002
among Zemex Corporation, Zemex U.S. Corporation and Bank of America N.A.
et al. (Incorporated by reference from Exhibit 4.1 of the Corporations
Form 10-Q filed on November 13, 2002)                                                                                                           
|        
|(10)(a)* |  | Key Executive Common Stock Purchase Plan (Incorporated by reference
from Exhibit (10)(b) of the Corporations Annual Report on Form 10-K
filed on March 31, 1991)                                                                                                                                                                                                  
|        
|(10)(b)  |  | Consent to Assignment of Lease and to Agreement Sublease, and
permission to Make Payments dated November 7, 1978 each from Joberta
Enterprises, Inc. to NL Industries, Inc. and The Feldspar Corporation
(Incorporated by reference from Exhibit 10(pp) to the Corporations
Registration Statement on Form S-2, Registration No. 33-7774, filed on
August 5, 1986)
|        
|(10)(c)  |  | Suzorite Mica Product Inc.s Mining Lease dated August 25, 1975
between the Province of Quebec and Marietta Resources International Ltd.
(Incorporated by reference from Exhibit 10(av) of the Corporations
Annual Report on Form 10-K filed on March 31, 1994)                                                                                                   

31



---



##### 





|(10)(d)  |  | 1999 Stock Option Plan, as amended (Incorporated by reference from
Exhibit 99.1 to the Corporations Registration Statement on Form S-8,
Registration No. 333-70406, filed on September 28, 2001)                                                                                                               
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|(10)(e)  |  | 1999 Employee Stock Purchase Plan, as amended (Incorporated by
reference from Exhibit 99.2 to the Corporations Registration Statement
on Form S-8, Registration No. 333-70406, filed on September 28, 2001)                                                                                                    
|        
|(10)(f)  |  | Stock Purchase Agreement by and between North American Höganäs
Holdings, Inc. and Zemex U.S. Corporation, Pyron Corporation and Pyron
Metal Powders, Inc. dated as of March 6, 2000 (Incorporated by reference
from the Corporations Current Report on Form 8-K dated March 8, 2000
and filed on March 9, 2000)
|        
|(10)(g)* |  | Agreement between Zemex Corporation and Richard L. Lister dated as
of the 7th day of August 2002 (Incorporated by reference from Exhibit
10.1 of the Corporations Form 8-K filed on August 22, 2002)                                                                                                           
|        
|(10)(h)* |  | Agreement between Zemex Corporation and Allen J. Palmiere dated as
of the 15th day of October 2002 (Incorporated by reference from Exhibit
10.2 of the Corporations Form 10-Q filed on November 13, 2002)                                                                                                      
|        
|(10)(i)* |  | Agreement between Zemex Corporation and Peter J. Goodwin dated as of
the 29th day of October 2002 (Incorporated by reference from Exhibit
10.3 of the Corporations Form 10-Q filed on November 13, 2002)                                                                                                       
|        
|(10)(j)* |  | Agreement between Zemex Corporation and Terrance J. Hogan dated as
of the 1st day of October 1999 (Incorporated by reference from Exhibit
(10)(p) of the Corporations Annual Report on Form 10-K filed on April
14, 2000)                                                                                      
|        
|(10)(k)* |  | Agreement between Zemex Corporation and R. Peter Gillin dated as of
the 11th day of November 2002 and effective November 18, 2002
(Incorporated by reference from Exhibit 10.4 of the Corporations Form
10-Q filed on November 13, 2002)                                                                       
|        
|(21)     |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                  
|        
|(23)     |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                
|        
|(99)(1)  |  | Certification of R. Peter Gillin pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|        
|(99)(2)  |  | Certification of Allen J. Palmiere pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                      
|        
|         |  | * Management contract or compensatory plan or arrangement.                                                                                                                                                                                                                                                      
|        
|(b)      |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                             

There were no reports Form 8-K filed in the fourth quarter of 2002.

32



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                      |  |                   |  |                                                      
|--------------------- |  | ----------------- |  | -----------------------------------------------------
|                      |  | ZEMEX CORPORATION
|                      |  |                   |  |                                                      
|                      |  | By:               |  | /s/ R. PETER GILLIN                                  
|                      |  |                   |  |                                                      
|Dated: March 27, 2003 |  |                   |  | R. Peter Gillin
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:

|                                                 |  |                                                                                 |  |               
|------------------------------------------------ |  | ------------------------------------------------------------------------------- |  | --------------
|Signature                                        |  | Title                                                                           |  | Date          
|                                                 |  |                                                                                 |  |               
|/s/ PETER LAWSON-JOHNSTON

Peter Lawson-Johnston |  | Chairman of the Board
and Director                                              |  | March 27, 2003
|                                                 |  |                                                                                 |  |               
|/s/ R. PETER GILLIN

R. Peter Gillin             |  | President and Chief Executive
Officer and Director(Principal Executive Officer) |  | March 27, 2003
|                                                 |  |                                                                                 |  |               
|/s/ PAUL A. CARROLL

Paul A. Carroll             |  | Director                                                                        |  | March 27, 2003
|                                                 |  |                                                                                 |  |               
|/s/ MORTON A. COHEN

Morton A. Cohen             |  | Director                                                                        |  | March 27, 2003
|                                                 |  |                                                                                 |  |               
|/s/ JOHN M. DONOVAN

John M. Donovan             |  | Director                                                                        |  | March 27, 2003
|                                                 |  |                                                                                 |  |               
|/s/ JONATHAN GOODMAN

Jonathan Goodman           |  | Director                                                                        |  | March 27, 2003

33



---



##### 



|                                                       |  |                                                                                                              |  |               
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------ |  | --------------
|Signature                                              |  | Title                                                                                                        |  | Date          
|                                                       |  |                                                                                                              |  |               
|/s/ GARTH A.C. MACRAE

Garth A.C. MacRae               |  | Director                                                                                                     |  | March 27, 2003
|                                                       |  |                                                                                                              |  |               
|/s/ WILLIAM J. VANDEN HEUVEL

William J. vanden Heuvel |  | Director                                                                                                     |  | March 27, 2003
|                                                       |  |                                                                                                              |  |               
|/s/ ALLEN J. PALMIERE

Allen J. Palmiere               |  | Vice President, Chief Financial
Officer and Corporate Secretary
(Principal Financial and
Accounting Officer) |  | March 27, 2003

34



---



##### 



CERTIFICATION

I, R. Peter Gillin, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Zemex Corporation;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    |  |     |  |                                                      
|----------------------------------- |  | --- |  | -----------------------------------------------------
|Dated this 27th day of March, 2003. |  |     |  |                                                      
|                                    |  | By: |  | /s/ R. PETER GILLIN                                  
|                                    |  |     |  |                                                      
|                                    |  |     |  | R. Peter Gillin
President and Chief Executive Officer

35



---



##### 



CERTIFICATION

I, Allen J. Palmiere, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Zemex Corporation;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    |  |     |  |                                                                                  
|----------------------------------- |  | --- |  | ---------------------------------------------------------------------------------
|Dated this 27th day of March, 2003. |  |     |  |                                                                                  
|                                    |  | By: |  | /s/ ALLEN J. PALMIERE                                                            
|                                    |  |     |  |                                                                                  
|                                    |  |     |  | Allen J. Palmiere
Vice President, Chief Financial Officer and Corporate Secretary

36



---



##### 



INDEPENDENT AUDITORS REPORT

To the Shareholders of Zemex Corporation

We have audited the consolidated financial statements of Zemex Corporation as
at December 31, 2002 and 2001, and for each of the years in the three-year
period ended December 31, 2002, and have issued our report thereon dated
February 18, 2003; such financial statements and report are included elsewhere
in this Form 10-K. Our audits also included the consolidated financial
statement schedule of Zemex Corporation listed in Item 15. This financial
statement schedule is the responsibility of Zemex Corporations management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

|                                                                       |  | 
|---------------------------------------------------------------------- |  | 
|/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Chartered Accountants |  | 
|                                                                      
|Toronto, Canada
February 18, 2003                                      |  | 

S-1





---



##### 



ZEMEX CORPORATION
And Subsidiaries

SCHEDULE II    VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES

For the Year Ended December 31,

(All amounts are in thousands of U.S. dollars)

|                                |  |            |     |            |  |              |     |            |  |           |      |         |  |   |     |  |  |   |     | 
|------------------------------- |  | ---------- | --- | ---------- |  | ------------ | --- | ---------- |  | --------- | ---- | ------- |  | - | --- |  |  | - | --- | 
|Column A                        |  | Column B   |     | Column C   |  | Column D     |     | Column E   |  | Column F 
|                                |  |            |     |            |  |              |     |            |  |          
|                                |  |            |     |            |  | Additions    |     |            |  |           |      |         |  |   |     |  |  |  
|                                |  | Balance at |     | Charged to |  | Other        |     |            |  |           |      | Balance
|                                |  | Beginning  |     | Costs and  |  | Additions    |     |            |  |           |      | At End 
|Description                     |  | of Period  |     | Expenses   |  | (Deductions) |     | Deductions |  | of Period
|                                |  |            |     |            |  |              |     |            |  |          
|2002                            |  |            |     |            |  |              |     |            |  |           |      |         |  |   |     |  |  |   |     | 
|Allowance for
Doubtful Accounts |  | $          | 195 |            |  | $            | 440 |            |  | $         | 2    |         |  | $ | 296 |  |  | $ | 341 | 
|2001                            |  |            |     |            |  |              |     |            |  |           |      |         |  |   |     |  |  |   |     | 
|Allowance for
Doubtful Accounts |  | $          | 166 |            |  | $            | 237 |            |  | $         | (1   | )       |  | $ | 207 |  |  | $ | 195 | 
|2000                            |  |            |     |            |  |              |     |            |  |           |      |         |  |   |     |  |  |   |     | 
|Allowance for
Doubtful Accounts |  | $          | 349 |            |  | $            | 85  |            |  | $         | (104 | )       |  | $ | 164 |  |  | $ | 166 | 

S-2





---



##### 



INDEPENDENT AUDITORS REPORT

To the Shareholders of Zemex Corporation

We have audited the consolidated balance sheets of Zemex Corporation as at
December 31, 2002 and 2001 and the consolidated statements of operations,
shareholders equity and cash flows for each of the years in the three-year
period ended December 31, 2002. These financial statements are the
responsibility of the Corporations management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards and auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
2002 and 2001 and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2002 in accordance with
Canadian generally accepted accounting principles.

/s/ Deloitte & Touche LLP
Chartered Accountants

Toronto, Ontario
February 18, 2003 except as to Note 21, which is as of March 3, 2003

Comments by Auditor on Canada-United States of America Reporting Difference

In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when
there is a change in accounting principle that has a material effect on the
comparability of the Corporations financial statements, such as the change
described in note 1(l) to the financial statements. Our report to the
shareholders, dated February 18, 2003 except as to note 21, which is as of
March 3, 2003 is expressed in accordance with Canadian reporting standards
which does not require a reference to such change in accounting principles in
the auditors report when the change is properly accounted for and adequately
disclosed in the financial statements.

/s/ Deloitte & Touche LLP
Chartered Accountants

Toronto, Ontario
February 18, 2003 except as to Note 21, which is as of March 3, 2003

F-1



---



##### 



MANAGEMENTS REPORT

The management of Zemex Corporation and its subsidiaries has the responsibility
for preparing the consolidated financial statements presented in this annual
report and for their accuracy and integrity. The statements have been prepared
in conformity with Canadian generally accepted accounting principles, and
include informed judgments and estimates as required. Other financial
information in this annual report is consistent with the financial statements.

Zemex Corporations system of internal controls is designed to provide
reasonable assurance, at a justifiable cost, as to the reliability of financial
records and reporting and the protection of assets. This system includes
organizational arrangements with clearly defined lines of responsibility.

Deloitte & Touche LLP, independent auditors, have audited the consolidated
financial statements of Zemex Corporation and their report is included on the
preceding page.

Zemex Corporation has formal standards of corporate conduct and policies
regarding high standards of ethics and financial integrity. These policies
have been disseminated to appropriate employees and internal control procedures
provide reasonable assurance that violations of these policies, if any, are
detected.

|                                                                                  |  |                                                      
|--------------------------------------------------------------------------------- |  | -----------------------------------------------------
|/s/ Allen J. Palmiere                                                             |  | /s/ R. Peter Gillin                                  
|                                                                                  |  |                                                      
|Allen J. Palmiere
Vice President, Chief Financial Officer and Corporate Secretary |  | R. Peter Gillin
President and Chief Executive Officer

AUDIT COMMITTEE REPORT

The audit committee of the board of directors is currently composed of three
independent directors, Garth A.C. MacRae, Morton A. Cohen and John M. Donovan.
The audit committee held seven meetings during 2002.

