Document e12LGr780G5XoRMEQLgnx90pM

Saint Joseph Lead Company Annual Report -- 1955 America's Corporate Foundation; 1955; ProQuest Historical Annual Reports pg. OJ tHAGR.VsA.RcDr-P'.A. |j I : i ; NINETY-SECOND ANNUAL REPORT TO THE STOCKHOLDERS St. Joseph Lead Co. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. TABLE OF CONTENTS Page Trustees and Officers . ......... . 1 Highlights........................................................................................ 2 World Markets for Lead and Zinc, . . : . ....................... 3-4 Earnings and Taxes .................... ;. ... . 5 Sales .................................................. .. . .......................................... 5 Dividends . ......................................................................................... 5 Lead and Zinc Statistics . ... ... 6 Working Capital . .. ... .. . ... 7 Capital Expenditures .. . .7 Aluminum Project ................ . .......................................... 8 Southeast Missouri .............. ........... .... .................................. 8 Edwards and Balmat, New York . ^ . ...................................... 8 Josephtown, Pennsylvania . . ......................................................... 8 Employee Relations................ 8 Oil Exploration......................................................................................... 8 Cia. Minera Aguilar, S.A. and Associated Companies....................... 8-9 Other Foreign Interests .. ......... . . 9 Anti-Trust Suit................................ .. .... . . , ......................... 9-10 Mine La Motte Corporation . 10 Staff Changes........................................................................................... 10 President's Report to Employees.................. 10 Stockholders ........................ ..... .. . .................................... 10 Conclusion................................................................................................ 10 Financial Statements and Accountants' Certificates..............................11-19 Transfer Office St. Joseph Lead Company 260 Park Avenue, New York 17, N. Y. Registrar City Bank Farmers Trust Company 22 William Street, New York 5, N. Y. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LIAO COMPANY INCORPORATED MARCH 25, 1864, UNDER THE LAWS OP THE STATE OP NEW YORK EXECUTIVE OFFICES . 250 PARK AVENUE . NEW YORK, 17, N. Y. Clinton H. Crane . . Irwin H. Cornell . . Andrew Fletcher . . Hendon Chubb . . . C. Merrill Chapin, Jr. Arthur M. Anderson . George I. Brigden . . H. DeWitt Smith . . John R. Shepley . . . Francis Cameron . . Bernard F. Desloge , Eli Whitney Debevoise James W. McAfee . . Board of Trustees Year Elected . . . ............. Chairman . Vice President, Cornell Iron Works, New York, N. Y. ......................................................................... President ....................................... Chubb & Son, New York, N. Y. ............................................................... Vice President Member Board of Directors and Executive Committee, J. P. Morgan & Co. Incorporated ............................. Vice President and Treasurer . . . . . . Consulting Engineer, New York, N. Y. . . . Vice President, St. Louis Union Trust Company ............................. Vice President ............................................ .... St. Louis, Missouri . . Debevoise, Plimpton & McLean, New York, N. Y. . . President, Union Electric Company of Missouri, St Louis, Missouri 1911 1913 1921 1928 1933 1944 1945 1948 1950 1953 1953 1954 1954 Executive Officers Clinton H. Crane . Andrew Fletcher . C. Merrill Chapin, Jr Francis Cameron . George I. Brigden . Charles R. Ince . R. J. Mechin . . . Robert H. Ramsey . James G. Colvin . William J. Elliott Edward P. Merrell . . . . . . . . Chairman .................................. President , .... . . Vice President , . . . . . . Vice President . Vice President and Treasurer . .........................Vice President . . . . . . . Vice President , . .........................Secretary Comptroller and Asst. Treasurer .................... Asst. Secretary ........................ Asst. Treasurer United States Division Managers MINES SMELTERS Elmer A. Jones Southeast Missouri John G. Wehn Josephtown, Pennsylvania Marshall G. Jones Edwards-Balmat, N. Y. William T. Isbell Herculaneum. Missouri Consultant George F. Weaton Cia. Minera Aguilar, S. A. Argentina Donald B. McGilvra ........... Vice President Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. JnJLonl^iljrri 15 : . " 1955 1954 Sales of metals, etc....................................... ' . $121,497,456 $95,003,072 Taxes on income................................................. $6,478,177 $4,628,764 Net income (after taxes)................ ... $12,729,820 $7,523,503 Dividends paid................................................. ... $8,148,666 $5,432,076 Shares of capital stock outstanding............. 2,716,222 2,716,222 Per share on capital stock: Taxes on income................................................. Net income............................................................ Dividends .............................................................. $2.38 $4.68 $3.00 $1.70 $2.77 $2.00 Current assets.................................. .... ... . Current liabilities.................................... . $47,421,282 $13,805,252 $39,868,612 $10,354,058 Net current assets......................... Cash....................................................... Short term marketable securities .. ....... $33,616,030 $7,210,350 $20,000,000 $29,514,554 $4,129,371 $10,000,000 Capital expenditures....................... $2,230,305 $1,125,743 Number of employees.................................. Number of stockholders..................... 