Document 826eomv246Erbj0yv5V8b765B

Anaconda Copper Mining Company 25 Broadway, New York May 22, . 1947 Mr. J. R. Hobbins, President Anaconda Copper Mining Company Building Dear Mr., Hobbins: . : ` ' . Since the East Chicago, Indiana Plant of he Inter- national Smelting & Refining Company has been perma{ ntly closed down, inventories liquidated,' and the property and .cilities . (with the exception of 15 acres) sold, I be' t a final. . report on,these transactions is in order. 1 ary, Mr. - Johnson and Mr. HurlesS have prepared Report en- titled "The Closing and Sale of the^^c^i^icago * and a ' copy is attached hereto. (ExhibJ' ' ' .' .The' question of liquida ,, he East Chicago operations 'has been the Subject of varfTS'Ts*.dis' sions and reports during the past 10-15, years. Ever deVfcasing tonnage of lead bullion and, increased bechA: problems at East Chicago,, variaus~invesligations nderxaken. Extensive studies ' were' completed*dnr*433 d various economies -implemented* With the advarh^'ol whe , ional adverse factors caused ' difficulty atf Ea&t Chi ag7~pgrticularly In connection with lead . and 2inc pigments, le the war was actually in progresslittle could be doi\\to cha: the situation. With the,war over, however, late in 1945 ' rst months of 1946 various 'studies-were undertaken. / - As you know, the American Smelting & Refining Companywere again approached in late 1945 and in 1946 concerning a toll arrangement for the treatment of our Tooele bullion along with .their own.at Omaha. These negotiations led to Mr. H. Y. Walker's proposal of May 1, 1946 which proved to be very attractive to us. ' Under the terms of A.S.4 H.'s proposal, the International Smelting & Refining. Company's average refining charge per ton of bullion was estimated at that time to be $8.10 as compared with a . cost of approximately $20.00 for East Chicago during the months of April and May 1946. A study by the East Chicago staff indicated that drastic economies would probably result in a $12-$14 per ton cost for refining. Since increased labor costs were anticipated,' East Chicago would probably have averaged approximately $14 instead of the lower figure. * UOis!|1Sia35SS->a=7iS3rSBOIitra Ur. J. E. Hobbins Hay 22, 1947 -2- Mr. Laist in his report dated May 10, 1946 analyzed the situation in great detail. (See Exhibit "B!1). In connec tion with pigments, several discussions were had during the early months of this year and the situation was outlined in my letter of January 15th to Mr. Laist and again on May 6th to Mr. C. F. Kelley. At that time pigment prices were very low compared to the market prices for lead and zinc metals. In addition, the allocation of lead and, the continued short: supply of secondary zinc made It very difficult to operate the zinc oxide and white lead plants at. a profit. Even .anticipating the elimination of O.P.A., the outlook for 1947 was not, very encouraging. Additional data with reference to the East Chicago situation is furnished by a group of studies and reports.' The most important of these are: tabulated below and copies are at- " tached for ready reference: Exhibit 1. Data on an Electrolytic Lead (Betts) Refinery at Tooele. Exhibit 2. Supplementary Information Regarding Betts Refinery at Tooele. Exhibit 3. Estimated Construction and Operating Costs for a Betts Refinery at Tooele. Estimate on New Money Operating Cost of a Betts Plant at East Chicago. Estimated Cost of Building a 2500 Ton-Per-Month Betts Refinery at East Chicago and Engineering Details. Comparison of Parkes and Betts Process Costs. Analysis of Lead Refining Costs by Accounting Department at East Chicago. Bullion Metal Recoveries 194-1945. Discussion of Overhead Costs by Mr, Laist. Breakdown of East Chicago Overhead Expenses by Mr. G. E. Johnson. Further Discussion of Overhead Costs, Outline of Terms by AS&R for Treatment of Tooele Bullion. Hr. J. R. Bobbins ' -3- May 22, 1947 ' Exhibit 14. Lead Bullion Refining Costs 1936-1945 Inc. Exhibit 15.