Document 8R7KbNwwb8M0ZOjVVX0jLwwJe

imtmmGmL mElLtab mb 'Wmh b JSSEUL JUil 12 1959 SPORT Of miLUmGXCAL AUDIT OP OOKBXRED OPFRATIGR OP TOCBLX PUUfT BT OlTBWATXCIttL SKELT3MO AMD SZPIM2MQ CCHPAMT AID OOTSD 87193 SSLTH0 ---------------------------------- HPIBDP AID KMHQ COfAIT OP rZBHUAKI. 1959 S. C. Jaoobecm jMJBagESDJOR AUDIT April 11, to a and 2fc, to 7f, 1959, inclusive Audit of the combined operation or the Tooele Plant by the International Smelting and Refining Company and the United State* Stolting Refining and Mining Company Included review of all data applicable to oonblned oparatiecs vhich would not normally be reviewed In metallurgical audita previously established. Inasmuch a* th* operation 1* oorered by contract, a aynopal* of Metallurgical aeooonting prorlaiooa la in cluded, with notations on revisions vhich have bam mad* to the original agreement. A* the contract la a toll contract providing for treatment coat baaed an accurate Mights, stapling and assaying of neteriela treated, tht Auditor darned it advisable to audit reoaipta of ere for U. 9. Company account. This vac dona to the extant of 251 of lota taken into treataant. Steterent of ecablntd ops rations (Exhibit A in contract) for February 1959 wua audited in detail. This ststesent is prepared frou cuetossary statement* of "Treatment, Production and loMei1* but allocate* th* entire data between the tvo cocrpanie* according to contract. All proration* hated on fafciblt B were audited la derail. In instance# there products vere sold under one eat of tense, examinations of the allocation of proceeds between the companies were node and entries verified to the Journal. In the ease of lead bullion, in which actual Ingots ware returned to each company, audit was sod* of th* entire U. 8, Company a* to weights shipped, oaeay ooagparlaona and uetal contest cooputetion. Provision* of th* contract r*l*tive to charge* and credit* for diluent* and flux** war* checked in detail and traced to applicable coat atetenant*. So inventories were observed and no audit of quantities was wade. The Auditor reviewed the method of presentation on the statement of Cost, Treatment, Production and Losses. Costa aa osed on this etaUwent, and credit for treating U. 9. Ccapany aaterial nrs ebeeked from cutnaent* prepared by the Coat Accounting Dopartasot* An index appears on the following page. X. C. lacoboon, 9p*oial BetaUargleal Accountant April 27, 1959 PNYC 00011832 mmkOim. smnmjm tsmnxQ canm : -.ftxm. trnfl X-..ft...P-S t STKOPSIS Of CCFTRACT COHBtACT RmSIOftS STATO-m CP CWBlTTfD 0PEMTI0H3, 1NCWDHW 0. 3. COKPANT OWSS TltKATH) TOTffiAOE - 0. S. COKPAHT PRODUCTS ACT SALES: lead Bullion Copper Matte end Spelt* Deleaded Zinc fuze Loaded Zinc Oxide Rev Zinc Pu b* ALLOCATICH OF FLUXIMO AMD D1LW5.T COSTS: Line end Silica Sulphur Le*d Diluent Zinc Diluent CADMIUM PLAHT COST Of CPflUTICW METALLURGICAL IKtatTOBT STATBTOT CP COST, 1SEATMMT, PRODUCTIOB ACT LOSSES ERRORS ACT DlSCnFPARCJZS COMHERTS v t LJLi InolutlT* 6 to 7 to 7, lnclualv* 7 7 8, lnslneiro 8 8 8 9$ inolutiv* 9 10 PNYC 00011833 BtTBffAxiroAi, .migg-Kffl TOCffUS PLAKT - TDGfBUS. UTAH m MBLiJLJZgBAgU3a m^jorac gKBffX The combined operation of the Tooele Plant by the International Eneltlng and Refining Company and the United Statee Smelting Refining and Pining Company la provided for wider tame of agreement between the two ooapanles dated gurnet 1, 1958* In memorandum of Hr. R. B. Caplee, dated <tane 17, 199*, concerning this agreement he etatee *(lt) la a toll contract between tbe International ftseltlng and Refining Coepany and Baited Statee Sbelting, Refining and Pining Coepany covering the treatment in the Tooele lead Treatment Plant and Slag Treat ment Plant of lead and lead-tine smelting erea and lead concentrates, pine other neteUlfereme nateriala end fluxing sateriale available to the United Statee Smelting, Refining and Mining Coepany, with return of motel e recovered therefrom, dietriboted among the product* of the Tooele Plant** Supplementing the contract it "Appendix A" establishing the methods and procedure* to bo followed in determining melting coats and metal recoverlet applicable to the varioos material* to be treated coder the ocntract and allocation of the metale recovered among the products of th* Tooele Plant* Ineluded as aupplammita to Appendix A are Exhibit* A, J! ft C* Exhibit A ia a hypothetical statement shoving treatment, production, metal loss** and inventories of tbe combined Operation and allocations of asm* between th* two oeapaniea* Exhibit B contains hypothetical exanpla* of various calculations relative to apportionments of tonnages and metal content of products and losses to th* contracting partita* Such apportionments arc incorporated into fafcibit A, Exhibit C contains illustration* of computing fluxing and diltunt cost*. After publication of Appendix A and Exhibit A, B & C, certain charges la warding and proee&ir* wore deemed advis able and new drafts of Appendix A and Exhibits B A C ware submitted. Appendix A bears the notation "Draft ?