Document OzggBMydmpvgGeyeKg5y0Q03X

Saint Joseph Lead Company Annual Report -- 1959 America's Corporate Foundation; 1959; ProQuest Historical Annual Reports Pg- OJ >*i , < JYihety-sixlh ,i * Annual Report : to the fl , . 1 ' "r'y'l ; ./y.F:/ Stockholders " , i it ***$% it* * ,s ^ - ** t `/ 'k"yt y/.;c' i-ViV..''..;", . . <-. . ....mm..mm imiimp.iiim.iwi...........in....mmmmmm !<** v,,dV';,V- r'\v fvlA , '5 V . f; ' *'.r ^ < */.> '\,i, ,i'V* .*/ r > 'v h ' V J^jj| fiT , :r,,i :`-V''A,.1 .\.-V ,* < . >' 'J| '`js ''fj -c'V.. ' .' ' " vI r . '.r,A,,i-J 'S*V-t * 4 * ' i.y-t ' . :l',*-r- .S' V- .-t t A'VVV/ 1 ! " .. ,, r ; ' * v/'.A i-vt"* ; - *' v !;*. a, ... a , - k s:.s't , j i' ' ,*v , ' . i ... , , i ' , ^'' '* *'" 'C' & kj . . * '?,p:* ; / ^ k't i ^ ' /. S' * , ` . li fp f' . A ,'A >f', w - X- . 't,-' , -%/eA;;'v . \ I . ; . ".*? - -.V ff. jt/l'f' * ' .. J.; , , .. . - .. 1 / 'If/'-' V'A*'v11 tied:'.-I'`'7'A-':' /? 'v;*! A; 1 "-A . ' j'. ' [y. \ "h$jFA'/ .'1'..' A; ^ ! /' >. . A !A'` L' ' A'- ' _*:',*V;?^7r,:.v r*vr' y;? , av '"' ,v .v..-.I> '`T',,y-, - 1 , ,' ,, :? i ; j, vyfrc.'^x v.;t. , ;9 A *. <>'*. y' >; i, ' %j , , ,* 1 ` ' ,, ' ' ' , ''Y&V rf*$' , '! /-a 1 ,7-'-. ` . `'''V11 -v' >. ' " '"V-^rV'VAiA 11 a/ / >. ' .' ( ^oVLA* ' ' Jj" 1 St $ *?f**<l|* * ' *', * " h*i * Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ORGANIZATION CHANGES The Board of Trusteec announced the follow ihr organization ehanjzes eiTeeli\e Feinuar\ 1(3. I960: I fa\ in<r icaehed normal i elii c'ment a<re. the following insinua tions were accepted: AMMsrw Fj.i:t< nr:R. President Gi.orgi: I. BlUGf)i:\. f ice President Bfak J. Mt:c HIN. V ice Piesident Fi:li\ F. WoRMhrk. I ice President Mi. Flet< hei u,e elected (.'hailman of the Board of Trustees, an olhee which had riot been filled since the rctilenient of the late Mr. Clinton H. Crane. Fianeis Camel on. Vice President >inee Max. 1916. n.n elected President. Lawraon Ri<z"s. II! and Bohert H. Hainsex. Assistant \ ice Presi dents. weie elected Vice Presidents. Mr. Biiirden was appointed Financial Consultant and Mi. Meehin. South Amei lean Consultant. Proxies for Annua! Meeting This Repoi t is sent to Sloejvhohhu s of the Compam in ad\ a nee of the .solicitation h\ the Board of Tiustees of proxies for tin* Annual Meeting of Stockholders t,> ite held on Max 9. 1960 at IIA.M. : Proxies will he solic ited c ommenein<r on April B. I960. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. TABLE OF CONTENTS Trustees and Officers....................................................................... Highlights...................................... ................................................ Lead and Zinc Markets . . . ........................................... Earnings........................ .... . . .... Taxes on Income............................. . ....................................... Dividends .... .... . . . .... Long-Term Debt . ............................. ....................................... Working Capital................................................ ........................ Cash and Marketable Securities . ..................................................... Capital Expenditures....................................................................... Southeast Missouri .... . ........................................... Edwards-Balmat, New York . . .... . . ................... Josephtown, Pennsylvania.................................................................. Mine La Motte Corporation . . ............................. ,... Employee Relations: Employment and Payrolls . . ...................................... Pension Program................... . . ................... Deferred Profit Sharing Plan.................................................... Stock Option Incentive Plan.................................................... Progress in New Areas: Viburnum Lead Project .............................................................. Pea Ridge Iron Project . , ...................................... . North Africa ....................................................................................... Oil Explorations: Crockett County, Texas.............................................................. Southwest Louisiana................................................................... Canada--Brunswick Mining and Smelting Corporation, Limited . . Argentina: Cia. Minera Aguilar, S. A. . ..................................................... Sulfacid, S. A................................................................................ Cia. Metalurgica Austral-Aigentina, S. A....................... .. Peru--Cia. Minerale.s Santander, Inc.................. ........................ Anti-Trust Suit................................................................................. Annual Meeting .................................................................................. Annual Report to Employees . . . .................................. Jn Memoriam ...... .................................................... Stockholders...................................................................................... Conclusion...................................... .................................................... Lead and Zinc Statistics....................................................................... Financial Statements and Accountants' Reports.................................. Page 3 4 5 5 6 6 6 6 7 7 7' 3 8 8 B 8 8 9 9 9 10 10 10 10 10 II II II 11 12 12 12 12 13-14 15-23 General Counsel DhBhVOISE, PUMPTON & McLtAN 20 Exchange Place New York 5, N. Y. Auditors Haskins & Sells Two Broadway New York 4, N. Y. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. '{JOSEPH, LEAb; COMPANY INCORPORATED MARCH 25, 1864, UNDER THE LAWS OF THE STATE OF NEW YORK exECtfwroFHcr/- 250 ,PARK AVENUE , 'NIW YORK^N^Y^j Irwin H. Cornell . . Andrew Fletcher . C. Merrill Chapin. Jr. Arthur M. Anderson George l. Brigden . . H. DeWitt Smith . . Francis Cameron . . Bernard F, Uesloge . Hu Whitney Debevoisi: James W. McAfee . . David R. Calhoun . , Ch arles R. Inge . , Joseph PijrsGLove, Jr. BOARD OF TRUSTEES Year Elected ....................Vice President, Cornell Iron Works. New York, N. Y. 1913 ..................................................................................... ..... Chairman 1921 ............................. .................................................. Vice President 1933 . , . . Member of the, l)ilectors Advisory Council of Morgan Guaranty Trust Company of New York 1944 .............................. Financial Consultant. St. Joseph Lead Company 1945 ............................................. Consulting Engineer, New York, N. Y. 1948 ...........................................................................................President 1953 ....................Vice President, Minerva Oil Co., St, Louis, Missouri .........................Dehevoise, Plimpton & McLean. New York, N. Y. 1953 1954 President. Union Electric Company of Missouri, St. Louis, Missouri 1954 ................................... Piesidenl, St, Louis Union Trust Company 1957 . ...... Vice Pi esklenl and Sales Manager 1958 . . . . I ice President, Consolidation Coal Co., Pittsburgh. Pa. 1959 C. Merrill Chapin. Jr. FrancisCamf.ron EXECUTIVE COMMITTEE Andrew Fletcher. Chairman Irwin H. Cornell IT. DeWitt Smith EXECUTIVE OFFICERS Andrew Fletcher, Chairman Francis Cameron. President C. Merrill Chapin. Jr.. Vice President James G. Colvin, Treasurer Charles R. Ince, Vice President Donold K. Lourie, Secretary and Sales Manager William L. Murphy, Jr.,Comptroller Robert H. Ramsey, Vice President William J. Elliott, Assistant Secretary Lavvrason Riggs HI, Vice President Edward F. IVIerrell, Assistant Treasurer Manager of Explorations Norman H. Donald, Jr. United States Division Managers Mines Elmer A. Jones, Southeast Missouri Marshall G. Jones, EcEvarcIs-Balniat. N. Y, Smelters John G. Wehn, Josephtown, Pennsylvania Jchin W. Sherman, Herculaneum, Missouri Consultants George I. Brigden, Financial William T. Isbell, Reseat ch Rene J. Mechin, South American Cia. Minera Aguilar, S. A,, Argentina Donald B. McGilyka, President 3 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. [JOSEPH LEAD COMPANY 1959 1958 Sales of metals, etc................................ Federal income taxes......................... Net earnings (after taxes) . , , . Dividends paid . . . . . . . . Shares of capital stock outstanding . . $86,179,208 $1,518,318 $6,263,076 $2,716,222 2,716,222 Per share on capital stock: Taxes on income ................................................ Net earnings ..................................................... $0.56 $2.30 Dividends.................... .... . . ' . . . $1.00 Current assets . . . . . .... . . . . $50,098,983 Current liabilities . . . .......................... $ 7,456,767 Net current assets ......... $42,642,216 Ratio of current assets to current liabilities . 6.72 to 1 Long-term debt ........ $27,650,000 Cash.............................................. $3,759,785 Short-term marketable securities . . $18,552,000 Capital expenditures......................... $8,742,755 Number of employees ..... . 4,263 Number of stockholders.................... Stockholders investment in the business: Total .......... Per share ......... 11,812 $79,064,194 $29.11 $75,615,147 $699,564 $3,986,880 $2,716,222 2,716,222 $0.26 $1.47 $1.00 $45,791,438 $ 5,786,183 $40,005,255 7.91 to 1 $23,500,000 $3,898,721 $10,785,000 $11,485,710 4,581 13,315 $75,517,340 $27.80 4 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 96th Annua/ Report ST. JOSEPH LEAD COMPANY TO THE STOCKHOLDERS: Lead and Zinc Markets * Increased demand for lead and zinc in the United States during 1959 coupled with restrictions on im ports due to the imposition of quotas, enabled smelt ers to reduce their stocks of both metals and resulted in an improvement of prices over the previous year's averages. Lead moved to an average price for the year of 12.211$ per pound against 12.109$ in 1958, which is admittedly not a marked improvement but nevertheless in the right direction. Zinc, on the other hand, registered a substantial gain of over 1$ a pound to an average of 11.448$ (10.309$ in 1958), reflect ing not only the better situation here, but a rise of nearly 16 on the London Metal Exchange. After a full year's operation under the quota system, it appeared that while the quota was not restrictive enough in the case of lead it may be with respect to zinc, particularly if consumption of both metals in the coming year should develop as anticipated from current business forecasts. Unfortunately, the gain in the prices of the two metals did not improve the lot of the domestic miner. Lead production was lower than 1958 which, it may be recalled, was the lowest since the turn of the cen tury, and zinc showed only a modest gain of less than 5% over the twenty-five year low of the previous year. In January, 1960, the Tariff Commission re viewed the quota system at the request of a Senate Committee. A strong case was made for closing the loopholes on manufactured items that threatened to undermine the effectiveness of the quotas. The pos sibility also arose of a recommendation for higher tariffs in lieu of quota restrictions, the inflexibility of which has been of concein to both consumers and the smelting industry. Lender the stimulus of population growth and new applications, the consumption of lead and zinc will continue to increase here and abroad, possibly at a higher rate abroad due to more rapidly expanding markets. While the United States is no longer the principal producer of lead and zinc, it possesses large latent reserves which can be developed and brought into operation if adequate protection is provided the domestic mining industry against lower cost foreign production. Earnings Consolidated net earnings were $6,263,076 for the year 1959 and equaled $2.30 per share, in compari son with $3,986,880, equaling $1.47 per share for 1958. The improvement shown in earnings was due to increased metal sales and higher metal prices. Divi dends from foreign investments were $506,000 less than in 1958. Lead sales from Company production rose in 1959 from 87,562 tons to 113,778 tons, an increase of 26,216 tons, and sales of zinc content of metal and oxide increased from 127,630 tons to 135,144 tons, an increase of 7,514 tons. This gain in sales enabled us to reduce inventories of lead and zinc by 7,549 tons and 9,485 tons respectively. In 1959, approximately 58% of gross earnings of the Company came from zinc and 42% from lead, in comparison with 67% for zinc and 33% for lead in 1958. Comparative earnings for each of the last ten years are shown below: Ten-tear Earnings---1950-1959 Year 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 ..................... .... ..................... ..................... ..................... ..................... ..... . . .