The audit committee oversees the financial reporting process of the Corporation
on behalf of the board of directors. In fulfilling its responsibility, the
audit committee recommended to the board of directors, subject to shareholder
approval, the selection of the Corporations independent auditors. The audit
committee met with management and representatives of the auditors, Deloitte &
Touche LLP, to review accounting, auditing and financial reporting matters. The
audit committee also met with Deloitte & Touche LLP representatives without
management present.

|                                                                   |  | 
|------------------------------------------------------------------ |  | 
|/s/ Garth A.C. MacRae

Garth A.C. MacRae
Chairman, Audit Committee |  | 

F-2



---



##### 



CONSOLIDATED STATEMENTS OF OPERATIONS(All amounts are in thousands of U.S. dollars, except share and per share amounts)

|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |   |           |  
|------------------------------------------------------------------------------------------ | ------- | ----------------------- | ------ | ---- | --------- | ---- | ------ | - | --------- | - | ------- | - | --------- | -
|Years ended December 31                                                                    |         | 2002                    |        | 2001 |           | 2000
|                                                                                           |         |                         |        |      |           |     
|Net sales                                                                                  |         | $                       | 73,869 |      |           | $    | 57,336 |   |           | $ | 76,480  |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|Costs and expenses                                                                         |         |                         |        |      |           |      |        |   |           |   |         |  
|Cost of goods sold                                                                         |         |                         | 50,977 |      |           |      | 37,883 |   |           |   | 55,683  |  
|Selling, general and administrative                                                        |         |                         | 13,842 |      |           |      | 11,833 |   |           |   | 12,394  |  
|Depreciation, depletion and amortization                                                   |         |                         | 6,250  |      |           |      | 5,766  |   |           |   | 7,801   |  
|Other expense (note 21)                                                                    |         |                         | 3,950  |      |           |      |       |   |           |   |        |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|                                                                                           |         |                         | 75,019 |      |           |      | 55,482 |   |           |   | 75,878  |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|(Loss) income before the undernoted                                                        |         |                         | (1,150 | )    |           |      | 1,854  |   |           |   | 602     |  
|Provision for asset impairment (note 6)                                                    |         |                         |       |      |           |      |       |   |           |   | (24,552 | )
|Interest income                                                                            |         |                         | 175    |      |           |      | 119    |   |           |   | 155     |  
|Interest expense                                                                           |         |                         | (1,119 | )    |           |      | (910   | ) |           |   | (2,386  | )
|Other, net                                                                                 |         |                         | 56     |      |           |      | 615    |   |           |   | (3,017  | )
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|(Loss) income before (recovery of) provision for
income taxes and non-controlling interest |         |                         | (2,038 | )    |           |      | 1,678  |   |           |   | (29,198 | )
|(Recovery of) provision for income taxes (note 7)                                          |         |                         | (223   | )    |           |      | 803    |   |           |   | (9,961  | )
|Non-controlling interest in earnings of subsidiary                                         |         |                         |       |      |           |      | 10     |   |           |   | 119     |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|(Loss) income before discontinued operations                                               |         |                         | (1,815 | )    |           |      | 865    |   |           |   | (19,356 | )
|Income from discontinued operations(note 12)                                               |         |                         |       |      |           |      |       |   |           |   | 11,385  |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|Net (loss) income                                                                          |         | $                       | (1,815 | )    |           | $    | 865    |   |           | $ | (7,971  | )
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|Net (loss) income per share                                                                |         |                         |        |      |           |      |        |   |           |   |         |  
|                                                                                           | Basic   |                         |        |      |           |      |        |   |           |   |         |   |          
|                                                                                           |         | Continuing operations   |        | $    | (0.23     | )    |        | $ | 0.11      |   |         | $ | (2.29     | )
|                                                                                           |         | Discontinued operations |        | $    |          |      |        | $ |          |   |         | $ | 1.35      |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|                                                                                           |         | $                       | (0.23  | )    |           | $    | 0.11   |   |           | $ | (0.94   | )
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|                                                                                           | Diluted |                         |        |      |           |      |        |   |           |   |         |   |          
|                                                                                           |         | Continuing operations   |        | $    | (0.23     | )    |        | $ | 0.10      |   |         | $ | (2.29     | )
|                                                                                           |         | Discontinued operations |        | $    |          |      |        | $ |          |   |         | $ | 1.35      |  
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|                                                                                           |         | $                       | (0.23  | )    |           | $    | 0.10   |   |           | $ | (0.94   | )
|                                                                                           |         |                         |        |      |           |      |        |   |           |   |         |  
|Weighted average number of
common shares outstanding                                       |         |                         |        |      |           |      |        |   |           |   |         |  
|                                                                                           |         | Basic                   |        |      | 7,907,760 |      |        |   | 8,190,194 |   |         |   | 8,466,988 |  
|                                                                                           |         | Diluted                 |        |      | 7,990,628 |      |        |   | 8,295,480 |   |         |   | 8,660,504 |  



---

Prepared in accordance with Canadian GAAP

See notes to the consolidated financial statements

F-3



---



##### 



CONSOLIDATED BALANCE SHEETS(All amounts are in thousands of U.S. dollars)

|                                                  |                                                                                                             |      |         |        |  |   |        |       | 
|------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ---- | ------- | ------ |  | - | ------ | ----- | 
|December 31                                       |                                                                                                             | 2002 |         | 2001  
|                                                  |                                                                                                             |      |         |       
|ASSETS                                            |                                                                                                             |      |         |        |  |   |        |      
|Current assets                                    |                                                                                                             |      |         |        |  |   |        |      
|Cash                                              |                                                                                                             | $    | 635     |        |  | $ | 532    |      
|Accounts receivable                               |                                                                                                             |      |         |        |  |   |        |      
|                                                  | (less allowance for doubtful accounts of $342
at December 31, 2002 and $195 at
December 31, 2001) (note 16) |      |         | 11,987 |  |   |        | 8,639 | 
|Inventories (note 3)                              |                                                                                                             |      | 17,611  |        |  |   | 16,417 |      
|Prepaid expenses and other current assets         |                                                                                                             |      | 755     |        |  |   | 380    |      
|Income taxes receivable                           |                                                                                                             |      |        |        |  |   | 601    |      
|Future income tax benefits (note 7)               |                                                                                                             |      | 1,954   |        |  |   | 384    |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|                                                  |                                                                                                             |      | 32,942  |        |  |   | 26,953 |      
|Property, plant and equipment(notes 4 and 10)     |                                                                                                             |      | 68,715  |        |  |   | 56,962 |      
|Goodwill(notes 1 and 2)                           |                                                                                                             |      | 2,787   |        |  |   | 2,701  |      
|Other assets(note 5)                              |                                                                                                             |      | 918     |        |  |   | 3,505  |      
|Future income tax benefits (non-current)(note 7)  |                                                                                                             |      | 8,068   |        |  |   | 7,394  |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|                                                  |                                                                                                             | $    | 113,430 |        |  | $ | 97,515 |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|LIABILITIES AND SHAREHOLDERS EQUITY              |                                                                                                             |      |         |        |  |   |        |      
|Current liabilities                               |                                                                                                             |      |         |        |  |   |        |      
|Bank indebtedness (note 10)                       |                                                                                                             | $    | 6,000   |        |  | $ | 11,000 |      
|Accounts payable                                  |                                                                                                             |      | 4,202   |        |  |   | 2,957  |      
|Accrued liabilities (note 21)                     |                                                                                                             |      | 5,970   |        |  |   | 2,578  |      
|Income taxes payable                              |                                                                                                             |      | 171     |        |  |   |       |      
|Current portion of long term debt (note 10)       |                                                                                                             |      | 381     |        |  |   | 284    |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|                                                  |                                                                                                             |      | 16,724  |        |  |   | 16,819 |      
|Long term debt(note 10)                           |                                                                                                             |      | 20,358  |        |  |   | 211    |      
|Other non-current liabilities                     |                                                                                                             |      | 2,434   |        |  |   | 2,281  |      
|Future income tax obligations(note 7)             |                                                                                                             |      | 1,413   |        |  |   | 1,399  |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|                                                  |                                                                                                             |      | 40,929  |        |  |   | 20,710 |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|Shareholders equity                              |                                                                                                             |      |         |        |  |   |        |      
|Common stock (notes 9 and 11)                     |                                                                                                             |      | 51,644  |        |  |   | 53,786 |      
|Retained earnings                                 |                                                                                                             |      | 23,330  |        |  |   | 26,820 |      
|Note receivable from shareholder (notes 9 and 11) |                                                                                                             |      |        |        |  |   | (1,259 | )    
|Cumulative translation adjustment                 |                                                                                                             |      | (2,473  | )      |  |   | (2,542 | )    
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|                                                  |                                                                                                             |      | 72,501  |        |  |   | 76,805 |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      
|                                                  |                                                                                                             | $    | 113,430 |        |  | $ | 97,515 |      
|                                                  |                                                                                                             |      |         |        |  |   |        |      



---

Prepared in accordance with Canadian GAAP


See notes to the consolidated financial statements



|                                   |  |                       |  |                    
|---------------------------------- |  | --------------------- |  | -------------------
|Approved by the Board of Directors |  | /s/ Garth A.C. MacRae |  | /s/ John M. Donovan
|                                   |  |                       |  |                    
|                                   |  | Director              |  | Director           

F-4



---



##### 



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY(All amounts are in thousands of U.S. dollars)

|                                     |  |        |        |          |  |             |        |             |  |            |        |            |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------ |  | ------ | ------ | -------- |  | ----------- | ------ | ----------- |  | ---------- | ------ | ---------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                     |  |        |        |          |  |             |        |             |  | Note       |        |            |  |   |        |   |  |   |        |   |  |  
|                                     |  |        |        |          |  |             |        |             |  | Receivable |        | Cumulative |  |   |        |   |  |   |        |  
|                                     |  | Common |        | Retained |  | From        |        | Translation |  | Treasury   |        |            |  |  
|                                     |  | Stock  |        | Earnings |  | Shareholder |        | Adjustment  |  | Stock      |        | Total     
|                                     |  |        |        |          |  |             |        |             |  |            |        |           
|Balance at December 31, 1999         |  | $      | 58,560 |          |  | $           | 33,920 |             |  | $          | (1,749 | )          |  | $ | (1,684 | ) |  | $ |       |   |  | $ | 89,047 |  
|Stock issued under ESPP, net (a) (b) |  |        | 514    |          |  |             |       |             |  |            |       |            |  |   |       |   |  |   |       |   |  |   | 514    |  
|Stock purchased for treasury (b)     |  |        |       |          |  |             |       |             |  |            |       |            |  |   |       |   |  |   | (1,862 | ) |  |   | (1,862 | )
|Stock options repurchased            |  |        |       |          |  |             | 9      |             |  |            |       |            |  |   |       |   |  |   |       |   |  |   | 9      |  
|Cancellation of treasury stock       |  |        | (1,862 | )        |  |             |       |             |  |            |       |            |  |   |       |   |  |   | 1,862  |   |  |   |       |  
|Net (loss) for the year              |  |        |       |          |  |             | (7,971 | )           |  |            |       |            |  |   |       |   |  |   |       |   |  |   | (7,971 | )
|Translation adjustment               |  |        |       |          |  |             |       |             |  |            |       |            |  |   | (324   | ) |  |   |       |   |  |   | (324   | )
|Shareholder loan repayment           |  |        |       |          |  |             |       |             |  |            | 490    |            |  |   |       |   |  |   |       |   |  |   | 490    |  
|                                     |  |        |        |          |  |             |        |             |  |            |        |            |  |   |        |   |  |   |        |   |  |   |        |  
|Balance at December 31, 2000         |  |        | 57,212 |          |  |             | 25,958 |             |  |            | (1,259 | )          |  |   | (2,008 | ) |  |   |       |   |  |   | 79,903 |  
|Stock issued under ESPP, net (a) (b) |  |        | 419    |          |  |             |       |             |  |            |       |            |  |   |       |   |  |   |       |   |  |   | 419    |  
|Stock purchased for treasury (b)     |  |        |       |          |  |             |       |             |  |            |       |            |  |   |       |   |  |   | (3,845 | ) |  |   | (3,845 | )
|Stock options repurchased            |  |        |       |          |  |             | (3     | )           |  |            |       |            |  |   |       |   |  |   |       |   |  |   | (3     | )
|Cancellation of treasury stock       |  |        | (3,845 | )        |  |             |       |             |  |            |       |            |  |   |       |   |  |   | 3,845  |   |  |   |       |  
|Net income for the year              |  |        |       |          |  |             | 865    |             |  |            |       |            |  |   |       |   |  |   |       |   |  |   | 865    |  
|Translation adjustment               |  |        |       |          |  |             |       |             |  |            |       |            |  |   | (534   | ) |  |   |       |   |  |   | (534   | )
|                                     |  |        |        |          |  |             |        |             |  |            |        |            |  |   |        |   |  |   |        |   |  |   |        |  
|Balance at December 31, 2001         |  |        | 53,786 |          |  |             | 26,820 |             |  |            | (1,259 | )          |  |   | (2,542 | ) |  |   |       |   |  |   | 76,805 |  
|Stock issued under ESPP, net (a) (b) |  |        | 349    |          |  |             |       |             |  |            |       |            |  |   |       |   |  |   |       |   |  |   | 349    |  
|Stock purchased for treasury (b) (c) |  |        |       |          |  |             |       |             |  |            |       |            |  |   |       |   |  |   | (2,491 | ) |  |   | (2,491 | )
|Cancellation of treasury stock (c)   |  |        | (2,491 | )        |  |             |       |             |  |            |       |            |  |   |       |   |  |   | 2,491  |   |  |   |       |  
|Net (loss) for the year              |  |        |       |          |  |             | (1,815 | )           |  |            |       |            |  |   |       |   |  |   |       |   |  |   | (1,815 | )
|Goodwill impairment (d)              |  |        |       |          |  |             | (1,675 | )           |  |            |       |            |  |   |       |   |  |   |       |   |  |   | (1,675 | )
|Shareholder loan repayment (c)       |  |        |       |          |  |             |       |             |  |            | 1,259  |            |  |   |       |   |  |   |       |   |  |   | 1,259  |  
|Translation adjustment               |  |        |       |          |  |             |       |             |  |            |       |            |  |   | 69     |   |  |   |       |   |  |   | 69     |  
|                                     |  |        |        |          |  |             |        |             |  |            |        |            |  |   |        |   |  |   |        |   |  |   |        |  
|Balance at December 31, 2002         |  | $      | 51,644 |          |  | $           | 23,330 |             |  | $          |       |            |  | $ | (2,473 | ) |  | $ |       |   |  | $ | 72,501 |  
|                                     |  |        |        |          |  |             |        |             |  |            |        |            |  |   |        |   |  |   |        |   |  |   |        |  



---

Prepared in accordance with Canadian GAAP

See notes to the consolidated financial statements

|(a) |  | Employee stock purchase plan (ESPP)
|--- |  | -------------------------------------
|   
|(b) |  | See note 11                          
|   
|(c) |  | See note 9                           
|   
|(d) |  | See note 1 (l)                       