-8-58". All metallurgical accounting data for August 1958 were prepared under provisions of the original Appendix A and Exhibit* A, B and C. Effective with September 1958, all data wart prepared under provision* of Schedule A and Exhibits B & 0 par draft of 9-8-58. Following is a brief synopsis of the August 1, 1958 agreement pertaining to metallurgical accounting provision. In th* synopsis, a* wall as in the audit report, abbreviations will bo mood aa follow*! International - International Smelting and Refining Company U. S. Coupany - United States Smelting, Refining and Mining Coapany Combined Companies - International and U* S*. Company Combined Operation - Toll operation in conjunction with International Operation Tooele Flant - Load aiwlter and Slag Treatment Flint Ml MUWZ U. S. Company to deliver lead and lead-sine smelting ores, lead concentrates, ores containing gold and silver, and other metalliferous material suitable for treatment up to a maxima tonnage of 9,000 dry tons per mouth excluding cold slag. If more than 9,000 tons are available U. S. shall offer earn* to International and Inter national shall accept and treat, such excess on th* term* hereof to the extent of the then available capacity of tho Tooele Plant. If plant capacity is not available 0. S*.Company may dispose of material aleotfcare or bold to be delivered in subsequent months. U* S. Coepany allowed to store eocoesa tonnage at Tooele for uee in making op subsequent deficiencies, but to be charged for cost of storage and removal* If D. S. Company regularly baa available more than 9,000 tons per month, and International can obtain nor* than Riant oapecity allow*, provisions provide for mutual agreement on increase of plant capacity* Bach party to retain ita right, title and ownership to the sstals contained in the materials furnished by it and recovered upon treatment. Delivery of ores to be made in open-top, bottom dump railroad care, F*0.B. International, Utah, otherwise, added cost to, be bone by shipper. Freight and transportation tax obligations of party For dm ere is. shipped. > -** iV H'i.-'Jjr . % >?** n i ^\arr- PNYC 00011834 `4i* ~ ** M+J - cgfcWk*-! * [i > .ww.'tihwiis - -- 2. CnKtmCT - Continued R*Wn> 9f, International to return to 9. 3. Comply aetale recovered fron 9. 3. Coepany'e materials la fora of (1) leed bullion, (w) slag treatment plant fume, (3) daleaded flare, (A) daleaded plant leed fane, (5) copper matte, (if copper apeiee, (7) cadmlua f\i, or any other eoimerelal products produced* Lead bullion retanefaie to be la fora of anodes cast In U. 3. Company molds. The products returnable, other than lead bullion, nay oootaia copper, eedniun, lead, sine, aUser and gold, la addition to letaor amount* of variona impurities. The reoov* eriea of auch tusisle and their distribution among the prodocta (1 to 7 above) are to be ^ttwatad la aeoordanoe with proeedturoa illustrated la Appendix A* The amount of each protest belonging to U. 3. Ccnpany as estimated to bo returned F.O.S, oars or trucks at the Tooele Plant, or, in lisa thereof, ante product# aay upon agreement of the partita be sold together with protecta of International and the proceed# of each eale distributed to the partita in accordance with such estimate* Adjustments between the parties which nay be neoeaaery so a result of differences between amount* of netale returnable to the 9* 8* Ccepany and anounts actually returned In pro* ducts as estimated to bo nade at end of each oalandar year nr at each other tiaaa aa agreed upon* Accords miltoyytfl International to raintain auditable records of all transactions and rattere pertaining to the contract. Inter* national to furnish r.cnthly reports to 9. 3. Company an cost ef operation, materials treated, recoveries of metals,' nstallurglcal inventories, distribution of recovered metal# in plant products or any other necessary reports. Sampling 9. 3. Company materials to be weighed, stapled and aelsture datondnad by a fubllc Sampler, or by International at the Tooele Plant, and the weights, moistures and samples so obtained shall be accepted by both parties* If a Public Sacrler is used, the cost shall be for account of the 9. 3* Cospeay. Sampling of each oar of 0. 3* Company iceterisl required, but composite samples ray be used on up to 10 carloads ef ore or five earloads of concentrates or othsr materials. Pour samples required, one for International, one for 9* 8. Cowpany, one for shipper and one for reserve. International required to furnish 9* 3* Company wights, moistures and samples of materials received for treatment for account of International* Fioducts produced for 9. 3. C*-psn7, except lead bullion, shall be weighed and sampled, and moisture determination made at destination to which such produets may be shipped, lead bullion for the 9. 8. Cempany to be weighed and sampled at the Tooele Plant. Where products returnable to 9* 3* Cempany are intermingled with those of Inter* rational and sold independently of arrangements concerning sals ef International's portion. International to advise 9. 