\ ..................... .... Consolidated Net Earnings $12,211,615 13.577.237 9.638.435 6,300.342 7,523.503 12,729,820 10,291.357 8,026.273 3,986.880 6.263,076 After Federal Income Taxes of $ 7.761,438 13,454,339 5,585.261 4,283,768 4,545.190 6.385,243 5.194,085 3.884,706 699.564 1,518,318 5 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Taxes on Income The provision for Federal income taxes was $1,518, 318, which is equivalent to $0.56 per share as com pared with $699,564 or $0.26 per share for the pre vious year. As indicated in the 1958 Annual Report, the Com pany has on file claims for refund of approximately $775,000 of Federal income taxes paid for the years 1949 through 1953, based on the ground that it was entitled in those years to deductions for percentage depletion on sales of metal produced from remilled tailings. These claims are not carried on the Com pany's books. The Internal Revenue Service has con ceded in principle the allowability of such deductions, but the amount refundable has not yet been deter mined. In any event, it is expected that the claimed refunds will be reduced by some $275,000 through the disallowance of other deductions for the years involved, principally for accelerated amortization of defense facilities. However, the full amount of dis allowed amortization will be deductible as deprecia tion in later years. Adequate provision has been made on the Com pany's books to cover possible liability for taxes for years subsequent to 1953. Dividends Quarterly dividends of 25$ per share were paid on the capital stock making the total $1.00 per share for the year, the same as in 1958. After payment of divi dends of $2,716,222, the amount of net earnings rein vested in the Company was $3,546,854, or 57% of the net earnings. These retained earnings were used for partial financing of the new Viburnum project and for other capital investments. On February 16, 1960, the Board of Trustees de clared a dividend of 25$ per share payable March 10, 1960 to stockholders of record February 26, 1960. The following is a record of cash dividend pay ments for the ten-year period through 1959 on the basis of 2,716,222 shares outstanding. This table gives effect to the stock dividends of 25% paid De cember 11, 1950 and the 10% paid June 10, 1952: 6 Dividends-- 1950-1959 Year Per Share 1950 . . . . . . 1951 . . . . . . 1952 . . . . . . 1953 . . . . . . 1954 . . . . . . 1955 . . . . . . 1956 . . . . . . 1957 . . . . . . 1958 . . . . . . 1959 . . . . . . $2.36 2.95 2.88 2.75 2.00 3.00 3.00 2.00 1.00 1.00 Amount $6,420,232 8,023,749 7,776,373 7,468,290 5,432,076 8,148,666 8,148,666 5.432,486 2,716,222 2.716,222 Long-Term Debt The long-term debt of the Company which at the end of 1958 stood at $23,500,000 was increased $5,000,000 on March 6, 1959 by taking down the balance of our $20,000,000 ten-year Term Loan with the banks. This was done to fix the interest rate on the additional borrowing at 4V*>% and to provide funds needed for the Josephtown, Viburnum and Pea Ridge projects. The $8,500,000 of 3% % Notes have been reduced $850,000 by the payment at the close of business December 31, 1959, of the first semi annual instalment of $425,000 and by the transfer to current liabilities of the $425,000 due July 1, 1960, thereby reducing the notes, due after one year, to $7,650,000. Under the $20,000,000 Term Loan, $7,000,000 of which is at 4% and $13,000,000 at 41/A%, the Com pany has agreed to repay $1,428,571 principal amount on January 15th and July 15th of each year commencing with January 15, 1962. The Loan Agreement requires the maintenance of not less than $20,000,000 in working capital and restricts the Company after December 31, 1957, from declaring cash dividends in excess of 75% of current earn ings, plus $6,000,000. At December 31, 1959, the working capital amounted to $42,642,216, and $8,255,023 of retained earnings was free from re striction. The long-term debt at December 31,1959 was $27,650,000. Working Capital Net working capital (cash resources, receivables and inventories minus current liabilities) increased $2,636,961 during the current year. Current assets at the year end were $50,098,983 which is 6.7 times Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the current liability of $7,456,767. A summary of the principal items comprising the changes during 1959 is as follows: Sources of Increase: Net earnings.................................... Long-term notes pa> able tobanks . S 6.263,076 5,000,000 Depletion, depreciation and abandonments................. 3.334,649 Decrease in deferred charges,etc. . 969,092 Total.................................... 315.566.817 Decreases due to: Cash dividends paid......................... 3 2,716.222 Capital expenditures............ 8.742,755 Investment in Brunswick Mining & Smelting Corporation Ltd. 5% Income Bonds................. 70.000 Reduction in 3%% Notes due after one year........................... Advances to Meramec Mining Company...................... 850.000 464,071 Investment in Compania Mineralcs Santander, Inc................... 30,000 Other investments andadvances . . 56.808 Total...................... 312,929^856 Net Increase in Working Capital During 1959 ................................................... S 2,636,961 Cash and Marketable Securities Cash and short-term marketable securities which were $14,683,721 at the beginning of the year, in creased to $22,311,785 at December 31, 1959. The increase was in part due to our having borrowed 85,000,000 from the banks in early 1959 and to the reduction in inventories during the year. Capital Expenditures in 1959 the Company invested $8,742,755 in con struction of new facilities and on improvement of plant and equipment as compared with $11,485,710 the previous year. Capital expenditures for the last ten years together with an estimate for the year 1960 are shown in the table below. Southeast Missouri Due to the buildup of excessive inventories, produc tion of lead was curtailed in Missouri. The work week was cut from five to four days on February 16. The live-day week was reinstated on August 6. Ore milled during 1959 totaled 5,290,638 tons as compared with 5,969,304 tons in 1958. The pig lead equivalent of the lead concentrates produced was 92,869 tons in comparison with 96,146 tons the previous year. Zinc concentrate production for the year was negligible. Pig lead production at the Herculaneum smelter was 91,742 tons in comparison with 86,035 tons in 1958. The two-furnace operation reinstated on May 1* 1958, continued throughout 1959. The zinc slag furnace at this plant was not operated during the cur rent year. Year Lead Belt 1950 . . 1951 . . 1952 , . 1953 . . 1954 . . 1955 . . 1956 . . 1957 . . 1958 . . 1959 . . I960 (Est. f 8 903,776 2.549,327 3,793,396 3,972,871 817,306 458,947 723.865 385,319 677,695 340.353 257.000 Comparative Capital Expenditures Viburnum -- ... -- S 82,678 1,540,804 6,874,363 3,170,000 Josephtoivn 1 Zinc Plant Power Plant S 177,071 564,768 1,768,048 720,665 208,499 1,769,847 2.171,031 2.185,953 423,990 721,355 -- '' L ' ' -1. --, 5 633,088 11,803,420 8,796,219 806,684 . -- ' Oil and Gas Edivards-Balmat Leases $929,617 685,128 90,896 94,475 99,938 1,445 6,000 233,000 3,250 -- 85,000 -.... S 92,804 -- 6,776 -- 239.503 43,752 --- Total S 2,010,464 3,799.223 5.652.340 4,880,815 LI 25,743 2.237,015 3,533,984 14,929,873 11,485,710 8,742,755 3.512,000 i Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Pig lead produced at Federal, Illinois under our toll contract with American Smelting and Refining Company was only 9,736 tons in 1959 as compared with 30,764 tons in 1958, because of the cancellation of the toll contract on May 15, 1959. Employee relations in St. Joe's Southeast Missouri plants remained harmonious throughout the year. Edwards-Balmat, New York The increase from a five-day to a six-day basis, which was placed in effect on January 5, continued until a strike on July 1, when the entire property was closed down. On November 2, settlement was reached and work was resumed on a six-day work week basis. Because of the strike, zinc concentrate production at this division decreased from 98,753 dry tons and lead concentrates from 979 tons in 1958 to 81,086 tons and 789 tons, respectively in 1959. As in previ ous years, all zinc concentrates produced at this divi sion were shipped to the Company's Josephtown smelter, and the lead concentrates to Herculaneum Josephtown, Pennsylvania The 44-hour week basis at our Josephtown smelter, which went into effect November 2,1958, continued until November 1, 1959, when the work week was increased to 48 hours. This caused production to in crease from 9,500 tons of zinc per month to approxi mately 11,500 tons per month. The zinc content of metal and oxide production at this smelter was 128, 670 tons in 1959, in comparison with 122,774 tons the previous year. The construction of a Special High Grade Zinc re fining column was completed in July, and production, at the rate of 1,800 tons per month, began in early August. This addition puts St. Joe in a position to produce any and all grades of zinc. The die cast ing industry which shows an excellent potential for growth, uses Special High Grade Zinc exclusively. Wage increases at this division were made on January 1, 1959. Mine La Motte Corporation This corporation, which is a 50% owned affiliate, owns a lead mine in St. Francois County, Missouri. 8 Due to depressed conditions in the lead market, this property was placed on a standby basis in February, 1959 upon completion of development of the new orebody. There are no immediate plans to place this mine in production. EMPLOYEE RELATIONS Employment and Payrolls At the end of 1959 the Company and its subsidiaries employed 4,263 men and women, a decrease of 318 from the 1958 figure. Of this number more than 18% of our employees have had over 25 years of service, and 55% have been employed between 10 and 25 years. During the year employees received direct salaries and wages amounting to .