F-5



---



##### 



CONSOLIDATED STATEMENTS OF CASH FLOWS(note 12)(All amounts are in thousands of U.S. dollars)

|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |         |  
|-------------------------------------------------------------------------------------- | --------------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------ | ------ | - | - | ------- | ------- | -
|Years ended December 31                                                                |                                                           | 2002 |         | 2001    |   | 2000
|                                                                                       |                                                           |      |         |         |   |     
|Cash flows from operating activities                                                   |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Net (loss) income                                                                      |                                                           | $    | (1,815  | )       |   | $    | 865    |        |   | $ | (7,971  | )      
|Adjustments to reconcile net (loss) income to net cash
flows from operating activities |                                                           |      |         |         |   |      |        |        |   |   |         |        
|                                                                                       | Depreciation, depletion and amortization                  |      |         | 6,250   |   |      |        | 5,766  |   |   |         | 8,181   |  
|                                                                                       | Amortization of and write-off of deferred
financing costs |      |         |        |   |      |        |       |   |   |         | 1,759   |  
|                                                                                       | Provision for asset impairment                            |      |         |        |   |      |        |       |   |   |         | 24,246  |  
|                                                                                       | (Increase) decrease in future income tax benefits         |      |         | (1,204  | ) |      |        | 26     |   |   |         | (5,244  | )
|                                                                                       | Non-controlling interest in subsidiary earnings           |      |         |        |   |      |        | 10     |   |   |         | 119     |  
|                                                                                       | Gain on sale of property, plant and equipment             |      |         | (27     | ) |      |        | (301   | ) |   |         | (263    | )
|                                                                                       | Gain on sale of discontinued operations                   |      |         |        |   |      |        |       |   |   |         | (15,718 | )
|                                                                                       | Decrease (increase) in other assets                       |      |         | 432     |   |      |        | 364    |   |   |         | (6,560  | )
|                                                                                       | (Decrease) increase in other non-current liabilities      |      |         | (27     | ) |      |        | 98     |   |   |         | 98      |  
|                                                                                       | Changes in non-cash working capital items (a)             |      |         | 2,575   |   |      |        | (2,245 | ) |   |         | 1,054   |  
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Net cash provided by (used in) operating activities                                    |                                                           |      | 6,184   |         |   |      | 4,583  |        |   |   | (299    | )      
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Cash flows from investing activities                                                   |                                                           |      |         |         |   |      |        |        |   |   |         |        
|                                                                                       | Additions to property, plant and equipment                |      |         | (5,524  | ) |      |        | (3,551 | ) |   |         | (4,436  | )
|                                                                                       | Acquisitions, net of cash acquired (b)                    |      |         | (14,705 | ) |      |        |       |   |   |         |        |  
|                                                                                       | Proceeds from sale of assets (b)                          |      |         | 184     |   |      |        | 7,357  |   |   |         | 352     |  
|                                                                                       | Proceeds from sale of discontinued operations (b)         |      |         |        |   |      |        |       |   |   |         | 39,353  |  
|                                                                                       | Proceeds from sale of securities                          |      |         |        |   |      |        |       |   |   |         | 5,134   |  
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Net cash (used in) provided by investing activities                                    |                                                           |      | (20,045 | )       |   |      | 3,806  |        |   |   | 40,403  |        
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Cash flows from financing activities                                                   |                                                           |      |         |         |   |      |        |        |   |   |         |        
|                                                                                       | (Payments) proceeds net, on bank indebtedness             |      |         | (5,000  | ) |      |        | (6,145 | ) |   |         | 11,645  |  
|                                                                                       | Proceeds from long term debt                              |      |         | 20,333  |   |      |        | 288    |   |   |         | 519     |  
|                                                                                       | Repayment of long term debt                               |      |         | (498    | ) |      |        | (575   | ) |   |         | (50,783 | )
|                                                                                       | Issuance of common stock (c)                              |      |         | 349     |   |      |        | 419    |   |   |         | 514     |  
|                                                                                       | Purchase of common stock and options (c) (d)              |      |         | (2,491  | ) |      |        | (3,848 | ) |   |         | (1,853  | )
|                                                                                       | Decrease in note receivable from shareholder (d)          |      |         | 1,259   |   |      |        |       |   |   |         | 490     |  
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Net cash provided by (used in) financing activities                                    |                                                           |      | 13,952  |         |   |      | (9,861 | )      |   |   | (39,468 | )      
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Effect of exchange rate changes on cash                                                |                                                           |      | 12      |         |   |      | (171   | )      |   |   | (53     | )      
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Net increase (decrease) in cash                                                        |                                                           |      | 103     |         |   |      | (1,643 | )      |   |   | 583     |        
|Cash at beginning of year                                                              |                                                           |      | 532     |         |   |      | 2,175  |        |   |   | 1,592   |        
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Cash at end of year                                                                    |                                                           | $    | 635     |         |   | $    | 532    |        |   | $ | 2,175   |        
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|Supplemental disclosure of cash flow information                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        
|                                                                                       | Income taxes paid                                         |      | $       | 246     |   |      | $      | 1,244  |   |   | $       | 1,519   |  
|                                                                                       | Interest paid                                             |      |         | 947     |   |      |        | 928    |   |   |         | 2,705   |  
|                                                                                       |                                                           |      |         |         |   |      |        |        |   |   |         |        



---

Prepared in accordance with Canadian GAAP

See notes to the consolidated financial statements

|(a) |  | See note 15
|--- |  | -----------
|   
|(b) |  | See note 2 
|   
|(c) |  | See note 11
|   
|(d) |  | See note 9 

F-6



---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Examples include provisions for bad debts, inventory
reserves, property, plant and equipment, impairment, reclamation reserves, tax
provision and pension liabilities. Actual results could differ from those
estimates. The significant accounting policies of Zemex Corporation and its
subsidiaries are as follows:



|a. |  | Principles of Consolidation
|-- |  | ---------------------------

The consolidated financial statements include the accounts of Zemex Corporation
and its wholly-owned subsidiaries. All intercompany transactions have been
eliminated.



|b. |  | Inventories
|-- |  | -----------

Inventories, specifically ore, raw materials, work in process and finished
products, are stated at the lower of cost or net realizable value and are
computed using the average cost method. Materials and supplies are stated at
cost using the first-in, first-out or average cost method.



|c. |  | Property, Plant and Equipment
|-- |  | -----------------------------

Property, plant and equipment are recorded at cost. Repairs and maintenance are
charged to expense as incurred. Expenditures for major renewals and
improvements are capitalized. When assets are sold or otherwise retired, the
cost and accumulated depreciation or depletion are removed from the accounts
and any gain or loss is included in results of operations. Provisions for
depreciation are based upon estimated useful lives, using the straight-line
method. Depreciation on newly constructed or purchased assets begins when the
asset is placed into production. Depletion of mining properties and
depreciation of other mining assets are computed using the unit-of-production
method, except in the case of the Corporations Canadian mica operation where
the estimated reserves exceed the expected production during the term of the
mining lease. The mica mining lease rights and deferred costs are amortized
using the straight-line method over the term of the mining lease.



|d. |  | Recoverability of Asset Carrying Value
|-- |  | --------------------------------------

The Corporation evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying value of such assets,
including intangibles, may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value, less costs to sell.

F-7



---



##### 





|e. |  | Postretirement Benefits
|-- |  | -----------------------

Pension Plans

The funding policy of the Corporation with respect to the pension plans for
U.S. employees is to contribute annually, to the extent necessary, at a rate
that is intended to provide for the cost of benefits earned during the year and
which will amortize prior service costs and experience gains and losses over
the average remaining service lives of the employee group.

Healthcare and Other Postretirement Benefits Other Than Pensions

The Corporation accounts for healthcare and other postretirement benefits other
than pensions by accruing for all such amounts during the years in which
employees render the necessary services to be entitled to receive such
benefits. The 2002, 2001 and 2000 amounts include the current year expense and
the impact of the transition liability, which is being amortized over a twenty
year period that began in 1993.



|f. |  | Foreign Currency Translation
|-- |  | ----------------------------

The functional currency for the Corporations operations is the U.S. dollar.
Foreign currency assets and liabilities are translated using the exchange rates
in effect at the balance sheet date. The effect of exchange rate fluctuations
on translating the foreign currency assets and liabilities of the Corporations

self-sustaining foreign operation into U.S. dollars is accumulated as part of
the cumulative translation adjustment component of shareholders equity.
Results of operations and cash flows are translated using the average exchange
rates during the year. Gains and losses from foreign currency transactions are
included in net (loss) income for the year.



|g. |  | Revenue Recognition
|-- |  | -------------------

Revenue is recognized when goods are shipped to customers and when all
significant contractual obligations have been satisfied. Consignment sales are
recognized when a customer draws the goods from inventory.



|h. |  | Research and Development Expenses
|-- |  | ---------------------------------

Research expenses are charged to earnings in the periods in which they are
incurred. Development costs are also expensed unless they are significant and
meet generally accepted criteria for deferral. Research and development
expenses were $325,000, $545,000 and $470,000 for the years ended December 31,
2002, 2001 and 2000, respectively.



|i. |  | Provision for Future Reclamation Costs
|-- |  | --------------------------------------

Provisions for future reclamation costs have been established based upon
estimated future reclamation costs, allocated over the expected productive
lives of the Corporations quarries and mines.

F-8



---



##### 





|j. |  | Income Taxes
|-- |  | ------------

Income taxes are recognized during the year in which transactions enter into
the determination of financial statement income, with future income taxes being
provided for temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws.
Future income taxes are adjusted to reflect the effect of enacted or
substantively enacted changes in the tax laws and tax rates.



|k. |  | Earnings Per Share
|-- |  | ------------------

Earnings per share are calculated based upon the weighted average number of
common shares outstanding. Diluted earnings per share are calculated in
accordance with the treasury stock method.



|l. |  | Goodwill and Other Intangible Assets
|-- |  | ------------------------------------

In 2001, the Canadian Institute of Chartered Accountants issued Section 3062
Goodwill and Other Intangible Assets. This standard was effective January 1,
2002 and requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles such as goodwill,
the reassessment of the useful lives of existing recognized intangibles, the
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential
future impairments of goodwill. The following table summarizes the adjustment
to the consolidated statements of operations on the adoption of this standard
(all amounts are in thousands of U.S. dollars):

|                                                          |  |      |       |      |  |   |         |  
|--------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ------- | -
|Years ended December 31                                   |  | 2001 |       | 2000
|                                                          |  |      |       |     
|Income (loss) before discontinued operations, as reported |  | $    | 865   |      |  | $ | (19,356 | )
|Goodwill amortization                                     |  |      | 183   |      |  |   | 156     |  
|                                                          |  |      |       |      |  |   |         |  
|Adjusted income (loss) before discontinued operations     |  | $    | 1,048 |      |  | $ | (19,200 | )
|                                                          |  |      |       |      |  |   |         |  

Section 3062 also requires the Corporation to complete a transitional goodwill
impairment test within six months from the date of adoption. This transitional
review was completed as at June 30, 2002 for the goodwill that had been
recorded by the Corporations aluminum recycling group, the operations of which
collectively comprise a reporting unit, on the acquisition of S&R Enterprises,
Inc. The review indicated an impairment of goodwill. The impairment reflected
the decline of the fair market value of the reporting unit due to the depressed
nature of the secondary aluminum industry. An after tax amount of $1.7 million
(total write down of $2.7 million less tax effect of $1.0 million),
representing the goodwill impairment, was charged to opening retained earnings
effective January 1, 2002 in accordance with the transitional provisions of
this standard.



|m. |  | Stock-Based Compensation Plans
|-- |  | ------------------------------

The Corporation does not recognize compensation expense for its stock-based
compensation plans. Any consideration paid by employees on exercise of stock
options or purchase of stock is recorded as share capital. If stock is
repurchased from employees, the excess of the consideration paid over the

F-9



---



##### 



cost of the capital stock cancelled is charged to selling, general and
administrative expense, net of any tax effect.



|2. |  | ACQUISITIONS AND DISPOSITIONS
|-- |  | -----------------------------

Acquisition of Friendly, West Virginia Plant

On March 27, 2002, the Corporation purchased, through a newly formed subsidiary
Alumitech of West Virginia, Inc., the assets of Resource Recovery Industries,
LLC, an aluminum dross processor located in Friendly, West Virginia. The
purchase price was $3.1 million and was financed by a drawdown on the
Corporations credit facility (see note 19).

Acquisition of Attapulgus, Georgia Plant

On February 1, 2002, the Corporation acquired, through Zemex Attapulgite, LLC,
a newly incorporated subsidiary under the industrial minerals group, the assets
of an attapulgite clay operation from Milwhite, Inc. The Corporation paid
$11.6 million for the assets and funded the acquisition through a drawdown from
its credit facility.

The following table summarizes the estimated fair value of the assets acquired
and liabilities assumed at the date of the acquisition (all amounts are in
thousands of U.S. dollars).

|                              |  |   |        | 
|----------------------------- |  | - | ------ | 
|Current assets                |  | $ | 1,123  | 
|Capital assets                |  |   | 8,840  | 
|Goodwill                      |  |   | 2,787  | 
|                              |  |   |        | 
|Total assets                  |  |   | 12,750 | 
|Current liabilities           |  |   | 991    | 
|Other non-current liabilities |  |   | 180    | 
|                              |  |   |        | 
|Net assets acquired           |  | $ | 11,579 | 
|                              |  |   |        | 

The following table presents pro forma information as though the transaction
had taken place as at January 1, 2000 (all amounts are in thousands of U.S.
dollars, except per share amounts):

|                                                       |           |      |        |       |   |      |        |      |  |   |         |       |  
|------------------------------------------------------ | --------- | ---- | ------ | ----- | - | ---- | ------ | ---- |  | - | ------- | ----- | -
|Years ended December 31                                |           | 2002 |        | 2001  |   | 2000
|                                                       |           |      |        |       |   |     
|Net sales                                              |           | $    | 74,559 |       |   | $    | 65,596 |      |  | $ | 83,863  |      
|                                                       |           |      |        |       |   |      |        |      |  |   |         |      
|(Loss) income before discontinued operations           |           | $    | (1,786 | )     |   | $    | 1,472  |      |  | $ | (19,297 | )    
|                                                       |           |      |        |       |   |      |        |      |  |   |         |      
|(Loss) income before discontinued
operations per share |           |      |        |       |   |      |        |      |  |   |         |      
|                                                       |  Basic   |      | $      | (0.23 | ) |      | $      | 0.18 |  |   | $       | (2.28 | )
|                                                       |  Diluted |      |        | (0.23 | ) |      |        | 0.17 |  |   |         | (2.28 | )
|                                                       |           |      |        |       |   |      |        |      |  |   |         |      

F-10



---



##### 



Sale of Natural Bridge Facility and Interest in Zemex Fabi-Benwood, LLC

On March 20, 2001, the Corporation completed the sale of its Natural Bridge,
New York talc facility and its 60% interest in Zemex Fabi-Benwood, LLC for $7.5
million to IMI Fabi S.p.A. (IMI Fabi). The Corporation recognized a pre-tax
gain of $0.3 million from this transaction which was recorded as other income
in the first quarter of 2001.