3. Company and the receiving plant of the tonnage and analysis of the proteots belonging to 9* 3. Company, such weight and metal content to be detected from total deliveries in order to determine International's portion. If the intermingled products arc sold under one set of tarns. International to submit to 9* 3. Cempany one copy of each settlement statenent together with statement of amount tea 9* 3. Company, and chocks in payment thereof fer U. S. Company's share. Assuring Bach party to have its assay samples of all material* delivered or products produced, assayed or analysed and the parties shall axchange the results. The averages of both parties results to be used if essays are within designated splitting Units (see agreement for tabulation). If in excess of splitting limits umpires are to be requested and umpire's assay used if between the assays; if not betwean, the assay closest to the uspire'e is used. Cost of umpire essay to be borne by party vtoee assay is further fren that of the umpire* U 3. Coepanj may require International to deliver, to 9* 3* Cempany, J00 tons lead bullion, proteoad from Inter* national rilsrials, per month under terms of April 1, 1953 ogreemit between International and American Smelting and Refining Cospany, except that the lead content will be fftp by 9* 3. Ccapany to International In contract)* Appendix A (Draft 9-6*53) of the agreement includes both oost and metallurgical accounting procedures. Provisions directly concerned with ratallurgical accounting audit, exclusive of methods of eaapmtatiems are aa follows, quoted verbatim: . Invgv^g An inventory of all metalliferous materials and fluxes on hand in the lead smelting sod slag treatment divisions of the Tooele Plant shall be made by International and aertlfiad to by the Manager of said plant prior to the start of operations under the agreement. A similar inventory and certification shall be made ea of December 31st of such year, and the adjustnemta referred to in paragraph i and 7 of the agremasmt and hereinafter described shall be baaed upon the next following certified metallurgical 1stan*027. qatTRACT - Continu'd Materials Proccscvd /H' Upon completion of th' weighing, eanpling moisture determination n provid'd in paragraph 15 of the egr--went, the material* may be coeedrgled and pot into process each month in such proportion* a* my bo 0*0*0*017 to pro duce th* d"ired bullion and slag analysis. A nonthly weighted composite analyei* of eoeh oospsay** materials ^ . treat'd or put into process will be rad*, with neeessary sub-division* by material eloaee* for ua* in aliooatin* malting coat* and total recoverable netal* to eoeh pert/** notorial** Provisional Allocation* of Metal*. Product* end Ketal Loaeee The usual metallurgical accounting method* will be used to establish netallnrgioal input, in proc o m, production, measured slag loses* and unaccounted for loaaea from th* treatment of notorial* furnished b/ each part/ and commingled aa above provided. In Irgnfr,c/J An eetirat* of th* in-process inventor/ will be mad* aa of th* end of each aouth during th* tens of th* agremmt. .gpllxarl"* o,f 11^.^ At the end of each calendar quarter, adjustments of the metal oontsnt* of bullion returned to each part/ during such quarter shall be made through the return of metals in bullion in subeequent ehlpawnts, If practical, or by payment for such metal* in cash using the arithmetical average of th* metal price* for each month of th* quarter, with proper deductions from such prices for furthsr treatment costs end transportationi provided, however, that payment to International for excess antimony in U. S. Company bullion shall be nod* only to the extent that it become* necessary for International to purchase antimony for the purpose of making such specifi cation bullion* Finn! Allocation of Fetal*. Products and Petal Loss's Whenever a certified metallurgical inventory a* described in paragraph 1 of thia Appendix A aball be made, appro priate adjustment* in th* above described provisional allocation* shall be oemputed for th* period *ino* the next preceding certified metallurgical inventory* All fact-ore outlined under paragraph A above in th* deter mination of such provisional allocations shall be followed in each computation*, except that the oertifled metallurgical inventory shall be used in place of the estimated inventory* In addition to the foregoing metallurgical accounting provision'. Appendix A provide* for allocation of fluxing and diluent ooste, computed from metallurgical statistic*. Brlafly that* provisions arc aa follow*} (1) Scrap Iron - If eerep iron it needed for better furnace operation th* cost of it will bo included la smelting coat, but if used as a flux, the cost will bo charged against th* materials requiring same, and th* tonnage shall be included in treatment tonnage for the party requiring such flux. (2) Limesand or Urn* Rock - A charge will be mad* to each party material treated for the lime flux required for that material to produce blast furnace slag having th* eurrontly desired insoluble to lime ratio* t3) Siliceous Flux - A charge shall be mad* to either party for silica required in fluxing that party** material to produce lead blast furnace slag of the eurrontly desired analysis. Credit will be allowed to one party if excess silica is contained in that party** materiela, to th* extent that such excess is required for fluxing th* second party** materials* The amount of this charge or credit shall b* based on the lovsst ooat of available silieoons material'. (4) Sulphur - Th* eoet of elisinating a unit of sulphur is agreed to bo 50% of tbs ooat of oparatlng th* sinter plant and sinter eottrell treater, divided by th* total unit* of sulphur contained la