Document 3NzzmyzwXN38QyRdvrkM31YvO

PNYC 00010061 N11741 Anaconda Copper Mining Company CAPITAL STOCK December 31, 1935 Authorized, 12,000,000:shares, $S0e4ch...............................$600,000,000 Issued, 8,919,086 shares, ISOeach............................... 445,954300 OFFICERS President..................................... Vice-President.............................. Vice-President and Treasurer . Secretary and Assistant Treasurer General Auditor ...... Assistant Secretary .. Co r n el iu s F. Ke l l e y . . Ja me s R. Ho b s in s . . Ro b e r t E. Dw y e r . . Da v id B. He n n e s s y . . Ja me s Dic k s o n . . Ke n n e t h B. Fr a z e r DIRECTORS An d r e w J. Mil l e r Gr a y s o n M.-P. Mu r ph y Ja me s R. Ho b b in s Wil l ia m D. Th o r n t o n Co r n el iu s F. Ke l l e y Jo h n A. Co e Ro b e r t E. Dw y e r He r man C. Be l l in g e r OFFICES An a c o n d a , Mo n t a n a Bu t t e, Mo n t a n a 25 Br o a d w a y , Ne w Yo r e To the Shareholders of Anaconda Copper Mining Company: The consumption of non-ferrous metals during 1935 was substantially greater than in the prior year. Consumption of copper in the foreign markets established an all-time record. In the domestic market copper consumption improved materially over the preceding year; nevertheless, it remained abnormally low compared; with either the high year of 1929 or the average consumption for 'thrfivfe' years immediately preceding 1929. During the first half of the year, although deliveries of Copper in the domestic market were maintained at a normal ratio to consumption, buying practically ceased during May and the first part of June.due to tfiel uncertainty that attended the continuance of the National Industrial; Recovery Act, and the price of cppper in this; market declined from 8.TTSe to 7.7?5e per pound, With the general increase in business during the last half of the year large sales of copper were made arid the price'advanced until at this close of the vear it was 9.Q23e per pound, f.o.b. refinery. At the beginning of the year it become evident that there was an overproduction of copper outside the United Spates fop foreign markets and foreign, production was curtailed. As a result, the stocks of refined copfssr abroad, which: had, increased during the first half of the year, were thereafter; materially reduced, The foreign price of copper declined to the equivalent of 6.15e 4: pound in February;; thereafter it advanced and reached the equivalent of 8.75c in October; and at the end of the year'was quoted at the equivalent of 8.375c f.o.b. refinery. The World smelter production of primary copper during the year was 1,575,838 tons, an increase of 16.7% overproduction of the prior year. Of this total 372,738 tons were domestic duty-free copper and 1,2031100 tons were foreign. Refined primary copper production totalled 1,550,745 tons, of which 368,407 tons were domestic and 1,182,338 tons were foreign. The World consumption of primary copper equalled 1,652,078 ton3, an increase of approximately 19.6% compared with the prior year. Domestic consumption of primary copper totalled 415,663 tons, and foreign consumption 1,236,415 tons. Domestic con sumption including secondary copper totalled 528,194 tons, an increase of 39.0% ;r 1934. Foreign consumption in 1935 increased 11.3% over the prior year and was the highest on record, while consumption in the United States was only 50% of that of 1929. Stocks of refined copper in the United States decreased 123,021 ton3, partially due to the exportation of duty free copper. Refined stocks abroad increased 21,688 tons. The net decrease in total refined stocks was therefore 101,333 tons. Refined stocks in the United States were approximately 292,000 tons less than at December31,1933. The production of zinc id the domestic market totalled 431.412 tons for the year, an increase as compared with the prior year of 17.6%. Domestic consumption totalled 465,600 3 torii lit iftcifSase of 32.1% over the prior year, and was greater than that of any year since 1929. Stocks of zinc in the United States decreased 36,072 tons, and were at the lowest pom; since 1929.. The price for silver mined in. the United' States was raised to 71.ltd per ounce under proclamation by the President of the United States on April 10th and again to 77.57c per ounce on April 24th. and closed-, the year at that figure. Gold remained at $35.00 per ounce throughout the year. The price , of foreign silver, which reached a high of 816 per ounce in. April, 1935, declined sharply during the latter half of the. year, and dosed the year at 49.75e per ounce. The prices for non-ferrous metals averaged for the year somewhat higher than the aycriages that prevailed, during the prior year. Prices of the principal metals-were reported by Engineering & Mining Journal as follows: Copper--Duty Freef.o.b. Refinery--Cents per lb....... " --Export f.o.b. Refinery--Cents per lb............. Lead --New York--Cents per lb............................ Zinc --St. Louis--Cents per lb... -................ .. Silver --New York (Not covered by Presidents. Proclamations}--Cents per o*----------------- Jan.'2 8.775 6.700 3.700 3.725 53.000 High 9.025 8.750 4.6G0 . 4.850 81.000 Low 7.775 6.150 3.500 3,. 700 49.750 Dec. 31 9.025 8.373 4.500 4.850 49.750 Average 8.649 7.533 4.065, 4.328 64.273 CORPORATE CHANGES The existing bank loans of your Company and its subsidiaries, which totalled $59,549,120 at the beginning of the year and had been reduced to $S4,322,120 at September 30, 1935, were funded during the latter part of the year, A registration statement under the Securities Act of 1933 as amended, was filed with the Securities and Exchange Com mission, covering an issue of $55,000,000 principal amount of fifteen year 4H% Sinking Fund Debentures, dated October 1, 1935, due October 1, 1950. After negotiation these debentures were sold to the underwriters on October 18, 1935. The offering price to the public was 98J% and the commission to the underwriters was 3%. These debentures are the direct unsecured obligations of the Company. Upon the sale of the debentures the outstanding bank loans of your Company and its subsidiary companies were paid. The indenture under which the debentures were issued contains a provision that on August 15, 1936, and on August 15th of each year thereafter to and including August 15, 1949, the Company will pay to the Trustee, (Guaranty Trust Company of New York), for the purposes of a sinking fund for the retirement of debentures, an amount equal to the sum of the following: (a) $1,000,000 plus(b) twenty percent (20%) of the consolidated net income of the Company, as the same is defined in the indenture, for the period of twelve months ended on the next preceding December 31st. Such consolidated net income is the consoli dated net income as published in the annual report of the Company for the respective twelvemonths period, subject to certain adjustments as Set forth in the indenture. In lieu of any such sinking fund payment, the Company may deliver to the Trustee debentures to be credited at cost to the Company. There is a provision that the maximum amount of sinking fund payments required shall be so limited that the total amount of debentures issued need not be retired through the sinking fund before October 1, 1945. The shares of the capital stock of your Company were registered on the New York Stock Exchange and the Boston Stock Exchange under the Securities Exchange Act of 1934, and the \Vi%Sinking- Fund Debentures were similarly registered on the New York Stock Exchange:* Following steps begun in 1934 to simplify the corporate structure of the Company, the assets and business of six minor 100% owned subsidiaries were transferred in 1935 to. your Company, or other 10(5% owned subsidiaries. An adjustment was made with the Montana Power Company in connection with powercharges deferred during the period of drastic curtailment of operations in Montana when, the power used whs below t;he minimum provisions of the -contract with that company,- and as a part consideration theifacilitigs of the Electric.; Eight1 Department which supplied: electric light and power t,0 the Cttydf Anaconda, Montapa, were transferred to the; Power Company. FINANCIAL The gross sales and earnings of the Company and its subsidiary companies upon a consolidated basis totalled $127,678,576.68, compared with $99,149,535.64 for the prior year. The cost of sales, including ail operating expenses,, development and maintenance charges, repairs, administrative, selling and general expenses, and all taxes except income taxes, amounted to $100,266,618.82, compared with $82,053,027.58 for the previous year, resulting in an operating income of $27,411,957.86, compared with $17,096,508.06 in 1934. The total income, including other income o! $1,011,366.88, amounted to $28,423,324.74. After deducting from income the following items: interest on bonds and current obliga tions $4,044,434.87; expenses pertaining to non-operating units $2,403,935.88; United States and foreign income taxes (estimated) $1,957,992.16; and loss on bonds retired $47,045.11; a total of $8,453,408.02, the balance was $19,969,9.16.72. Provision for depreciation and obsolescence and for depletion of timber, coal and phosphate lands was $8,390,015.79, and the discount:on bonds was $266,173.96, a total for these items,of $8,656,189.75, and the re sultant net income on a consolidated basis for the year (without deduction for depletion of metal mines), was $11,313,726.97, as compared with $1,960,093.75 for the prior year. The consolidated net income after deducting minority share of $133,639.52, was $11,180,087.45. Additional