- East Chicago Lead Refining Repair Costs 1936-1945 Inc. Exhibit 16. R. G. Bowman's Proposals to Reduce East Chicago Overhead Costs. Exhibit 17. Comparison of Cost of Producing Refined Bismuth by AS&R at Omaha and East Chicago. . ' Exhibit 18. Reduction in Ventilation Costs Provided Betts Plant Built at East Chicago. Exhibit 19. May 15, 1946 Estimate of Parkas Process Refining Costs' at East Chicago. . Exhibit 20. Additional Estimated Refining Costs for East Chicago. Exhibit 21. Bullion Treatment Comparisons ` Omaha vs. East Chicago. Exhibit 22. Additional Bullion Treatment Comparisons - . Omaha vs. East Chicago. Exhibit 23. January-April 1946 Including Costs of Refining East Helena and Tooele Bullion at East Chicago. Exhibit 24. Bullion Metal Recoveries at East Chicago 1940-45 Inc. Exhibit 25. Additional Estimates by R. G. Bowman Regarding East Chicago's Future Refining Costs. Exhibit 26. Revised Comparison of East Chicago By-Product Treatment Costs. Exhibit 27. Comparison of Cost of By-Products Treated at East Chicago, Omaha and Tooele. Exhibit 28. Cost of Recovery of Bismuth Through Omaha Compared to Recovery by Whits Lead Plant. Exhibit 29. Metal Payments Omaha and East Chicago. Esihibit 30. Estimated Cost of Construction of Parkes Process . Refinery at Tooele. Exhibit 31. Cost to Shut Down East Chicago Refinery. Exhibit 32. Muffle Zinc Oxide Costs East Chicago. Exhibit 33. Relation Between Pigment Prices, Metal Prices and Profi Exhibit 34. White Lead Plant Operating Cost Estimates. Ur. J. R. Bobbins May 22, 1947 -4- Discussions were continued in May end June, and these clearly indicated that our Company would not again have an excess of lead and zinc metals which could be advantageously marketed, as pigments in place of the metals. This was the, exact reverse of the situation that existed when in each case vre started to produce white lead and later zinc oxide. Cn Hay 22, 1946, final decision to shut doto and liquidate East Chicago was made. Between June 1st and 3rd notices were sent to all pigment customers that East Chicago would discontinue operations as soon as raw materials were used up and warehouse stocks sold and shipped. Leah and Bismuth customers were not involved because the arrangement made with AS&R called for delivery to Anaconda. Sales of lead and bismuth metals.in time to continue shipments to customers in the usual way. In early June it was also decided to seek a buyer for the East Chicago Plant and acreage adjacent thereto. After dis cussion, it was agreed that we would retain all equipment and operating supplies in the East Chicago Plant and only liquidate raw materials and finished products in order that the plant could be sold in condition to operate. Our Engineering Department was authorized to make an appraisal of the machinery, buildings, equipment and real estate. This was completed in great detail, the summary of which is as follows: All Buildings All Equipment Services Total without Land Original Cost 1,376,450 1,361,066 -.-25.1,.114 2,988,630 Replacement Cost (New)________ ^. 2,116,850 1,901,095 ' 383.936 4,406,881 Value as is ------ 1--------- 966,940 639,890 145.812 1,802,642 Value of Sand as estimated by Mr. Boschen 62.615 acres @ $3300 per acre - Total value of land plus buildings, etc. 206.630 $2,009,272 Two additional reports narked "Exhibits 'Cr End !D,n give details concerning the liquidation of personnel at East Chicago. It Is also of Interest to note that during the operating life of the East Chicago Plants the following items were produced for sale: . ' Mr. J. R. Hobbins May 22, 1947 -5- Lead Refilling 1912-46 Bismuth lbs Tin n Lead n 3 ,44^,544 7^,054 3,234,534,089 Antimony n Copper "n 31,105,317 1,803,523 Silver Gold. ozs "B 151,863,616.60 664,421,166 White Lead 1920-46 348,969,200 lbs. Zinc Oxide 1921-46 908,027,300 lbs. Shortly after public announcement of our shutdown was made, representatives' of various companies approached both the East Chicago Plant asjd. oy office relative to purchasing our facili ties. By