the materials treated, and shall be divided between th* parties in th* same proportion thst th* amounts of sulphur contained in th* materials treated for each party boar to each other* The remaining 50% of the sinter and sinter eottrell eoete will be divided between th* parties on the basis of the total tonnage of materials sintered for each. .. .. (5) Lead Diluent - If material* treated in th* sintering and blast furnace operation caused an average of 37% load content, a supply of diluent will be necessary to reduce th* average below 37%* If. only one party*s material exceeds yj% that party will pay for the diluent end have the tonnage of diluent added to his treatment tonnage. If both parti*** notarial exceeds 37* then each will boar th# cost of hi* own diluent and tbs toonago in aaoh ease will be added to bis tonnage treated. '~iv. 'j-U - -:M PNYC 00011836 ' V' ." - CONTRACT - Continued A. (6) tine Diluent - If Bateriel*, including necessary eoslting flux** and lead diluent*, result in produc tion of hla*t furnace slag exceeding 22% tine oxide, a diluent will be necessary to lover the slag grade below 221 fine oxide. The party whoa# material eauaaa the exoeee will bear the coat of the diluent and have the material added to hi* treatment tonnage, or if both eaoae the exoeae then both will eupply the diluent and have hi* own tonnage added to material* treated. COKTRACT msim In letter of Mr. G* A. Burt to Mr. R. L. Johnson, dated July 23, 1938, he stalest ih* following outlln* of sam pling and asesying procedure* attached hereto confiras our agreement covering the handling of the various smelting materials being shipped by 0. 3. Company to Tooels and milling or* shipped by International to the Midvale Rill* In some cases the procedures are at varianc* with the agreements of August 1, 1938 but in order to avoid duplication of effort and aave operating eoata, the parties have mutually agreed to these arrangements, subject to change at any time by mutual agreement". Briefly, tha satariala covered by this latter and ttrms applicable thereto are as follows: I - Midvale Lead Concentratest Weights - International received weights and moisture determination to govern. Sampling - U. 3. Company pipe sampling to govern. Samples - One for International, one for 0. 3. Company and one reserve. Assays - Each party to assay. Repeats when in excess of splitting limits. Exchange of samples similar to cold slag procedure. II - Midvale Smelter Secondary Products; Weight* - International received weights and moisture determinations. Sampling - V. 3. pip* sample if possible. If crusting required 0. 3. Company sample to govern. Samples - One to each party and one for reserve. Assay* - Each party to assay. Repeat and exchanged sample provisions. (See letter for exception on specific motels) III - 0. 3. Company Custom Materials: Weight* - International received weight* and moisture determination. Sscpling - International*s pipe or mill sampling to govern. San.pl*a - If tJ. 5. Company accepts smelter assays no sample mailed unless requested. Otherwise one sample to outside assay firm, on* kept by International and ent 0. 3. Coapany for umpire use. Asaays - If shipper accepts smelter assay, International* assays govern. If not, assays to be compared t-y V. 3. Coryany using agreed limits* 0. 3. Company to call for umpire if needed. (See letter for metals covered, and exceptions on specific metals). 17 - V, 3. Company - Battery Plate*: Weights - Tooele City scale ticket weights or from reputable Salt Lake City teal**. Sampling - International ssapling will govern. Samples - Rone unless requested. Assays - International** assay to govern. 7, 7-a A 7-b - apply to Midvale Mill. Sot audit on that operation. The provisions of Appendix A, Exhibit C, relative to allocation of lime flux eoata have been superseded by a method reported on page 11 of the Pebruary 1959 Cost 3tataei*nta entitled "Allocation of Sbeltlng fluxing and Diluent Costs", for comment on this revision see section of this audit "Allocation of fluxing and Diluent Costs". The managements of both companies have made revision* in arriving at settlnsent assay* for U. 3. Company lead bullion shipped. See coamsnt under "Products - Lead Bullion". . .. * pAIYC sTtmaiT <r ceramro cmmi*. neunnB n. a. carat am ] c Tie ^Statement of Coskiiied operations" is the stati mt rfarrad^toes ."Bddbit k*'i five sain divisions in this atat meet, as follow 1) Sintering Operation " 2) Blast Furnace !3) Slag Treatment Plant 4) Deleading Plant 5) R*A4>TM Plant Tha statement is a surasaxy of treatnsnt, prodnotion and lossas of tha antira plant oparation in raapaot to pounds^ of notarial, pounds of load, copper, sine, antimony, bismuth and cadwim, and ounces of /silver-sod gold. All r4f data vara allocated batman tha 0. S* Cccpany and International. "fc-AS-T-* T-`"C ' In auditing tha Statement of Combined Oparations tba Auditor assumed that atatiatiea on receipts,- shipments, and 1 inventories, were regularly eovarad on pariodlc metallurgical aoeountlng audita and for that raaaoa vara aoula*^- dad from this audit, axctpt for examination of moipts fron tba 0. S. Company.