Sale of Metal Powders Division

On April 11, 2000, the Corporation disposed of its metal powders division,
which consisted of Pyron Corporation and Pyron Metal Powders, Inc. by way of a
sale to North American Höganäs Holdings, Inc., a subsidiary of Höganäs AB. The
Corporation recognized a pre-tax gain of $15.7 million in fiscal 2000. The
after-tax gain was $10.5 million, or $1.24 per share. The metal powders
division was disclosed as a discontinued operation and the prior period figures
were reclassified accordingly (see note 12).



|3. |  | INVENTORIES
|-- |  | -----------

|                                                          |  |      |        |      |  |   |        | 
|--------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|(All amounts are in thousands of U.S. dollars)            |  | 2002 |        | 2001
|                                                          |  |      |        |     
|Ore, raw materials, work in process and finished products |  |      |        |      |  |   |        | 
|Industrial minerals                                       |  | $    | 12,906 |      |  | $ | 12,378 | 
|Aluminum recycling                                        |  |      | 1,054  |      |  |   | 494    | 
|                                                          |  |      |        |      |  |   |        | 
|                                                          |  |      | 13,960 |      |  |   | 12,872 | 
|                                                          |  |      |        |      |  |   |        | 
|Materials and supplies                                    |  |      |        |      |  |   |        | 
|Industrial minerals                                       |  |      | 3,651  |      |  |   | 3,545  | 
|                                                          |  |      |        |      |  |   |        | 
|                                                          |  | $    | 17,611 |      |  | $ | 16,417 | 
|                                                          |  |      |        |      |  |   |        | 



|4. |  | PROPERTY, PLANT AND EQUIPMENT
|-- |  | -----------------------------

|                                               |                                              |             |  |      |        |      |         |         |        |   |        |         |  
|---------------------------------------------- | -------------------------------------------- | ----------- |  | ---- | ------ | ---- | ------- | ------- | ------ | - | ------ | ------- | -
|(All amounts are in thousands of U.S. dollars) |                                              | Useful Life |  | 2002 |        | 2001
|                                               |                                              |             |  |      |        |     
|Land                                           |                                              |             |  |      |        | $    | 9,567   |         |        | $ | 6,810  |        
|Mining properties and deferred costs           |                                              |             |  |      |        |      | 11,377  |         |        |   | 8,937  |        
|Buildings                                      |                                              | 3040 years |  |      | 19,176 |      |         |         | 15,509 |  
|Machinery and equipment                        |                                              | 320 years  |  |      | 73,571 |      |         |         | 64,007 |  
|Construction in progress                       |                                              |             |  |      |        |      | 1,591   |         |        |   | 2,805  |        
|                                               |                                              |             |  |      |        |      |         |         |        |   |        |        
|Total property, plant and equipment, at cost   |                                              |             |  |      |        |      | 115,282 |         |        |   | 98,068 |        
|                                               | Less: Accumulated depreciation and
depletion |             |  |      |        |      |         | (46,567 | )      |   |        | (41,106 | )
|                                               |                                              |             |  |      |        |      |         |         |        |   |        |        
|Net property, plant and equipment              |                                              |             |  |      |        | $    | 68,715  |         |        | $ | 56,962 |        
|                                               |                                              |             |  |      |        |      |         |         |        |   |        |        

F-11



---



##### 



The major components of the net change in property, plant and equipment are
as follows:

|                                                     |  |      |        |      |  |   |        |  
|---------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|(All amounts are in thousands of U.S. dollars)       |  | 2002 |        | 2001
|                                                     |  |      |        |     
|Net property, plant and equipment, beginning of year |  | $    | 56,962 |      |  | $ | 65,846 |  
|Acquisition of subsidiaries                          |  |      | 12,545 |      |  |   |       |  
|Depreciation and depletion                           |  |      | (6,215 | )    |  |   | (5,468 | )
|Capital asset additions                              |  |      | 5,524  |      |  |   | 3,551  |  
|Capital asset dispositions                           |  |      | (157   | )    |  |   | (44    | )
|Translation adjustment                               |  |      | 56     |      |  |   | (364   | )
|Sale of industrial minerals facilities (note 2)     |  |      |       |      |  |   | (6,559 | )
|                                                     |  |      |        |      |  |   |        |  
|Net property, plant and equipment, end of year       |  | $    | 68,715 |      |  | $ | 56,962 |  
|                                                     |  |      |        |      |  |   |        |  

As at December 31, 2002, the Corporation estimates that approximately
$1,781,000 will be expended to complete its construction in progress
(December 31, 2001  $678,000). The Corporation did not capitalize any
interest relating to capital projects during 2002 and 2001.



|5. |  | OTHER ASSETS
|-- |  | ------------

|                                               |  |      |     |      |  |   |       | 
|---------------------------------------------- |  | ---- | --- | ---- |  | - | ----- | 
|(All amounts are in thousands of U.S. dollars) |  | 2002 |     | 2001
|                                               |  |      |     |     
|Long-term receivables                          |  | $    | 367 |      |  | $ | 365   | 
|Prepaid pension cost (note 8)                  |  |      | 192 |      |  |   | 726   | 
|Deferred reorganization                        |  |      | 183 |      |  |   | 213   | 
|Patents, net                                   |  |      |    |      |  |   | 3     | 
|Hecla escrow (note 21)                         |  |      |    |      |  |   | 2,000 | 
|Other                                          |  |      | 176 |      |  |   | 198   | 
|                                               |  |      |     |      |  |   |       | 
|                                               |  | $    | 918 |      |  | $ | 3,505 | 
|                                               |  |      |     |      |  |   |       | 

F-12



---



##### 





|6. |  | PROVISION FOR ASSET IMPAIRMENT
|-- |  | ------------------------------

The Corporation provided the following asset impairment in fiscal 2000 (all
amounts are in thousands of U.S. dollars):

|                        |                                   |   |        |        | 
|----------------------- | --------------------------------- | - | ------ | ------ | 
|                        |                                   |   | 2000  
|                        |                                   |   |       
|Aluminum recycling (a)  |                                   |   |        |       
|                        | Property, plant and equipment     |   | $      | 11,445 | 
|                        | Patents                           |   |        | 4,640  | 
|                        | Site restoration costs            |   |        | 1,500  | 
|Industrial minerals (b) |                                   |   |        |       
|                        | Goodwill                          |   |        | 2,244  | 
|                        | Property, plant and equipment     |   |        | 1,700  | 
|                        | Other                             |   |        | 1,258  | 
|Corporate (c)           |                                   |   |        |       
|                        | Acquisition and disposition costs |   |        | 1,765  | 
|                        |                                   |   |        |       
|                        |                                   | $ | 24,552 |       
|                        |                                   |   |        |       

---

|(a) |  | The Corporations subsidiary, Alumitech, invested significant time and
capital in the development of a proprietary technology for the processing
of aluminum dross and saltcake. While the technology was proven and a
competitive product produced, a combination of a poor economic environment
for secondary aluminum, a depressed steel industry and low landfill prices
resulted in an inability to make the process economically viable.
Accordingly, in fiscal 2000 the Corporation provided fully for a permanent
asset impairment, wrote down the related assets to their estimated salvage
value, and wrote off all costs associated with the process.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | In 1998 the Corporation purchased 100% of the shares of Aspect Minerals,
Inc. The plant was rebuilt and expanded, and the product line increased.
Shortly before the commissioning phase a major source of raw material
feedstock closed down. The Corporation had been unsuccessful in locating
an alternate source of acceptable feedstock, and had to rely on higher
quantities of mined material which were inconsistent in nature.
Accordingly, in fiscal 2000, the Corporation placed the facility on care
and maintenance and, based on estimated future cash flows, established a
provision for permanent asset impairment.                             
|   
|(c) |  | During 2000, the Corporation incurred significant costs in evaluating and
pursuing various alternatives to maximize shareholder value. In addition,
the Corporation incurred significant legal, banking, environmental and
other due diligence costs associated with the attempted purchase of K-T
Clay Company from Hecla Mining Company (see note 21). These costs were
written off in fiscal 2000.                                                                                                                                                                                                                                                           

F-13



---



##### 





|7. |  | INCOME TAXES
|-- |  | ------------

The (recovery of) provision for income taxes consists of the following
components (all amounts are in thousands of U.S. dollars):

|                                                       |  |      |        |      |  |      |       |   |  |   |         |  
|------------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ----- | - |  | - | ------- | -
|                                                       |  | 2002 |        | 2001 |  | 2000
|                                                       |  |      |        |      |  |     
|Total pre-tax (loss) income from continuing operations |  | $    | (2,038 | )    |  | $    | 1,678 |   |  | $ | (29,198 | )
|                                                       |  |      |        |      |  |      |       |   |  |   |         |  
|Current tax provision                                  |  |      |        |      |  |      |       |   |  |   |         |  
|Canadian                                               |  | $    | 713    |      |  | $    | 838   |   |  | $ | 744     |  
|Federal U.S                                            |  |      | (98    | )    |  |      | (68   | ) |  |   | (4,868  | )
|State and local U.S                                    |  |      | 227    |      |  |      | 3     |   |  |   | 32      |  
|                                                       |  |      |        |      |  |      |       |   |  |   |         |  
|Total                                                  |  |      | 842    |      |  |      | 773   |   |  |   | (4,092  | )
|                                                       |  |      |        |      |  |      |       |   |  |   |         |  
|Future tax provision                                   |  |      |        |      |  |      |       |   |  |   |         |  
|Canadian                                               |  |      | 14     |      |  |      | (257  | ) |  |   | 202     |  
|Federal U.S                                            |  |      | (1,059 | )    |  |      | 292   |   |  |   | (4,840  | )
|State and local U.S                                    |  |      | (20    | )    |  |      | (5    | ) |  |   | (1,231  | )
|                                                       |  |      |        |      |  |      |       |   |  |   |         |  
|Total                                                  |  |      | (1,065 | )    |  |      | 30    |   |  |   | (5,869  | )
|                                                       |  |      |        |      |  |      |       |   |  |   |         |  
|(Recovery of) provision for income taxes               |  | $    | (223   | )    |  | $    | 803   |   |  | $ | (9,961  | )
|                                                       |  |      |        |      |  |      |       |   |  |   |         |  

The following analysis reconciles the Canadian income tax rate to the
effective income tax rate.

|                               |  |      |       |      |  |      |       |   |  |  |       |  
|------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                               |  | 2002 |       | 2001 |  | 2000
|                               |  |      |       |      |  |     
|                               |  | %    |       | %    |  | %   
|Statutory federal rate         |  |      | (37.2 | )    |  |      | 37.2  |   |  |  | (37.2 | )
|Unrecognized benefit of losses |  |      | 23.4  |      |  |      | 13.8  |   |  |  | 0.6   |  
|Mining taxes                   |  |      | 12.5  |      |  |      | 14.0  |   |  |  | 1.0   |  
|Resource allowance             |  |      | (10.4 | )    |  |      | (10.8 | ) |  |  | (1.1  | )
|Difference in U.S. tax rates   |  |      | 4.1   |      |  |      | (1.7  | ) |  |  | 3.4   |  
|Other                          |  |      | (3.3  | )    |  |      | (4.7  | ) |  |  | (0.8  | )
|                               |  |      |       |      |  |      |       |   |  |  |       |  
|Effective income tax rate      |  |      | (10.9 | )    |  |      | 47.8  |   |  |  | (34.1 | )
|                               |  |      |       |      |  |      |       |   |  |  |       |  

Future income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of December 31, 2002
and 2001, the Corporation had unused tax benefits of $1,203,000 and $689,000,
respectively, related to Canadian net operating losses. For the fiscal years
ended December 31, 2002 and 2001, the Corporation had unused tax benefits of
$10,220,000 and $9,940,000, respectively, related to U.S. federal and state net
operating loss and tax credit carryforwards.

Significant components of the Corporations future tax benefits and obligations
as of December 31 are as follows (all amounts are in thousands of U.S.
dollars):

F-14



---



##### 



|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|----------------------------------------------- |  | ------ | ------ | ---- |  | ----- | ------- | ------ |  | ---- | ------ | ----- |  | - | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                                |  | 2002   |        | 2001
|                                                |  |        |        |     
|                                                |  | Canada |        | U.S. |  | Total |         | Canada |  | U.S. |        | Total
|                                                |  |        |        |      |  |       |         |        |  |      |        |      
|Future tax benefits                             |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Net operating loss and tax
credit carryforwards |  | $      | 1,203  |      |  | $     | 10,220  |        |  | $    | 11,423 |       |  | $ | 689   |   |  | $ | 9,940  |   |  | $ | 10,629 |  
|Accrued expenses and reserves                   |  |        |       |      |  |       | 1,812   |        |  |      | 1,812  |       |  |   |      |   |  |   | 1,503  |   |  |   | 1,503  |  
|Goodwill                                        |  |        |       |      |  |       | 1,026   |        |  |      | 1,026  |       |  |   |      |   |  |   |       |   |  |   |       |  
|Bad debt allowances                             |  |        |       |      |  |       | 181     |        |  |      | 181    |       |  |   |      |   |  |   | 137    |   |  |   | 137    |  
|Inventories                                     |  |        |       |      |  |       | 622     |        |  |      | 622    |       |  |   |      |   |  |   | 158    |   |  |   | 158    |  
|Other                                           |  |        |       |      |  |       | 705     |        |  |      | 705    |       |  |   |      |   |  |   | 264    |   |  |   | 264    |  
|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Gross future tax benefits                       |  |        | 1,203  |      |  |       | 14,566  |        |  |      | 15,769 |       |  |   | 689   |   |  |   | 12,002 |   |  |   | 12,691 |  
|Valuation allowance                             |  |        | (1,203 | )    |  |       | (852    | )      |  |      | (2,055 | )     |  |   | (689  | ) |  |   | (873   | ) |  |   | (1,562 | )
|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Net future tax benefits                         |  |        |       |      |  |       | 13,714  |        |  |      | 13,714 |       |  |   |      |   |  |   | 11,129 |   |  |   | 11,129 |  
|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Future tax obligations                          |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Property, plant and equipment                   |  |        | 1,413  |      |  |       | 3,692   |        |  |      | 5,105  |       |  |   | 1,399 |   |  |   | 3,096  |   |  |   | 4,495  |  
|Inventories                                     |  |        |       |      |  |       |        |        |  |      |       |       |  |   |      |   |  |   |       |   |  |   |       |  
|Pension contributions                           |  |        |       |      |  |       |        |        |  |      |       |       |  |   |      |   |  |   | 255    |   |  |   | 255    |  
|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Total future tax obligations                    |  |        | 1,413  |      |  |       | 3,692   |        |  |      | 5,105  |       |  |   | 1,399 |   |  |   | 3,351  |   |  |   | 4,750  |  
|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  
|Net future tax obligations
(benefits)           |  | $      | 1,413  |      |  | $     | (10,022 | )      |  | $    | (8,609 | )     |  | $ | 1,399 |   |  | $ | (7,778 | ) |  | $ | (6,379 | )
|                                                |  |        |        |      |  |       |         |        |  |      |        |       |  |   |       |   |  |   |        |   |  |   |        |  

At December 31, 2002, the Corporation had approximately $3,234,000 of Canadian
net operating loss carryforwards which expire between 2006 and 2009. These
losses are not within the Canadian operating subsidiary and are not available
to offset operating income in Canada. No benefit has been recognized in
respect of these losses. At December 31, 2002, the Corporation had
approximately $14,788,000 of U.S. net federal operating loss carryforwards
available to reduce future taxable income, which will expire between 2010 and
2021. Additionally, the Corporation has unused general business tax credits,
which expire between 2003 and 2012, and alternative minimum tax credits. The
Corporation also has U.S. net state operating losses and investment credit
carryforwards; however, a valuation allowance of $852,000 has been recognized
to offset the related future tax benefit due to the uncertainty of realizing
the full benefit of the tax attribute carryforward.



|8. |  | PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
|-- |  | -----------------------------------------------

Pension Plans

The Corporation has a non-contributory defined benefit pension plan covering a
number of U.S. resident employees. During 2002, the Corporation set up a new
supplemental executive retirement plan. These plans provide pension benefits
that are based on the length of service and the compensation of the employee.