5,101 11,263 5,010 10,497 2 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. NINETY-SECOND ANNUAL REPORT. FOR THE YEAR 1955 ST. JOSEPH LEAD COMPANY To the Stockholders: We take pleasure in submitting a report of operations for the year, 1955. Consolidated Balance Sheets as of December 31, 1955 and 1954 together with Summaries of Consolidated Net Income and Earned Surplus for each year for St. Joseph Lead Company and Subsidiaries, are submitted herewith. Similar statements for Compania Minera Aguilar, S. A., are included in this report. The accounts for these compa nies were audited by Haskins & Sells, Certified Public Accountants, and their certificates are appended. World Markets for Lead and Zinc Domestic and foreign demand for lead and zinc was excellent throughout 1955. In the United States, increasing industrial activity pushed the Federal Reserve Board's Index from 132 early in the year to an all-time high of 144 by December 1955. U. S. zinc consumption climbed to the record height of 1,084,000 tons, 21% higher than in 1954 and 10% higher than in any previous year. U. S. lead consumption registered a 10% gain over 1954 and reached 1,200,000 tons, the second highest year in the history of the lead industry. During the first half of the year, Government stockpiling took off the market the surplus stocks that had been built up owing to unneeded imports of metals. It will be recalled that in 1954, in lieu of tariff protection sought by pro ducers, the Government instituted a special stockpiling program in order to maintain a domestic mining industry sufficient to provide "an adequate mobilization base". As the figures in the following table show, this special stock pile program has not resulted in any appreci able increase in domestic production while imports continue high. Although it did succeed in raising the prices of lead and zinc, it is hoped that a more effective and permanent solution will be devised. In the last half of the year, shipments to con sumers of lead and zinc were in balance or slightly in excess of supply and only token offer ings were made to the stockpile. Because of the effect of Government stock piling on world metal markets and because of higher wage and supply costs, lead and zinc prices rose during the year. At the beginning of the year the price of lead was 15 per pound, was increased to 15*4^ on September 23rd, and to 16 on December 29, 1955. Zinc was 11*4^ per pound at the beginning of the year, was increased to 12^ in April, 12in June, 13 in September and 13*4# on October 17th, fell back to 13 on October 21st, where it remained to the end of the year. 3 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The following figures show, for the year 1955, the source of supply of lead and zinc in the United States and their consumption by industries, as compared with 1954: LEAD Available Supply; U. S. Mine Production .......... . ............. From scrap ...................................... Imports of concentrates and bullion(Pb content)........... Imports of pig lead ........................................................... 1955 (Eat.) 333,000 490,000 166,000 264,000 Total ...................................... ............................ 1,253,000 Add Decrease in Stocks at Smeltersand Refineries ... . 50,000 Total Lead Metal Available...,.. ................. 1,303,000 1954 (Final) * 325,000 481,000 162,000 276,000 1,244,000 * (5,500) 1,238,500 Consumption: Batteries..................................................... Ethyl gasoline............................................. Cables ................................................................................... Construction (pipe, etc.) .................................................. Paint.................................................................................... Other uses ........................................................................... Total Consumption.............................................. Surplus ................................................ 373,000 166,000 121,000 117,000 133,000 290,000 1,200,000 103,000 337,000 160,000 128,000 103,000 116,000 251,000 1,095,000 143,500 Available Supply: ZINC Recoverable U. S. Mine Production................................... Less--used to make pigments ......... 504,000 110,000 Recoverable domestic zinc available tb Metal Smelters ... Scrap zinc ............................................... Imports of concentrates (Recoverable zinc content) .. . Imports of slab zinc.......................... 394,000 80,000 413,000 198,000 Total .......................... 1,085,000 Add Decrease in Stocks at Smelters .. . . . ................... 118,000 Total Zinc Metal Available .................. 1,203,000 Consumption: Galvanizing ......................................................................... Zinc Base Alloys................................................................. Brass ................................................................................... Rolled Zinc........................................................................... Other ................................................................................... 442,000 404,000 143,000 60,000 45,000 Total Consumption . .. ., ............................. 1,084,000 Exports ............................................................... ............... 18,000 Total zinc metalconsumed and exported.. Surplus ................................................................................. 1,102,000 101,000 * Represents increase. 