* At tha raquaat of tba D. 8. $*,, Company* Zntarnational reports monthly to tha 0* 8. Company a atataaant of oroo traatad for its account, by lots. Inasmuch as tha total of thaaa lota antar tha statement of Combined Oparations, an andlt of tbaaa lota was aada to tha extent of 25# of lote treated. The larger portion is traatad st tbs Sintering Plant and the balance at the Blast furnace, the audit dieclosed full agrssmmnt batman the total* a* reported to the 0..3. \ Colony and thoee taken into the atateaent of Combined Oporations. . . . It was notad that in the Blast furnace section of the statement an itan of Storey SLag" aas traatad, and an allocation male between tha U. S. Company and International. This slag was purchased.by International which bills tha 0. S. Company for lta portion of purchase oost. Tba allocation^of slag batman tha ooepanias was hgt aada on tha basis of the dry pounds of sinter, ores and eadaiua flat dust'treated st tbs Blast Puraaoe*. Tbs basis for this allocation is not included in the contrast, but ms astahliahsd tqr tbs local mmunt rr. **- <* ' * ,h- 4 >. >* " ' '&. Audit of the Statement of Combined Oparations covered the first four plants above anunaratsd. Tba Cadmium Plant / ma not in oparation during February 1959* All districtions on tba eowblned operation ware fonnd to be in i` ;v aeeordanca with tame of tha contract. Iheae distributiona included Invnstorloa, products, and know and unaccounted for losses. Treste^nt tonnages from tha five stain divisions of this ststawsat mra ohackad to Cost Statements for use in allocating costs batman tha eonblnod ooapaaloo. The contract provides for treating a maximum tonnaga of 9,000 tons par month for tbs 0* 8# Company with certain provisions for storing excess over this tonnsge, or for enlarging plant capacity. During February 1939 the following dry tons vers treated for the 0. 8. Company! Sintering Plant Blast furnace Slag Treating Plant 5.757 n v 7ti Total 6,538 Total tonnages for other months of ths cos&lnod operation are as followst August 1958 September 1958 October 1958 November 1958 December 1958 January 1959 5.683 5.532 **8,144 2?6,577 * *7.245 17,398 tonnaga limitation. J3sms UJ Billion Bach perty shares in the production of lead bullion as determined by tha agreed method of ccaputiag product allo cation. During February 1959 production * 7,085,264 pound* of bullion. Of thie aaount 0. 9. awaiting Coepany** portion was 5,506,795 pounds and International*a portion 1,578,479 pounds. Included in these weights are lead, silver, geld, antlnony, and bismuth. The contract provides for assaying by both partiss, using tha following splitting limitsi < Leal t Copper Ore. Silver Dss. Gold 5 Antiirony % Bismuth .20 .02 .50 .VI .02 This also provides for the use of an orpine when results vary by wore than tha abova amounts. The loeal manage ments have revised this procedure ae followe: Atsay determinations are nods on the following metsls; copper, antlnony, bunuth, arsenic, tellurium, silver, gold, and other metals in total, except lead. After aattlewent assays are agreed upon for all metals except lead, the lead assay is arrived at by deducting tha total assays of other metals from 1005. Tha contract does not specify splitting limits on arsenic tellurlua and "Others". By subsequent agreement a splitting limit of .02$ vss established for each of thee* metals. Silver and gold assay determinations are mads for each lot shipped. Assay determinations on all othsr metals arc mads from a notithly composite eample of shipments. In arriving at aattlewent assay# for any particular metal tha original assay of eaoh party is averaged with that of th* othsr party. If outside of tbs splitting limit each party repeats hie assay. If not then within tha Unit tbs aaaqtla of each party is exchanged for that of the other party aud an assay determination is mada on such mohanged sample. If the "Exchange" assays are still outside tha splitting limit, then no further assay determination le made, but tha mean of International *s repeat and exchange assay# are averaged with the mean of 0. 9. Company's repeat and exchange assays. Although silver and gold are assayed In onnoea per ton, a conversion is rada to percentage in arriving at lead assay. For February 1959 the settlement assays for 0* 9. Ccapany bullion were as follows; Copper Antimony Bismuth Arsenic Tellurium Other Silver and Gold 1.490 .113 .100 .042 .020 Lead to Faience 98.015 Total Thus, even though the contract provide* for assay on load, with provision for ecsparlsoo and umpire, the above method is used as a substitute. Th# contract provides for an adjustment of current deliverlee of metal In bullion as follow#; "At the end of each calendar quarter adjustments of the metal contents of bullion rsturnsd to sad; party during such quarter shall be made through the return of metals In bullion In subeequmt shipments, if practical, or by payment for such ratals in sash using th* arithmetical average of ths metal prices for each month of tbs quarter, with proper dvducticr.e from such prlees for further treatment costs and transportation". v . The nontract also provides, under appendix A, for final allocation* of metals,'products and metal losses whenever a certified metallurgical inventory shall be made, and adjustments mad* for any difference* brought about thereby. To data no certified inventory has been taken. ' \ if* From the inception of the contract to the end of February 1959 there have been no cash payments for metal* owed by one party tc the ether. However, payment* in kind have bean made. In respeet to lead, a sufficient Inventory has been available to meet deficiencies caused by shipping more for either party than was produced by that party. In respeet to ether metals, specifically bismuth, gold and silver, there have been some deficiencies. : Thus, st February 29, 1959 the U. 9. Company owed International 9,889 pounds ef bismuth and 191,034.42 ounces, of. silver. International in turn owed th* 0. 