$22,670,522 which is 414% less than the $23,755,404 reported for 1958. This decrease was due principally to the cui tailed work schedule during 1959 in the Missouri Lead Belt and the 3 month work stoppage at the Edwards-Balmat Division. Pension Program Our program consists of two non-contributory plans, a Retirement Plan for Salaried Employees and a Pen sion Plan for Payroll Employees. A total of 2,816 employees is covered by these plans. During 1959 the Company contributed $780,000 to Morgan Guar anty Trust Company as Pension Fund Trustee, which was charged against current earnings, and retired employees received payments of $331,550. At the year end, 822 former employees were receiving pen sions as compared with 780 at the end of 1958. To improve the Pension Plan for Payroll Em ployees and to alleviate certain hardships which were inherent in the old Plan, the Board of Trustees in October authorized a revision in the Plan effective for service with the Company after January 1, 1960. The additional cost of this revision is estimated by our Actuary to be approximately $268,500 per year. The cost of past service under both plans has been entirely funded through contributions to the Trustee. Deferred Profit Sharing Plan Under the Deferred Profit Sharing Plan for Salaried Employees, which was established as of January 1, Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1956, contributions by the Company are 3% of the consolidated net earnings or 10% of the aggregate salaries of eligible employees, whichever is less. How ever, no contribution shall be made which would re sult in the consolidated net earnings after such con tributions being less than $2.00 per share. For the year 1959, the Company's contribution amounted to $187,892 and represented 3% of the consolidated net earnings. This is equal to 3.61% of the aggregate yearly salaries of the 682 employees who participate under the Plan. Stock Option Incentive Plan Under a stock option plan adopted by stockholders in 1958, 130.000 shares of the Company's unissued capital stock were reserved for issuance and sale to officers and other key employees under 60 years of age. at a price not less than the market price at the time such options are granted. On September 24, 1958. options were granted on 35,500 shares at $30.50 per share, and on September 22, 1959 on 9,700 shares also at $30.50 per share, thereby bring ing the total of the two grants at December 31, 1959 to 45.200 shares. These options become exercisable to the extent of 25% annually on the anniversary date of each grant. Any part of an option unexercised at the end of five years from date of grant becomes void. During 1959 no options were exercised. PROGRESS IN NEW AREAS Viburnum Lead Project Further expansion of the ore reserves in the Vi burnum area of Washington, Crawford and Iron Counties. Missouri, continued during 1959, but poor weather delayed construction work during the early months, However, progress since the middle of May has been satisfactory and barring any serious inter ruption, construction of the first 3,000-ton unit of the 6,000-ton mill should be completed and the property placed in initial operation in May, 1960. Expenditures in this area for 1959 amounted to $8,024,907 of which $6,874,363 was charged to capi tal and $1,150,514 of shaft sinking and development expense was written off against current income. It is estimated that approximately $3,890,000 wm be ex pended on this project during 1960, and that $3,170, 000 will be capitalized and $720,000 charged to income. : Pea Ridge Iron Project The Pea Ridge iron ore property which is located about 40 miles northwest of Bonne Terre, Missouri, is operated by the Meramec Mining Company owned jointly (50% each) by Bethlehem Steel and St. Joe. Good progress on this project was made until the property was closed by a strike of the United Steel workers of America. CIO, on April 21, 1959. From that date until December l lth, building construction and shaft sinking were held in abeyance due to the unwillingness of construction labor to cross the Steel workers' picket line. This seven months' strike will postpone the starting of operations until May 1963. At the end of the year, the service shaft of the mine (shaft if 1) reached a depth of 1.681 feet and the main ore hoisting shaft (shaft it 2) which had been collared and the foundations poured for the head frame in 1958. reached a depth of 439 feet. Construction of the branch railroad to connect with the Missouri Pacific Railroad main line is pro gressing satisfactorily, but due to the strike, complelion will not be required for incoming freight until early 1961. During 1959. Bethlehem and St. Joe each advanced a total of $1,023,016 of which $464,071 was set up by St, Joe as an additional investment in Meramec Mining Company and $558,945 of shaft sinking and development expenses together with $8,541 of deferred charges were written off against current earnings. During 1960. construction of the permanent serv ice facilities and buildings which was started in 1959, will continue as well as shaft sinking and underground development of the orebody. Under the 1960 pro gram it is estimated that expenditures on this project will1 amount to $6,130,000 ($3,065,000 each by Bethlehem and St. Joe) and of this amount, St. Joe will charge approximately $2,065,000 to investment account and $1,000,000 against current earnings as a development expense. Under our agreement with Bethlehem. St Joe can 9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission borrow on its 4*4% Notes, 80% of its 50% share of the expenditures on the project. To date no funds have been borrowed under this agreement. NORTH AFRICA Societe Nord Africaine du Plomb (NAP) and Societe Algerienne du Zinc (ALZI), both owned 17.15% by St. Joe, have mining operations on the AlgerianMoroccan border, south of Oujda, Morocco. Two strikes adversely affected the operations of ALZI. The mine produced 99,538 metric tons of ore in 1959 in comparison with 151,000 metric tons in 1958. This production was treated at the NAP mill. Although ore reserves decreased during 1959 by approximate ly the tonnage mined, they are estimated to be suffi cient at the year's end to cover about three years of full scale operations. Six drill holes some 4,000 feet north of the present mining area have indicated the presence of interesting mineralization. Further ex ploration work is expected to be done in I960. NAP has acquired a controlling interest in a new Moroccan company which will undertake exploration in the Alhucemas region of Northern Morocco. OIL EXPLORATIONS Crockett County, Texas Income from oil royalties from our joint venture with Continental Oil Company in the Harris Ranch Leases amounted to $432,469 in comparison with $460,718 in 1958. The reduction in royalties is due to curtail ment in the number of days of production allowed by the Texas Railroad Commission. The allowable of 12 days per month at the beginning of the year de creased until it reached 9 days a month, which was in effect during the months of July through November when it was increased to 10. It is estimated that our share of the recoverable re serves as of December 31, 1959, is 1,962,404 bbls. of oil and 15,166 million cubic feet of gas compared with 2,184,034 bbls. and 15,476 million cubic feet of gas at December 31, 1958. On July 1st, the Harris Ranch Leases were made a part of two newly formed unitized operations. 10 Southwest Louisiana Under a farmout agreement, test wells completed on four lease blocks were negative. It was, therefore, decided to abandon these lease blocks as rentals be come due and write off $87,400 to exploration ex penses. : CANADA Brunswick Mining and Smelting Corporation Limited Brunswick (40% owned) which suspended opera tions April 1, 1958, continued on a shutdown basis throughout 1959. Expenditures during 1959 amounted to $80,355. St. Joe advanced $70,000 to Brunswick on its 5% Income Bonds due 1970, to cover the cash required. This brings the total ad vanced to December 31,1959 to $6,085,000. Early in 1960, Brunswick Mining and Smelting reached an agreement in principle with Sogemines Ltd. of Montreal to bring the Brunswick zinc and lead mine, located in the Province of New Brunswick, Canada, into initial production at the rate of 2,000 tons of ore per day. Under the agreement, Sogemines will undertake certain check drilling, will study fur ther the detailed estimates of plant and operating costs and will secure confirmation from the Canadian authorities of the proposed Bathurst harbor develop ment and railroad construction. If satisfied, then Sogemines will enter into a 15-year contract for the purchase of Brunswick's concentrate production and will provide $7.5 million of the $17.5 million be lieved necessary to bring the mine into production. St. Joe will purchase additional 5% Income Bonds beyond the $6,085,000 already purchased to fulfill its purchase obligation of $7.5 million. The remain der of the funds will be obtained by Sogemines from outside sources. SOUTH AMERICAN OPERATIONS Argentina Cia. Minera Aguilar, S.A. (99.9% owned) oper ates a lead-zinc-silver mine in the Province of Jujuy, Argentina. Due to increased sales, the peso earnings Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. for 1959 amounted to 166,538,682 pesos. The equiv alent dollar earnings computed at the free rate of ex change at the year end, which reflect the depreciation in the dollar value of the peso, were approximately $1,990,000 in comparison with $1,324,000 the pre vious year. The property operated without interruption throughout the year and produced 60,291 metric tons of zinc concentrates and 28,483 metric tons of lead concentrates in comparison with 54,643 metric tons and 28,128 metric tons, respectively, in 1958. All concentrates were sold in Argentina. The mill again treated a record tonnage of crude ore. Argentina's austerity program has not been fully successful. Good progress has been made in the drive for self-sufficiency in oil. At the end of 1959, orders for concentrates were at a low for many years and metal sales were practically non-existent. Argen tina's leturn to prosperity requires a strict adherence to true austerity. Sulfacid, S.A. (50% owned affiliate of Aguilar) showed earnings of approximately 24,000,000 pesos but no dividends were declared in order to conserve the cash for financing the new 18-ton per day elec trolytic zinc plant. The new cadmium recovery plant is operating. A brief shutdown occurred at the end of the year and continued during the early part of January, 1960 because of full storage tanks and a slowdown in shipping orders. Cia. Metaeurgica Austral-Argentina, S.A. (43.3% owned affiliate of Aguilar). Operations were adversely affected by shutdowns caused by the gov ernment-owned company, Petroquimica, which fur nishes Austral power, first due to extensive repairs to the power plant and second because of a lengthy strike. As a result production decreased from 8,900 metric tons of zinc in 1958 to 7.408 metric tons in 1959. Profits were approximately 