F-15



---



##### 



Information relating to the Corporations pension plans is as follows (all
amounts are in thousands of U.S. dollars):

|                                      |  |      |        |      |  |   |        |  
|------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|Change in benefit obligation          |  | 2002 |        | 2001
|                                      |  |      |        |     
|Benefit obligation, beginning of year |  | $    | 15,504 |      |  | $ | 14,247 |  
|Service cost                          |  |      | 439    |      |  |   | 451    |  
|Interest cost                         |  |      | 1,034  |      |  |   | 1,030  |  
|Amendments                            |  |      | 201    |      |  |   |       |  
|Actuarial loss                        |  |      | 1,010  |      |  |   | 1,084  |  
|Distributions and benefits paid       |  |      | (1,950 | )    |  |   | (1,308 | )
|                                      |  |      |        |      |  |   |        |  
|Benefit obligation, end of year       |  | $    | 16,238 |      |  | $ | 15,504 |  
|                                      |  |      |        |      |  |   |        |  

|                                    |  |      |        |      |  |   |        |  
|----------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|Change in fair value of plan assets |  | 2002 |        | 2001
|                                    |  |      |        |     
|Fair value, beginning of year       |  | $    | 13,829 |      |  | $ | 15,704 |  
|Actual return on plan assets        |  |      | (673   | )    |  |   | (567   | )
|Distributions and benefits paid     |  |      | (1,950 | )    |  |   | (1,308 | )
|                                    |  |      |        |      |  |   |        |  
|Fair value, end of year             |  | $    | 11,206 |      |  | $ | 13,829 |  
|                                    |  |      |        |      |  |   |        |  

Net periodic pension expense included the following components (all amounts are
in thousands of U.S. dollars):

|                                              |  |      |       |      |  |      |        |   |  |   |        |  
|--------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                              |  | 2002 |       | 2001 |  | 2000
|                                              |  |      |       |      |  |     
|Current service cost                          |  | $    | 438   |      |  | $    | 451    |   |  | $ | 409    |  
|Interest cost on projected benefit obligation |  |      | 1,034 |      |  |      | 1,030  |   |  |   | 961    |  
|Expected return on assets                     |  |      | (997  | )    |  |      | (1,058 | ) |  |   | (1,134 | )
|Net amortization                              |  |      | 58    |      |  |      | 14     |   |  |   | (5     | )
|                                              |  |      |       |      |  |      |        |   |  |   |        |  
|Net pension expense                           |  | $    | 533   |      |  | $    | 437    |   |  | $ | 231    |  
|                                              |  |      |       |      |  |      |        |   |  |   |        |  

The status of the plans and the amounts recognized in the consolidated balance
sheets of the Corporation for its pension plans as of December 31, 2002 and
2001 is tabulated below (all amounts are in thousands of U.S. dollars):

|                                                                      |  |      |         |      |  |   |         |  
|--------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                                      |  | 2002 |         | 2001
|                                                                      |  |      |         |     
|Projected benefit obligation                                          |  | $    | (16,238 | )    |  | $ | (15,504 | )
|Plan assets at fair value                                             |  |      | 11,206  |      |  |   | 13,829  |  
|                                                                      |  |      |         |      |  |   |         |  
|Projected benefit obligation in excess of plan assets                 |  |      | (5,032  | )    |  |   | (1,675  | )
|Unrecognized net actuarial loss                                       |  |      | 4,931   |      |  |   | 2,293   |  
|Prior service cost not yet recognized in net
periodic pension expense |  |      | 293     |      |  |   | 108     |  
|                                                                      |  |      |         |      |  |   |         |  
|Prepaid pension cost included in consolidated balance sheets          |  | $    | 192     |      |  | $ | 726     |  
|                                                                      |  |      |         |      |  |   |         |  

F-16



---



##### 



Other Postretirement Benefits

Information relating to other postretirement benefits is as follows (all
amounts are in thousands of U.S. dollars):

|                                      |  |      |     |      |  |   |     |  
|------------------------------------- |  | ---- | --- | ---- |  | - | --- | -
|Change in benefit obligation          |  | 2002 |     | 2001
|                                      |  |      |     |     
|Benefit obligation, beginning of year |  | $    | 354 |      |  | $ | 360 |  
|Service cost                          |  |      | 10  |      |  |   | 8   |  
|Interest cost                         |  |      | 25  |      |  |   | 24  |  
|Actuarial loss                        |  |      | 45  |      |  |   | 11  |  
|Benefits paid                         |  |      | (53 | )    |  |   | (49 | )
|                                      |  |      |     |      |  |   |     |  
|Benefit obligation, end of year       |  | $    | 381 |      |  | $ | 354 |  
|                                      |  |      |     |      |  |   |     |  

|                                    |  |      |     |      |  |   |     |  
|----------------------------------- |  | ---- | --- | ---- |  | - | --- | -
|Change in fair value of plan assets |  | 2002 |     | 2001
|                                    |  |      |     |     
|Fair value, beginning of year       |  | $    |    |      |  | $ |    |  
|Employer contribution               |  |      | 53  |      |  |   | 49  |  
|Benefits paid                       |  |      | (53 | )    |  |   | (49 | )
|                                    |  |      |     |      |  |   |     |  
|Fair value, end of year             |  | $    |    |      |  | $ |    |  
|                                    |  |      |     |      |  |   |     |  

Net periodic postretirement benefit expense included the following components
(all amounts are in thousands of U.S. dollars):

|                                              |  |      |    |      |  |      |    |  |  |   |    | 
|--------------------------------------------- |  | ---- | -- | ---- |  | ---- | -- |  |  | - | -- | 
|                                              |  | 2002 |    | 2001 |  | 2000
|                                              |  |      |    |      |  |     
|Current service cost                          |  | $    | 10 |      |  | $    | 8  |  |  | $ | 6  | 
|Interest cost on projected benefit obligation |  |      | 25 |      |  |      | 24 |  |  |   | 26 | 
|Net amortization                              |  |      | 27 |      |  |      | 25 |  |  |   | 24 | 
|                                              |  |      |    |      |  |      |    |  |  |   |    | 
|Net postretirement benefit expense            |  | $    | 62 |      |  | $    | 57 |  |  | $ | 56 | 
|                                              |  |      |    |      |  |      |    |  |  |   |    | 

Assumed health care cost trend rates have a significant effect on the amounts
reported for health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects (all amounts are
in thousands of U.S. dollars):

|                                                                |  |             |    |             |  |   |     |  
|--------------------------------------------------------------- |  | ----------- | -- | ----------- |  | - | --- | -
|                                                                |  | 1% Increase |    | 1% Decrease
|                                                                |  |             |    |            
|Effect on accumulated postretirement benefit obligation         |  | $           | 49 |             |  | $ | (42 | )
|Effect on aggregate of the service and interest cost components |  |             | 5  |             |  |   | (5  | )
|                                                                |  |             |    |             |  |   |     |  

F-17



---



##### 



Assumptions:

|                                                                    |  |      |      |      |  |      |      |  |  |  |      | 
|------------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                                                                    |  | 2002 |      | 2001 |  | 2000
|                                                                    |  | %    |      | %    |  | %   
|                                                                    |  |      |      |      |  |     
|Weighted average discount rate                                      |  |      | 6.50 |      |  |      | 6.85 |  |  |  | 7.25 | 
|Expected long term rate of return                                   |  |      | 8.75 |      |  |      | 8.75 |  |  |  | 8.75 | 
|Increase in level of compensation                                   |  |      | 4.00 |      |  |      | 4.00 |  |  |  | 4.00 | 
|Weighted average health care cost trend rate                        |  |      | 6.50 |      |  |      | 7.00 |  |  |  | 7.50 | 
|Weighted average ultimate health care cost trend rate               |  |      | 5.00 |      |  |      | 5.00 |  |  |  | 5.00 | 
|                                                                    |  |      |      |      |  |      |      |  |  |  |      | 
|Year in which ultimate health care cost trend rate will be achieved |  |      | 2005 |      |  |      | 2005 |  |  |  | 2005 | 
|                                                                    |  |      |      |      |  |      |      |  |  |  |      | 



|9. |  | EMPLOYMENT CONTRACTS
|-- |  | --------------------

During the third quarter of 2002, the Corporation and its former President and
Chief Executive Officer entered into an employment agreement. Under the terms
of the agreement, the Corporation purchased from this individual 340,000 common
shares of the Corporation at $6.96 per share and paid $257,000 to purchase for
cancellation 220,000 previously issued stock options. The individual was
issued new options on 165,000 common shares at $6.96 per share and received a
one time bonus of $885,000. The financial statement impact was a one time
expense of $1,142,000 reflected in selling, general and administrative expense,
the reduction of $2,366,000 of share capital upon cancellation of the purchased
shares, the repayment of the $1,259,000 note receivable from shareholder, the
repayment of the $500,000 advance to shareholder and an increase in the
Corporations bank indebtedness of $1,300,000.

During the same quarter, the Corporation entered into employment contracts with
two other executives. A one time charge of $150,000 resulted from these
contracts.



|10. |  | LONG TERM DEBT AND BANK INDEBTEDNESS
|--- |  | ------------------------------------

|                                               |                       |      |        |      |  |   |     |     | 
|---------------------------------------------- | --------------------- | ---- | ------ | ---- |  | - | --- | --- | 
|(All amounts are in thousands of U.S. dollars) |                       | 2002 |        | 2001
|                                               |                       |      |        |     
|Credit facility (a)                            |                       | $    | 20,000 |      |  | $ |    |    
|Capital leases (b)                             |                       |      | 484    |      |  |   | 450 |    
|Other                                          |                       |      | 255    |      |  |   | 45  |    
|                                               |                       |      |        |      |  |   |     |    
|Total long term debt                           |                       |      | 20,739 |      |  |   | 495 |    
|                                               | Less: Current portion |      |        | 381  |  |   |     | 284 | 
|                                               |                       |      |        |      |  |   |     |    
|Long term debt                                 |                       | $    | 20,358 |      |  | $ | 211 |    
|                                               |                       |      |        |      |  |   |     |    

F-18



---



##### 





|(a) |  | On August 15, 2002, the Corporation entered into an amended and restated
credit facility with its bankers. Under the amended credit facility, the
then existing $30.0 million facility was split into two tranches. The
first $10.0 million tranche, against which $6.0 million has been drawn as
of December 31, 2002 (2001  $11.0 million), remains a 364 day facility
maturing on August 15, 2003 and is reflected as bank indebtedness on the
balance sheet. The second $20.0 million tranche, against which $20.0
million has been drawn as of December 31, 2002 (2001  nil), has a two
year term and matures on August 15, 2004. The obligations are secured by
a pledge of most of the shares of the Corporations subsidiary companies
and a floating charge on the assets of the subsidiaries. The facility
bears interest at LIBOR plus 1.25% to LIBOR plus 1.75% in the case of
LIBOR loans or at the base rate plus 0.25% to 0.75% in the case of prime
and base rate loans. The actual margin is determined by certain financial
ratios.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The Corporation has long term capital lease agreements at various rates
and for various terms with maturities ranging from 2003 to 2007 for
equipment used in its operations. The carrying value of the leased
equipment as of December 31, 2002 and 2001 was $689,000 and $756,000,
respectively. The current obligation under the long term lease agreements
is $246,000 (2001  $274,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Principal repayments required in respect of long term debt are as follows (all
amounts are in thousands of U.S. dollars):

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 381    | 
|2004 |  |   | 20,282 | 
|2005 |  |   | 55     | 
|2006 |  |   | 13     | 
|2007 |  |   | 8      | 
|     |  |   |        | 
|     |  | $ | 20,739 | 
|     |  |   |        | 



|11. |  | COMMON SHARES AND STOCK OPTIONS
|--- |  | -------------------------------

Shares Outstanding

As at December 31, 2002 and 2001, the authorized capital stock of the
Corporation consisted of an unlimited number of first preference shares without
par value and an unlimited number of common shares without par value. There
were 7,870,152 common shares issued and outstanding as of December 31, 2002 and
8,178,393 common shares issued and outstanding as of December 31, 2001.

During 2002, 2001 and 2000, 69,000, 98,000 and 117,000 common shares,
respectively, were issued pursuant to the Corporations employee stock purchase
plan for aggregate proceeds to the Corporation of $455,000, $612,000 and
$906,000, respectively.

As part of a stock repurchase program in 2002, the Corporation purchased 21,000
common shares at an aggregate cost of $125,000, 589,000 common shares in 2001
at an aggregate cost of $3,845,000 and 242,000 common shares in 2000 at an
aggregate cost of $1,862,000.

F-19



---



##### 



Stock Options

The Corporation provides stock option incentive plans and has, with shareholder
approval, issued options to certain of the Corporations directors outside of
the plans. The plans are intended to provide long term incentives and rewards
to executive officers, directors and other key employees contingent upon an
increase in the market value of the Corporations common shares. The options
usually vest and are exercisable from the beginning of the second year
subsequent to the date of issuance.

The following is a summary of option transactions under the Corporations stock
option plans:

|                                               |  |         |           |       |  |           |      |       |  |         |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|---------------------------------------------- |  | ------- | --------- | ----- |  | --------- | ---- | ----- |  | ------- | --------- | --------- |  | - | ---- |  |  | --------- | --------- | - |  | - | ---- | 
|                                               |  | 2002    |           | 2001  |  | 2000     
|                                               |  |         |           |       |  |          
|                                               |  |         |           |       |  | Weighted- |      |       |  |         |           | Weighted- |  |   |      |  |  | Weighted-
|                                               |  |         |           |       |  | average   |      |       |  |         |           | average   |  |   |      |  |  | average  
|                                               |  |         |           |       |  | exercise  |      |       |  |         |           | exercise  |  |   |      |  |  | exercise 
|                                               |  | Options |           | price |  | Options   |      | price |  | Options |           | price    
|                                               |  |         |           |       |  |           |      |       |  |         |           |          
|Options outstanding at
beginning of year       |  |         | 1,070,650 |       |  | $         | 7.16 |       |  |         | 1,177,150 |           |  | $ | 8.17 |  |  |           | 1,163,150 |   |  | $ | 8.11 | 
|Options granted during year                    |  |         | 224,000   |       |  |           | 6.91 |       |  |         | 315,000   |           |  |   | 5.41 |  |  |           | 85,000    |   |  |   | 8.06 | 
|Options purchased during the year*             |  |         | (220,000  | )     |  |           | 5.78 |       |  |         | (8,000    | )         |  |   | 6.50 |  |  |           | (4,000    | ) |  |   | 7.25 | 
|Options cancelled during the year              |  |         | (27,500   | )     |  |           | 8.67 |       |  |         | (413,500  | )         |  |   | 8.85 |  |  |           | (67,000   | ) |  |   | 8.84 | 
|                                               |  |         |           |       |  |           |      |       |  |         |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|Options outstanding at end of year             |  |         | 1,047,150 |       |  | $         | 7.37 |       |  |         | 1,070,650 |           |  | $ | 7.36 |  |  |           | 1,177,150 |   |  | $ | 8.17 | 
|                                               |  |         |           |       |  |           |      |       |  |         |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|Options exercisable at end of year             |  |         | 880,650   |       |  | $         | 7.61 |       |  |         | 713,150   |           |  | $ | 7.82 |  |  |           | 947,200   |   |  | $ | 8.46 | 
|                                               |  |         |           |       |  |           |      |       |  |         |           |           |  |   |      |  |  |           |           |   |  |   |      | 
|Price range of options granted
during the year |  | $       | 6.45~6.96 |       |  |           |      |       |  | $       | 5.21~7.25 |           |  |   |      |  |  | $         | 7.56~8.19 |   |  |   |      | 
|                                               |  |         |           |       |  |           |      |       |  |         |           |           |  |   |      |  |  |           |           |   |  |   |      | 



---

|* |  | See note 9
|- |  | ----------

The options expire from 2003 to 2010.