9. Company 469.829 ounces of fold.rv-i Providing the 8. 9. Cempany it unable to pay baek in kind tha allver it oWa lntanational it is apparent that ths contract provision should be applied requiring eaeh payment to International^ Th* saaa would apply to ths 8,889 pounds of bitenth. Conversely, International should pay for the gold owed to the 0. 9. Ccapany. rROKTCrS - Continued t>ad BalHon Continued . , > n*i* ;: m,f ' -t Messrs. W. j. McKenna and G, Port were consulted regarding liquidation of metal balance* beti rorpanie&< noth were in agreement that cash settlements should bo made la Um near future M it likely thst payments in kind could bo made. A suggestion mm aodo that ooeb differences as oziotod on April 10, 1?59 be liquidated to eoincidt with tho expected taking of a certified inventory at that time, Mr. ricf.orma olated that he Mould consult with Mr. Hugo Johnson of the 0* 3* ^'rpimy regarding payment# for those laetalo. - . a. V At March 31, 1959 the balances worst ' ! (H.ed by 0. S. Coepony to International Owed by International to 0. 3. Company Blanth Silver Gold lead - 11,201 pounds - 170,973.84 cwneee -913.691, cwneea - 100.980 . ; j There will apparently be no difficulty for International to return any lead it nay owe to the V. 8. Coepany in *-beqr*nt c.anthe but repayment in kind by either company in respect to other metals ie lose oertain or irpr'-labla. Or. Atrll 2.1> 1959 ?*r McKenna eenferred with Mr. Hugo Johnson regarding eaah settlements for natal owed by one company to the other. Mr. McKerna informed the Auditor that Mr. Johnson agreed that cash liquidations should be mad* so./r., preferably after the taking of the expected certified inventory on Hay 1, 1959. Allwing tine for the cer-puUtion of revised allocations due to use of a certified inventory such cash adjustment should be made the latter part of May 1959* Audit of lead bullion shipments was made only on ehipnanta for account of the U. 8. Company.' All data were in good order and were properly recorded in "Lead Bullion Production Statement - 0. 3. Ccmpany Portion*. . .fegnu laid-s wi 3pis?. Copper jiatta and opclsa are Smelting Plant products shipped to the Anaconda Bedaetlon Mark*. Settlements are prepared st Anaconda vith entry crediting International. At Tooele proper sales entries are aide for each product, the Statement cf Combined Operations, Blast furnace Smelting section provides an allocation of these products to t). S. Company end International. This allocation provides a basis for eoaputing settlerents for tr. S. Con-pony s share of each product. The Journal contains an entry charging ealaa for the tf. 3* Company portion and crediting that coopany. Audit diacloeed lha' proper settlment terms were used in eoaputing the 0. 3. Coepany portion of sales according ' to the contract which provides that hen one set of tome ie used for entire ahlpMot International is to compute the share of the G S. Company and tender payment for tans. , .;.v Deleaded tine fume sales wire made to American Zinc Coepany, national Zine Coepany and The Aneoonda Ceapany. This fume is stored as produced and maintained as an identifiable finished inventory on plant reports. In this re spect it is different than copper malts and spelts iftich is not carried on plant inventories as finished pro ducts, tat vhi eh srt considered at such only 'hen shipped. Consequently these copper products are carried on the Statement of Combined Operations as production items and as such are alloeated to the combined co^anles and tho entire amount due the U. S, Company is settled for. Deleaded tine fume is produced la greater quantity than is tcld which requires that first-in first-out method bo applied in apportioning the sale between the companies. The sale made in FeVruery 1959 was accounted for by stock remaining from December 1958 production end a portion of January 1959 production Bach company's proportionate amount of production for these months ie therefore deducted from prior inventory belonging to each to arrive at quantity remaining for sale. Bookkeeping.entry is then made crediting the 0. 3. Coepany for ita share and charging Deleaded 2ine Puma galea. ^ ':*fc ' ' t The local managements have agreed that International may claim 1005 nf tales to American Zine Company (toll basis) and shipments to The Anaconda Coepany, terms for sals to those companies being confidential. Weight and quantl->. ties of these two sales are therefore deducted from appropriate months production. belonging to Anaconda id>en , ' proration is cade to the combined companies. _ ?' . .-.'