late July, East Chicago had completed operations and were cleaned up enough to receive visitors interested in studying our plants with a view to making a bid for our facilities. During July and August discussions in New York City and EastChicago were carried on with the following companies: Calumet Iron and Supply Company U. S. Reduction Company Pennsylvania Railroad Company Chromium Mining & Smelting Co. American Zinc, Lead k Smelting Co. A group of International Smelting k Ref. Co. employees Eagle-Picher Company . Gardiner Metal Company . Goldsmith Bros. Smelting & Refining Co. . Rational Lead Company Metal & Thermit Corp. , Nicholson, Porter k List Chemical Service Corp. Capitol City Wrecking Company northern Indiana Public Service Corp. . Weiss & Weiss . ' Hugo Heu Chicago Association of Commerce Consolidated Products Co., Inc. Ethyl Corporation Hart & Whetstone Real Estate . Representatives of practically all of the above companies visited East Chicago at least once and, in some cases, several times. Numerous proposals were made by representatives of the above companies, all of', which clearly indicated that our original idea was sound and that ws could expect to receive more for the facilities at East Chicago if we could find a buyer who would use Ur. J. R. Hobbins May 22, 1947 --6-- the plants for the production of lead and zinc pigments and at least treat secondary lead products in the refinery. These considerations reduced our active list of prospects to the fol lowing: . , 1. American Zinc, Lead & Smelting Company 2. A combination of a paint company with Calumet Iron & Supply Co. and U. S. Reduction Company 3. Eagle-Picher Company 4. National Lead Company By the middle of August, it had become apparent that neither the American Zinc nor the Calumet Iron combination would pay approximately 50# on the dollar for the value of the plant and the land as it then stood and as shown in the appraisal.sum mary of $.2,009,272. Discussions among our own officials had pre viously developed the Opinion that even after allowing for the parts of the plant that hardly any purchaser would be able to use, $ , , .that nevertheless the plants should be worth between $800,000 and 1 000 000 Discussions with Mr, Howard Young of American Zinc developed an offer of $500,000 as being their top price. Ur. ' Weinstein of Calumet Iren indicated that he might go as high as $450,000 but no higher. These offers were logical since American could not use the lead refinery to any extent and Calumet Iron intended to scrap much of the plant or else lease it out to others. Discussions with the National Lead and Eagle-Picher Companies were folloiwed by several inspection trips to the plant by members of each organization. By the middle of September, it was evident that the: Chicago group of the National Lead Company were most anxious to acquire the plant,. although their interest was.not duplicated by the New York officials of National. On the other hand, the Eagle-Picher Company having recently sold their Cincinnati, Ohio Plant, were very seriously interested in using our East Chicago facilities as a substitute. After confer ences in New York and later in Cincinnati, an agreement was made between International Smelting and Eagle-Picher which was signed on September 27, 1946 with the provision that Eagle-Picher would take possession as of October 1st. (See Exhibit "EB) The Agreement with Eagle-Picher provided for payment of $800,000 for the appraised items and in addition the purchase of certain raw materials, 10 acres of land and operating inven tories with a final total after checking inventories, weights and assays of $990,712.26. (See Exhibit "F") Ur. J. Ri Robbins May 22, 1947 -7- Prior to making the Eagle-Picher agreement, the old Blast Furnace slag pile was sold to the Baldwin-Hill Company for 20,000. This addition makes a total of $1,010,712.26 for the East Chicago properties in addition to what was realized from the sale of metal and .pigment inventories.