The following table summarizes information about the stock options outstanding
at December 31, 2002:

|                         |  |                     |           |                     |  |            |  |                   |       |          |  |  |         |           |         |   |       |  |  | 
|------------------------ |  | ------------------- | --------- | ------------------- |  | ---------- |  | ----------------- | ----- | -------- |  |  | ------- | --------- | ------- | - | ----- |  |  | 
|                         |  | Options Outstanding |           | Options Exercisable
|                         |  |                     |           |                    
|                         |  |                     |           |                     |  | Weighted-  |  | Weighted-         |       |          |  |  |         | Weighted-
|                         |  | Number              |           | average             |  | average    |  | Number            |       | average 
|                         |  | outstanding at      |           | remaining           |  | exercise   |  | exercisable at    |       | exercise
|Range of exercise prices |  | December 31, 2002   |           | contractual life    |  | price      |  | December 31, 2002 |       | price   
|                         |  |                     |           |                     |  |            |  |                   |       |         
|$5.00 to $5.99           |  |                     | 141,500   |                     |  | 4.13 years |  | $                 | 5.21  |          |  |  | 70,750  |           |         | $ | 5.21  | 
|$6.00 to $6.99           |  |                     | 452,150   |                     |  | 4.00 years |  |                   | 6.63  |          |  |  | 367,400 |           |         |   | 6.61  | 
|$7.00 to $7.99           |  |                     | 170,000   |                     |  | 2.31 years |  |                   | 7.26  |          |  |  | 159,000 |           |         |   | 7.26  | 
|$8.00 to $8.99           |  |                     | 64,000    |                     |  | 6.94 years |  |                   | 8.21  |          |  |  | 64,000  |           |         |   | 8.21  | 
|$9.00 to $9.99           |  |                     | 12,000    |                     |  | 0.88 years |  |                   | 9.06  |          |  |  | 12,000  |           |         |   | 9.06  | 
|$10.00 to $10.99         |  |                     | 207,500   |                     |  | 1.62 years |  |                   | 10.19 |          |  |  | 207,500 |           |         |   | 10.19 | 
|                         |  |                     |           |                     |  |            |  |                   |       |          |  |  |         |           |         |   |       |  |  | 
|$5.00 to $10.99          |  |                     | 1,047,150 |                     |  |            |  |                   |       |          |  |  |         |           | 880,650 |   |       |  |  | 
|                         |  |                     |           |                     |  |            |  |                   |       |          |  |  |         |           |         |   |       |  |  | 

Note Receivable from Shareholder

The note receivable from shareholder of $1,259,000 as of December 31, 2001
represented an amount due from the Corporations former President and Chief
Executive Officer pursuant to the Key

F-20



---



##### 



Executive Common Stock Purchase Plan. The note, which was used to acquire
shares of common stock of the Corporation, was non-interest bearing and was
secured by a pledge of 176,000 shares of the Corporation. The note receivable
was paid in full pursuant to the employment agreement entered into third
quarter of 2002 (see note 9).



|12. |  | DISCONTINUED OPERATIONS
|--- |  | -----------------------

On April 11, 2000, the Corporation completed the sale of its metal powders
division for gross proceeds of $42.0 million. The metal powders division
included the Corporations wholly-owned subsidiaries, Pyron Corporation and
Pyron Metal Powders, Inc. The Corporation recognized a pre-tax gain of $15.7
million in fiscal 2000 (see note 2).

Financial results from discontinued operations reflected in the Corporations
consolidated statement of operations were as follows (all amounts are in
thousands of U.S. dollars):

|                                                    |  |      |        | 
|--------------------------------------------------- |  | ---- | ------ | 
|Year ended December 31                              |  | 2000
|                                                    |  |     
|Net sales                                           |  | $    | 10,733 | 
|Income before income taxes                          |  |      | 1,470  | 
|Provision for income taxes                          |  |      | 565    | 
|Gain on sale of discontinued operations, net of tax |  |      | 10,480 | 
|Income from discontinued operations                 |  |      | 11,385 | 

Cash provided by discontinued operations included in the Corporations
consolidated statement of cash flows was as follows (all amounts are in
thousands of U.S. dollars):

|                                         |  |      |       |  
|---------------------------------------- |  | ---- | ----- | -
|Year ended December 31                   |  | 2000
|                                         |  |     
|Operating activities                     |  | $    | 2,546 |  
|Investing activities                     |  |      | (161  | )
|Financing activities                     |  |      | (10   | )
|                                         |  |      |       |  
|Cash provided by discontinued operations |  | $    | 2,375 |  
|                                         |  |      |       |  



|13. |  | OPERATING LEASES AND OTHER COMMITMENTS
|--- |  | --------------------------------------

Operating Leases

The Corporation has a number of operating lease agreements primarily involving
equipment, office space, warehouse facilities and rail sidings. The operating
leases for equipment provide that the Corporation may, after the initial lease
term, renew the lease for successive yearly periods or may purchase the
equipment at its fair market value. One of the operating leases for office
facilities contains escalation clauses for increases in operating costs and
property taxes. The majority of the leases are cancellable and are renewable on
a yearly basis. Future minimum lease payments required to meet obligations that
have initial or remaining non-cancellable lease terms in excess of one year as
of December 31, 2002 are as follows (all amounts are in thousands of U.S.
dollars):

F-21



---



##### 



|                             |  |               |       | 
|---------------------------- |  | ------------- | ----- | 
|                             |  | Minimum Lease
|Years                        |  | Payments     
|                             |  |              
|2003                         |  | $             | 889   | 
|2004                         |  |               | 563   | 
|2005                         |  |               | 385   | 
|2006                         |  |               | 202   | 
|2007                         |  |               | 90    | 
|Thereafter                   |  |               | 784   | 
|                             |  |               |       | 
|Total minimum lease payments |  | $             | 2,913 | 
|                             |  |               |       | 

Rent expense was $1,919,000, $1,028,000 and $1,186,000 in 2002, 2001 and 2000,
respectively.



|14. |  | FINANCIAL INSTRUMENTS
|--- |  | ---------------------

Financial instruments which potentially subject the Corporation to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Corporations customer base and
their dispersion across a number of different industries, principally
construction, glass, electrical and automotive. The Corporations exposure to
interest rate risk is limited to interest on bank indebtedness and long term
debt.

Financial instruments comprise cash, accounts receivable, short term bank
borrowings, accounts payable, accrued liabilities, and long term debt. The fair
value of these financial instruments approximates their carrying value
reflecting: (i) the proximity to market rates of the interest obligations on
the debt instruments; and (ii) the limited durations of all of the other
instruments.

The Corporation has no financial interest in derivative contracts for hedging
or speculative purposes.



|15. |  | CHANGES IN NON-CASH WORKING CAPITAL
|--- |  | -----------------------------------

The changes in non-cash working capital items are as follows (all amounts are
in thousands of U.S. dollars):

|                                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                        |  | 2002 |        | 2001 |  | 2000
|                                                                        |  |      |        |      |  |     
|(Increase) decrease in accounts receivable                              |  | $    | (2,539 | )    |  | $    | 2,542  |   |  | $ | 673    |  
|Increase in inventories                                                 |  |      | (809   | )    |  |      | (2,031 | ) |  |   | (1,300 | )
|(Increase) decrease in prepaid expenses and other
current assets        |  |      | (312   | )    |  |      | 102    |   |  |   | 897    |  
|Increase (decrease) in accounts payable and
accrued liabilities         |  |      | 5,463  |      |  |      | (2,377 | ) |  |   | 1,820  |  
|Decrease (increase) in income taxes receivable and
income taxes payable |  |      | 772    |      |  |      | (481   | ) |  |   | (1,036 | )
|                                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|                                                                        |  | $    | 2,575  |      |  | $    | (2,245 | ) |  | $ | 1,054  |  
|                                                                        |  |      |        |      |  |      |        |   |  |   |        |  

F-22



---



##### 





|16. |  | RELATED PARTY TRANSACTIONS
|--- |  | --------------------------

The following summarizes related party transactions not otherwise disclosed in
the financial statements:

As at December 31, 2002 and 2001, accounts receivable included amounts due from
one director and one officer totaling $50,000. These amounts are non-interest
bearing, with no fixed terms of repayment and are secured by common shares of
the Corporation.

During 1998, a director became indebted to the Corporation in the amount of
$124,000. At December 31, 2002, $102,000 remained outstanding and is included
in accounts receivable (2001  $111,000). This obligation is secured by common
shares of the Corporation and bears interest at the Corporations cost of
borrowing (3.2% at December 31, 2002 and December 31, 2001).

The Corporation provides management services to a company owned by its largest
shareholder, Dundee Bancorp, Inc. (Dundee). The Corporation charged $68,000,
$69,000 and $67,000 in 2002, 2001 and 2000, respectively. The fee has been
established based upon fees charged for comparable services provided by a
consultant operating on an arms length basis. This contract was terminated
effective December 31, 2002.

During the year the Corporation paid $63,000 (2001  $74,000 and 2000 
$87,000) to a subsidiary of Dundee for services provided as a financial advisor
for the management of the Corporations pension plan.



|17. |  | SEGMENT INFORMATION
|--- |  | -------------------

The Corporations continuing operations now comprise two principal lines of
business and are organized into two operating units based on its product lines:
(i) industrial minerals, and (ii) aluminum recycling. Industrial mineral
products include feldspar, kaolin, mica, talc, baryte, feldspathic sand and
industrial sand. These products are marketed principally to the automotive,
housing and ceramics industries in North America. They are produced from mines
and processing plants located near Edgar, Florida; Monticello, Georgia; Murphy,
North Carolina; Spruce Pine, North Carolina; Van Horn, Texas; Attapulgus,
Georgia; Boucherville, Quebec; and Suzor Township, Quebec. Aluminum dross is
recycled at plants in Cleveland, Ohio; Wabash, Indiana and Friendly, West
Virginia and ceramic fiber products are fabricated at a plant in Macedonia,
Ohio. Corporate assets principally include cash, term deposits, and furniture
and fixtures.

The accounting policies of the segments are the same as those described in note
1. Information pertaining to sales and (loss) earnings from continuing
operations and assets by business segment appears below (all amounts are in
thousands of U.S. dollars):

F-23



---



##### 



|                                                              |  |              |        |                     |  |           |        |           |  |          |        |   |  |   |         |  
|------------------------------------------------------------- |  | ------------ | ------ | ------------------- |  | --------- | ------ | --------- |  | -------- | ------ | - |  | - | ------- | -
|                                                              |  |              |        |                     |  |           |        |           |  | Aluminum |        |   |  |  
|Year Ended December 31, 2002                                  |  | Consolidated |        | Industrial Minerals |  | Recycling |        | Corporate
|                                                              |  |              |        |                     |  |           |        |          
|Net sales                                                     |  | $            | 73,869 |                     |  | $         | 48,410 |           |  | $        | 25,459 |   |  | $ |        |  
|Depreciation and depletion                                    |  |              | 6,250  |                     |  |           | 3,871  |           |  |          | 2,311  |   |  |   | 68      |  
|Other expense                                                 |  |              | 3,950  |                     |  |           |       |           |  |          |       |   |  |   | 3,950   |  
|(Loss) income before the undernoted                           |  |              | (1,150 | )                   |  |           | 7,733  |           |  |          | 299    |   |  |   | (9,182  | )
|Interest income                                               |  |              | 175    |                     |  |           | 1      |           |  |          | 5      |   |  |   | 169     |  
|Interest expense                                              |  |              | (1,119 | )                   |  |           | (49    | )         |  |          | (26    | ) |  |   | (1,044  | )
|Other income (expense)                                        |  |              | 56     |                     |  |           | (14    | )         |  |          | 77     |   |  |   | (7      | )
|(Loss) income before (recovery of)
provision for income taxes |  |              | (2,038 | )                   |  |           | 7,671  |           |  |          | 355    |   |  |   | (10,064 | )
|(Recovery of) provision for income taxes                      |  |              | (223   | )                   |  |           | 727    |           |  |          | 23     |   |  |   | (973    | )
|Net (loss) income                                             |  |              | (1,815 | )                   |  |           | 6,944  |           |  |          | 332    |   |  |   | (9,091  | )

|                                                                         |  |              |        |                     |  |           |        |           |  |          |        |   |  |   |        |  
|------------------------------------------------------------------------ |  | ------------ | ------ | ------------------- |  | --------- | ------ | --------- |  | -------- | ------ | - |  | - | ------ | -
|                                                                         |  |              |        |                     |  |           |        |           |  | Aluminum |        |   |  |  
|Year Ended December 31, 2001                                             |  | Consolidated |        | Industrial Minerals |  | Recycling |        | Corporate
|                                                                         |  |              |        |                     |  |           |        |          
|Net sales                                                                |  | $            | 57,336 |                     |  | $         | 39,942 |           |  | $        | 17,394 |   |  | $ |       |  
|Depreciation, depletion and amortization                                 |  |              | 5,766  |                     |  |           | 3,305  |           |  |          | 2,366  |   |  |   | 95     |  
|Income (loss) before the undernoted                                      |  |              | 1,854  |                     |  |           | 7,234  |           |  |          | (1,670 | ) |  |   | (3,710 | )
|Interest income                                                          |  |              | 119    |                     |  |           | 65     |           |  |          |       |   |  |   | 54     |  
|Interest expense                                                         |  |              | (910   | )                   |  |           | (17    | )         |  |          | (20    | ) |  |   | (873   | )
|Other income                                                             |  |              | 615    |                     |  |           | 295    |           |  |          | 37     |   |  |   | 283    |  
|Income (loss) before provision income taxes
and non-controlling interest |  |              | 1,678  |                     |  |           | 7,577  |           |  |          | (1,653 | ) |  |   | (4,246 | )
|Provision for income taxes                                               |  |              | 803    |                     |  |           | 580    |           |  |          | 10     |   |  |   | 213    |  
|Non-controlling interest in subsidiary earnings                          |  |              | 10     |                     |  |           | 10     |           |  |          |       |   |  |   |       |  
|Net income (loss)                                                        |  |              | 865    |                     |  |           | 6,987  |           |  |          | (1,663 | ) |  |   | (4,459 | )