Federal income taxes for prior years plus charge-offs on dissolution of sub sidiary companies, less a credit on account of adjustment of deferred power charges, resulted in a net charge to consolidated surplus of $268,500.19. The funding of the bank loans through the issuance of the 44$% Sinking Fund Debentures materially improved the consolidated current position of the Company and its subsidiaries as set forth in the consolidated balance sheet at December 31, 1935. Cash on hand at the dose of the year amounted to $17,869,122.46, compared with $12,245,431.10 at the close of 1934. <7urrent assets; Including cash, totalled $76,588,329.97, compared with $67,856,820.2^ for the prior year. Current liabilities were $10,016,210.18, compared with current liabilities of $67,645,362.01, including notes payable to banks, at the end of 1934. The improvement in the nek current position was $66,360,661.52. 5 There were {Jurbtsased arid retired during the year, or held in the treasury at the close of the year SI.252,000 par value of Twenty Year 5% Debentures of Chile Copper Company and $108,000 par value of First Mortgage 5^, Sinking. Fund Bonds of Butte, Anaconda & Pacific Railway Company, a total: of $1,360,000. The improvement of $<56,060,661.52 in the net current position, on a consolidated basis, and the decrease of SI.560,000 in the funded debt of the subsidiary companies totalled $67,720,661.52. Of this amount' $52,525,000 is attributable to the proceeds of the debentures and the balance. SI5.195.661,52, is accounted for principally by earnings for the year plus depreciation charge in excess of expenditures for plant. Further advances were made' to the Inspiration Consolidated Copper Company on its promissory notes: secured b,y First Mortgage' Ponds of that company, making its total liability on notes to this Company as of the close of the year $7,643,000. on which interest accrued as of that date amounted to $557,373.08. The Inspiration Company resumed operations on a curtailed basis during the tetter part of the year. Capital expenditures during the year amounted to $2,165,432.91, summarized as follows: Mines. Mining Claims, and Lands,................................... $63,628.41 Buildings, Machinery and Equipment at the plants of the Company and its subsidiaries............,.............................. 1,984,024,51 Acquisition of shares of stock of subsidiary companies___ 117,779,99 $2,165,432.91 OPERATIONS The operations of the mines, and the reduction, refining, fabricating, and other plants of your Company and its consolidated subsidiaries, while conducted at an increased scale as compared with the previous year, continued on a basis of substantial curtailment. Copper The production of metals from the mines of your Company and its consolidated sub sidiary mining companies through Copper Plant operations was 517,943,873 pounds of copper, 5,472,579 ounces of silver, and 29,629 ounces of gold. Copper deliveries for the year in both the domestic and foreign markets amounted to 828,589,950 pounds. After allowing for custom, secondary, and purchased copper, the deliveries were in excess of production and resulted in a decrease of 53,776.871 pounds in stocks of copper on hand. Deliveries were approximately 36% over the deliveries of the prior year. Zinc Production of electrolytic zinc during the year amounted to 212,055,670 pounds, of which 49,235,857 pounds were from Company mines, and the remainder from custom ores 6 PNYC 00010066 aha tencencraces and'leased mines. Deliveries of zinc amounted to 197.145.190 pounds including the zinc used in the manufacture of zinc oxide at the zinc oxide plants at East Chicago-, Indiana and Akron. Ohio, The mecals paid for in zinc residues arid dross sold to other companies amounted to 1.518.274 pounds of zinc. '7,105.467 pounds of lead 848 149 pounds of copper, 2,874,131 ounces of silver and 6,132 ounces of gold. Custom Smelting and Refining The Copper Smelting Plant at Tooele, Utah, of International Smelting apd Refining Company resumed operations in October, 1935,, on ores: received from the Mountain City Copper Company and,concentrates received from,the Walker Mining Company, sutejdiarv companies pf the International Smelting and: Refining Company. The Copper Smelting Plant of the International Company at Miami, Arizona, operated intermittently; and its Lead Smelting Plant at Tooele, Utah, and Lead Refinery at East Chicago, Indiana, operated on a curtailed basis throughout the year. Operations at the Raritan Copper Works division at Perth Amboy, New Jersey, were at somewhat higher levels than in the prior year. The facilities for the treatment of secon dary metals and by-product metals at that plant operated throughout the year. The custom smeiting and refining operations, other than zinc, produced from the treat ment