Document Ne2BmeEbQojBg6D5bny85YQaD

An a c o n d a Co p pe r Min in g Co mp a n y An a ^c Wa ! ; - ~*'"r N11744 PNYC 00010076 ANACONDA COPPER MINING COMPANY $600,000,000 443,954,300 To the Shareholders of ANACONDA COPPER MINING COMPANY THE demand for non-ferrous metals during the year 1936 in the United States continued to increase above that of; the prior year and wjth the demand that had been established in foreign markets caused a rapid expansion of the industry. The monthlv consumption of copper during the year reached its peak in October in both the domestic arid foreign .pickets.: Shocks' of befihed copper decreased materially and production was substantially increased during fie latter part of the1 year. World production of primary Blister copper totalled 1,799,940 tons, of which 604.340 tons were domestic duty-iree, and 1,195,600 tons were foreign. Production of primary copper in the United States showed an increase of approximately 62% over that of the prior year. Production abroad was approximately the same. World produc tion of primary refined copper was 1.760.299 tons, the domestic duty-free copper amounting to 621.371 tons and foreign to 1.138.928 tons. In comparison with 1935 '/lorlfi consumption of primary copper amounted to 1.593.543 tons, an increase of 14.2%; consumption of primary copper in the United StdteSitOi.idSSilhSjifdnS:, ahlincrease'bf and foreign consumption to 1,830,11*7 tons, approximately the same as in the previous year. The consumption in the domestic market, including secondary copper, totalled 764,560 tons, an increase of 44.7% compared with the previous year. Stocks of duty-free refined copper in the United States were reduced during the year by 70.347 tons and refined stocks abroad by 62,897 tons, a total decrease of 133.244 tons. Stocks.-ojf. refined copper ate the end of the year, as reported by the Copper Insti tute,'' Wche,T,6l46fiji;|ons of duty-free and 192,255 tons of foreign. At these levels stocks are normal landlfuture demand must be supplied: by production. Production of zinc in the United States was 524,271 tons, an increase of 21.5% compared with the prior year, and consumption amounted to 563,273 tons, an increase of 23.1%. Stocks of zinc on hand at the close of the year totalled 44,756 tons, the lowest since June 30,1929. The trend of non-ferrous metal prices was definitely upward during the year. The domestic price of copper was 9.023d per pound f.o.b. refinery at the beginning of the year and was 11.775/ per pound at the end. The price for export copper f.o.b. refinery was 8.375/ per pound at the first of the year and at the close was 11.600/ per pound. Zinc at the end of the year was 5.450/ per pound St. Louis, compared with 4.8502 per pound at the beginning. The price for silver mined in the United States remained at 77.57/ per ounce throughout the year and gold at S35.00 per ounce. The price for foreign silver showed slight variation throughout the year and was 45/ per ounce at the close. 2 PNYC 00010078  The prices of the principal metals as reported by the Engineering & Mining Journal were as follows: CopPER-Duty Free f.o.b. ReSnery-per lb................... CopRER-Export f.ob. Renery~per lb...................... Leap . -New Vork-per lb...................................... Zin c ->t. Louis-per lb.............................................. Sil v e r -New York-"'Not covered by President's Proclamations;-per oz.......................... Jan. 3 9.025c 8.375 4.500 4.850 49.750* Sigh 11.775c n.600 6.000 5.450 49.750 Lots 9.02.5e 8.250 4.500 4.750 44.730 Dee. 31 1 i.775e 11.600 6.000 5.450 45.000 9. 474c 9..230 4 .710 4 .901 45 .087 CORPORATE CHANGES The Chile Copper Company Twenty-Year 5% Debentures due January 1, 1947, of which 326.574.000 were outstanding at the beginning of the year, were called on Januarv 1, 1937, at the redemption, price of 101. Funds to the amount of $25,000,000 for the retirement of these Debentures were obtained through serial notes of Chile Copper Company, guaranteed by Anaconda Copper Mining Company, payable to banks. $2,000,000 annually from December; 10, 1937, to December 10, 1940, and $17,000,000 December 10, 1941. Subsequently and before, the close of the year notes of Chile Exploration Company in like amounts similarly guaranteed were issued to the banks in lieu of notes of Chile Copper Company, The remainder of the funds required was provided from the treasury of Chile Copper Company. Through this financing sub stantial savings were effected in yearly interest charges. The Anaconda Lead Products Company was organized in 1919, and produced at its plant at East Chicago^ Indiana, dry white lead by an electrolytic process under patents acquired from the late Elmer A. Sperry. The total stock of the Company was 13,630 shares of which 10.99% had been issued, to the, Sperry interests in exchange for the above patents. This stock liras purchased for the sum of $80,000, in June, 1936, Thereafter the Company was dissolved hod its assets transferred to the International Smelting and Refining Company, In conformity with the steps being taken to simplify and integrate the holdings of the Company, Andes Exploration Company (Delaware), Butte Electric Railway Company, Mountain Trading Company, and New York and Hastings Steamboat Company, all 100% owned subsidiaries, were dissolved during the year and their assets transferred to the parent Company or its consolidated subsidiaries. The assets of the New York and Hastings Steamboat Company were acquired by Chile Steamship Company Incorporated, a wholly'-owned subsidiary of Chile Copper Company. The substitution of natural gas and oil developed in the State of Montana for other fuels, so impaired the market for coal that it became advisable to discontinue operations at the plant of the Company at Washoe, Montana. The Milltown plant, no lodger needed in the operation of the Lumber Department, was discarded during the ydar. These items, together with some mining prospects, carried on the books at $637,081.32, were written off and charged to surplus. 