467,000 97,000 370,000 68,000 381,000 157,000 976,000 41,000 1,017,000 404,000 291,000 108,000 47,000 42,000 892,000 17,000 909,000 108,000 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Earnings and Taxes The 1955 consolidated net income after all charges of St, Joseph Lead Company and Sub sidiaries was $12,729,820, an increase of 69% over the $7,523,503 for the previous year. On the basis of 2,716,222 shares of capital stock outstanding, earnings were $4.68 per share as compared with $2.77 per share in 1954. The substantial increase stems from a number of factors, the most important of which is the increase in metal prices. The higher earnings also reflect reduction of inventories during the year by 17,007 tons of lead and 1,436 tons of zinc, as well as a dividend of $754,188 received in December from the Company's Argentine subsidiary, Compania Minera Aguilar, S.A. This dividend after deducting U. S. income tax is equivalent to 26$ per share on the capi tal stock. The provision for Federal and State taxes on income was $6,478,177 which is equivalent to $2.38 per share as against $4,628,764 or $1.70 per share for the previous year. The net earn ings per share for each quarter in 1955 as com pared with 1954 were as follows: The table below gives a record of the Com pany's earnings for the ten-year period ended December 31, 1955. TEN-YEAR EARNINGS 1946-1955 Year Consolidated Net Income After Income Taxes of 1946... . ... 1947.... . . . . 1948 ........ . . 1949.. .. . 1950 . .. . 1951 .... . 1952. .. . . 1953 .... . . 1954 .. 1955.......... . . $ 5,807,131 12,537,761 9,636,737 8,564,436 12,211,615 13,577,237 9,638,455 6,300,342 7,523,503 12,729,820 $ 1,923,373 4,479,659 3,776,836 2,889,925 7,976,468 13,819,817 5,667,894 4,344,733 4,628,764 6,478,177 The above earnings do not include the earn ings of Compania Minera Aguilar, S.A. which are shown separately in this report except to the extent of dividends in the amount of $294,340 received in 1947, $69,574 in 1951, $69,874 in 1952 and $754,188 in 1955. Sales First Quarter. Second Quarter. Third Quarter . Fourth Quarter. 1955 . $1.24 . 1.24 . .89 . 1.31 $4.68 mi $ .40 .61 .82 .94 $2.77: Total sales in 1955 amounted to $121,497,456, which is 28% higher than the comparable figure of $95,003,072 for 1954. Lead sales from St. Joe's production were 155,755 tons, as com pared with 123,273 tons in 1954. Sales of zinc content in slab zinc and zinc oxide showed an increase from 117,611 tons to 136,723 tons in 1955. The table on the following page shows the tonnage of lead and zinc production, purchases and sales for each of the last ten years. Dividends Quarterly dividends at the rate of 75 cents per share were paid during 1955 aggregating $3.00 a share for the year compared with $2.00 paid in 1954. The following is a record of cash dividend payments for the ten-year period through 1955: DIVIDENDS 1946-1955 Fear Outstanding Shares 1946............... ........... 1947............... . .. 1948 . . . .. 1949. . .. 1950 . .. 1951 . . . . . . . 1952 .. . . . 1953 . . . .. . 1954.. . . . .. . 1955. . . . .. 1,975,456 1,975,456 1,975,456 1,975,456 1.975.456 *2,468,846 2,592,124 **2,715,742 2,716,222 2,716,222 Per Share $2.00 3.00 3.25 3.25 3.25 3.25 3.00 2.75 2.00 3.00 * After 25% stock dividend. ** After 10% stock dividend. Amount $3,950,912 5,926,368 6,420,282 6,420,232 6,420,282 8,023,749 7,776,373 7,468,290 5,432,076 8,148,666 5 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. IrEAD STATISTICS Year 1946 ....... .............. . 1947 ........... . 1948 ......... . 1949 ........... . 1950 ........... . 1951 ........... 1952 ........... . 1953 ........... .............. . 1954 ........... .............. . 1955 ........... *.** . jlead Pig Lead Concentrates Equivalent Produced of Produced from ' Lead and Company's Concentrates Purchased Mims Purchased Concentrates Pig Lead Production 172,020 26,265 138,775 137,745 164,867 , 34,573 132,561 130,935 126,589 25,453 98,566 93,838 156,301 49,580 136,219 131,802 169,354 38,951 137,058 141,595 158,579 27,792 121,431 112,754 157,037 39,726 128,141 128,691 160,625 38,294 129,281 130,430 164,171 39,373 133,932 129,766 162,552 42,100 136,668 138,796 Lead Sales St. Joe Smelter Production 148,510 129,621 92,536 121,333 153,933 115,873 125,718 122,062 123,273 155,755 Purchased Lead Sales 17,026 32,257 32,963 32,596 58,217 32,032 34,907 45,130 59,806 56,345 ZINC STATISTICS Year Zinc Concentrates Produced from Company's mines Slab Zinc Equivalent of Produced Zinc and Concentrates Purchased Purchased Concentrates Slab Zinc Production Including Toll Zinc Content of Oxide and Metal Sales from Smelter Production Purchased Zinc Sates 1946 ......... 65,988 56,387 61,207 50,874 52,082 36,848 1947 ........... 71,595 53,737 65,124 60,982 60,616 44,152 1948 ........... 66,697 78,170 71,781 76,051 75,977 40,755 1949 ........... 70,952 81,946 79,769 86,314 71,116 41,702 1950 ........... 75,290 72,444 75,238 98,443 94,028 59,198 1951 ........... 1952 ......... 82,217 69,173 47,659 103,769 71,077 98,680 99,602 108,959 89,047 89,414 64,540 i r pffirOt 1953 ......... 104,744 112,991 126,968 121,592 103,009 49,513 1954 ........... 109,547 61,640 105,610 111,021 117,611 49,931 1955 ........... 109,303 111,868 >134,012' 138,201 136,723 65,822 Sulphuric Acid Sales 83,809 106,306 129,068 124,621 157,036 156,861 162,712 174,715 147,076 183,609 6 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Working Capital Reflecting the reduction in inventory and accounts receivable, the net working capital (cash resources, receivables and inventories, minus current liabilities) increased during the year from $29,514,554 at December 31, 1954 to $33,616,030 at the end of 1955. During this period the cash and short term securities position rose from $14,129,371 to $27,210,350. A summary of the prin cipal items during the year which accounted for the improvement in working capital is as follows: Net working capital at January 1, 1955 ............................... Additions: Net income after all charges................................................. Charges to income for depreciation, depletion, other re serves and other items which did not affect working capital ....................................... ........................................ $29,514,554 12,729,820 3,008,725 Deductions: Dividends paid................................................. Capital expenditures................... Investment in Brunswick Mining and Smelt ing Corporation Limited 5% Income Bonds due 1968 ....................................................... Other Investments and Advances................... $45,253,099 $8,148,666 2,230,305 1,625,000 (366,902) 11,637,069 Net working capital at December 31, 1955 $33,616,030 Capital Expenditures Expenditures during the year for property, plant and equipment were $2,230,305 as com pared with $1,125,743 in 1954. The major portion of the 1955 expenditures was for additional land and increased production facilities at Josephtown, totaling $1,769,847. Satisfactory progress is being made in increasing the refined zinc production capacity at this plant from 10,000 tons to 12,000 tons per month, the additional cost of which is estimated to be approximately $4,000,000. It is believed that the additional plant facilities will be completed early in 1957. At a meeting of the Board of Trustees on February 6, 1956, authorization was given to con struct a 100,000 kw, coal-fired steam power plant on property owned by the Company adjacent to the Josephtown, Pennsylvania, smelter, consisting of two 50,000 kw. turbine generators, at a cost of approximately $17,000,000. It is estimated that about 10% of this amount will be expended in 1956. Capital expenditures at the other divisions in 1956 are estimated at $1,450,000. Therefore, from present indications, it is believed that the total capital expenditures for the year 1956 will be about $7,150,000. Capital expenditures since 1946 are shown in the following table; COMPARATIVE: CAPITAL EXPENDITURES Year Lead Belt Josephtown Edwards-Balmat Total 1946. . . . . . 1947.. .. . . 1948.......... . . 1949.......... . . 1950.......... . 1951.... . . 1952........ . . 1953... . . . 1954.. ... .. 1955.......... . . $ 66,195 830,993 469,093 774,658 903,776 2,549,327 3,793,396 3,972,871 817,306 459,013 $ 699,645 5,316,460 1,776,183 147,536 177,071 564,768 1,768,048 720,665 208,499 1,769,847 $ 54,374 151,968 81,590 160,553 929,617 685,128 90,896 94,475 99,938 1,445 $ 820,214 6,299,421 2,326,866 1,082,747 *2,010,464 *3,799,223 *5,652,340 4,788,011 *1,125,743 2,230,305 Includes items capitalized by agreement with the Internal Revenue Service applicable to prior years amounting to $635,491 in 1960, $669,920 in 1951, $151,784 in 1952 and $92,938 in 1954. 7 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Aluminum Project Your Company has had under consideration during last year a proposal to join with Pitts burgh Consolidation Coal Company in building an aluminum reduction plant adjoining the Jos ephtown smelter. This plant would have had a capacity of 66,000 tons of aluminum annually at an investment of about $86,000,000. During 1955, engineering studies were made by Kaiser Engineers of the power plant, the aluminum re duction plant and of the economic phases of the project. Application was made to the Office of Defense Mobilization for a certificate of neces sity for rapid amortization of the planned facil ities. Shortly thereafter, the O.D.M. decided against granting such certificates for any fur ther aluminum plant expansion. The aluminum project has been held in abeyance pending fur ther study. Southeast Missouri The mines and mills in the Lead Belt again operated without interruption during 1955. Ore and chat milled was slightly less than in the previous year and totaled 7,090,797 tons as compared with 7,182,035 tons in 1954. Lead content, 90% basis, also showed a slight de crease from 97,599 tons to 95,232 tons. The average grade of ore mined remained about the same as in the previous year, but mill recoveries showed significant improvement. Zinc recovered in 1955 was 2,568 tons as com pared with 2,700 tons the previous year. Throughout 1955, production at the Indian Creek property in Washington County, pow in its second year of operation, continued to in crease and at the end of the year was oper ating on a basis of approximately 1,200 tons of ore per day. It is expected that continued improvement in production will be made until the 2,000-ton per day capacity is reached. New ore developed at the Southeast Missouri properties in 1955 approximated the tonnage mined during the year. Pig lead production at the Herculaneum smelter rose from 91,736 tons in 1954 to 99,286 tons in 1955. The rebuilding of the zinc furnace at Herculaneum was completed in the third quarter and 1,846 tons of slab zinc was pro duced during the remaining months of the year. Edwards-Balmat The mines and mills in this area operated throughout the year without interruption. The combined production at this division was 101,796 tons of zinc concentrates and 1,679 tons of lead concentrates. The comparable figures for 1954 were 103,479 tons and 1,981 tons re spectively. The entire production of zinc con centrates was shipped to our Josephtown, Penn sylvania, smelter. The lead concentrates wept to our Herculaneum, Missouri, smelter. 