|                                                                                           |  |              |         |                     |  |           |        |           |  |          |         |   |  |   |         |  
|------------------------------------------------------------------------------------------ |  | ------------ | ------- | ------------------- |  | --------- | ------ | --------- |  | -------- | ------- | - |  | - | ------- | -
|                                                                                           |  |              |         |                     |  |           |        |           |  | Aluminum |         |   |  |  
|Year Ended December 31, 2000                                                               |  | Consolidated |         | Industrial Minerals |  | Recycling |        | Corporate
|                                                                                           |  |              |         |                     |  |           |        |          
|Net sales                                                                                  |  | $            | 76,480  |                     |  | $         | 51,422 |           |  | $        | 25,058  |   |  | $ |        |  
|Depreciation, depletion and amortization                                                   |  |              | 7,801   |                     |  |           | 4,578  |           |  |          | 2,614   |   |  |   | 609     |  
|Income (loss) before the undernoted                                                        |  |              | 602     |                     |  |           | 5,698  |           |  |          | (1,265  | ) |  |   | (3,831  | )
|Provision for asset impairment                                                             |  |              | (24,552 | )                   |  |           | (5,202 | )         |  |          | (13,047 | ) |  |   | (6,303  | )
|Interest income                                                                            |  |              | 155     |                     |  |           | 51     |           |  |          | 29      |   |  |   | 75      |  
|Interest expense                                                                           |  |              | (2,386  | )                   |  |           | (95    | )         |  |          | (28     | ) |  |   | (2,263  | )
|Other (expense) income                                                                     |  |              | (3,017  | )                   |  |           | (56    | )         |  |          | 24      |   |  |   | (2,985  | )
|(Loss) income before (recovery of) provision
for income taxes and non-controlling interest |  |              | (29,198 | )                   |  |           | 396    |           |  |          | (14,287 | ) |  |   | (15,307 | )
|(Recovery of) provision for income taxes                                                   |  |              | (9,961  | )                   |  |           | 934    |           |  |          |        |   |  |   | (10,895 | )
|Non-controlling interest in subsidiary earnings                                            |  |              | 119     |                     |  |           | 119    |           |  |          |        |   |  |   |        |  
|Loss before discontinued operations                                                        |  |              | (19,356 | )                   |  |           | (657   | )         |  |          | (14,287 | ) |  |   | (4,412  | )
|Income from discontinued operations                                                        |  |              | 11,385  |                     |  |           |       |           |  |          |        |   |  |   | 10,480  |  
|Net (loss) income                                                                          |  |              | (7,971  | )                   |  |           | (657   | )         |  |          | (14,287 | ) |  |   | 6,068   |  

F-24



---



##### 



|                            |  |              |         |          |  |            |        |           |  |   |        |  |  |   |        | 
|--------------------------- |  | ------------ | ------- | -------- |  | ---------- | ------ | --------- |  | - | ------ |  |  | - | ------ | 
|                            |  |              |         |          |  | Industrial |        | Aluminum  |  |   |        | 
|December 31, 2002           |  | Consolidated |         | Minerals |  | Recycling  |        | Corporate
|                            |  |              |         |          |  |            |        |          
|Total assets                |  | $            | 113,430 |          |  | $          | 78,738 |           |  | $ | 24,901 |  |  | $ | 9,791  | 
|Total current liabilities   |  |              | 16,724  |          |  |            | 4,895  |           |  |   | 3,285  |  |  |   | 8,544  | 
|Total long term liabilities |  |              | 24,205  |          |  |            | 2,005  |           |  |   | 1,830  |  |  |   | 20,370 | 
|Total shareholders equity  |  |              | 72,501  |          |  |            |       |           |  |   |       |  |  |   | 72,501 | 

|                            |  |              |        |          |  |            |        |           |  |   |        |  |  |   |        | 
|--------------------------- |  | ------------ | ------ | -------- |  | ---------- | ------ | --------- |  | - | ------ |  |  | - | ------ | 
|                            |  |              |        |          |  | Industrial |        | Aluminum  |  |   |        | 
|December 31, 2001           |  | Consolidated |        | Minerals |  | Recycling  |        | Corporate
|                            |  |              |        |          |  |            |        |          
|Total assets                |  | $            | 97,515 |          |  | $          | 64,490 |           |  | $ | 20,306 |  |  | $ | 12,719 | 
|Total current liabilities   |  |              | 16,819 |          |  |            | 3,501  |           |  |   | 1,911  |  |  |   | 11,407 | 
|Total long term liabilities |  |              | 3,891  |          |  |            | 1,859  |           |  |   | 1,663  |  |  |   | 369    | 
|Total shareholders equity  |  |              | 76,805 |          |  |            |       |           |  |   |       |  |  |   | 76,805 | 

|                            |  |              |         |          |  |            |        |           |  |   |        |  |  |   |        | 
|--------------------------- |  | ------------ | ------- | -------- |  | ---------- | ------ | --------- |  | - | ------ |  |  | - | ------ | 
|                            |  |              |         |          |  | Industrial |        | Aluminum  |  |   |        | 
|December 31, 2000           |  | Consolidated |         | Minerals |  | Recycling  |        | Corporate
|                            |  |              |         |          |  |            |        |          
|Total assets                |  | $            | 113,579 |          |  | $          | 76,931 |           |  | $ | 23,055 |  |  | $ | 13,593 | 
|Total current liabilities   |  |              | 27,709  |          |  |            | 4,761  |           |  |   | 4,367  |  |  |   | 18,581 | 
|Total long term liabilities |  |              | 2,600   |          |  |            | 2,144  |           |  |   | 139    |  |  |   | 317    | 
|Total shareholders equity  |  |              | 79,903  |          |  |            |       |           |  |   |       |  |  |   | 79,903 | 

|     |                      |  |              |       |          |  |            |       |           |  |            |       |  |  |              |    |  |  |   |     | 
|---- | -------------------- |  | ------------ | ----- | -------- |  | ---------- | ----- | --------- |  | ---------- | ----- |  |  | ------------ | -- |  |  | - | --- | 
|     |                      |  |              |       |          |  | Industrial |       | Aluminum  |  |            |       |  |  | Discontinued
|     |                      |  | Consolidated |       | Minerals |  | Recycling  |       | Corporate |  | Operations
|     |                      |  |              |       |          |  |            |       |           |  |           
|2002 |                      |  |              |       |          |  |            |       |           |  |            |       |  |  |              |    |  |  |   |    
|     | Capital expenditures |  | $            | 5,524 |          |  | $          | 3,932 |           |  | $          | 1,574 |  |  | $            | 18 |  |  | $ |    | 
|2001 |                      |  |              |       |          |  |            |       |           |  |            |       |  |  |              |    |  |  |   |    
|     | Capital expenditures |  | $            | 3,551 |          |  | $          | 2,719 |           |  | $          | 831   |  |  | $            | 1  |  |  | $ |    | 
|2000 |                      |  |              |       |          |  |            |       |           |  |            |       |  |  |              |    |  |  |   |    
|     | Capital expenditures |  | $            | 4,436 |          |  | $          | 2,830 |           |  | $          | 1,375 |  |  | $            | 70 |  |  | $ | 161 | 

|                     |  |        |     |      |  |      |     |      |  |      |     |      |  |   |       |  |  |   |       |  |  |   |       | 
|-------------------- |  | ------ | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                     |  | Canada |     | U.S.
|                     |  |        |     |     
|                     |  | 2002   |     | 2001 |  | 2000 |     | 2002 |  | 2001 |     | 2000
|                     |  |        |     |      |  |      |     |      |  |      |     |     
|Capital expenditures |  | $      | 371 |      |  | $    | 147 |      |  | $    | 233 |      |  | $ | 5,153 |  |  | $ | 3,404 |  |  | $ | 4,203 | 

The Corporation bases its geographic allocation upon the location of its sales
offices which are all domiciled in the United States.

F-25



---



##### 





|18. |  | CONTINGENCIES
|--- |  | -------------

The Corporation is involved in various legal actions in the normal course of
business. In the opinion of management, the aggregate amount of any potential
liability, for which provision has not already been established, is not
expected to have a material adverse effect on the Corporations financial
position or its results of operations and cash flows.



|19. |  | GUARANTEES
|--- |  | ----------

In November 2002, the Financial Accounting Standards Board (FASB) issued FASB
interpretation No. 45 (FIN No. 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others which is effective for financial periods ending after December 15,
2002. FIN No. 45 defines guarantees to include indemnifications granted
pursuant to contractual arrangements as well as contingent consideration.

In March 2001, the Corporation assigned its 60% interest in the Benwood Fabi
J.V. Pursuant to the contract, the Corporation indemnified the assignee
against financial loss arising from a breach of certain representations and
warranties. The indemnification is for a three year period ending on the third
anniversary of the closing date. As at December 31, 2002 the Corporation was
not aware of any breach that would give rise to a financial exposure.

In March 2002, the Corporation purchased the assets of Resource Recovery
Industries, LLC (see note 2). As contingent consideration for the purchase,
the Corporation issued Series A and Series B warrants which are exercisable for
cash consideration into shares of Alumitech, Inc., or into shares of the
Corporation under certain circumstances on an exchange ratio based upon a
calculated fair market value of Alumitech and the prevailing market price of
the Corporations common shares. The warrants, which vest in 2005 and 2006
respectively, will terminate if certain earnings targets are not met by the
aluminum operations of Alumitech by the beginning of these fiscal years.

F-26



---



##### 





|20. |  | DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
|--- |  | ----------------------------------------------------

These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles. The differences between
Canadian and U.S. GAAP do not have a material effect on the Corporations
reported financial position or net (loss) income except as follows:



|a. |  | Statements of Operations
|-- |  | ------------------------

Under U.S. GAAP, the measure (Loss) Income before the Undernoted is not a
recognized term and would therefore not be presented. Also under U.S. GAAP,
Provision for Asset Impairment would appear as a component of operating
(loss) income.

The implementation of the American Institute of Certified Public Accountants
Statement of Position (SOP) 98-5 requires that the costs of start-up
activities and organization costs be expensed as incurred. Canadian GAAP
permits the deferral and amortization of such costs.

Under U.S. GAAP, the provision for asset impairment for property, plant and
equipment should be based on discounted future cash flows from impaired assets.
Under Canadian GAAP, future cash flows from impaired assets are not
discounted.

Under U.S. GAAP, goodwill impairment charges recorded pursuant to a
transitional impairment test under SFAS No. 142 are recognized in the
Corporations statement of operations as a cumulative effect of the change in
accounting principle. Under Canadian GAAP such impairment charges are
recognized as an adjustment to opening retained earnings.

Under U.S. GAAP, certain costs associated with the redemption of the Senior
Secured Notes would be considered to be an extraordinary item and require
separate disclosure.

The following summarizes the income statement amounts in accordance with U.S.
GAAP where different from the amounts reported under Canadian GAAP, as
described above (all amounts are in thousands of U.S. dollars, except per share
amounts):

F-27



---



##### 



|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |        |       |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | --------- | ------------------------------------ | -- | ----- | - | ---- | --- | ---- | - | ------- | ------ | ----- | ------ | -
|                                                                                                                                                    |                                                                 |           |                                      |    | 2002  |   | 2001 |     | 2000
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |     
|(Loss) income before discontinued operations under Canadian GAAP                                                                                    |                                                                 | $         | (1,815                               | )  |       | $ | 865  |     |      | $ | (19,356 | )     
|Adjustments for U.S. GAAP                                                                                                                           |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|                                                                                                                                                    | Add: Amortization of start-up activities and organization costs |           |                                      | 30 |       |   |      | 62  |      |   |         | 2,784  |      
|                                                                                                                                                    |                                                                 |           | Provision for asset impairment       |    |       |  |      |     |      |  |         |        |       | (1,439 | )
|                                                                                                                                                    |                                                                 |           | Senior secured notes redemption cost |    |       |  |      |     |      |  |         |        |       | 3,215  |  
|                                                                                                                                                    | Tax effect related thereto                                      |           |                                      | (7 | )     |   |      | (30 | )    |   |         | (1,587 | )    
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|(Loss) income before discontinued operations, extraordinary
loss and cumulative effect on change in accounting principle,
under U.S. GAAP           |                                                                 |           | (1,792                               | )  |       |   | 897  |     |      |   | (16,383 | )     
|Income from discontinued operations, net of tax                                                                                                     |                                                                 |           |                                     |    |       |   |     |     |      |   | 11,385  |       
|Extraordinary loss, net of tax                                                                                                                      |                                                                 |           |                                     |    |       |   |     |     |      |   | (2,096  | )     
|Cumulative effect on change in accounting principle, net of tax                                                                                     |                                                                 |           | (1,675                               | )  |       |   |     |     |      |   |        |       
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|Net (loss) income under U.S. GAAP                                                                                                                   |                                                                 | $         | (3,467                               | )  |       | $ | 897  |     |      | $ | (7,094  | )     
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|(Loss) income per share before discontinued operations,
extraordinary loss and cumulative effect on change in
accounting principle, under U.S. GAAP |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|                                                                                                                                                    |                                                                 |  Basic   |                                      | $  | (0.23 | ) |      | $   | 0.11 |   |         | $      | (1.93 | )     
|                                                                                                                                                    |                                                                 |  Diluted |                                      | $  | (0.23 | ) |      | $   | 0.11 |   |         | $      | (1.93 | )     
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|Income from discontinued operations per share, under U.S. GAAP                                                                                      |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|                                                                                                                                                    |                                                                 |  Basic   |                                      | $  |      |   |      | $   |     |   |         | $      | 1.34  |       
|                                                                                                                                                    |                                                                 |  Diluted |                                      | $  |      |   |      | $   |     |   |         | $      | 1.34  |       
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|Extraordinary loss per share, under U.S. GAAP                                                                                                       |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|                                                                                                                                                    |                                                                 |  Basic   |                                      | $  |      |   |      | $   |     |   |         | $      | (0.25 | )     
|                                                                                                                                                    |                                                                 |  Diluted |                                      | $  |      |   |      | $   |     |   |         | $      | (0.25 | )     
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|Cumulative effect on change in accounting principle per share,
under U.S. GAAP                                                                      |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|                                                                                                                                                    |                                                                 |  Basic   |                                      | $  | (0.21 | ) |      | $   |     |   |         | $      |      |       
|                                                                                                                                                    |                                                                 |  Diluted |                                      | $  | (0.21 | ) |      | $   |     |   |         | $      |      |       
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|Net (loss) income per share, under U.S. GAAP                                                                                                        |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       
|                                                                                                                                                    |                                                                 |  Basic   |                                      | $  | (0.44 | ) |      | $   | 0.11 |   |         | $      | (0.84 | )     
|                                                                                                                                                    |                                                                 |  Diluted |                                      | $  | (0.44 | ) |      | $   | 0.11 |   |         | $      | (0.84 | )     
|                                                                                                                                                    |                                                                 |           |                                      |    |       |   |      |     |      |   |         |       



|b. |  | Balance Sheets
|-- |  | --------------

U.S. GAAP, SOP 98-5, requires that the costs of start-up activities and
organization costs be expensed as incurred in the period incurred rather than
be deferred.