3 FINANCIAL Gross sales and earnings of the Company upon a consolidated basis totalled $160,884,734.15, compared with 3147,6*8,576.68 for the prior year, an increase of 833.404,157.47, or 46?c- This increase was accounted for both by larger sales volume and higher prices received for the products. The cost of sales, including all operating expenses, development and maintenance charges, repairs, administrative selling and genera! expenses, and all taxes except income andj, undistributed profits taxes, amounted to $149,81:1,064.67, compared with 8100.466.618.S4 for the previous yeah The resulting operating income was........................................... 531,071,869.48 Other Income, including Dividends from unconsolidated sub sidiaries, was..........';...................................................... 4.385.848.91 Total Income was............................ .......................................... $33,437,318.39 Deductions from Income for Interest on Bonds and Current Obligations $3,818,41448. Expenses pertaining to Non operating L'r.its 84440,080.31. United States and Foreign Income Taxes 84,9731917.76, and Discount, etc,, on Bonds and Debentures retired through sinking fund operations 8486.970.73. amounted to....................................................... 9,301,38148 Leaving Balance of.................:................................................ $43,955,936.91 Provision1 for Depreciation and Obsolescence and for Depletion of Coal Mines, Timber Lands, Phosphate Deposits and Clay Lands was $7,608,864.81, and Discount and Expenses on Bonds and Debentures was $388,410.04, a total of.. ........... 7,997,074.93 Consolidated Set Income, without deduction for depletion of metal Hj&ehiwas..................................................................... $15,938,864.48 Of which Minority Share amounted to..................................... 77,034.69 Leaving Consolidated Net Income of......................................... $15.881.849,59 The Consolidated Net Income of $15,881,849.59 compares with $11,180,087.45 for the year 1935. Sales of metals and manufactured products are included in the income account as they are invoiced and delivered to customers. Forward sales contracts are not included nor does the income account reflect the profit that may be derived from such sales. The dividends declared and paid during the year on the capital stock of your Company amounted to $10,844,922.50, or $1.25 per share. Charges to surplus for the year totalled $4,248,761.06, consisting of write-offs on account of discarded plants and properties $637,081.32; adjustment through write-down of assets of subsidiary dissolved $73,311,49; and discount and premium applicable to 5% Debentures of Chile Copper Company redeemed up to and including December 31, 1936, *1,538,368.25. 4 The principal subsidiaries included in the consolidated statements are Andes Copper Alining Company and its wholly-owned subsidiary; Chile Copper Company and its wholly-owned subsidiaries; Grefene Cananea Copper Company and its Mexican subsidiary;. International smelting and Refining Company, The American Brass Com pany, Anaron(ia dales Cdmpanv, Butte, Anaconda & Pacific Railway Companv, Tooele Valley Rail way Company, Diamond Coal & Coke Company, ami Butte Water Companv. The a.--ets and liabilities of subsidiaries in which'a majority but less than,73^ of the issued stock is held arc not distributed under the various headings in the consolidated balance sheet,, but the: cost of the holdings in such subsidiaries is show n as a separate item under ''Investments". The consolidated income:account1 shows as. a separaih item the diyidends received from such subsidiaries. The principal unconsolidated subsidiaries areAdacondaiSSfireiiandiCable Company; Mountain-City Copper' Company and Walker Allhinli Cipittpany. Current assets at the close of the year, including cash on hand of 816,282.190.76, amounted to 882,268,579.93, compared Wilth. 876.588.329.97 for the prior year,, and curreii'hiUsbiilitihSv 'iftbhidihg f8.00Q,OO^i?li,lK>tes payable of Chile Exploration Company due December 10, 1937, were 815,442,097.08, compared with -310,016,510.18. There were purchased and retired during the year 33.159.000 par value of ilA% Sinking.ElhhdeDebehtureS. of your Company apdllS^.OOf)1 par value "of. First Mortgage Sinking. EhhdiiBpride of Butte, Anaconda & Fiifijes.:Etaibivagy Company- The sum of S3,19e3l5j:hd iaiBQUnt equivalent :!tp,tWebby' periifehtiofii'thg'iiestil^stedlieoiisolidated net income of the year 1936,1 was set aside and1 deposited w^th the Trustee for the purchase of 414% Debentures of the Company-tfor.ihe sinking lifugd and to the extent not so used, to be paid into the sinking fund on August 13, 1937; and $7,913.21 remained in the staking fund of Butte, Asceinda8-&-BBacifipBl^ra7: Company First Mortgage Bonds. The Twenty-Year 3% Debentures of Chile Copper Company outstanding at the beginning .of the- year in the tamdunt of tap^SwJoSOsYfei*- called dor redemption. These items total 832,912,042 21. Of this sum 825,000,000 was, as previously explained, obtainejihiv bdnk ioapsKthe netTesUltibem^'ithatl'thej outstanding mdebtedness of your Company was reduced, or its reduciion provided for, to the extent of $7,912,042.21 from current cash. The Inspiration Consolidated Copper Company paid in 1930 the-current interest payments on its notes, and In addition paid 3336,868.08 of interest accrued prior to January 1, 1936, reducing its indebtedness to your Company to 87,864,005.00. Capital expenditures during the year amounted to 33,426,380.19, summarized as foEowst Mines, Mining Claims, and Lands (less sales)............................ Buildings, Machinery and Equipment at the Mines, Smelting, Refining and Manufacturing Plants Of the Company and its subsidiaries (less sales)................................ ........ ........ Miscellaneous-Including acquisition of shares of stock of sub sidiary companies.,.......................... ..................................... $ 288,566.60 2,999,797.76 138,021.83 o OPERATIONS The operations at the mines and the reduction, refining, fabricating and other plants of your Company and its consolidated subsidiaries were conducted continuously during the year, with the exception of the properties of the Mexican subsidiary of Greene Cananea Copper Company which were closed down by a strike for two and one-half mopths in the early part of thd year, During the latter half of the year the increasing demand for metals necessitated a: rapid Increase in operations, particularly of the copper producing units, and by the ehd of the year the consumptive demands were such that all metal producing and fabricating properties were operating or were being prepared for operation, on a normal basis,' w.th the exception of the zinc'.plants in Mont ana which!; were1 obliged by low temperature and shortage of water for power to curtail output.' (Note--Such conditions caused suspension of operations of zinc plants for one month at the beginning of 1937;. Copper: The production of metals from the mines of vour Company and its consolidated subsidiary mining companies through copper plant operations was 552,807,952 pounds of copper, 6,508,847 ounces of silver, and 30,579 ounces of gold. The metal production thrdugh custom smelting and refining operations is not included in the foregoing figures. Including copper production from purchased custom ores and concentrates and secondary medals the output was 651,365,607 pounds. Deliveries of copper for the year in both the domestic and foreign markets amounted to 849.321,306 pounds. Deliveries of copper include not only the copper production from the iflines of your Company and its subsidiaries but also the custom, secondary and purchased intake. Zinc: Production of electrolytic zinc during the year amounted to 211,969,707 pounds, of which 43,448,219 pounds were from Company mines, and the remainder from custom orek and concentrates and leased mines. Deliveries of zinc amounted to 227,307,370 pounds, including the zinc delivered to the fabricating plants of subsidiaries of your Com pany and zinc used in the manufacture of zinc oxide at the zinc oxide plants. The metals paid for in zinc residues and dross sold to other companies amounted to 6,985,433 pounds of zinc, 27,227,017 pounds of lead, 330,321 pounds of copper, 2,899,867 ounces of The custom smelting and refining operations, other than zinc, produced from the treatment o! custom ores and concentrates and secondary metals 98.557,655 pounds of copper,; 67,629,153 pounds of lead < including 1,739,5?7 pounds of lead from own mines t, 4.620.201 ounces of silver. 78.170 ounces of gold, and certain byproduct metals and materials. The foregoing ihcludes production from ores and concentrates received froth the Walker'afid Mountain "City companies. Ih addition, production from materials treated on toll w;,as. 132,,193,8,38 pounds of copper, 861.-25! pounds Of lead, 1.513.666 ounces.of silver, ahdjdf'iOlSiodlhcespfigold., Deliveries of lead during the year, including that'used, inuthe mianafa'cture of white'lead at East Chicago,. Indiana, plant, were 100.383.367 pounds. Ores and Concentrates from Subsidiary Mining Companies: The concentrator at the mine of the Mountain City Copper Company for the treatment of the lower grade ores was completed-and put into operation in August, 1936. The gripe has operating at normal capacity by the close of the year, its ores and conceptr^teis being, shipped mainly to the Taodle Copper Plant of International Smelting and Refining Company for treatment. Recoverable copper production during the year amounted tip 25,054,996 pounds. The Walker Mining Company operated its mine throughout the year, the concen trates being;,shipped to the Tooele Copper Plant for treatment. Recoverable copper production amounted to 9,614,277 pounds. Fabricating, Plants: The shipments of manufactured products from the plants of The American Brass Company (including Toronto Plant), and Anaconda Wire and Cable Company, amounted to 682.287,179 pounds, an increase of approximately 28% over those of the prior year. The demand for fabricated products increased steadily throughout the year. The American Brass Company and Anaconda Wire and Cable Company, through their respective sales and research organizations, are constantly at work to widen the field for the use of copper and brass products and to meet the more exacting requirements of the trade. Miscellaneous Products: Miscellaneous products consisted of 97,541,356 feet lumber; 22,589 tons treblesuperphosphate and phosphoric acid; 7,442 tons arsenic; 853,018 pounds cadmium; 130,098 pounds nickel sulphate; and 359,286 pounds copper sulphate. GROUP INSURANCE The Board of Directors of your Company authorized the placement of group life insurance with The Prudential Insurance Company of America for employees of your 7 Company and those, of its subsidiary companies operating in the United States and Canada, under which joint Contributions are made bv the Company and each insured employee- The plan provides insurance for alt eligible employees! including officers, without physical examination- idore