8 Josephtown Due to the increased demand for zinc, pro duction at this smelter was on a full-time basis throughout 1955, and totaled 136,355 tons of slab zinc equivalent of oxide and metal. Pro duction the previous year, which was on a cur tailed basis during the first quarter, totaled 111,021 tons of slab zinc equivalent. Employee Relations Employee relations at all divisions were again satisfactory and no work stoppages were experienced. The number of employees at the end of 1955 was 5,101 compared with 5,010 at the end of 1954. It is interesting to note that more than 18% of our employees or 936 have over 25 years of service with the Company. The Company continues to place particular emphasis on safety at our mines, mills and smelters with the result that lost-time accidents are kept to a minimum. Wages and salaries kept pace with the na tional trend and employees therefore, main tained or improved their relative earning power. Employees in the United States received $23,818,308 in wages and salaries during the year as compared with $21,975,110 in 1954. These earnings are supplemented by fringe benefits including retirement and disability in come, group life insurance and hospitalization. Oil Exploration The net amount expended for oil exploration in 1955 was $49,701 as compared with $331,982 in 1954, after deducting income from the sale of oil amounting to $136,955 and $113,329 for these years respectively. During the year one additional well was drilled on the Harris Ranch Block, Crockett County, Texas, known as the C-8, jointly owned with Continental Oil Company, which was com pleted as a commercial well. With the completion of the C-8 well, there are now six producing wells and one shut-in well on the Harris Ranch Block. The Harris C-9 well, located approximately one-half mile west of the Harris C-8, author ized in 1955, was being drilled at the end of the year and has since been completed as a producing well. A wild-cat well known as the Weynandt #1 well, jointly owned with Cerro de Pasco, on the Heard Ranch block in Wharton and Jackson Counties, Texas, was abandoned at 7,543 feet as no significant show of oil or gas was obtained. Compania Minera Aguilar, S.A. Net income of Compania Minera Aguilar, S.A., for the year 1955 amounted to 46,785,490 pesos and was 1,027,915 pesos under the previ- Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. oils year when the earnings reached an all-time high of 47,813,405 pesos. These earnings were after the following deductions: Depreciation and Spe cial Reserves .... Income and Excess Profits Taxes ___ 1955 Pesos 26,618,551 49,066,725 1954 Pesos 20,242,001 45,935,919 Total ...... 75,685,276 66,177,920 Cash and marketable securities at December 31, 1955 were 202,472,501 pesos, an increase of 26,625,459 pesos over the previous year. Relaxation of certain exchange restrictions by the new Argentine Government on dividends declared after June 30, 1955, made it possible to convert 27,322,596 pesos into US $754,188 in December at an average rate of 36.23 pesos to the U. S. dollar. St. Joseph Lead Company and Cia. Minera Aguilar have 225,895,750 pesos invested in Argentine securities and in cash deposits. Lead and zinc concentrate production for 1955 in metric tons as compared with 1954, is shown below: 1955 Tons 1954 Tons Lead Concentrates............ 27,879 22,581 Zinc Concentrates ............ 42,204 36,240 The rehabilitation program for the mine and mill which began in 1954, has been practically completed and dollar remittances for this equip ment continue to be received with reasonable promptness. Development work continues encouraging. Very good ore was exposed in the first level below the collar of the interior shaft. Most cor dial labor relations were maintained, in spite of some rather unsettled times experienced by the country. Costs and mill recoveries were satisfactory. A more active campaign of geological recon naissance in various parts of Argentina was carried on during the year. Two copper pros pects are being drilled and negotiations for an option on a third are under way. Difficulties have been encountered in clearing the titles to an attractive sulphur deposit. Sulfacid, S.A., had its best year to date, with sulphuric acid sales 50% above 1954. The out look for 1956 is encouraging. Operating conditions and metallurgical re sults at Austral were much improved and a nominal profit was earned in 1955. While Argentina will undoubtedly experience an immediate period of difficult economic ad justment, we are optimistic for the long range future. Brunswick Mining and Smelting Corporation Limited . The expenditures on exploration, develop ment and research by Brunswick Mining and Smelting Corporation Limited during the past year were approximately $1,575,000. The Com pany has advanced to December 31, 1955 on their 5% income bonds due in 1968, a total of $1,925,000. Brunswick's budget for 1956 contemplates expenditures of approximately $2,000,000, all of which will be advanced by the Company under its loan agreement. Development of a satisfactory milling process for Brunswick ores has proven more difficult than had been expected from the initial experi mental work. The pilot mill which was placed in operation in February, 1955, was shut down June 1st because results were unsatisfactory, and an extensive research program was initi ated with the assistance of Battelle Memorial Institute. Procedures which we are hopeful will result in a solution of the milling problems, are being developed and will be tested in the pilot mill this spring. Dependent upon the out come of this work, a decision will be made with regard to construction of production facilities. North African Exploration Societe de Developpement Minier, 35% owned by St. Joseph Lead Company and 65% by Newmont Mining Corporation, was formed as a holding company for the shares of Societe des Mines de Zellidja, owned by these two compa nies. Societe de Developpement Minier subse quently acquired the interest of St. Joseph Lead Company and Newxnont Mining Corporation in Societe Nord Africaine du Plomb. On the basis of the last sale in 1955, the Com pany's equity in Zellidja shares held by Societe de Developpement Minier had a market value of approximately $640,000. The dividends received on Zellidja shares in 1955 amount to 8,008,000 francs. The Company owns, through Minier, 17.15% of the issued shares of Nord Africaine du Plomb. These shares are not listed. It is estimated that the earnings of Nord Africaine du Plomb in 1955 will approximate $1,000,000. The cost of our equity in Societe de Developpe ment Minier is $290,497. In addition to the foregoing equity interest, the Company receives a consulting fee from Zellidja of 35% of 1% of the gross production of the Zellidja mine. This fee is paid in kind and amounted to $29,759.02 in 1954. Anti-Trust Suit In the last two Annual Reports, the stock holders were advised that the United States had commenced a civil action against St. Joseph 9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Lead Company and American Smelting & Refin ing Company in the United States District Court for the Southern District of New York, alleg ing violations of the Sherman Anti-trust Act in connection with the lead business of each of the defendants. The stockholders were also advised that the Company vigorously denies that it has in any way violated the anti-trust laws and that the Company stated this position in an answer filed to the Government's complaint. Mine La Motte Corporation The net income for 1955 of Mine La Motte (50% owned) was $408,188 but no dividend was declared as the available cash is needed for the 1956 development program which involves the sinking of a new shaft. Staff Changes There have been no major developments within the past year. Although the case will appear on the Court Calendar in April, 1956, it is not anticipated that the trial will be held before 1957. President's Report to Employees A copy of the President's Report to Em ployees for the year 1955 will be found under the flap of the rear cover of this report. On May 9, 1955, Mr. Robert H. Ramsey was elected Secretary of the Company, succeeding Mr. Robert Bennett who retired after 49 years of service; Mr. James G. Colvin, Assistant Sec retary and Assistant Treasurer was elected Comptroller and Assistant Treasurer; Mr. William J, Elliott was elected Assistant Secre tary and Mr. Edward P. Merrell, Assistant Treasurer. Stockholders The number of St. Joseph Lead Company stockholders of record on December 31, of each year since 1946 and a classification of their holdings are as follows: A TEN-YEAR RECORD OF STOCKHOLDER CLASSIFICATION Year Total 19 or less 20-99 100-199 200-Over 1946......... .... 1947......... .... 1948.......... .... 1949........ . . . 1950......... ... 1951....... .... 1952.. .. .... 1953 .. .. .... 1954......... .... 1955 .... . .. 7,581 7,885 7,823 7,993 8,435 9,023 10,182 10,657 10,497 11,263 1,778 1,834 1,834 1,847 1,794 1,907 2,146 2,257 2,165 2,105 2,865 3,021 3,135 3,123 3,443 3,705 4,235 4,424 4,305 4,830 1,641 1,735 1,611 1,747 1,943 2,076 2,346 2,485 2,511 2,740 1,297 1,295 1,243 1,276 1,255 1,335 1,455 1,491 1,516 1,588 The following from the data submitted to the New York Stock Exchange as of December 14, 1955 for its requested census of stockholders, may be of interest: DISTRIBUTION OF MAJOR CLASSIFICATIONS Number of Number of .. - ' ' Holders of Record Shares Held Men ................................. . ................ v.. . 3,934 622,141 Women .............................................. / .. . 4,573 581,276 Joint Accounts............................................ . 1,208 72,921 Fiduciaries Individuals ................................... . .. 506 281,720 Institutions........................................... . . 211 117,770 Stock Brokers and Securities Dealers.......... .. 219 360,426 Nominees....................................................... . . 170 309,734 Other..................................... .................... . . . 335 364,664 Foreign Stockholders................................... . . 34 5,570 Total ................ '... ..^ ... . . 11,189 2,716,222 Conclusion We wish again to express our sincere appreciation to all employees for their loyal and efficient efforts during the past year, and for the continued support of our stockholders. Clinton H, Crane Chairman New York, March 19, 1956. Andrew Fletchee President 10 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST, JOSEPH HEAD COMPANY AND SUBSIDIARIES Summaries of Consolidated Income For the Years Ended December $1, 1955 and 1954 Net Sales of Metals, Metal Products, Etc................... Cost Thereof (exclusive of depreciation and depletion). Gross Profit from Operations Before Depreciation and Depletion Deduct: Selling, general and administrative expenses , , Exploration: $1,749,589 New mine examination and development expenses Oil and natural gas expenses, net . . .. Past service annuities (Note 5)........................ ......... 75,107 49,701 195,550 Net Profit from Operations Before Depreciation and Depletion Other Income: Dividends: Compania Minera Aguilar, S. A. (Note 2) . The New Jersey Zinc Company . . Mine La Motte Corporation (Note 3) .............. $ 754,188 243,750 -- Other dividends, interest, etc. less charges .. . 433,865 Deduct: Depreciation of plant and equipment $2,328,105 Depletion of mines........................... ... , 280,648 Provision for Taxes on Income: Federal normal tax and surtax (1954, net of Federal excess profits tax refund, $35,690) .................. Federal income taxes--deferred--related to acceierated amortization of emergency facilities . ..... State income taxes............................................. ;. .. $6,096,210 289,033 . 92,934 Net Income for the Year................................................... Earned Per Share on the 2,716,222 Shares Outstanding ............ 1955 $121,497,456 99,042,562 $ 22,454,894 2,069,947 $ 20,384,947 1,431,803 $ 21,816,750 2,608,753 $ 19,207,997 6,478,177 $ 12,729,820 $4.68 $1,499,717 344,756 331,982 195,550 -- $ 243,750 100,000 498,780 $2,218,945 247,766 $4,233,441 311,749 83,574 1954 $95,003,072 78,854,619 $16,148,453 2,372,005 $13,776,448 842,530 $14,618,978 2,466,711 $12,152,267 4,628,764 $ 7,523,503 $2.77 Summaries of Consolidated Earned Surplus For the Years Ended December SI, 1955 and 1954 Earned Surplus at Beginning of the Year......................................... Net Income for the Year........................................................................ Cash Dividends Paid During the Year (1955, $3 per share; 1954, $2 per share)....................................................... ........... ........................ Earned Surplus at End of the Year............................ . ........ 1955 $ 19,610,334 12,729,820 $ 32,340,154 8,148,666 $ 24,191,488 1954 $17,518,907 7,523,503 $25,042,410 5,432,076 $19,610,334 The accompanying notes to financial statements are an integral part of the above summaries. 11 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY AND SUBSIDIARIES Consolidated Balance Sheets, December SI, 1955 and 195i ASSETS Current Assets: Cash . ...................... ' State, Municipal, and U. S. Government 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 (less reserve for slow- moving items--1955, $21,837; 1954, $21,637) Advances: Compania Minora Aguilar, S. A.............................. Sulfacid, S. A. Industrial........................................ Compania Metalurgica Austral-Argentina, S. A. Comereial ................................................................ December 31,1955 $ 7,210,350 20,000,000 8,411,916 376,533 374,804 2,120,778 3,551,083 5,376,818 $47,421,282 $ 95,034 1,175 24,670 120,879 Investments: Compania Minera Aguilar, S. A. (at nominal valuation--99.9% owned, not consolidated)-- (Note 2)................................................................. Mine La Motte Corporation (at nominal valua tion--50% owned) -- (Note 3) ........................ The New Jersey Zinc Company (195,000 shares at cost, less non-taxable dividends--9.9% owned) Brunswick Mining and Smelting Corporation Limited (at cost)--(Note 7): 1,600,000 shares--40% owned ........................ 5% income bonds, due July 1, 1968 . . . Sundry securities, loans, etc. (at cost, less reserve, $200,000) ................................................................. $1 :. 1 11,161,854 2,339,758 1,925,000 437,000 15,863,614 Capital Assets (Note 4): Mining properties and mineral rights: Appraised value as of March 1,1913.................. Less allowance for depletion................ ... Appreciation arising from revaluation subse quent to March 1,1913 .................. . .. Less allowance for depletion . ,. , Additions subsequent to March 1,1913 (at cost) Less allowance for depletion . . ...... Land, buildings, plant and equipment (at cost) .. Less allowance for depreciation.......................... Total capital assets, net.................. Miscellaneous Assets: State, Municipal and U. S. Government securities on deposit with State departments (at amortized cost) ......................................................................... Cash and marketable securities (at amortized cost)--Fire insurance fund (see contra).......... $13,500,000 13,500,000 $ 3,500,000 3,500,000 $21,877,896 19,497,366 $47,556,345 30,876,597 $ 798,771 214,653 2,380,530 16,679,748 $19,060,278 1,013,424 Deferred Charges: Oil and natural gas expenditures in suspense Deferred past service annuities (Note 5) ... , Deferred exploration expenses .............. Other deferred charges........................................... Total .............................................. ..... . $ 156,009 650,935 687,542 247,704 1,742,190 $85,221,667 December 31,195U $ 4,129,371 10,000,000 10,109,075 406,504 226,638 5,712,455 4,016,935 5,267,634 $39,868,612 $ 126,880 357 25,028 152,265 $1 1 11,161,854 2,339,758 300,000 673,718 14,476,332 $13,500,000 13,500,000 $ 3,500,000 3,500,000 $21,726,677 19,216,718 $46,113,811 29,067,078 2,509,959 17,046,733 $19,556,692 $ 799,780 134,475 334,255 $ 74,153 840,486 621,838 261,923 1,804,400 $76,851,556 The accompanying notes to financial statements are an integral part of the above balance sheets. 12 Vr. ' ,i i'' ; Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ;ST. JOSEPH LEAD COMPANY AND SUBSIDIARIES Consolidated Balance Sheets, December 31, 1955 and 1954 LIABILITIES Current Liabilities: Accounts payable . Wages payable........................................................ Accrued taxes: Federal income (Note 6) .................................. Other ........................................................... ... Deferred Credit--Deferred Federal income taxes-- related to accelerated amortization of emergency facilities..................................................................... Reserves: Injury claims and workmen's liability insurance Employees' life insurance and retirement (Note 5) Fire insurance (see contra) .................................... Stockholders' Equity: Capital Stock: Authorized, 5,000,000 shares of $10.00 each. Shares Issued ... .. . In Treasury............................ 2,737,636.85 21,414.35 Outstanding . . 2,716,222.50 Surplus: Earned ,. . . .......................... .... Capital ................................................................. Total Stockholders* Equity.............. December SI, 1955 $ 7,215,612 384,252 5,820,233 385,155 $13,805,252 $ 568,142 384,431 214,653 738,985 1,167,226 $27,376,369 214,144 27,162,225 $24,191,488 18,156,491 42,347,979 $69,510,204 December SI, 1954 $ 5,158,181 321,017 4,577,711 297,149 $10,354,058 $ 533,271 390,749 194,475 449,953 1,118,495 $27,376,369 214,144 27,162,225 $19,610,334 18,156,491 37,766,825 $64,929,050 Total . $85,221,667 $76,851,556 The accompanying notes to financial statements are an integral part of the above balance sheets. 