30,000.000 pesos. Sales outlook for the immediate future is discour aging. Peru Cia.IVIinerai.es Santander,Inc. (66.9% owned) in which St. Joe's investment amounted to $2,135,000 at December 31, 1959, operates a lead-zinc mine in the Peruvian Andes. This mine was initially placed in production in late December, 1958 and produced 5,864 dry short tons of lead concentrates and 21,865 dry short tons of zinc concentrates during 1959, which were sold in the European market. This com pany showed a net profit of $244,936 for the year after writing off development expenses in the amount of approximately $80,091. ANTI-TRUST SUIT In the last six Annual Reports, the stockholders have been advised concerning the civil action commenced by the United States in 1953 against St. Joseph Lead Company and American Smelting and Refining Com pany in the United States District Court for the Southern District of New York, alleging violations of Sections 1 and 2 of the Sherman Antitrust Act in connection with the lead business of each of the de fendants, The stockholders were also advised that St. Joe, in an answer filed to the Government's com plaint, had vigorously denied that it had in any way violated the antitrust laws. In 1957, American Smelting and Refining Com pany accepted a consent decree in settlement of the case against it, but St. Joe has continued to contest the suit. In March, 1958, the Government amended its complaint to make The Bunker Hill Company a co-defendant with St. Joe, and in February, 1959, further amended its complaint to exclude, among other things, all allegations of violation of Section 2 of the Sherman Act. The trial of the remaining charges of violation of Section 1 of the Sherman Act was completed in November, 1959. As of March 7, 1960, the Court had not announced its decision. ANNUAL MEETING The 1960 Annual Meeting of Stockholders will be held on Monday, May 9th, at the Park Lane Hotel, 48th Street and Park Avenue, New York, at 11:00 a.m. All stockholders are cordially urged to attend. If you are unable to be present, please vote by proxy. A proxy and proxy statement will be mailed to you on or about April 8th. 11 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Annual Report t Employees . A copy of the Annual Report to Employees for the year 1959 will be found under the flap of the rear cover of this report. The photographs and addition al operating comments may be of interest to stock holders. Stockholders At December 31, 1959, there were 11,812 registered stockholders compared with 13,315 the previous year. A classification of stockholders at the end of 1959 is as follows: Stockholders Men..................... ..... Women.................................................... Joint Accounts............................... ..... Fiduciaries .......................................... Insurance Companies ...... Brokers and Security Dealers . . . Nominees............................................... Institutions and Others..................... . ... .,.. .... ................. .... .... .... .... Total............................... .... 4.165 4.362 2,026 492 147 248 172 200 11,812 Percent 35.26 36.93 17.15 4.17 1.24 2.10 1.46 1.69 100.00 Shares Held 521,422 426,654 118,898 303,663 204,796 691,861 249,695 199,233 2,716.222 Percent 19.20 15.71 4.38 11.18 7.54 25.47 9.19 7.33 100.00 llu iitrmuriam All of his associates were saddened by the death on December 4,1959 of George F. Weaton. Mr. Weaton was Division Manager of the Josephtown, Pennsyl vania, Zinc Smelting Division from its inception ift 1928 until November, 1954, when he was transferred to the New York Office as a consultant. His pioneering efforts in developing the Company's electrothermic smelter to its present pre-eminence, coupled with the establishment of the Company's new Josephtown Power Station which appropriately bears his name, have been outstanding contributions to the Company, Mr. Weaton had retired from active employment with the Company at the end of 1958, after over 37 years of valued service. Conclusion Sincere appreciation is expressed to all employees for their loyal and efficient efforts during the past year and to our stockholders for their continued support. New York, March 15, 1960. 12 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UNITED STATES LEAD AND ZINC STATISTICS LBAD (In Short Tons) 1959 (Est.) Available Supply: U. S. Mine Production . . ..... . . . . . . From scrap................................... . ........................................... Imports of concentrates and bullion (Leadcontent) .... Metal imports (net).................................................. ..... Total Lead Metal Available. ..... .................... ..... . 253,000 468,000 139,000 277,000 1.137,000 Consumption: Batteries............................... Ethyl gasoline........................................................................... Cables....................................................... Construction........................................................................... Pigments................................................................................. Other uses............................................ Total Consumption /^^-Su-rplus.................................... 357,000 162,000 61.000 128,000 111,000 266,000 1,085.000 52,000 1958 (Final) 267,000 369,000 202,000 371,000 1,209,000 313,000 159,000 75,000 120,000 96,000 223,000 986,000 223.000 ZINC (In Short Tons) Available Supply: Recoverable U. S. Mine Production ......... Less--used to make pigments .................................................. Recoverable domestic zinc available to Metal Smelters. . . . Scrap zinc......................... Imports of concentrates (Recoverable zinc content) .... Imports of slab zinc . . . ................................... Total Zinc Metal Available ......................................... Consumption: Galvanizing........................................................... Zinc Base Alloys . .. ................................................................. Brass........................................................................................... Rolled Zinc................................................................................. Oxides...................................................................................... Other........................................................................................... Total Consumption.................................................. Exports...................................................................................... Total zinc metal consumed and exported.................... Surplus........................................................................................... 417,000 103,000 314,000 53.000 422,000 157,000 946,000 339,000 369,000 129,000 41,000 18,000 30,000 926,000 12,000 938,000 8,000 412,000 91,000 321,000 47,000 462,000 195,000 1,025,000 381,000 317,000 101,000 41,000 13,000 15,000 868,000 2,000 870,000 155,000 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. $7. JOSEPH HAD COMPANY -- LEAD AND ZINC STATISTICS ISAD (In Short Tons) Year 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Lead Concentrates Produced from Company's Mines .................................. 169,354 158,579 157,037 160,625 164,171 162,552 158,861 163,079 149,624 143,167 Lead Concentrates Purchased 38,951 27,792 39,726 38,294 39.373 43,100 44,353 46,309 25,102 8,300 Pig Lead Equivalent of Produced and Purchased Concentrates 137,058 121,431 128,141 129,281 133,932 136,668 136,921 140,617 119,489 106,678 Pig Lead Production 141,595 112,754 128,691 130,430 129,766 138,796 137,429 137,940 116,799 101,478 Pig Lead Sales Including Sales Under Agency Contracts 212,150 147,905 160,625 167,192 183,079 212,100 199,294 183,942 139,131 164,084 Year Zinc Concentrates Produced from Company's Mines 1950 . . . . 1951 . . . . 75,290 82,217 1952 . . . . 69,173 1953 . . . . 1954 . . . . 1955 . . . . 1956 . . . . 104,744 109,547 109,303 114,138 1957 . . . . 123,417 1958 . . . . 99,523 1959 . . . . 81,292 ' 'U. ' Zinc Concentrates Purchased 72,444 47,659 103,769 112,991 61,640 111,868 126,164 105,604 84,987 104,493 Slab Zinc Equivalent of Produced and Purchased Concentrates -`75,238 71,077 98,680 126,968 105,610 134,012 146,897 144,011 120,515 121,138 ZINC (In Short Tons) Slab Zinc Equivalent of Smelter Production 98,443 99,602 108,959 121,592 111,021 138,201 136,879 151,554 122,774 128,670 Zinc Content of Oxide and Metal Sales from Smelter Production 94,028 89,047 89,414 103,009 117,611 136,723 132,652 135,499 127,630 135,144 Zinc Sales Including Sales Under Agency Contracts 216,234 211,401 208,240 224,228 197,007 249,431 238,676 260,868 218,391 220,941 14 ' ; -it./'- 1 : Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1959 Net Sales of Metals, Metal Products, Etc............................................ ..... Cost of Sales, Etc............................................................................ Other Income: Dividends: From foreign investments.............................................................................. From domestic investments.............................................................. Interest from investments.............................................. Income from oil royalties................................ . . . . . . . . . . . Other income less charges..................................... ..... ................................ Total................................................................................................... $86,179,208 72,967,543 $13,211,665 2,104,014 172,850 594,295 432,469 137,901 $16,653,194 Deduct: Selling, general and administrative expenses.................................................... Shaft sinking and development expenses Meramec and Viburnum Projects ............................................................... Oil exploration and operating expenses.................................................... Other exploration and development expenses............................... . Past service annuities (Note 5).............................................................................. Depreciation and abandonments.............................................................................. Depletion.............................................................................. Interest on indebtedness.............................................................................. Total deductions......................................................................................... Earnings Before Federal Income Taxes......................................................... ..... . Provision for Federal Income Taxes . ............................... ..... . Net Earnings for the Year (1959, $2.30 per share; 1958, $1,47 per share) . . . Retained Earnings at Beginning of the Year . . ... . . . . . . . . Cash Dividends Paid During the Year ($1 per share) ................................................ Retained Earnings at End of the Year (Note 7) . . ............................................... $ 2,114,233 1,718,030 153,021 132,521 265,040 3,200,352 134.296 1,154,307 $ 8,871,800 $ 7,781,394 1,518,318 $ 6,263,076 30,198,624 $36,461,700 2,716,222 $33,745,478 Minor reclassifications have been made in 1958 figures to conform with 1959. See notes to financial statements. 