of custom ores and Concentrates and secondary metals 43.711,854 pounds of copper, 52,042.186 pounds of lead (including,2,127,592 pounds of lead from:own mines), 2,826,513 ounces of silver, 63,954 ounces of gold, and certain by-product rrtetaiis and materials. The foregoing production! includes production from ores and concentrates received from the Walker and Mountain City Companies. In addition production from materials treated on toll was 75.679.233 pounds of copper, 2,520.776 pounds of lead, 2.600.50.3 ounces of silver and 6,132 ounces of gold. Deliveries of lead during the year were 68,$68,(563 pounds, includ ing the lead used in the manufacture of white lead at East, Chicago! Indiana, plant. Ore* and Concentrate* From Subsidiaries Operations on a curtailed basis were resumed by the Walker Mining Company in September, 1935. The concentrates produced by it are shipped to the Tooele Copper Plant of International Smeiting and Refining Company. Shipments of ore from the mine of the Mountain City Copper Company, located in Elko County, Nevada, commenced in October. The company holds unpatented mining claims covering approximately 470 acres and, in addition, owns approximately 176 acres of patented agricultural lands which carry mineral rights. The property' is equipped with adequate structures and machinery for mining ore and carrying on development work. Shipments are made by truck from: the mine to existing railroad fad lies, and thence by railroad to the Tooele Copper Plant, A concentrator for the treatme't of lower grade ores than are now being shipped, is now being constructed at the mine. The Internationa! Smelting and Refining Company, a 100% owned subsidiary of .Ana conda owns 50.42% and 61.45% respectively of the stock of the Walker and Mountain City Companies. Fabricating Plant* The shipments of manufactured products of The American Brass Company, (including Toronto Plant), and of the Anaconda Wire and Cable Company totalled 551.102.747 pounds, compared with 425,516,899 pounds in the prior year, an increase of approximately 25%. Miscellaneous Products Miscellaneous products consisted of 73.128.020 feet lumber: 19.880 tons treble superphosphate and phosphoric acid: 7,929 tons arsenic: 946,051 pounds cadmium; 104.600 pounds nickel sulphate ; and 289,162 pounds copper sulphate. EMPLOYEES During the year 1935 the average number of employees of the Company and its con solidated subsidiary companies was 32.828, of which 22,134 were within the United States. The number of employees on the payroll at the close of the year totalled 34,976, of which 24,650 were within the United States. NUMBER OF SHAREHOLDERS The number of registered shareholders appearing on the transfer books of the Company at December 31, 1935, was 110,229, as compared with 118,094 at the close of the prior year. SILESIAN-AMERICAN CORPORATION Principal production for the year of the subsidiaries of Silesian-American Corporation operating in Poland was 89,457,039 pounds of zinc, 28,185,811 pounds of lead, 1,693,956 metric tons of coal, 42,453 metric tons of sulphuric add. and 9.518 metric tons of super phosphate. Although the currency of Poland has continued on a Gold basis, the products of the subsidiaries of Silesian-American Corporation are sold in the World markets on the basis of the Pound Sterling, which adversely affect3 such subsidiaries. At current exchange rates the average price of zinc for the year on the London market was equivalent to 3.10<f per pound, and at December 31, 1935, was equivalent to 3.20t per pound. The prindpal amount of bonds of Silesian-American Corporation outstanding at the end of the year was $6,230,000, a reduction of $818,000 during the year. FINANCIAL STATEMENTS There is attached hereto .as a part of this report a Consolidated Balance Sheet showing' the financial condition of the Company and subsidiary companies at the close-of business December 31, 1935, together with a Consolidated Income Account and a Consolidated Surplus Account tor the year, certified to by Messrs. Pogsori, Peioubet <& Company, Certified Public Accountants. By Order of the Board of Directors. CORNELIUS F, KELLEY, president. New York, N. V'., March 2i. 1956. 9 I ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 193S FIXED ASSETS: Mines and mining claims, water rights and lands for metal producing and manufacturing plants---see note G.,,............ .................................................... Coat mines, timber lands, phosphate deposits and clay lands--see note G`. 5 Less reserve tor depletion............................._......................................................... S290.925.372 9.629.32S.09 1.970.911.90 653.416.19 Buildings and machinery at mines, reduction works, rerineries, manufac ture? plants, sawmills, foundries, waterworks, steamshipsand railroads (including railroad concessions to the extent of 3983.719,83)--see noteG S2S5.398.333.24 Lss reserve for depreciation............... ......................