than ToU, of the eligible employees made appli cation. and the contributory insurance became effective July 31,: 1938. During the period' n-hen individual1 applications::were being made by the employees from July 6th to and including July 31st, 1936, the entire cost of the insurance! was paid by the Company. ,The: airnognt of insurance tpiwjjkh" eath eligible employee is! entitled is approximately one-\ ear's wage or stdary, the limitations being a minimum of 31 150 and a,max|niiifp,pf:^!lOi,dCfO. Tftechhfieitodfieldrhployehls'Sdfi .per jtipiith per thousand of linsU!fnnce.,'jhe:l Company payj|jg\;fbe,:<iost'aBoyfe|bat.,antoUpt,. HrnjsfeyeeS:. hovered al December 31st. 1936. totalled -27.067. or approximateIy96% of the eligible employees. The-total insufbnte in forte wgs 838^5141250.. EMPLOYEES During the year 1936 the average number of employees of the Company and its consolidated subsidiary companies was 36,377, of which 25,362 were within the United States. The number of employees on the payrolls at the end of the year totalled 40,996 compared with 34,976 at the close of the prior year, of which 28,283 were within the United States, compared with 24,650 at the end of 1935. NUMBER OF SHAREHOLDERS The number of registered shareholders appearing on the transfer books of the Company at December 31st, 1936, was 106,745, as compared with 110,229 at the same date of the prior year. SILESIAN-AMERICAN CORPORATION Principal production for the year of the subsidiaries of Silesian-American Corpora tion operating in Poland was 94,669,593 pounds of zinc, 22,298,980 pounds of lead, 1,750,909 metric tons of coal, 47,148 metric tons of sulphuric acid, and 18,703 metric tons of superphosphate. Of the above 1,169,311 pounds of zinc and 4,774,652 pounds of lead were produced from custom materials. 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 affects such subsidiaries. Difficulties were further increased during the year by governmental restrictions on the transfer of funds, which still continue in effect. At current exchange rates the average price of zinc for the year on the Lohdon market was equivalent to 3.34g per pound, and at December 31st, 1936, was equivalent to 4.384 per pound. PNYC 00010084 The principal amount of bonds of Siiesian-American Corporation outstanding at the end of the year was 35,345,000, a reduction of 3885,000 during the year. FINANCIAL STATEMENTS There is attached hereto as a. part of this report a Consolidated Balance Sheet showing1 the financial condition of the Company and consolidated subsidiary companies at the close of business December .'il. 1936. together with a Consolidated Income Account and a Consolidated Surplus Account for the year, certified to by Messrs. Ppgsod, Peloubet & Co.. Certified Public Accountants. By Order of the Board of Directors. CORNELIUS F. KELLEY, President. New York, X. Y,, March it, 1937. D PNYC 00010085 ANACONDA c o p p e r min in g c o mp a n y and Subsidiary Companies Consolidated Balance Sheet--December 31st, 1936 FIXED ASSETS: ASSETS Mines and rainina claims, water riahts aod lands (or metal producing and manu facturing plants---ee note G.. Ci>ai mine6- timber. Sands. phosphate deposits and ciiv lands--sefe noteG............ $ Leis reserve ipt depletion.................................. .................................................. '....... 9.587,299.8? 2.034,400.35 $290,832,622.07 Buildings-atfd'machinery at mines, reduction, works, refineries, manufacturing plants, sawmills. foundries, waterworks, steamships and. railroads (including railroad concessions to the extent of 3973,833:48}--see note ........................ S2S4.687.334.i8 Less rpierve for depreciation......................................... ................................................ 140.842.533.87 143.844.820.41 Patents.,................................................................................................... Investments: Securities of subsidiaries not consolidated--see notes C and F... Other security investments---see note F._....................... ............ . Indebtedness of subsidiaries not consolidated--not current.... 13,470,172.39 13,707,103.91 752.404.73 29.993.681.08 $472,192,128.08 CASH; DEPOSITED w it h TRUSTEES--see note J; Amount deposited December 30th, 1936. equivalent to 20^ of estimated con solidated pet income for,1936, payable as part of sinking fund for discharge of Anacd^ida Copper Mining Company 4!^% Sinking Fund Debentures due 1930.. Amount deposited December 10th, 1930 for holders of Chile Copper Company Twenty Year Debentures due 1947 called on December 1st, 1936 for re- d'emptjjop January 1st, 1937, including amount required for payment of pre mium ijtpd interest--per contra,..,..,...... ............................................... .......................... Amount held in sinking fund for Butte, Anaconda St Pacific Railway Company First Mortgage 5% Sinking Fuad Gold Bonds due 1944............................................ $ 3,190,129.00 9,524,950.00 7.S13.il 12,728.992.21 DEFERRED CHARGES: Stripping ;ind development--........................................................................................... Prepaid Expenses-................................................................................................................ .. Deferred expenses.............. ................................................................................................... DispofiihU premium and expense on bonds and debentures--see note J................. .. $ 7,378,330.13 261.022.99 323,738.05 3.204,387.21 11,167,696.38 CURRENT AND OTHER ASSETS: Current assets: Supplies on hand--see note Z page IS............................................................ .......... $ 12,997,040.65 Metals and manufactured products: la process-r-see note D page IS._.............................................................................. Finished---see: note D page 13..... ........................... ............... 6,003,386.19 33,773,338.81 Accounts and. notes receivable--trade, leas reserve.................... ............................. 10,357,903.57 Indebtedness of subsidiaries not consolidated--current........................................... 865,024.26 Marketable securities--at cost (market value $1,206,159,35)--.......................... 1,387,495. Cash......................... ............................. ............................... ................. ............................... 16,282,190.76 82,268,379.93 Other suets: Iastjhlitbedt house and land sake and other accounts receivable, less reserve-- Advances to sundry mining companies, including advances on ores, less reserve- Ore produced during development period not being currently treated during period of curtailed operations ' -see note ......-........................... ............... - Cupriferous material held /or future treatment--see note L Notes receivable of Inspiration Consolidated Copper Company and interest accrued thereon secured by First Mortgage Bonds of that company in the principal amountof $7,643,000 (being total amount of said bonds issued)------- 932,959.99 305,598.25 1.390,647.92 3.151,282.25 7,864,005.00 13,664.493.41 95.933.073.34 $592,021,890.01 See explanatory notes, pages 13 and 14. 10 PNYC 00010086 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 1936 LIABILITIES CAPITAL STOCK- of Anaconda Copper Mining Company: Authorized -- I2.ouo.ooo shares or the par value of 350.00 each I>'ue^._...... ............................................. Held :n treasury or through subsidiaries .. . , Outstanding................................................. ................................. S.,919.086 shares 244.748 shares '<.674.333 shares S4A3.954.A00.orj U.ll7.4'XI'X) CAPITAL STOCK AND SURPLUS of subsidiary companies owned by minority interest. 4.54;).7n.6..*s BONDS ANT) NOTES OUTSTANDING: Anaconda Copper Mining Company 41-2r^ Sinking Fund Debentures due 1950--see note J.............. Chile Exploration Company--Serial Notes--payable to banks, due December 10th. 1938 to De cember loth. 1941. interest to 31 z^c (guaranteed as to both principal and interest by Ana conda Copper Mining Company).......................................... ........................................................................ Butte. Anaconda & Pacific.Railway Company First Mortgage 5^ Sinking Fund Gold Bonds, due 1944 'guaranteed as to both principal and interest by Anaconda Copper Mining Company) see note J.................................................... .............................. .....................................................................i........... *51.371.000.00 23.000.000.00 1.498.000.00 76.389.000 00 CHILE COPPER COMPANY 5% GOLD DEBENTURES due 1947--called for redemp tion January 1st. 1937--see note J--per contra: Not presented for redemption at December 31st, 1938........................................................................... Premium and interest thereon.................................... ....................................................... 8 9.077.500.00 447.450.00 9.524.930.00 RESERVES: For repairs, renewals and replacements.................. For workmen's compensation insurance, etc----- --For contingencies....................................................... $ 338.802.78 638.818.1S 273.000.00 1.252.613.94 CURRENT LIABILITIES: Chile Exploration Company--Serial Notes--payable to banks, due December 10th, 1937 (guar anteed as to both principal and interest by Anaconda Copper Mining Company)........._................... 3 2,000,000.00 Accounts payable--trade Wages payable......... . 6.523.827.43 1,302,040.23 Accrued taxes............ Accrued interest------- 4,584,115.48 671.433.41 Other accnied liabilities--...-......................-............................................ ............................................ ............. 192,707.04 Other account* payable------------------------ -......................................................................................................... 163,951.46 15,442,097.08 DEFERRED CREDITS TO LNCOME.,,,, SURPLUS See explanatory notes, page* 13 and 14. 11 213,820.74 50.953,796.87 8592,021.890.01 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Income Account--Year Ended December 31st, 1936 Gross sales aod Earnings.................................................................................................... _ Cost of Sales--operating expenses, development, maintenance and repairs, administrative, selling and general expeoses.and taxes except income taxes--sales to the extent of current production being applied at current cost ............................................... Income from, operations, of mining, smelting, refining and manufacturing plants.................................... Other Income--Dividends from subsidiaries not consolidated--ee note D page 14.............................. . --Other dividends and interest--see note E page 14 ................................. --Miscellaneous Income........ ........ . -Profit on sale of capital assets... ............................................... Sl60.SSi.734.lJ li9.SU.064 67 i 31.071,669.48' i 1.564.197. u 5oS.iol.V6 196,759.64 7S.540.S9 Total Income.....,..,-.............. ,,..................................... ........................................................................................... Interest on hoodie, debentures and serial notes................................................................................................... Expenses pertaining.to non-operating units, including expenses at Cananea during strike period............ Dated states and Foreign Income Taxes--estimated (including 36,436.71 estimated surtax on undistributed income).. Discount, premium and expense on bonds and debentures retired through sinking fund operations.. $ 33,457.313 39 $ 3,818.414.48 4,420.080.31 4.973.917.76 286.970.73 9.501.381.48 Provision for depreciation and obsolescence........................................ ............................... ............................. Provision for depletion of coal mines, timber lands, phosphate deposits and clay lands (without deduction' for depletion of metal mines).,.................................................................................................... Discount and expense on bonds and debentures-.............................................................................................. 3 43,935,936.91 $ 7,343,374.1$ 83,488.43 388.il0.02 Netlnoome, witbodf deduction for depletion of metal mines............... ................................................. Minority share of income..... ................................................................................................................... 3 15,938.864.48 77.034.69 Consolidated Met Incomje, without deduction for depletion of metal mines............................ ............ i 13.881.329 59 See explanatory notes, page H. Consolidated Surplus Account--Year Ended December 31st, 1936 Surplus, December 31st, 1933............................................................................................................................... .. 48,233.924.09 Minority Interest.-- ............. ...................................................................................................... .................. 72.273.25 48,163,630.64 13.881.849 59 NOTES TO CONSOLIDATED BALANCE SHEET-DECEMBER a 1s t , 1936 NOTE .^PRINCIPLES APPLYING IN CONSOLIDATION' (a->fler to pr*ot the status the Ciapnov',* >nt^Up subsidiaries where toe interest wned Mircrtlv *r through n,k.. .. tV usetJ BdIi'l>.Ities of said jiiosidiiriM. a* tor? appear upon the bo,ks of j*,d .ubs.d^es '3 `,P O0" ''l'"'* ,;'"1"-1 utrt tfaixnr* nht. ftcept itM.U.ut .mi'i!; iubs.dianes mure wan T3-r Awa*d. the operation.ofVh */***!L.eH1 -iiir-J ey-un- Av-menu.i^lhe Coniolidated Bai.nre ihwt. The. ,ntere,t of Binontv J "* .* pC*r*t,,DVl! * ., -<.;-:.i4tr.J. .*show0.on rneCWristedBaiaaceibeet,' .Vaunts of suBs.d.er.e* ,o e Cmpiny-V^ Z 'VX*P***"*TM *'='" *r* r-,r.*.:..;-lafeil ami the uiarei '>'ned -n tnese rdbiirfiamsar* earned, u javestaeou so the C'hviiidsted 8*tne VC, - fKth* 'v't tte3ft -rpofat-ns .arpi'cy -a w-pivo i Ji ' a anority of the voting stock ;s o*oed directly By the Company or through other "curporauoos ia w'hich the tjck iotere NOTE B-rBALANCE? IN FOREIGN CURRENCIES rfn.e->r-~r-.< e^uivaieot *0:.Mi8.-M)fl.9<t n Carted rutes '-urrracy: ^re inverted >n.to <W!*m { rate, n<* a he .1'iropto piaat of Anaconda-American Brass. Ltd. are earned-a less of rate* fdrreijt lit. December d,I>;t.:i9U6. i. ' ?sr acreiacrepuoces cp yerin? loreien sajes of copper discounted-.in the o received ud ;b:/'for eicbaa^'romm'iufeeat* most !bf *oich n NOTE: C--EQUITY OF COMPANY IN CNCONSOLIDATED SCBSIDLAIUES The *du!ty>f?.he Company ia the assets of the p'rinr!ipat uDcoBsolidated Subsidiaries i'An*rood: FTfre and Cabie Company Afouatmn C-t? Cipher C moan Uajker'Mibin? Oimpeny: and the four uncoDtohdatod subsidiaries referredto ia Note A had decrewed at December 31st. [aw. >o"tae *t5h?l i*?*"L Coasobctaud BsJ.ijn^Sth^deist thriabsuatiootnb* eatnad^psu^rsptleuds sfodrfususelmd edoeciireuaws.hown by the books of sard udeionsoi.dated >uD,i-i.a NOTE D-SNVENTORIES OF METALS AND MAI Tbe.. .. IdfW,lS,pif,^,.s,...:.:e...d..n..C...e..u..t..^*tWij:n:d, :"< ...------ rous metenaa. and srncaqd lead ores and Cooreatfafes, while in- trratmentlat reduction niaou , t^heelt^irp&roadtiuccjitpioita'ifoJf hblliissUterr/^cpo'pjwpe^rii,eeleleccttyrpoliytxicipc^oppppeerrl.'jtfiertllicithc'.aiSd lead. bullion, are classified u metail ip process. Blister and electrolytic ^iDoer an nb'c!i!;eid:i!bdib`},n.''khdl'0.tiidr^rbd,ucti^id etuis produced ia coaoecuos. therewith or Userffrom. iBcludin* stock ia works at fabricAtf&f- pluau areV-ai' Inventory ia ptwess i* calculated at "aormaJ .cost'* wbiea is [beiow the e<juivieat of current tnafiltet for metallic cooteot of such iav'entorie*. Fiaishf^aiet^iaD^tmf|ti^aiD')huk/a'-r*tbuyre1ediipt<td^'d,wuc'boit.foca!w'aa1o'd at i-r eolh-which. are earned.at .market quotations or U'. have bes -- 1.inr;}--:-->*n,l*r SWt^i9i:at the mventdry prirt of December Stt. 1935 '*u, ........ ..........."e"i'tJher a.;tt!!PprprioiiMddu-cititlipoEni Ijbfdosriuij.t'jemjrj for year* fplipwngacrord|df ;tij!!pkrjod-m which accurtblated and 'b> as to that part ft1 to'Uly inventory oa band at!1 . her 31st. 1333 at production costs',duno* the year ended December iist., m Invent 11 ' e with the I " ' were below market price* for the rarioiis metals and products at December 31st. 193. See Note C Ijto'. potisalidated tacome Account. VOTE -.m>FUS OX B.C.-D S'lRo'ee l ^a. ` - o4 *ei.^e.ect r*rts u well M current supply items, are carried at coeC N ~T' w-rMTv'**-- ,, 3 Iuf -e--i awe - n i ip ^i iidteneVand other serurity ioyestmeat* are earned at etwt or l*e. euch cost beinf cash cost, nr in the ^ase tr*-ur i, isjed a escbacre f r property transferred by. the Company or a conablidated subsidiary. the cost of such property to the consolidated croup after !>>., > iienm-'.aiirin '.ri 'is'e -'f i.-ansfer, aou :]ii not iodtcau current values. Other security investments include 333,000 sham of Inspiration Consolidated C. ;o<poper ' tywe'al - NOTE G--PROPERTY, PLANT "AND EQCIPMENT-c-BASIS OF VALEATloy - 1'rt. i.wrv. i a. t and naupsem vf tur '.