1958 $75,615,147 67,287,253 $ 8,327,894 2.610,073 152,870 111,037 460,718 210,738 $11,873,330 $ 2,047,716 1,220,035 82,977 302,427 265,025 2,621,376 133,357 513,973 $ 7,186,886 $ 4,686,444 699,564 $ 3,986,880 28,927,966 $32,914,846 2,716,222 $30,198,624 15 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ASSETS Current Assets: Cash......................................................................... ..... . U. S. Government. State, and Municipal short-term securities......................................................................... Accounts receivable--trade.......................................... U. S. Government--claims for income tax refunds . . Other accounts receivable..................................... ..... . Inventories (valuation not in excess of market) -- (Note 1): Finished lead, zinc, etc.............................. Lead, zinc, etc., in process and concentrates . . . Materials and supplies..................... ..... Investments: Compania Minera Aguilar, S. A. (at nominal valua tion--99.9% owned, not consolidated)--(Note 2) Mine La Motte Corporation (at nominal valuation-- 50% owned) -- (Note 3).......................................... The New Jersey Zinc Company (at cost, less non-taxable dividends, 100,000 shares--5.1% owned) . . Brunswick Mining and Smelting Corporation Limited (at cost)--(Notes 6 and 7): 1.600,000 shares--40% owned. . . . . . . . 5% income bonds, due July 1,1970 ...... Compania Minerales Santander, Inc.--Investments and advances (at cost--66.9% owned)..................... Meramec Mining Company---Investments and ad vances (at cost--50% owned) ..................................... Sundry securities, loans, etc.--including advances to affiliates (at cost, less reserve, $200,000) .... Capital Assets (Note 4): Mining properties and mineral rights (at March 1,1913 appraised value plus subsequent additions at cost) Less allowance for depletion..................................... Land, buildings, plant and equipment (at cost) . . Less allowance for depreciation................................ Power plant (at cost)..................................... Less allowance for depreciation . . , i . . . . Total capital assets, net . . . . . , . Miscellaneous Assets: ;y ; U. S. Government, State, and Municipal securities on deposit with State departments (at amortized cost) Cash and marketable securities (at amortized cost)--- Fire insurance fund (see contra)................................ Deferred Charges: Deferred past service annuities (Note 5)..................... Deferred exploration expenses..................................... Oil and natural gas expenditures in suspense . . . Other deferred charges..................................................... December 31,1959 $ 3,759,785 18,552,000 6,783,939 480,201 394.223 8,906,894 5,089,362 6.132.579 $ 50,098,983 S. 1 1 5,724,028 2,339,758 6,085,000 2,135,000 1,267,518 841,590 18,392.896 $40,211,170 37,254,607 $61,490,474 39,255,543 $22,039,411 1,604,822 2,956,563 22,234,931 20,434,589 $ 45,626,083 $ 965,720 275,881 $ 958,412 892,491 120,635 218,637 1,241,601 2,190.175 December 31.1958 $ 3.898,721 10,785.000 6,375,094 480.201 363,991 12.463,391 5.211,103 6.213.937 S 45.791.438 $1 1 5.724.028 2,339,758 6.015.000 2,105,000 803,447 948.800 17,936.035 $39,706,773 37,120,310 $54,223,308 37.182,180 $21,232,727 502.852 2,586,463 17.041,128 20,729,875 $ 40.357.466 S 835.779 241,804 $ 1,223,452 846,154 210,844 236,113 1.077.583 2.516.563 Total 16 $117,549,738 See notes to financial statements. $107,679,085 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIABILITIES Current Liabilities: Accounts payable........................................... Wages accrued ....................................................................... Long-term debt due within one year................................. Interest accrued on long-term debt................................. Accrued taxes: Federal income (Note 7)........................................... Other ..... ...................................................... Long-Term Debt (Note 7): 3%% notes due in semi-annual instalments of $425,000 commencing January 1,1960 ..... Notes payable to banks due in semi-annual instalments of $1,428,571 commencing January 15, 1962 ($7,000,000 at 4% and $13,000,000 at 4y2%) . . Deferred Federal Income Taxes--related to accelerated amortization and depreciation........................... ..... . Reserves: Injury claims and workmen's liability insurance . . Employees' life insurance and retirement...................... Fire insurance (see contra)........................... ..... Stockholders' Equity: Capital Stock, par value $10 per share: ,. , , Authorized 5,000,000 shares Outstanding--2,716,222.5 shares (after deducting 21,414.35 shares in treasury)................................. Other Capital-representing principally excess of amount of stock dividends over par value of capital stock ................................................................................. Retained Earnings (Note 7)...................................... ..... Total Stockholders' Equity ...... December 31,1959 $ 5,616.907 341,323 425.000 841,434 232.103 $ 7,456,767 $ 7,650,000 20.000.000 $ 586,813 409,573 275.881 27,650,000 2.106,510 1,272.267 27,162.225 18.156,491 33,745,478 $ 79,064,194 December 31, 1958 $ 4,545,318 462,542 164,687 343,063 270,573 $ 5.786,183 $ 8,500,000 15.000,000 $ 545,497 404,121 241,804 23.500,000 1,684.140 1,191.422 27,162.225 18,156,491 30,198,624 $ 75,517.340 Total . SI 17.549,738 See notes to financial statements. $107.679,085 17 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY AND CONSOLIDATED SUBSIDIARIES Notes to financial statements 1. Inventories of lead, zinc, etc. (finished, in process, and concentrates) are valued at cost, determined substantially on last-in, first-out (LIFO) method. Materials and supplies are valued at average cost. 2. It is the practice of the Company to record dividends received or receivable from Compania Miners Agui* lar, S. A. and associated companies as they are con verted into U. S. dollars. Unconverted dividends as of December 31, 1958 and dividends declared in 1959 were converted during 1959. Compania Minera Aguilar, S. A. owns 43.3% of Compania Metalurgica Austral--Argentina, S. A. Comercial and 50% of Sulfacid, S. A. Industrial. Financial statements of Compania Minera Aguilar, S. A., are included herein on pages 20-22. 3. The Company's equity in the net assets of Mine La Motte Corporation, as shown by audited financial statements of that company was $213,623 and $264,317 at December 31, 1959 and 1958, respec tively. Its share of the net loss for the years then ended was $50,694 and $179,151, respectively. 4. The net value of the capital assets as shown in the consolidated balance sheet does not indicate the present value of the companies' property, plant and equipment, as such value could be arrived at only by current estimates which would vary from time to time depending on the price of metals, rate of pro duction, cost of labor, and other factors. Mining properties and mineral rights include $17, 000,000, which has been fully depleted, represent ing March 1, 1913 appraised values. 5. The Company and its domestic subsidiaries have a Retirement Plan for Salaried Employees and a Pen sion Plan for Payroll Employees, covered either by a contract with an insurance company or by funds deposited with a Trustee, no part of which is reflected in the accompanying consolidated balance sheet. Both plans are non-contributory and all past service costs have been funded. The deferred past service cost is being amortized over a 10-year period. Cur rent annual costs of both the Retirement Plan and Pension Plan aggregated approximately $780,000 and $875,000 in 1959 and 1958, respectively. For additional information as to the Company's Pension Program reference is made to the text of this report. 6. Leadridge Mining Company Limited, a whollyowned subsidiary, was liquidated in 1959 and its investment in Brunswick Mining and Smelting Cor poration was taken over by St. Joseph Lead Com pany, which assumed the subsidiary's commitment to loan Brunswick Mining and Smelting Corpora tion, a 40% owned company, up to $7,500,000 (Ca nadian funds) as needed for development and equip ment. Under this commitment $6,085,000 had been loaned at December 31, 1959 in exchange for an equal amount of 5% Income Bonds of Brunswick. The loan may be subordinated to other indebtedness of Brunswick not to exceed $17,500,000 (Canadian funds). 7. Reference is made to the text of this report relative to the companies' taxes on income, long-term debt, stock option incentive plan, Viburnum lead project, Pea Ridge iron project, Brunswick Mining and Smelting Corporation Limited, and anti-trust suit. 18 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS TWO BROADWAY NEW YORK 4 ACCOUNTANTS' REPORT To the Stockholders of St. Joseph Lead Company: We have examined the consolidated balance sheet of St. Joseph Lead Com pany and its consolidated subsidiaries as of December 31, 1959 and the related statement of consolidated earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated earnings, with the notes to financial statements, present fairly the financial position of St. Joseph Lead Company and its consolidated subsidiaries at December 31, 1959 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. February 16,1960. HASKINS & SELLS 19 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. m BALANCE SHEET December 31,1959 and 195$ ASSETS December 31,1959 Argentine paper pesos : (Notel) Current Assets: Cash.......................................................... Marketable securities: Argentine Government (at cost) ....... Other (at cost, less reserve--1959 and 1958, 19,493,471)..................................................... ..... . Accounts receivable--trade (less reserve--1959, 7,037,000; 1958,3,232,906) . ..................... ..... . Due from partly-owned company--trade..................... Other accounts receivable, etc........................................... Inventories (at average cost or less--not in excess of market): Lead and zinc concentrates..................... ..... Materials and supplies................................................ 75,895,726 14,000.000 114,162,878 57,551,570 23,257,664 7,210,476 185,558,755 133,285,157 610,922,226 Investments; Sulfacid, S. A. Industrial (at cost--50% owned) . . Compania Metalurgica Austral-Argentina, S. A. Com- ercial (at cost--43.3% owned)................................ 20,428,902 8,746,356 29,175,258 Capital Assets (Notes 2, 3 and 4): .............. Mining properties and mineral rights: Cost, including exploration and development prior to the commencement of operations ..... Less allowance for depletion................................ Appreciation arising from valuation in 1936 . . ., Less allowance for depletion ....... Total mining properties and mineral rights, net................................................ ..... Land, buildings, plant and equipment (at cost) . . . Less allowance for depreciation ...... Construction in progress.......................................... ..... Total capital assets, net................................ 4,400.598 3,502,941 49,446,736 39,700,779 170,514,197 56,846,283 897,657 9,745,957 10,643,614 113,667,914 15,250,055 139,561,583 Deferred Charge-...................................................... ..... . Total..................................................................... - 6,515,966 786,175,033 December 31,1958 Argentine paper pesos (Note 1) 78,403,581 14,739,038 108,802,190 36,704,854 16,562,455 12,359,003 106,735,354 89,316,917 463,623,392 7,825,000 673,000 8,498,000 4,396,077 3,502,941 49,446,736 39,700,779 893,136 9.745.957 90.405,712 35,979,647 10,639,093 ` 54,426,065 34,435,368 99,500,526 2,893.624 574,515,542 Notes: (!) The quoted free rate of exchange for a peso was approximately L2 cents at December 31, 1959 and L4 cents at December 31, 1958. (2) The net value of the capital assets as shown in the above balance sheet does not indicate the present value of the Com pany's property, plant and equipment, as such value could be arrived at only by current estimates which would vary from time to time depending on the price of metals, rate of production, cost of labor, and other factors. (3) Ore reserves have been estimated by the directors to exceed appreciably those indicated by former surveys. Had depletion been provided for units sold in each year based on the average book values of ore reserves and the quantities of ores on hand and remaining in the properties as so estimated, the amounts would not have been significant and net earnings would not have been materially affected. Accordingly, no depletion has been provided since 1950. A special appropriation of 65,245,200 Argentine paper pesos for replacement of capital assets has been made out of earnings for the year 1959. Similar special appropriations were made out of earnings in the preceding eight years aggregating 187,873,400 Argentine paper pesos. (4) In prior years, it was the Company's policy to charge development expense with the cost of underground construction work 20 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIABILITIES Current Liabilities: Accounts payable--trade................................................. Due to St. Joseph Lead Company (including, in 1958, dividends payable of 27,681,946)................................. Due to partly-owned company............................................ Wages accrued...................................................................... Accrued Argentine income and other taxes . . . . Other accounts payable....................................................... December 31,1959 Argentine paper pesos (Note!) 5,772,132 4,724,585 23.558,999 6,078,064 92,-667,509 5,477,784 138,279,073 Advance from St. Joseph Lead Company 13,505,116 Deferred Credits--Unearned interest, etc........................... 140,198 Reserves: Replacement of capital assets (Notes 3 and 4) . . . Employees' compensation under Argentine social laws Accidents................................................................ Other...................................................................................... 270,537,942 19,844,743 .20^817,511 21,705,481 332,905,677 Stockholders' Equity: Capital Stock--Nominal value of 80 Argentine paper pesos each: Authorized 2,500,000 shares Issued--1,375,000 shares............................................ Other Capital--arising from 1936 valuation of ore re serves (remainder after transfer of pesos 48,000,000 to stated value of capital stock)................................. Retained earnings: Appropriated for statutory reserve............................ Unappropriated (after charging deficits aggregat ing pesos 6,395,000 against capital surplus arising from reduction in stated value of capital stock-- Note 5)....................................................................... Total Stockholders' Equity............................ , 8.293,926 181,604,307 110,000,000 1,446,736 189,898,233 301,344,969 Total....................................................................... 786,175,033 December 31,1958 Argentine paper pesos (Note 1) 15,773,916 29,335,950 10,564,959 4,335,373 48,021,987 3,821,068 111,853,253 14,066,358 81,207 187,873,400 16,290,646 14,322,127 18,952,265 237,438,438 110,000,000 6,432,953 1,446,736 93,196,597 99,629,550 211,076,286 574,515,542 Notes Continued: carried out. During 1959, the Company decided to capitalize amounts so written off amounting to pesos 24,791,580, and depreciation thereon for prior years at the rate of 8% per annum amounting to pesos 7,373,238 was added to the allowance for depreciation. The net amount so adjusted, pesos 17,418,342, has been added to the reserve for replacement of capital assets. The effect of this change was to increase net earnings for 1959 by pesos 3,461,879 being the difference between the amount capitalized and the depreciation thereon. (5) The net earnings since the beginning of operations, pesos 571,379,733 (retained earnings at December 3L 1959, pesos 189,898,233, plus dividends declared, pesos 387,876,500, and less aggregate deficits transferred to capital surplus, pesos 6,395,000) repre sents the aggregate net earnings of pesos 864,200,112 (after deducting depletion computed on cost) against which has been charged depletion computed on appreciation aggregating pesos 39,700,779 and special appropriations for replacement of capital assets aggre gating pesos 253,119,600. (6) In accordance with standard practice in Argentina, stock dividends received have been credited to earnings at par. Amounts so credited during the years ended December 31, 1959 and 1958 totaled approximately pesos 12,800,000 and 12,400,000, respectively. 21 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPANIA MINERA AGUILAR, $. A Statement of EamtngS F@r the fears Ended December 31, 1959 and 1958 Net Sales uf Leaf} and Zinc Concentrates, Etc. ... . !..................... Cost Thereof......................................................................... . Other Income: Dividends (Note 6).................................................................................................... Profit (loss) from sale of marketable securities .......................................... Interest...........................................V ......................... ............................................... Other, less charges ... Total..................................................... ..... . : ' . .......................................... Deduct: Selling, general anti administrative expenses ..................................................... Taxes, other than taxes on income .......................................................................... Depreciation (Note 3)..................... ..... . . . . . . ................................ Total Deductions . . . . . .......................................................... Earnings Before Taxes on Income and Special Appropriation................................ Provision for Argentine Income and Extraordinary Profits Taxes .... . Earnings before SpecialAppropriation ...... ...................................... Special Appropriation for Replacement of Capital Assets (Note 3) .... Net Earnings for the Year (after special appropriation) ......... See notes on accompanying balance sheet. 1959 Argentine paper pesos (Note 1) 472,726,446 113,805,136 358.921,310 15,141,489 4,557,002 482,993 2,773,527 7381.876,321 19,671,685 6,246,191 13,701,994 39,619,870 342,256,451 111,116,568 231,139,883 65,246,200 165,893,683 1958 Argentine paper pesos (Note 1) 283,660,278 85,366.900 198,293,378 15,813,986 (315,093) 899,668 3,592,350 218,284,289 9,127,880 4.352,147 7,245,571 20,725,598 197,558,691 67,524.314 130,034,377 37,330,750 92,703,627 Statement of Unappropriated Retained Earnings For the Years Ended December 31, 1959 and 1958 Unappropriated Retained Earnings at Beginning of the Year................................ Add: ' '` Net Earnings for the year (after special appropriation) ..................................... Restoration of earnings appropriated in prior years for acquisition of capital stock held in treasury......................................................................................... Total..................................... ..... . . . . ..................................... Deduct: .,, Dividends declared or paid during the year: .. . .; , Cash ..................................... .......................................................................... Capital stock..................................... ; ; .................................................... Appropriation for statutory reserve .................................................................... Total Deductions.................................................................... Unappropriated Retained Earnings at End of the Year (after charging deficits aggregating pesos 6,395.000 against capital surplus) .......................................... See notes on accompanying balance sheet. 22 1959 Argentine paper pesos (Note 1) 93,196,597 165,893,683 259,090,280 75,625,000 1,860,973 77,485,973 181,604,307 1958 Argentine paper pesos (Note 1) 70,582,388 92,703,627 7,700,000 170,986,015 68,750,000 7,700,000 1,339,418 77,789,418 93,196,597 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS , - . TWO BROADWAY NEW YORK 4 ACCOUNTANTS' REPORT St. Joseph Lead Company: We have examined the balance sheet of Campania Minera Aguilar, S. A. (incorporated and doing business in Argentina) as of December 31, 1959 and the related statements of earnings and unappropriated retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. By reason of progressive currency inflation, a special appropriation of 65,246,200 Argentine paper pesos for replacement of capital assets has been made out of net earnings for the year. Similar special appropriations were made annually out of earnings in the preceding eight years, aggregating 187,873,400 Argentine paper pesos. In our opinion, accepted accounting principles require that such appropriations be set aside not out of earnings for the year but out of retained earnings. In our opinion, except as described in the preceding paragraph the accom panying balance sheet with the footnotes thereon, and statements of earnings and unappropriated retained earnings present fairly the financial position of Compania Minera Aguilar, S. A. at December 31, 1959 and the results of its operations for the year then ended, in conformity with generally accepted account ing principles applied (except for the change in ithie method of accounting for underground construction explained in Note 4 to the Balance Sheet) on a basis consistent with that of the preceding year. February 16,1960. ' : n : l- HASKINS & SELLS 23 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. - NEWrPRfiJECTS Viburnum, modern efficient lead producer now v, r^ITH^N^^'ROGiSSES^ Cdritinuouroveiflow -caelfn^g ^- Ynearing completion, is example of successful search for new mining areas' . purity-zinc in '2,500-lb. ingots typifies development of new# .... Photo by Walker, Mtoouri'Ruources Die. . ni^ye^'to\improw'imqww^|jro|MS^BS' Report to [Employees To all employees of St. Joseph Lead Company and their families: St Joe and you, as well, have an excellent oppor tunity to build a better future than we have known in the past. You will find details elsewhere in this Report. Tiie kepouts that have gone to you in recent years have had a great deal to say about the difficult posi tion of the lead and zinc mining industry in the United States. Because St. Joseph Lead Company is the largest miner of lead in the United States, and one of the foremost producers of zinc, you might well be concerned, not only about St. Joe's fortunes this past year, but about how well the Company may do in the next few years. The four photographs shown above summarize the basis for our belief that Our Record in 1959 A glance at the next page will show you that the Company's performance in 1959 was reasonab y satisfactory. Si. Joe's earnings rose to just over $6,000,000 in 1959 from about $4,000,000 in 1953. The reasons for this increase in earnings are tw )fold: first, imports of lead and zinc from abroed were curtailed by the imposition of quotas on iniports established by the Federal Government n October of 1958, which tended to stabilize the met il j j ( , 1 ] . 