-.................................... ....... 136.497.350.68 148.900.982.56 6,105.00 13,469.318.65 waMOHasapBaaiafieisarqiii ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 1933 LIABILITIES CAPITAL STOCK oi Anacor.daCopper Minin? Company: Authorised--12.000.000 shares of the par value of 530.00 each, . Issued.............................................................................................................................. 3.919.086 shares Held in treasury or through subsidiaries...................... ........................................ 244.748 shares Outstanding................................................................................................................. S.6T4.338shares S443.93-i.2CO.OG i:.:3r.40O,CG 5433.715.900,00 CAPITAL STOCK AND SURPLUS of subsidiary companies owned by minority interest.. 4.56j , to^.73 BONDS OUTSTANDINGS Anaconda Copper.Mining Company 4H?o Sinking Fund Debentures due 1950--see note J Chile Copper Co. Twenty-year 5% Gold Debentures due 1947--see note J................. ............. Butte. Anaconda & Pacific Railway Co. First Mortgage 5^3 Sinking Fund Gold Bonds, due .1944 (guaranteed as to both principal and interest by AnacondaCopper MiningCompany)--see note J........... ..... ..................... $1,588,000.00 Less held in treasury....................................................................................... 8S.OCO.OO S33.000.000.00 26,574,000.00 1.303.000.00 83.077,003.00 RESERVES: For repairs, renewals and replacements.......................................................................................... $ 390,800.63 For workmen 3 compensation insurance, etc...... .................................._....................................... 532.391.29 For contingencies......... ........................................................... ......................................................... 273,000.00 For deferred payment under power contract in connection with curtailment of operations. 450,000.00 1,648.191.92 CURRENT LIABILITIES? Accounts payable--trade________________ Wages payable.................................... .................. Accrued taxes...................................................... Accrued interest.........................--.................... Other accrued liabilities....................................... Other accounts payable......... ............................... $ 5.008.9X3.46 720.720.89 2.590.877.79 1.323,743.86 193.597.89 178,354.29 10,016.210-18 DEFERRED CREDITS TO INCOMESURPLUS-- See explanatory notes, pages 13 and 14. 11 . 242,490.20 48.163.630.34 S581.531.907.87 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Income Account--Year Ended December 31st, 1935 ,678.376.63 NOTES TO CONSOLIDATED BALANCE SHEET--DECEMBER 31s t , 1933 NOTE A--PRINCIPLES AFPLVtNG IN CONSOLIDATION In order '3 present the status of t-. Comoanv- a interest in subsidiaries'where Lite interest owned -'diree'iv nr t^rrum* ir.*-issued.HOC>; the-atoev, and Uabihties.oi wd subsidiaries iHty appear upon -.M booksorisLd subs.dS, headings on the Consolidated Sauces Sheet, except teat :our smsil tubsidi ,-n TMy.SSir _______ i* 'S~ ',r pan. ot the o^xsrauons ot the consolidated group. are earned as invest menu in in* Consolidated Balance Sheet t'-r - -i ..... c afB n01 an .mee.ai of subsidiaries. the accounts of weigh are consolidated. a Jtiawn on the Consolidated Balance Sheet. Account*of suhVidiin*.'! T?h 0h L.V >nwrMt :i )e than.-'5n, ,of- .he tssce{1 ,:ock ^ ,,?t consolidated.had the snares owned :n these subsidfariw Zt &* Cg*pi"y ' mdated Balanc:ee sShheeeett,. T. he. te.r.m..r-.-.*..u. t.i.s...id...i.a..n.....,...u. .'.-.tended to mean colorations ut which a maior.t^i the voiuog itocit Is owned ^rcdl.y 'bV the: Company i r through other corporations in which t t' Siocic interest of one Company is more thin*95^, NOTE B--BALANCES, IN FOREIGN' CURRENCIES Cash baia.r.cju in. foreign currencies ?.equivalent to JJ66.665.69 in United State* currency} are converted into dollars at -ate* those effective at December Jljt-,19.15. Currect assets and liabilities adihe Toronto plant of Xnacdnda-Amencan Brass Lm currency and have beets .convertedirvto L\. S. ffoUaf* at rates not m excess of me. current ^ f,,,___. - .. ori , r`M ;a La^d:4a Contingent liabilities:existed at December list. V?IS for acceptance* varto.ua. b'adtajfon the greater par? of which payments have already Covenrig foreign sales of copper discounted in th*';ofdi-ary been received, and for exchange'cosinuemeats most of wiuti c*"rs -ive i of bftsim dated. NOTE C-EQUITY OF COMPANY IN UNCONSOLIDATED SUBSIDIARIES . The equity oi the Company in ^he,,asieniof;tfte-pnhi(3ihiijartdohsolldated!:*tibsidfan4ts 'Anaconda Wire and Cable Company, Mountain c:ty C'-ber r pariy ar.d Walker Mining Company) and thefour unconsolidated subsidiar.ee reterred tom Note,A had, decreased: al O^cernPer Jllsc. 