-v- +J* The records showing the distributicn of the sale and the apportionment ofthe revenue were^ound^to be in order. leaded sine oxide, similar to deleaded Bine fume is told from inventory on a first-in first-cut basis relative to PrCOtJCTS - Continued ... I.p"idt3 Zinc teide.Sales'- Continued This material is eold on the heals of *10.00 per cvt, F.O.B., destination, from eonslgmMnt stock. Freight cmmission* ar.l discounts are deducted. A statemmt is submitted Vo the U. S. Company showing full detali. Inasmuch as it is eold on cvt taels, regardless of astal eontsnt, the net return is merely prorated on a dry weight basis to determine each company's portion. A detailed record le maintains*, however, of netal content remaining in inventory. If sales were trade on any other basis than par ewt, the infonastloo would still be svailsble. All records pertaining to sale of leaded sine oxide were found to be correct, and entry crediting the 0* 9. account was verified. This fume is reoovei from the eyster prior to the deleading process. Mo inventory of this material ie regularly carried, hovevtr, an order vsa reeleved from the American Zinc Company of Illinois for shipment to Halliburton Oil Well Cementing Company, thincon, Oklahoma. The material was sold at 7*32* per pound and was shipped collect. Stellar to procedure on leaded cine oxide sale, the net return was prorated to taeh eospany on a tannage basis, although a net distribution is available. The net amount due the l*. S. Ccrpjr.y for this material was noted on the same statement submitted for deleaded ainc oxi^e. The entry ho Journal *a verified by the Auditor. MLtflciTiqi or .FtTOiw ATTD pnmT norm .fetajeu The confutation or lire fluxirg tost and allocation of same is reported on page 11 of the February 1959 Cost Statements. The method as herein used differs from that as illustrated in Exhibit 0 of ths contract. Briefly the method illustrated in the exhibit takes into account the deficiency of either party** CaO content in pro* duslng a required slag grade- This deficiency is then multiplied by a cost per unit of CaO, the unit cost being the delivered cost cf lice flux, the cost of sinter and eottrall and 804 of blast furnace cost, all divide! Ip the excess units of CaO (CeO less Insol.). Ths method as uaad accounts for tho smelting oost of the lit.* materiel used on a per ton basis, added to the actual purchaat coat per ton. The Auditor was advised that the msn&geeento of ths V* 3. Company and International agreed upon the method pre sently being used. The computation of Insol., deficiency w* made according to the method illustrated in Exhibit C It was noted that tbs estimated cost of a unit of silica aa used in the axhlbit was 22*. The same estimated cost was used in computing the February 1955 charge. Incidentally, for that month International was charged only #32.78 for its latol. deficiency and 0. 5. Company was credited with tbs asms amount. ' After allowing for proper charges for lime flux, the balance of the blast furnace cost was allocated to ths companies on a tonnage treated basis and ths total cost for cash company, adjusted by the insol. ehargs or credit was entered on the blast furnace cost statement aa the official cost to each company. Messrs. W. J, PcK:n ar.i 5. A* hurt were consulted regarding use of 22* per unit estimated silica credit. Mr. fort stated that 'hi* price v*s as accurate as any available and that it would continue to bt used aa final until a more accurate one would become available. Bulchur The computation of the apportionment of the Sintering Plant cost based 90% oo sulphur content of material treated and 50% baaed on total tonnage of material treated was in accordance with contract provisions as sumsMurised in this audit. All data were ehteked and ths cost allocation ms traeod to the Matering Plant coat etetasant. Is&L&UMnk '. During Pebruary 1959 ths combined sinter feed averaged 34.3624, feed of 0. 3, Coapeny averaging 39,2154 and Inter national 25*4274, *11 excluding lead diluent added. Including some Murray slag added aa diluent the respective percentages were 34*1384, 33.8204 and 25*4274* It is apparent that the diluent mas necessary to redues the high lead percentage eauesd by treatment of U. 3* materials* A settlaaent was prepared shoving the entire value of this slag used bj the 0. S. Company. A portion was traatsd at the Blast Furnace and was included as a portion of its treatment tonnage at that plant. The portion treated at the Sintering Plant was labeled as suoh on ths Statement of Combined Operations, indicating its uas as a diluent. ' PNYC 00011841 . < * .