2 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. prices, especially zinc; and second, consumption of both lead and zinc in the United States increased about 11% in 1959 over 1958. These factors com bined to increase our sales, and we were able to sell about 7,500 tons of lead and 9,500 tons of zinc from the stocks of metal we had been unable to sell in 1958 and 1957. If an employee wishes additional linancial information, and is not a stockholder, a c opy of the Report to Stockholders can be obtained upon request to his manager. Has the Federal Government Helped? For several years past, this Report to St Joe em ployees has mentioned the urgent need of the lead and zinc industry for at least a minimum of Govern ment help, which we in St Joe have believed should take the form of adequate tariff protection to equal ize the competitive positions of domestic and for eign producers, necessitated in part by the lower ore grade of the United States mines, and higher wage costs resulting from the higher standard of living of our employees. Following lengthy investigation and debate, sev eral alternative proposals, among which were higher tariffs, were rejected by the Administration or by Congress in 1958, and a system of quotas on imports of lead and zinc was established in October of that year. Although the quotas appear to have curtailed imports, much of the drop in imported pig Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. We Sold: * Pig lead, tons ' Slab zinc, equivalent, tons 'Sulphuric^cid^ .tons v ' We Received: From sales /.?.V' From our investments From other sources Our gross income totaled ''F.V/4 . f We Kept in Reserve: .; .J To replace worn-out plants and equipment . To replace depleted ore reserves .* *. We Paid: : \ In wages, salaries, supplies, and other production costs : In exploration arid in developing new orebodies . : In sales, administrative; pension fund/and other costs . In Federal income taxes In interest on long-term debt , .\ . We Had Left: . ' A net income amounting to . ! , - Of .which, we paid as dividends -to.-bdrstockholders'. . ' . / . . And kept for use in the business '. Our net'earnings, per share of stock, amounted to . ;, ; . . v Our dividend payments, per share of stock, pmounted to , .. : Our Current Assets (at year's end) Our Current Liabilities (at year'send)^ Our Net Working Capital (at year's end) .......... Number of Our Employees . .... Number of Our Stockholders Shares of Our Stock Outstanding 1950 164,084 179,478 176,607 . 139,131 174,083 ' 171,938 $86,179,208 2,865,986 575,543 89,620,737 . $75,615,147 3,045,286 500,150 ... 79,160,583 3,200,352 134,296 . 2,621,376 133,357 72,967,543 1,850,552 2,532,294 1,518,318 1,154,307 , ^ ; !67,287;253 ' 1,522,462 2,395,718 .. .699,564 v;..:;:;;:5;1.3;973v;" 6,263,076 2,716,222 3,546,854 2.30 1.00 50,098,983 7,456,767 42,642,216 4,263 11,812 2,716,222 3,986,880 2,716,222 1,270,658 ; v:;\- i.47 V X00 ;; 45,791,438 ;;v;;>^-$>786,:i8^:.;,' / v ' 40,005,255 ; 4,58F : '/13,315V HIGHLIGHTS of our financial position for 1959, as compared with 1958, are shown above. Note that lead sales rose sub stantially, but zinc sales increased by only about 5,000 tons. However, the price of zinc averaged ly a lb. higher in 1959 than in 1958, whereas the average price of lead was practically unchanged. Gross income was higher for 1959, but so were taxes, interest charges, and production costs. Considering the obstacles we faced in 1959, this is a good record, but we can, and must, do still better in future years il IMPORTS of lead and zinc eased somewhat their strangleho J on domestic markets in 1959, as the data opposite sho1 Quotas, imposed on imports by the Federal Government, wei ? responsible. Note, however, that quotas failed to accomplis i their stated objective of increasing U. S. mine output of lee- i and zinc, in fact, domestic mine output of both metals actual / declined. Domestic miners expect to do better in 1960, pr Ocularly in zinc. 4 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. cad and (lie metal content of concentrates has been iffsct In great]}- expanded imports of "manufaciired" lead and zinc products, a device to which oreign producers have resorted in order to escape piota restrictions. Quotas have definitely failed to accomplish the primary objective, which was to in Tease output of domestic lead and zinc mines in the United Stales. Production of lead and zinc from domestic mines actually declined in 1959, as com pared with 195S. As this report was being written, the question of aid to U. S. lead-zinc mines was again being investi gated in Washington. Hearings wane bold in Janu ary, I960, before the tr. S. Tariff Commission, under a mandate bom Congress to determine what was needed to promote "a sound and stable" U. S. leadzinc mining industry. Again, as so often in the past, there appears some hope that out of these healings might come the kind of tariff protection that the domestic industry really needs. How We Can Help Ourselves ;' Exery St. Joe employee must share the responsi bility of trying to keep our Company strong, espe cially if Government help is denied. The following paragraphs outline what the Management of your Company is doing to build that strength into its future. We Will Conduct Research St. Joe's icsearch acth (ties fall into three general areas, with the objective of improving our present techniques and widening the usefulness and the sales of our products. Typical activities in these three areas are as follows; 1. Research ox Better Methods At Josephtown, metallurgical research is aimed at improving smelting techniques by studies of process fundamentals. Greater knowledge of the basic chemistry of two leach plant circuits has in creased cadmium recovery substantially. In addi tion, this research has made it possible to convert cadmium residue into commercial metal. A profnam of basic research on furnace charge prepara tion continues to be emphasized as the most profit able tool for cutting costs and improving metal recovery. At Herculaneum, research programs cover im proved blast furnace charging arrangements, meth ods of improving the grade of matte, by-product and of cutting the quantity of dross produced. In Missouri, research in mining methods and milling procedures continues to contribute to the continual drive to cut operating costs. 2. Joint Research Programs With the objective of increasing the usefulness of lead and zinc, the Company is supporting, in asso ciation with domestic and foreign producers, the Joint Research Programs sponsored by the Lead Industries Association and the American Zinc Insti- EAD .... the domestic situation .... ZINC From domestic mines 1959 1958 SHORT TONS ESTIMATED 253/000 267/000 From domestic mines* ; 1959 -: ' 1958'. SHORT TONS ESTIMATED 314,000 321,000 Scrap ................ 468/000 369/000 Secondary sources . . . 53,000 47,000 Imports (net) . 416/000 573/000 Imports (ore and metal) 579,000 657,000 Supply (not incl. stock) 1/137/000 1/209/000 Supply (not incl. stock) 946,000 1,025,000 Consumption . . 1/085/000 986/000 Consumed and exported 938,000 870,000 Surplus or (deficit) . 52,000 223/000 ' Surplus or (deficit) . 8,000 155,000 ; ' . ' .' "After deducting ores used for pigment production ' ' 5' \ . ' . . '' ' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. tute. There is not space here to give details of the many programs now financed by this joint research, but they may be summarized as follows; In I960, about $-360,000 will be spent in lead re search programs aimed at increasing the usefulness of this metal, for example: as a coating on structural steel, as a component of ceramic products, as a powder in the rapidly expanding powder metallur gical field, as cable sheathing, and many others. The cable field is one in which lead has suffered greatly through competition from plastics, hut improved methods of continuous extrusion of lead-covered cable, which the Joint Research Program has de veloped, give promise of helping lead regain some of its lost position. As an example of the possibilities in this field, it is significant that the Douglas DCS jet transport uses a plastic insulating sheet impregnated with lead to shield its passengers against the noise of the plane's four jet engines. In the construction oi new buildings and in the installation of heavy ma chinery, lead pads are being used to lessen vibra tion. In zinc, about $300,000 will be spent in 1960 on a wide variety of research projects covering every phase of zinc consumption. The objective in each one is to help the present consumer of zinc obtain a better product, or in new and more useful forms. An outstanding example of the benefit of the Joint Research Program is the definite increase in con sumption in 1959 of zinc* in die castings by the auto motive industry, owing to the discovery of a means for improving the quality of nickel-chrome plating on zinc die castings. 