10.15 -UT-l ot 'JiJd.QOZi^JidildCe'the dates of adquisuioh .as tihei.r.esiilLp/ prftriu- !<j>s.s,antii:drsttji,ButidnS'.aa jbown ST'thc.boo.ka'of:4iid .uaSansQudatea'ia"odcdi-M but the cost thereof as shown ia the Cocsaudaced 3aiar.ee Sheet has not been adyjjied for such decrease. NOTE DEINVENTORIES OF METALS AND MANUFACTURED PRODUCTS The metailic.con'teEts of copper ores, concentrates, and cadi^qo'u* WatsriaU. add r.nc a.nd lead ores and concentrates, while in treatment at re^-c-im piants up to the production of blister copper, electrolytic copper, metallic nnc and lead buiiion. are; clasaified-aa metals in process. , C? ,,'T1` troiyt.'C copper; metallic sine, lead bullion, and other pfod.iic'-s and metals produced m eppheetiba'therewith or therefrom, including stock j.i work-' ^ fabricating points, are treated as Crushed. '1 . t nvetttafy fa oiqc^si^ calculate^ at;.`Vrio.rjtTial cost:" :<vhich i's ] beldw the equivalent of current market for metallic content of such inventories. Finished 'ifirtjetiiiiy.j.kjiiidlii::1prlejudkicts on hand 'at' December Jhu. 'tOJS (except silver and sold which' are 'earned ',at market' quotations or w- have been .valued.fa) as to that part 0/ the inventory which was equal to the' quantity oa hand at,December Jtst. i9Ja. at themventon- inc* - i Dedembjsr Jlit, 1954, arid tb) as to'jc^iat'cariii.iof'.the inyintary which exceeds m quantity inventory on hand at December Jiv 103**1 prod-c'-n coses during -the year ended December JIst. J9.JJ. Inventory valuation* detenatacd is accordance with the foregoing method were below market prices :or me vanom metal, and pfodheu at December -Use, 1955.!! See Note C to Coosoudated Income Acccuat. NOTE E-SUPPLIES ON HAND Supplies, oa hand, isciudicg repisikemeat pari, as wn as current supply items, arc carried at cost. NOTE .FS.rjrtesTMEfrrSi.BASIS! Iavesunerv.. n iec jni.es of uncoridiiditted mbditries and other security investments are carried at cost or le. such coet bean* cash cost, or-a -he cas!of .*ecumies;'iMued in exchaftte for property transterred bv the Company or a consolidated subsidiary, the cost of such property to the ccrioiidated1 groupNafterdeductinridepreciatidn to date of transfer, and do sot indicate current vaJues. Other security iavenmeau include shares oi lessiratioa Gouoiidaied iCoppee Company carried at tl0.9lt.10f.5l. NOTE 0--PROPERTY. PLANT AND EQUIPMENT--BASIS OP VALUATION (a) Prcpery. P'ant and Equpvteat of the Ccmpstay are carried at cash cask, or in the cast of physical properLiea acquired for stock 'd the Company at iiiiparivilijeiorijueb'jiaciu (b> Prope-.y P'ant ard Equpmrnt of subsidiaries (the accounts of which are included in this Consolidated Balance Sheet) are carried at the difference between i I) me investment basis for the respective subsidiary as set forth below, and (2) ail act asset, (ether than property, plant and eqmom.er.ti it in,: n fi.-jii<iiirr 4t i.> '.ink wtve.hit* accounts were first included in the Consolidated Balance Sben of the Company and subsidiaries, to mc,l 11 .uKirc '.r.e o.'tt o* su^tei'iiient acquietiooa. Such investment basis i. the cash east to the consolidated group of the stock of the respective a j v w--1 - s. * rpup. wbers the same wta acquired by the croup for cash, or where the same was acquired by this consolidated group "for1 stock of the Company; ithe par value of the nock of the Company, except as to properties of Andes Copper Mining Company and Sar.t-.igo w -r ~ 4y v fd by said compaai*. respectively for shares Of their capital Rock, which properties are included m the Coosoudated f'4 a-- at * 'ri2ial par value of the .hares of those companies issued therefor (Lc., 925 per .hare), vnountiag is the case of Ar.qe CcpperIM mag Ccmparty to 1.000.000 share, and is the case of Santiago Mining Compasy to 70.564 shares. Of said nock oi Andes Ccsoer M.nag|Compaay issued lor property 99S.0J6 shares were acquired by tbe Company and mbsidlahes at Urns than the original par value tnereof L ' u*1 sud 'w-t.ago. Miniag Company 65.451 shares were acquired (ia 1950) by the Company at leas than the onpnai par value tnereof- T e 65 SJ uni f asaago Minim Company pner to their acquiatioo by the Company were carried its the consolidated financial *ttemectj as outstanding rrjBentyiinersik at'bsr from the date when Ssatiago Mining Gpmpany was first included ift wchautements. Uponthe acquisition of Rich .hares by the Compaay ifl 1950 the difference of Sl.5i9.565.66 between the par value thereof and the cost of such share, to me Company *u transferred from minority interest to cenaolidafed surplus. The total amount credited to consolidated surplus an account of the difference e'wcv- r;s'w e N '.htlkdovdimeatioaed share, of Andes Copper Mining Compasy and Santiago Mining Company and cost thcreot u me "m fan -s eswaa425.429.I05.J6. (c) . vn *ePnrt.