-..mpany are earned at caab coat or in the ease of physical peopertie* acquired for stock of th Company at par - j, k ii i Cb) Proper*/ P'ant and Equipment b( subsidianes s tbe sccaunts of which art included is this Coosolidated Balance Sheet) are carried at the difference rip 11:vest iarm r>sj:i mi ue mrwr'.j vsi subsidiary las mt forth bebw^. apd i.t) all .net assets 'other thaa property, plant and equipment) of such -,r.; i-.i ar~..jnrj were or it included ia the Coaiohdated Baiaac* Sheet of tbe Company and subsidiaries, to which is added the c-.-t '!.-- S.r-- v . sit. w. 11cri in. esiBiea: aasis is tbe cosh cost to tbe consolidated croup of the stock of the respective subsidiary owned by such ?. :;i. . r seLr.s was a .rm' ri- inr .p :or cash, or where the same *a* acquired by the consolidated froup for stock of the Company, the par -a,.- < Mo c k of Ue ( ompany so issued etcept as to properties of Andes Copper .\fioina Company and naatiafo Miniaf Company acquired by tud company-* i e ri >m f r a a i a a wbicopropeitiesiare1 inclddedia tbe Consolidated Balance sheet at the onpinai par value of the sh*Ff r ~ ,n- i *r r luH t.'ier-tnr i e . |<i scare), amoununf in the caw of Andes Copper Mima* Company to I.OOO.OCK) sham and is the case .*f Santi.w. M - ->< i. .: * siarn :> f tar.' v. kof Andes Copper Minin* Company issued for property 903.030 sham wnc acquired by the Company *rt -j i 'lein'tran we rfiuit oar,aiue :::errdt and of said stock of Santiato Minin* Company 35.iSI shares were acquired iia 1930) by the Company *( > .w the orificni par value thereof. The U.431 shares of Santiago Minin* ComwiBy_por to their acqytsitmB by tbe Company were earned > tne . -..-i : .-sen, staiemeBts as o u c s u s 'Iib* nii'aortty ioterast at par from the date wnea Saatuico Mioie* Company tu first iocluded ia such statements. \ - acquisition of'wcbl'inam by the Company in'l930itbe difference of. *1.5ISi5tt5.3* between the par value thereof and the cost of such shares to the * - m i itj/rrei frc Ri suoomy intatset to ooaabiidated surplus. The total aosount credited to consolidated surplus on account of the difference b. - pay vaiue'ofutbe above meatsoned sliatwa of Andes Coppse MiaiA* Company..and Sanua*n Minin* Company and cost thereof to the Company ar.-i ., - i .vweuMl*'. 5 3* fc) it 6* o ta* orurt.iw f uie "'moany 'mnautMtly aippliad to its own fUeoperties and those of submdiarM the stocks of which hae bees acquired an.i ->- couowiofiwbicihrsreiiiincludediiiB: the Consolidated Bsiance Sheet, to carry Property. Plant and Equipment as described above. Pursuant to the of tv I. -'s'^i i r*a*ury Departmeat, valuations as of March 1st., 1919 of minm* properties then owned have bees recorded on the borne.* f-- nciwilbf.compcitiaeKhe ameuet allowahla as a dedactioB for "depietioa' ia amvui* at tattbla iaenma under Uw Federal income tax laws, but u-.e* .......... hRvej;sot beea- incuded tbe pubhshsd accounts of the Company. -*.e r spany -as -cLWitssuy followed tbs pnetsea of not dsd'n^tia* ia any of its published accounts, any amount for depletion on account of aeub m.-v-i. a&d uo such daductson ts usdsded ua any of the fthahrial stnteoeau submitted herewith. Depletion based * cce^ 'has in tbs'casa'of timber. eoeL cku And pbo^iaate lands.' bees deducted hem Lneome is.the financial statements' submitted berewti *n-i t tu l'*'m lie ccw Baas snows n the Cossolidsted:Balance sheet (d) Tbe i dues1 of Frepwty* Plaat aod Equipment are ahn'wni an-tiWibasal' above set forth and, do, not'indicate current values which could be established - n:v - . -ftspprwliri" 13 NOTE a--ORES PRODUCED DURING DEVELOPMENT PERIOD Ore* produced; during development period not being currently treated m carried it cost of extraction which i* lew than conjervitmly estimated rtaliiabi* rilue NOTE r-CUPRIFEROCS MATERIAL, Cupriferous material held for future treatment is valued at L'pited Stiles Treasury Departmeat valuation for income tas purposes, which is less than the v*jUe >f the .recoverable metakcenUiaedAhereic it,current met* price* after deducting treatment costs, .both as estimated by metaihirguu of the Company. NOTE J--SINKING FUND REQUIREMENTS Under the unsing fund prnv^ioiu of thejhaeBtufeproviding for the issue of the Sinking Fund Debentures of Anaconda Copper Minin* Company due IBiO the;,i..>fmP4oy is o&uaned .n August !3th, 1.939 and f t tl be obligated o.o August 13th of each year thereafter, to and including August 15th 19*9 to oav to the Trustee, for tne purposes of .the tioking fund for the retirement of debentures.' an amount equal to 11.000.000 pius iO^ of the consolidated net income of the . Company .as iefio'eu in the indenture.- for the period of teke months ended do the nett preceding December Slst or id lieu of such payment `he f'omoiny piy deii vjr to tnei Trustee! deocM-ures to. be received by the Truitee .a lieu of is amount of cash equal to the purchase'price of such debentures paid by '-e Company;^ me 4cti.uilit.ipn thereof. t,ader these provmooi there were deposited with the Trustee on August 13th. 1939 debentures of tae par value of 93 |-) ,o in fuiJ satisfaction .ii the.nckice TuBd,pay.oent..<lue on that date. There Fas .alsono.December 30th. i939 set.aside out of:the profits of. the.veer,-1939 and de posited .a trust with Guaranty Trust Company of New tor* 93,I99,li. being an amount equivalent to of the estimated consolidated net income of the V-ar 15th' fg^f^*** Wta"'3 U* of debenturem/or cancellation id the sinking fund dr to the ettest not so used to 'be pei'd into the,sinking' fund an August On December 1st. 1939 the outstanding Chile Copper .Company 3^ Debenture* were called for redemption.' Ob December 10th. 193* Chile Copper Company to-make full payment of principal. premium and1 interest due January 1st. 193Ton debentures presented-el any -time after December 10th. Of the'total um.mnt 'debenture* covered by the call for redemption. *19.989.300 face value ere presented for redemption before January 1st. 193?. 