Canadian and U.S. GAAP differ as to the methodology applied to determine the
quantum of any necessary asset impairment provision.

Canadian and U.S. GAAP differ as to the recording of goodwill impairments on
transition.

The following summarizes the balance sheet amounts in accordance with U.S. GAAP
where different from the amounts reported under Canadian GAAP (all amounts are
in thousands of U.S. dollars):

F-28



---



##### 



|                                         |  |          |        |               |  |          |        |               |  |   |        |  |  |   |        |  
|---------------------------------------- |  | -------- | ------ | ------------- |  | -------- | ------ | ------------- |  | - | ------ |  |  | - | ------ | -
|                                         |  | 2002     |        | 2001         
|                                         |  |          |        |              
|                                         |  | Canadian |        | United States |  | Canadian |        | United States
|                                         |  | GAAP     |        | GAAP          |  | GAAP     |        | GAAP         
|                                         |  |          |        |               |  |          |        |              
|Property, plant and equipment            |  | $        | 68,715 |               |  | $        | 67,276 |               |  | $ | 56,962 |  |  | $ | 55,523 |  
|Other assets                             |  |          | 918    |               |  |          | 735    |               |  |   | 3,505  |  |  |   | 3,292  |  
|Future income tax benefits
(non-current) |  |          | 8,068  |               |  |          | 8,221  |               |  |   | 7,394  |  |  |   | 7,554  |  
|Accumulated other comprehensive loss     |  |          |       |               |  |          | (2,473 | )             |  |   |       |  |  |   | (2,542 | )
|Retained earnings                        |  |          | 23,330 |               |  |          | 21,861 |               |  |   | 26,820 |  |  |   | 25,328 |  



|c. |  | Statements of Comprehensive (Loss) Income
|-- |  | -----------------------------------------

U.S. GAAP requires a statement of comprehensive (loss) income as follows (all
amounts are in thousands of U.S. dollars):

|                                                  |  |      |        |      |  |      |      |   |  |   |         |  
|------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ---- | - |  | - | ------- | -
|                                                  |  | 2002 |        | 2001 |  | 2000
|                                                  |  |      |        |      |  |     
|(Loss) income before discontinued operations      |  | $    | (3,467 | )    |  | $    | 897  |   |  | $ | (18,479 | )
|Change in foreign currency translation adjustment |  |      | 69     |      |  |      | (534 | ) |  |   | (211    | )
|Change in additional minimum pension liability    |  |      | 2,802  |      |  |      |     |   |  |   |        |  
|                                                  |  |      |        |      |  |      |      |   |  |   |         |  
|Comprehensive (loss) income                       |  | $    | (596   | )    |  | $    | 363  |   |  | $ | (18,690 | )
|                                                  |  |      |        |      |  |      |      |   |  |   |         |  

Under U.S. GAAP, a minimum pension liability is required to be recorded for the
excess of the fair value of the benefit obligation over the pension liability.



|d. |  | Stock Based Compensation
|-- |  | ------------------------

The Corporation does not recognize compensation expense for its stock-based
compensation plans. Had compensation cost for the stock option plans been
determined based upon fair value at the grant date for awards under these plans
consistent with the methodology prescribed under SFAS No. 123, Accounting for
Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment to SFAS No. 123, the
Corporations pro forma (loss) income and (loss) earning per share would be as
presented below (all amounts are in thousands of U.S. dollars, except per share
amounts):

|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |       |  
|-------------------------------------------------------------------------------------------------------------- | --------- | ---- | ------ | ----- | - | ---- | --- | ---- |  | - | ------- | ----- | -
|Years Ended December 31                                                                                        |           | 2002 |        | 2001  |   | 2000
|                                                                                                               |           |      |        |       |   |     
|(Loss) income before discontinued operations, under U.S. GAAP                                                  |           | $    | (3,467 | )     |   | $    | 897 |      |  | $ | (18,479 | )    
|Less: Total stock-based employee compensation expense
determined under the fair value based method, net of tax |           |      | 310    |       |   |      | 224 |      |  |   | 309     |      
|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |       |  
|Pro forma (loss) income before discontinued operations,
under U.S. GAAP                                        |           | $    | (3,777 | )     |   | $    | 673 |      |  | $ | (18,788 | )    
|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |       |  
|Pro forma (loss) income per share before discontinued operations,                                              |           |      |        |       |   |      |     |      |  |   |         |      
|under U.S. GAAP                                                                                                |           |      |        |       |   |      |     |      |  |   |         |      
|                                                                                                               |  Basic   |      | $      | (0.48 | ) |      | $   | 0.08 |  |   | $       | (2.22 | )
|                                                                                                               |  Diluted |      | $      | (0.48 | ) |      | $   | 0.08 |  |   | $       | (2.22 | )
|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |       |  

F-29



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##### 



Under CICA Handbook Section 3870, Stock-based Compensation and Other
Stock-based Payments which is similar to the U.S. pronouncement, SFAS No. 148,
the Corporations pro forma (loss) income and (loss) earning per share under
Canadian GAAP would be as presented below (all amounts are in thousands of U.S.
dollars, except per share amounts):

|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |       |  
|-------------------------------------------------------------------------------------------------------------- | --------- | ---- | ------ | ----- | - | ---- | --- | ---- |  | - | ------- | ----- | -
|Years Ended December 31                                                                                        |           | 2002 |        | 2001  |   | 2000
|                                                                                                               |           |      |        |       |   |     
|(Loss) income before discontinued operations under Canadian GAAP                                               |           | $    | (1,815 | )     |   | $    | 865 |      |  | $ | (19,356 | )    
|Less: Total stock-based employee compensation expense
determined under the fair value based method, net of tax |           |      | 310    |       |   |      | 224 |      |  |   | 309     |      
|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |      
|Pro forma (loss) income before discontinued operations,
under Canadian GAAP                                    |           | $    | (2,125 | )     |   | $    | 641 |      |  | $ | (19,665 | )    
|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |      
|Pro forma (loss) income per share before discontinued operations,
under Canadian GAAP                          |           |      |        |       |   |      |     |      |  |   |         |      
|                                                                                                               |  Basic   |      | $      | (0.27 | ) |      | $   | 0.08 |  |   | $       | (2.32 | )
|                                                                                                               |  Diluted |      | $      | (0.27 | ) |      | $   | 0.08 |  |   | $       | (2.32 | )
|                                                                                                               |           |      |        |       |   |      |     |      |  |   |         |      

The fair value of the options granted during 2002, 2001 and 2000 is estimated
to have been $339,000, $600,000 and $257,000, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 2002, 2001 and 2000: dividend yield of 0%; expected volatility of
29%, 28% and 28%, respectively; risk-free interest rates varying from 2.18% to
6.73%; and an expected life varying between 2 years to 5 years.



|e. |  | Recent Accounting Pronouncements
|-- |  | --------------------------------

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143, (SFAS No. 143),
Accounting for Asset Retirement Obligations, which is effective for financial
statements issued for fiscal years beginning after June 15, 2002. SFAS No. 143
addresses the recognition and remeasurement of obligations associated with the
retirement of tangible long lived assets.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, (SFAS No. 146), Accounting for Costs Associated with Exit or Disposal
Activities, which is effective for exit or disposal activities initiated after
December 31, 2002. SFAS No. 146 supercedes Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in Restructuring) (EITF 94-3). SFAS No. 146 requires that costs associated
with an exit or disposal activity be recognized when the liability is incurred,
whereas EITF 94-3 required recognition of a liability when an entity committed
to an exit plan.

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest
Entities. FIN No. 46 clarifies the application of Accounting Research
Bulletin No. 51  Consolidated Financial Statements to those entities defined
as Variable Interest Entities (more commonly referred to as special purpose
entities) in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support

F-30



---



##### 



from other parties. FIN No. 46 applies immediately to all Variable Interest
Entities created after January 31, 2003, and by the beginning of the first
interim or annual reporting period commencing after June 15, 2003 for Variable
Interest Entities created prior to February 1, 2003. The Corporation does not
conduct any transactions through special purpose entities and does not expect
FIN No. 46 to have an impact on its financial statements.

The Canadian Institute of Chartered Accountants (CICA) issued Accounting
Guideline 13, (AcG-13), Hedging Relationships, which requires that in order
to apply hedge accounting, all hedging relationships must be identified,
designated, documented and effective. Where hedging relationships cannot meet
these requirements, hedge accounting must be discontinued. AcG-13 is
applicable for fiscal years beginning on or after July 1, 2002.

The CICA issued a revised Handbook Section 3475, Disposal of Long-Lived Assets
and Discontinued Operations. The revised standard establishes criteria for
the classification of long-lived assets as held for sale and requires that
long-lived assets that are to be disposed of by sale be measured at the lower
of carrying value or fair value less cost to sell. It eliminates the previous
recommendation that enterprises include under ''discontinued operations in
the financial statements amounts for operating losses that have not yet
occurred. Additionally, the revised standard expands the scope of discontinued
operations to include all components of an enterprise with operations that (1)
can be distinguished from the rest of the entity and (2) will be eliminated
from the ongoing operations of the entity in a disposal transaction. The new
Section 3475 is effective for disposal activities initiated by the enterprises
commitment to a plan on or after May 1, 2003.

Finally, the CICA issued Handbook Section 3063, Impairment of Long-Lived
Assets, which requires that impairment of long-lived assets held for use be
determined by a two-step process, with the first step determining when an
impairment is recognized and the second step measuring the amount of the
impairment. Under Section 3063 an impairment loss is recognized when the
carrying amount of a long-lived asset exceeds the sum of the undiscounted cash
flows expected to result from its use and eventual disposition and is measured
as the amount by which the long-lived assets carrying amount exceeds its fair
value. Section 3063 is effective for fiscal years beginning on or after April
1, 2003.

The Corporation has not yet determined the effect, if any, that the adoption of
SFAS Nos. 143 and 146, FIN No. 46, CICA AcG-13, CICA Sections 3475 and 3063
will have on its business, results of operations and financial condition.



|21. |  | SUBSEQUENT EVENTS
|--- |  | -----------------

On November 17, 2000, a subsidiary of the Corporation entered into a Stock
Purchase Agreement with Hecla Mining Company (Hecla) whereby the Corporation
agreed to purchase, subject to certain conditions precedent, the shares of two
of Heclas subsidiaries collectively known as K-T Clay. As specifically
permitted by the Stock Purchase Agreement (the Agreement), on January 15,
2001 the Corporation notified Hecla of a number of conditions which resulted in
Heclas representations and warranties being untrue and that such conditions
were reasonably expected to prevent consummation of the transaction in
accordance with the Agreement, thus resulting in Hecla being in default of the
Agreement. The Corporation advised Hecla that, based on those conditions, it
intended to terminate the Agreement and it did so formally on February 16,
2001. Despite this, on January 22, 2001, Hecla

F-31



---



##### 



filed an action in the United States District Court, Northern District of
Illinois, alleging breach of contract and seeking to enforce performance and an
award of damages. The claim for specific performance was subsequently
withdrawn. The Corporation was of the opinion that Heclas allegations were
without merit; however, the Corporation determined that it was prudent to
eliminate the financial exposure arising from the uncertain outcome of
litigation. In January 2003, the dispute was settled for $3,950,000. This
amount has been provided for as at December 31, 2002.

On March 3, 2003, the Corporation entered into an Arrangement Agreement
(Arrangement) with Cementos Pacasmayo S.A.A., a cement company headquartered
in Lima, Peru, whereby, pursuant to the Arrangement and subject to shareholder
and court approval, Pacasmayo will acquire 100% of the issued and outstanding
common shares and options of the Corporation. The transaction is expected to
close in May of 2003.



|22. |  | COMPARATIVE FIGURES
|--- |  | -------------------

Certain of the comparative figures have been reclassified to comply with the
current years presentation.

F-32



---



##### 



FINANCIAL DATA (UNAUDITED)

The following is a summary of certain unaudited quarterly financial data (all
amounts are in thousands of U.S. dollars, except per share amounts):

|                                     |                |   |        |        |      |   |        |        |  
|------------------------------------ | -------------- | - | ------ | ------ | ---- | - | ------ | ------ | -
|                                     |                |   | 2002   |        | 2001
|                                     |                |   |        |        |     
|Net sales from continuing operations |                |   |        |        |      |   |        |       
|                                     | First quarter  |   | $      | 14,973 |      |   | $      | 16,563 |  
|                                     | Second quarter |   |        | 18,064 |      |   |        | 14,493 |  
|                                     | Third quarter  |   |        | 19,592 |      |   |        | 14,125 |  
|                                     | Fourth quarter |   |        | 21,240 |      |   |        | 12,155 |  
|                                     |                |   |        |        |      |   |        |       
|                                     |                | $ | 73,869 |        |      | $ | 57,336 |       
|                                     |                |   |        |        |      |   |        |       
|Income (loss) before the undernoted  |                |   |        |        |      |   |        |       
|                                     | First quarter  |   | $      | 128    |      |   | $      | 775    |  
|                                     | Second quarter |   |        | 664    |      |   |        | 754    |  
|                                     | Third quarter  |   |        | (403   | )    |   |        | 398    |  
|                                     | Fourth quarter |   |        | (1,539 | )    |   |        | (73    | )
|                                     |                |   |        |        |      |   |        |       
|                                     |                | $ | (1,150 | )      |      | $ | 1,854  |       
|                                     |                |   |        |        |      |   |        |       
|Net income (loss)                    |                |   |        |        |      |   |        |       
|                                     | First quarter  |   | $      | 50     |      |   | $      | 683    |  
|                                     | Second quarter |   |        | 130    |      |   |        | 544    |  
|                                     | Third quarter  |   |        | (324   | )    |   |        | 90     |  
|                                     | Fourth quarter |   |        | (1,671 | )    |   |        | (452   | )
|                                     |                |   |        |        |      |   |        |       
|                                     |                | $ | (1,815 | )      |      | $ | 865    |       
|                                     |                |   |        |        |      |   |        |       
|Net income (loss) per share  basic  |                |   |        |        |      |   |        |       
|                                     | First quarter  |   | $      | 0.01   |      |   | $      | 0.08   |  
|                                     | Second quarter |   |        | 0.02   |      |   |        | 0.07   |  
|                                     | Third quarter  |   |        | (0.04  | )    |   |        | 0.01   |  
|                                     | Fourth quarter |   |        | (0.21  | )    |   |        | (0.06  | )

F-33