-e l Coaicsssy, coustently applied to ita owp properties sad those of sabwdiarie* the Rocks of which have been acquired f m ca afkihduded in the Consolidated Balance Sheet, to carry Property. Plant and Equipment as described above. Purv.:-i k ** -*mu l be Uzutsd Staue Treasury Depertmect, valuations a. Of March 1*. 1915 of mining properties thea owned have 3--n recorded oa the books for the purpos* of computing the amount allowable a. a deduction for "depletioa" is arriving as taxable income under - -.= Federal incaeis uax!iawa..bii^thMa values have not bees included in the publiRicd amounts of the Company. The Compear has rennsteaUr foBowed the practice of not deducting any amount for depletion on account of tnttaia mined in any of iu pus,,i.-.rd accounsa, and no such deduction is included in any of the financiai statements submitted herewith, ->*p * 1" beerd -a com has n th. cue of umber, coal, clay and phosphate land*, been deducted from inmane ia the finasriai statements mbm.-.ied -FFewf sod a^o f-fpi the caec baiu mown in the Consolidated Balance Sheet. (hi be -irjH <ited "islanc* j teetr of the Company and its subsidiaries heretofore published, the depredation reserve, shown oa the bocks -r T"e Arnencan Brass'- mpaayAbdceftain other nihidiaf!aa of the date*the Rcdu of those compeaies were acquired by the Company w j ded. .M m niiingme piant trl emupmesf account of the*, companies ia the Consolidated Balance Sheet and was not included ia depreciation .-e-c-. -? oa the Consolidated BalanceiSiMsetii: The f'ccegoiog CousoUdated Balance Sheet include! such accumulation in the deprecation reserve. cr.snse 'Hwn nct ffen '.^s net amount at which such fixed iseet. are carried; oar does it affect consolidated-surplus, or aay item otaer 1.1x3 -.ze eptoatSDi.eBi. .1 piut *c4. equipment and depteciaiioa reserve. 13 Certain- transfers between the accounts "Mines and Minin? Cairns". "P'.a? erfect to in this Consolidated Balance Sheet. They consist entirely ir at -Cfiien Property, Plant and Equipment are earned nor tio t.-.ey -irieci c.ation reserve. and Equipment, and "Reserve for Depreciation" have been given "fs oetween these three accounts and 4o rxot irfect one net amount se consolidated surplus-or any item other than fixed- assets and depre- .} The values of Property. Plant and Equipment are shown ciyy oy current appraisaia. ' bases above set. forth and -do not indicate Current values which could be established .VOTE H--ORES PRODUCED. OCRING DEVELOPMENT PERIOD Ores produced d-ring. development period not bang currently treated are tarried at cost of extraction which isles* than a conservatively estimated reahaaole VOTE I--CL'PRIFEROUS MATERIAL Capr.terous material ne;d for future treatment is valued at United States Treasury Department valuation for income tax. purposes, which :s .jp-rojumattly he Company"* recoveral< meU!i contained tnerno at current metal pnees aster deducting treatment costs, beta as estimated oy metallurgists of VOTE SINKING FUND REQUIREMENTS Under the stniunc fund provisions o , , - -* >* v% ...ueijkwsi iui >/ie'y.. r-_ ________ ___ - ____ the Cpirvpany may deliver to :he: Trustee debentures1'to 'te received by-: the Trustee ;m lieu of an amount of .dash equal to trie purchase pnet suen debentures paid by the-Company in the acquisition thereof. " The sinking-fund provision ot the indenture providing tor the issue of Chile Copper Co. 5%. Debentures requires the redemption or .cancellation . cf debentures annually1 arid ill: idid such. requirement? call for1 redemption or canpeliation of >1,96/,000 pnfiapaTamouat of debentures against wuinn g;Lt$0.00Qihadi'Be;(S4.^iw'*u'e^.'!fri?h:l':i:^'.,T,r\fste'pihof to1'1 D'ed^fhber iTst;',1915. UaderAheiimking^und provision of the indenture providing for the issue of First!' Mortgage i% Sinking Fund Bonds of Suite; Anaconda k. Pacific Railway Co.tKe ahnual casd jrnltiog,!uadlpaymeatj;for l9J6''wili:.amouoL to liOf.OOO. VOTE K-SURPLUS Included in Cpniclidatled Surplus are; 'a) A credit of 421,909,539.72 arising from inclusion in Consolidated Balance Sheet of assets and liabilities of Andes Copper Mining Company at the amoifncls1 snoWts.on us1 hooks ' Vote Gl. >b5 a credit of 41.519,565.66 arising from acauisition in !9Jd of minority $Hics:ift dantugol'Mtwng Company issued fdr property and earned at their par value, said amount representing the ercesa of par value over ic-utSitibri cait.'i'FCJ :3 credit of 520,816,(58.49. beirtg the excess of the proceeds of uw issue of 3.109.598.3+ shares of stock of Company aver the oar value thereoi and :di a <rn*rre oi. 4! 