3. Research ox New Products Apart from the Joint Research Program, St. Joe b carrying on several studies that can be more effec tively conducted by the Company, itself, looking toward increased consumption of Raid and zinc. A part of this effort has always been maintained at Joseph town as a service to our customers, particu larly to purchasers of zinc oxide in the rubber in dustry and of zinc metal in the galvanizing fields. St. Joe is conducting studies of means of improving the physical properties of lead in order to widen its usefulness as an insulator against sound, vibra tion, and as a shield against the ill effects of nueleai radiation. To sum up this whole matter of research, it is clear, and most encouraging, that lead and zinc, which have had such a long, if not glamorous, ca reer of service in industry, still have areas of useful ness yet to be explored. It is conceivable that re search is one of the major avenues by which the domestic lead-zinc industry may eventually gain a measure of freedom from its present urgent need for Government assistance. We Can Develop New Projects Viburnum. By now, everyone in St. Joe must he aware that in the Viburnum project in Missouri, the ; Company is developing what will be one of the best- Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I < quipped and most efficient mining enterprises in t ie world. Viburnum should enter production the ` .'cond quarter of this year, and as rapidly as possi! Ie will be brought up to a mining and milling rate i f 3,000 tons of ore per day. As soon thereafter as Hjcins desirable, or is feasible, production can be < \panded still farther. I Th is is not to imply by any means that the start ing of Viburnum will signalize the end of the Lead belt. Far from it. There ai e many of the Lead Belt areas that have a prosperous career ahead of them, but some, where mining has been carried on for nearly a century, are approaching the end of profit able operation, because the cost of production is greater than the sales value of the lead. St. Joe can count itself extremely fortunate that through the capability and activity of its geologists and explora tion crews, it has found in the Viburnum orebodies new reserves that will maintain employment and pioduction in Southeast Missouri for many years to come. The housing, town-site and community fa cilities generally, are in keeping with what has been planned as one of the most up-to-date and efficient mining projects in the industry. Mcramcc Mining Company. At Pea Ridge in Missouri, development of the iron ore project that we share on a 50-50 basis with Bethlehem Steel Lompany was halted in 1959 by a strike lasting from April until December. Shaft sinking and mine de\elopment are again underway, but the entrance of this property into production has probably been Shaft-sinking with big drill cuts 52-in. core at Viburnum Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. postponed by about the duration of the shutdown, and will not therefore become a producer of iron ore until 1963. Other Projects. The oil venture that we share with Continental Oil Co. on the Harris Ranch leases in Texas yielded St. Joe an income of $432,469 in 1959, as compared with$460,71S, in 1958. The re- duction was due to the Texas Railroad Cominis- sion's having cut the number of days per month of production allowed our wells. # In addition to the foregoing proi'ects, St. Joe has continually under study various proposals that could take the Company into both new mining fields and new industrial areas. Our objective in these studies is only to develop those enterprises that fit in with the Company's resources of man- power, ability, and finances, and that will become assured and long-lasting contributors to the Com- pany's earning power. We Can Improve Efficiency Each Division The possible closing of certain of the Lead Belt wines within a relatively few years, because of un- 7 profitable operations, has put an added premium at those properties to increase efficiency and lower cost. But no Division can be free of the urgency of looking for, and finding, better methods at lower costs, At Herculaneum, improvements are being made the unloading trestles in order to handle efficientlv the shipments of Viburnum lead conceit* trates, when they begin arriving in May or June, 1960. Additional kettles are being installed in th ' refinery, and an enlarged refinery building will improve operating conditions. A new storage doc'; is under construction to help solve the problem < f stocking the many brands of lead now required t > 8 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. satisfy customer demand. Consideration is being given to increasing the capacity of the smelter. At the Edwards Division, a strike, also called by the Steelworkers, interrupted operations from July 1 through November 1, 1959, during which nothing was produced -- 40,000 tons of needed zinc concen trates were lost, and over a half-million dollars in \\ ages -- everyone loses in a strike, including the consumer. During the operating periods before and alter the strike, exploration was successful in main taining the ore reserve position at both Balmat and Edwards, Early in 1960, major mechanical im provements were being installed in the Balmat mill. I here was an improvement in the safety record at both the Balmat and the Edwards mines in 1959, as frequency and severity rates were well below those of 1958. !At Josephtown, interest centered on the new re finery, which uses a process to produce Special High Grade zinc of 99.99 + % purity. Production of this grade enables St. Joe to supply its customers with any desired grade of zinc. Beginning production in July, 1959, well ahead of schedule, the refinery pro duced 8,267 tons of Special High Grade zinc in 1959. An important improvement in the refinery's oper ation was the development of a continuous How technique of casting high-purity zinc into 2,500-lb. ingots. In 1959, 5,485 tons of Special High Grade were shipped as 2,500-lb. ingots, this form having proven most acceptable to the consuming industry, f hi the Southeast Missouri Mines, Indian Creek again le^l the Lead Belt in improved efficiency, largely because when the property was brought into production, more flexible methods of mining, ore transport, and milling were established. The new luster, high-capacity trucks used underground, both at Indian Creek and in the Lead Belt mines, ha\e proven to be most satisfactory. 9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. In the Lead wood mine, a method of roof support has been worked out using a mixture of coarse tail ings and reclaimed chat. Use of this method in old stopes has apparently stopped the caving that threatened the Leadwood shops, and it also may provide a relatively inexpensive but effective means of pillar extraction in old workings. We Can Increase Our Activities Abroad In Peru, St. Joe is a % partner in Cia. Minerales Santander, S.A., an open-pit lead-zinc property, where production began in December, 1958. Fol lowing start-up, difficulties were encountered be cause of an unusually heavy rainy season, and with pesos. Increased sales of lead and zinc plus higher metal prices, rising as the peso's value declined, were responsible. All of Aguilar's metal output is smelted, sold, and used inside Argentina. The equivalent dollar earnings of Aguilar were ap proximately $2,000,000 in 1959, compared wilh $1,325,000'for 1958. A new hoist was delivered and installed in 1959, and relaxed import controls enabled the mine staff to obtain other badly-needed mechanical items. New ore discoveries continue to be made, and the Company is in excellent condition, from the point of view of ore reserves, mechanical equipment, housing and staff. Argentina's austerity program lias been only par- certain mechanical and metallurgical problems, that have now been overcome. The mine is pro ducing and milling nearly 500 tons of ore per day, and equipment is being installed to increase ca pacity to about 650 tons daily. The lead and zinc concentrates produced in 1959 were shipped to Europe. Elsewhere in Peru, St. Joe has investigated other promising mineral prospects, one of which was being diamond-drilled as this Report was written. In Argentina, Cia. Minera Aguilar, S. A., showed earnings in 1959 of approximately 166,000,000 pesos, as compared with 1958 earnings of 93,000,000 tially successful in reducing government budget deficits. However, good progress was made in the ' nation's drive for self-sufficiency in oil production. 1 By the end of 1959, however, the austerity program 1 had reduced bank credit and curbed industrial c\- 1 pansion to such an extent that a depression m iy 1 result 1 Sulfacid, S.A., (50% owned by Aguilar) showed 0 earnings of about 24,000,000 pesos, but declared no ; dividends in order to conserve cash needed for the v new 18-ton per day electrolytic zinc plant. ,1 Cia. Metalurgica Austral (43.4% owned by Ag uj lar) suffered a long shut-down at its zinc smeltei in ^ Patagonia because the government-owned pi; nt J ' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. a hat supplies power to Austral was closed by estenive repair work and a long strike. Production de li ned from 8,900 metric tons of zinc in 1958 to ,',408 tons in 1959. The current sales outlook is not ncouraging. Argentina is potentially one of the richest coun` l ies in South America. If the nation can realize this potential, Aguilar and its affiliates will benefit. In North Africa, St. Joe has a 17.15% interest in each of two companies: one, Societe Algerienne du Zinc (ALZI), mined 99,538 metric tons of ore in 1959, assaying 25.4% zinc and 3.68% lead; this ton nage was treated in the mill operated by the other company, Societe Nord Africaine du Plomb (NAP). the foreign producers of lead and zinc intend to relax the restrictions on their zinc output but to try to retain some control on lead. This action is being taken in expectation of increased consumption of zinc both in the United States and abroad. Our own opinion is that both zinc and lead consumption in the United States should increase about 10% in 1960, as compared to 1959, and that if a moderate increase in U. S. tariffs is not granted by Congress or the Administration, then the import quotas will continue. Therefore, it appears that St. Joe can look forward to a reasonably good year in 1960. Zinc demand should hold up well, and even though the world lead production will be in excess of consumption, it is hoped that we may be able to make a further reduction in our large unsold lead stocks. Beginning in late spring, the Viburnum project will enter production, which will give us the oppor tunity of gradually switching emphasis from some of our older and lower grade operations. Finally, from the long-range point of view, as we hope this Report has indicated, St. Joe is developing opportunities for itself as a company and for its employees as individuals, through these means: In Canada, St. Joe lias a 40interest in Bruns wick Mining & Smelting Corporation, which owns large undeveloped lead-zinc orcbodies near Bath urst, N.B. As in 1958, these properties remained dormant during 1959. On February 9, 1960, the Brunswick Board reached an agreement in prineb pie with a group of Continental smelters which offered a long-term purchase contract and financing i rrangement that may permit placing this property in production at the rate of 2,000 tons of ore per day | i i about three years. 1. New projects, such as Viburnum and Meramec. 2. Research to find new production teclmicpies and improve old ones. 3. Research to find new uses for lead and zinc Hnd to broaden the scope of the old ones, 4. Constant search for new opportunities for St. Joe's resources of manpower and finance, here and abroad, in mining and in related fields. 5. Constant effort to improve operating efficien cies fo improve our competitive position. If you believe, as we do, in the capability ot your Management and the value of the effort you and they are making, the outlook for St. Joe is bright. CUAIHM \\ To Sum It Up ... '' Fiist, as to the outlook for 1960, it appears that '' . n; ' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. NORTHERN NEW YORK Zinc mines and mills, ship* ping zinc concentrate to Josephtown, lead concentrate to Herculaneum. MISSOURI (IRON) Meramec Mining Co. (50% owned) will enter production in 1963 at 2,000,000-ton an nual capacity. MISSOURI (LEAD) Mining in Lead Belt since 1864. New properties at In dian Creek (1954) and Vi burnum (I960). ARGENTINA Cia. Minera Aguilar, S.A., St. Joe affiliate, produces leaa and zinc concentrates, also has interest in acid plant and zinc smelter. PERU Two-thirds' interest in open-! pit mine, shipping lead and zinc concentrates to Europe.; ST. JOSEPH LEAD COMPANY, NEW YORK, N. V Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.