'The' remaining debentures liOjtUdCHMpf1 Seipai'amoubtii'we^eryUred isiccwdance. with thepro.yj.ubai of the pail forredemptio.O aa of January 1st, 1937. The amoliatof: tS^l.931.,0'9 included --* iNpreopumj'end'les^enwiios' bonds and debentures in:i^,peet'of:i*idl;l9:07",5OO,princtpi*nduBt;of debentures Ui be written od as of January tit. [sar. sir fund pro'vT'sioa'of tte'iodentuw .providing fbf the-issueof First'Mortgage JTc Sinking Fund'Bondi 6t Butte. Anaconda APactfic Raiiwe^Coeioahv cash'sinking ftind requiremehts foriSST will amount to 9103,000. . ay. uoapany NOTE K--SURPLUS Inch cryditiof lil^Oflid- 'I .arising; f?om inclusion in Consolidated Balance sheet of aaeeu aod .liabilities of .Andes Copper lionets '.books, i.Frt'puie'&lijj; hi'#'"credit ,of 91.319,393.99 arising frqm acquisition m I9S0 of minority shares in iaotugo r..___jBd carried 'at ::tieir pah' yalbe.; Itaiid amount represeating the excetr Of 'ipar value over acquisition cost. - c;: a cretin of :idf !^He;;pi^>c*e<i*['.of the issue of '^,108.298.34 shares of "Stock of Company over the par value thereof and id) a'charge -of d expense'00 issuanck. and premium on redempuon of bonds, redeemed through fundi obtained by issuance of Keck 'above rt!utc';G as to practice:regarding depletion. : NOTES TO CONSOLIDATED INCOME ACCOUNT--YEAit ENDED DECEMBER 31s t , 1936 NOTE A--BASIS ; Principle* applyrng to the Coaeoiidated Income .Account are the same as. set-forth in Note A to the Consolidated Balance sheet. The equity of the Company in the income of fouritsm^ 'uecbnaoUdktejd 'subsidiaries more than '3^j_o^neih the operations of which are not an iinntegral 'part of-the operation* of the consolidated group, amounted for the year ended .December Slst. 1939 to *18.939.17. Sale* of metal*':snd[imahuf*ctured prHiiueti'.arei included in income as billed and delivered customers. Undelivered sake1 contracts and purchase commitment* are not given effect to ut the incom -ccounL NOTE B--INTER-COMPANY SALES AND PROFITS Sale*'to con*ehdatbd!;Siibeidiaiiutiiha'v been eliminated and the.sales shown to the Consolidated Income Account include only sale* to olixn than the Company and consolidated subsidiaries. | InU*-company profits.' where these are material. have been eliminated in the Consolidated Income Account. The priadpai inter-company Lraasaetioss are isles of copper and other metals to manufacturingisijbsidiane*. - The iaventone* of manufacturing subsidiaries include, solar as is ascertainable, no intercompany profit. Aay inter-company .profits resulting from transection* is conaectioa with purchase* asd tala* of suppiia* and furnishing of services and is connection with refining and smelUagVoJbere^bn* krr ndtjmatarikl ie .amount enci|:ha*e not been elimiaated. NOTE. C--COST OF SALES The general practice of inventory valuation followed in the year ended December 3.1st. 1939 * Is ascertaining edoaoiidated income during the year 19^9. the Consolidated Income Account was stated on the basis of lart*ia firet-out. that i*. applying current cosi lof metal11brodiiction tOaale* is mNo U Al to the attest of current production and sale* in excess of current production were earned in the Cvtuoinuied aacelSbeeLjt1!;!"'." 1' Income Account at the inventory cost, such co*t being the same as the inventory coat used for Balance Sheet purpose*. (See Note D ts Consoiidatea Bel> NOTE; D--DIVIDENDS AND' EARNINGS ,OP PRINCIPAL UNC0NS0UDATED SUBSIDIARIES la the year IS36 tlie'j^mfyi'of ;ih*'Compihyl|ia the combiaed act current earnings of the priannel oacoBsofriated snhmdiarias (Anaconda Wire and Cable Company. Mouatain Cjty!=Copper Company tad W'aiksr Mining Company) and the four unconeodoamd wbrntyaha* referted to in Note A amounted to 9l.999,4l9.*3. Out of that equity.taera was paid to the Company the amount of SI.9M.197.14 in dividends by aaid oaconsolidatad subsidiaries. There i* included ra laedaie ;Account undw'the item "Other IXvideads and Interest" interest on notes of Inspiration Consolidated Copper Company, in the amount tbi.Jiknuaqr:lstliiiili99.'l'|i'.: 'of 9389.519.15 ifor .itbeiyear leaded -Decemaef 31st, IWf. Such interest has been pud during the yens a* wail a* 9339.Mft.08 on account of interest acmued prior POGSON, PELOUBET & CO, PERCYW. POGSON lAC'BXCE E. PELOUBET LEWIS Mv S'ORTQST SIDNEY. W. PELOUBET tiOW'ARDL-GUYETT' NEW YORK -.25 BBOADW<y e l Pa s o , t e x a s - mil l s b l d g . .VCENT5 Lo n d o n ' * k f ..mp . c h a t t e r rs. vtcHoii, s u n -d e l l * co. j6 vV.U-SflOOt, E. C. i. PARTS - TYRQL'AND. YOCNr,?. KEMP fc CO. & ROE-DC HELpeS BERLIN - TX.-*QCASO, YaCNCS. ENC?' k C.O. VNTER d e n l in d e n 56 EGYPT,- MEW*T,.lRrOSON * NEWBY ALEXANDRIA AND CAIRO C\Lg A001ESS "'.ElirrffEO SV# VQK To the Board of Directors, Anaconda Copper Mining Company, 23 Broadway, New York, S'. Y. We have made an examination of the Consolidated Balance Sheet as of December 3Ut 1936, of Anaconda Copper Mining Company and of the other corporations whose accounts are consolidated with its1 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 1936. 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 1936, but we did not make a detailed audit of the trans actions. 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 3lst, 1930 and the Combined results of their operations for the calendar year 1936. POGSON, PELOUBET & CO., Certified Public Accountants. New York, March 13th, 1937. 15 PNYC 00010092 *