1.907,498-50. being discount and expense on issuance, and premium on redemption of bond*, redeemed tfarougo fund* ootaiced by issuance stock above referred- ic pee paragrapa ici of Note G as to practice regarding depletion. * NOTES TO CONSOLIDATED INCOME ACCOUNT--YEAR ENDED DECEMBER 31s t , 1935 VOTE A--BASIS Basis A same as set forth in Vote A to Consolidated Balance-Sheet. The equity of the Company in the income of four small subsidiaries mors chan 75^ owned tne operations of which are not an integral pan of the operations of the consolidated group, amounted for the year ended December 21st. lOjj to Hi4.sil6.10. ' VOTE B--I N't,ER.COM PAVY SALES AND PROFITS Sales to consolidated subsidiaries have been'eliminated and the sales shown in the Consolidated Income Account include only saiesto othersthaa ihe Company" and consolidated subsidiaries.' Inter-company profits, where these are material, have been eiiminated in the Consolidated Income Account. The principal intercompany tnr.sscu-rs are sales .of cooper and other metals to manufacturing subsidiaries. The inventories of manufacturing subsidiaries mciude so far as is ascertainable, no interrcompany profit. Any inter-company profits resulting from transactions in connection with purchases and sales of supplies od furnishing of services and in connection with refilling .and smelting operaticos ace act material is amount and have sot been eliminated. NOTE C--COST OF SALES Tbe general practice of .inventory valuation followed in the year ended December 31st. 1933 was as follows: la ascertaining consolidated' income during tbe year 193S. the Consolidated Income Account was stated on the basis of last-in first-out. that apply ing current cost of metal production to sales to the extent of current production and ales in excess of current production were earned m the Oasoiidkted income1 Account at the inventory cose, such cost bong tae same at the inventory cost used lor Balance Sheet purposes. NOTE D-- DIVIDENDS AND EARNINGS OF PRINCIPAL UNCONSOLIDATED SUBSIDIARIES No dividends were paid'to the Company by any unconsolidated subsidiary during the year. 19JS. The amount of the Company-* proportion of the com- tuned oeti.c.urrent earning* of the principal unconsolidated subsidiaries (Anaconda Wire and Cable Company, Mountain City Copper Company and Walker Mining Company; and the four unconsolidated subsidiaries referred to is Note A amounted to >761.7+2.73. NOTE E--INTEREST-INSPIRATION CONSOLIDATED COPPER COMPANY There is included in Interest and Dividends interest on onto of Inspiration Consolidated Copper Company, in the amount of >+34.043.00 for tbe year ended December 21st, 1933, 14 POGSON, PELOUBET & CO. PERCY w. POGSON MACRICE ; PELOCBET LEWIS NORTON J1DNET W. PELOL'BET NEW Y0RX - 25 BROADWAY EL PASO, TEXAS - HILLS BLDG, AGENTS LONDON - K.ENf*, CHATTERIS, >TCHOCi. dE.s-aeu. 4 CO. J6 VALaKOCJC, . C. J,. P.V8I3 . tVRQ'/tVO. YOUNGS.- XEMP 4 CO. 5 ALS DC HS-CSR Be r l in r-aovtxo, y o u n g s . k e mp 4 co. .rs*-:EN.ux&s.s 56 EGYPT - HE<.V.T. 3*;0SOH 4 SKW9Y AL EXaNORJA AND Ca ISO o.3uc o d ms a ''c e it imo" h e w vane To the Board of Directors, Anaconda Copper Mining Company, 25 Broadway, New York, N. Y. We have made an examination of the Consolidated Balance Sheet as of December 51st, 1955, of Anaconda Copper Mining Company and of the ocher corporations whose accounts are consolidated with its accounts as stated in Note A to the Consolidated Balance Sheet (which other corporations are hereinafter referred to as consolidated subsidiaries) and of their Consolidated Income and Surplus Accounts for the calendar year 1935. In connection with our audit we examined or tested the accounting records of Anaconda Copper Mining Company and its consolidated subsidiaries together with other supporting evidence and made a general review of the accounting methods and of the operating and income accounts for the calendar year 1935, but we did not make a detailed audit of the transactions. The practice of the Company and its subsidiaries with respect to the computation of their net income or net loss without deduction for depletion of metal mines is, in our opinion, in accordance with accepted principles of accounting in industries engaged in the mining of copper, gold, lead, silver and zinc. In our opinion, based on our examination, such Balance Sheet, Income and Surplus Accounts, together with the notes attached thereto or appearing thereon, fairly present, in accordance with accepted principles of accounting in the industries in which the Company and its subsidiaries operate, consistently maintained by the Company and its subsidiaries, the consolidated position of the Company and its consolidated subsidiaries as of December 31st, 1933 and the combined results of their operations for the calendar year 193S, POGSON, PELOUBET & CO.. Certified Public Accountants. New York, March 12th, 1936. IS