- x - , V-- : v.d ; AIJ/'CATICfi QT nil!IPO AMD DHAIEST C03T3 - Continued ' v. ^ & .. { . Lead Diluent - Continued The entire ^lurray Slag Dump w purchas'd from the American Stealtinf and Refining Coapany and la earrlad aa an asset account on International*9 books, designated aa ^lurray Slag Do r p**. hben removal* aro nada for treatrent at the Tooele Plant the account la credited and ora purchases debited* Under term* of schedule in affect Mth the U. S. Cospany the settlement value was oradlted to the International Ora Purchased Aobount and charfad to the 0. S. Company, the antire removal for tha month, including that latar transferred to the tJ* S. Coapany, r-: having been chergad to the ora purchase account and creditad to Murray Slag Dump* ftar. ?,U*nt; nlt.?t Furnace Sing for rebruory 1959 did not exceed 22% sine cod.de and for that reason tha contract provision for elite diluent vas JLneffactli'0 ww' nxv,r c o s t o p orm-rer Aj-j-mdix 1 atatta "Coat f operation of the cadmium plant ahall be allocated betvaan tha parties on tha basis of the total cadmium content of material* treated for each"* Since the inception of the contract this plant hae operated only one month, namely Oeentber 1958* For that aonth, the Auditor was informed that tbs plant seat ae allocated on the contract baeie. i--AU^CICAt. It.Tf3.TORT Aa nted in the synopsis of the contract, a certified Inventory should ba taken at December 31 of each year. This was not done at December 31, 1?56. When consulted about this contract provlaion Hr. McKenna stated that an inventory cf this nature will be taken on Ray 1 or 2, 1959 with all 1teats of inventory adjusted to 8:00 A.R.. Mar 1, 1959. The Statements of Cert, Trealrcr.t, Prod-action and Losses are prepared in tha same manner aa under the prior opera-? tlcr.i except for ir.corporation of treatment tonnages, aetal contact, ooata and toll revenue applieahla to the treatment of l*. S. Company material. In tha contract between the ooaipanlaa oertaln item* of axpenae are to be borne 100? by International, thereby being excluded fran allocation to tha companies on a tonnage basis* Briefly some of these excluded costs are: (1) pensions for employees retiring prior to August 1, 1958, (2) taxes on property not used in the combined operation, (3) corporation franchise taxes, (4) 251 of tha salaries and expenses of LiU.-r.ationai'e Ore Purchasing Department in Salt Lake City, (5) .all costa In connection with making settlements for eras and concentretea purchased for aecuunt of International (5098 of salaries and expenses of this department to be deenad as cost of making settlements), (6) umpire assays and Tooele laboratory coats chargeable to the purchase of ores for International, (?) outside property expenses, (8) use end occupancy lueursr.ee premiums or premium on property not used in the combined operation, (9) International Oeological Department expense, and (1C) legal firm retainer# and other legal axpenee net applicable to the cca&lned operation. To properly show the true coat of treating all material# the Coat Accounting Department allocates all costs, in cluding those itemized above, to both International and 0. 5. Company materials. In this respect the oost data are prepared aa though the U. 9. Company saterial was a custom material absorbing its proper share of all coats. Consequently the tolls received (or the 0. 8. Cospany portion of treatment coat baaed on contract) are taken as credits to the cost of operation. This procedure la similar to that used In the treatment of sine cancertratee on toll st the Kontana Sine Plants of The Anaconda Company. In that operation,however, tolls are not determined on a plant tonnage basis, lut on a fixed coat per ton of material treated, adjusted by labor, power and other costs. To record the distribution of total treatment ccsta including the ten enumerated above, to materials of both coepariea, the Cost Accounting Department prepares a supplementary "Coat Beale" nwaiirj of ooata for both the Lead and Slag Treating Plants. In current audit, these costs. Including allocation of same to both companies were traced to respective cost, treatment, production and lose statement*. Aa these statements are eoverod under work programs of metallurgical audits previously established, the Auditor did act Include any further verification of data. The statement on the Slag Treating Plant showed a leas of 1164.53 for February 1959* A Lead Plant estimated profit ais.Umsnt shoved a loss of 16,251*74 for February 1959* This statement assumed sale of lead at the Fast St. Louis pries of 11.363# par pound aa quotadla tha Zhglneering and Mining Journal. Ho errors or discrepancies of importance were noted (Airing audit of tha statements and work sheets used in pre paration of published metallurgical reports covering tha combined operation. v v !>-Sl PNYC 00011842 iii'Tbrr -.* i&ii* .-*$ ' ; .*>*3iV- ;X' Mv|:^ tlr ccwawTS i A high dtgree of accuracy w evident on all reports reviewed during tbe audit, lech mmtmr of tbe NeUIlurtleel Accounting Stuff appears to be well qualified for hi* particular taaka. 7be present staff seneUts of Xesere. Marcello* Clark, Jane* loofy, d Porter* Chester Khitsbouse, Alex Ibcsie and Gary L. Bennett. Hr* " has ' been Infomed that Kr. David furneu, a forcer aaplojree of the departneot dll return fro* South Aaerloa and be added to the presrnt staff, at least part tine* He stated that the Huber of clerks at present eas Jaauffi- dent in eae of sickness or other enorgenegr, and that replacement* far vaoatious are not yet available. It is hoped that Mr. Furnau's return vlU alleviate situation. ' ' The Initiation of tbe ccublned operation hat thrown an imanaelf larger quantity of work, upon the metallurgical accounting depart&eat. A Srunlng Copy Machine has been of inastiaabls value in saving typist and alerleel help, and cay be of sore use in this raspeet aa the organlaatian of work is perfected. Fine cooperation on the part of the managsmut and accounting staff was evident during tba course of this audit. M pNYC 00011843 .wr