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPAHI AND SUBSIDIARIES Notes to Financial Statements 1. Inventories of lead, zinc, etc. (finished, in process, and concentrates) are valued at cost deter mined on last-in, first-out (LIFO) method, exclusive of depreciation and depletion. Materials and supplies are valued at average cost. 2. The remittances of past profits from Argentina are subject to certain restrictions. It is the prac tice of the Company to record dividends received or receivable from Compania Minera Aguilar, S. A. as they are converted into U. S. dollars. Accordingly, the financial statements of St. Joseph Lead Company and subsidiaries do not include dividends of Compania Minera Aguilar, S. A. not so converted as follows: Argentine paper pesos December 31 1955 195h In bank in Argentina ... Invested: Compania Metalurgica Austral-Argentina, S. A. Comercial: 5,463,249 2,983,749 Capital stock (40.5% owned) ............................. Bonds ......................................... .................... . ........................ Sulfacid, S. A. Industrial--Capital stock (28.6% owned) .. Due from Compania Minera Aguilar, S. A.--Dividends declared not paid, less Argentine income tax withheld--1955, 4,764,070 pesos; 1954,4,609,093 pesos......................................................... 9,720,000 -- 8,240,000 51,104,212 9,720,000 1,000,000 8,240,000 48,832,905 Total.................................................................................... 74,527,461 70,776,654 St. Joseph Lead Company together with Compania Minera Aguilar, S. A. own 43.3% of Compania Meta lurgica Austral-Argentina, S. A. Comercial and 60% of Sulfacid, S. A. Industrial. Financial statements of Compania Minera Aguilar, S. A. are included herein on pages 15-17. 3. The Company's equity in the net assets of Mine La Motte Corporation, as shown by audited financial statements, was $511,881 and $307*787 at December 31, 1955 and 1954, respectively, and its equity in the net income for the years then ended was $204,094 and $111,656 respectively. 4. The net value of the capital assets as shown in the consolidated balance sheets 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 production, cost of labor, and other factors. 5. The Company has a Retirement Plan for Salaried Employees and a Pension 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 sheets. Both plans are non-contributory and all past service costs have been funded. Current annual costs of both plans aggregated approximately $390,000 and $411,000 in 1955 and 1954, respectively. It is the practice of the Company to defer past service annuity cost payments made in the past in amounts equivalent to the estimated future tax reductions resulting therefrom. 6. The Federal income and excess profits tax returns of St. Joseph Lead Company and subsidiaries have been examined by the Internal Revenue Service through the year ended December 31, 1952 and all assessments and adjustments have been settled. 7. Leadridge Mining Company Limited, a wholly-owned subsidiary, is committed to loan Bruns wick Mining and Smelting Corporation Limited, a 40% owned company, up to $7,500,000 (Canadian funds) as needed for development and equipment. St. Joseph Lead Company has agreed to make $7,500,000 (U. S. funds) available to Leadridge for this purpose. The loan may be subordinated to other indebtedness of Brunswick not to exceed $17,500,000 (Canadian funds) on terms and conditions satisfactory to Leadridge. At December 31, 1955 Leadridge held $1,925,000 of Brunswick's 5% income bonds purchased under the commitment. 8. Reference is made to the text of this report relative to the companies' capital expenditures and Anti-Trust suit. 14 , Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS 67 BROAD STREET NEW YORK ACCOUNTANTS1 CERTIFICATE To the Stockholders of St. Joseph Lead Company; We have examined the consolidated balance sheet of St. Joseph Lead Company and its subsidiaries as of December 31,1955 and the related sum maries of consolidated income and earned surplus 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 summaries of consolidated income and earned surplus, with the notes to financial statements, present fairly the financial position of St. Joseph Lead Company and its subsidiaries at December 31, 1955 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 27, 1956 HASKINS & SELLS 15 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPANIA MINERA AGUILAR, S. A. Balance Sheets, December 31, 1955 and 195A ASSETS Current Assets: Cash............................................................................ Marketable securities: Argentine Government (at cost) ... ... . Other (at cost, less reserve--1955 and 1954, 3,213,871) .......................................................... Accounts receivable--trade (less reserve--1955 and 1954, 4,111,400) ............................... ........... Due from partly-owned company--trade .. Other accounts receivable, etc................................ Inventories: Lead and zinc concentrates (at average cost, or less, exclusive of depreciation and depletion --valuation not in excess of market)............ Materials and supplies (at average cost or less) Investments (Note 2): Sulfacid, S. A, Industrial (at cost--21.4% owned) Compania Metalurgica Austral-Argentina, S, A. Comercial (at cost--2.8% owned) ................ Capital Assets (Notes 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 1935 .. Less allowance for depletion............................ Total mining properties and mineral rights, net........................................... Land, buildings, plant and equipment (at cost). . Less allowance for depreciation...................... Total capital assets, net..................... Deferred Charges December SI, 1955 Argentine paper pesos (Note!) 32,480,363 78,885,277 91,106,861 7,883,121 5,127,790 4,818,324 40,853,150 32,829,036 293,983,922 6,155,000 673,000 6,828,000 4,384,038 3,502,941 49,446,736 39,700,779 49,346,332 18,006,737 881,097 9,745,957 10,627,054 31,339,595 41,966,649 499,276 December 81,1954 Argentine paper pesos (Note 1) 39,617,633 79,121,213 57,108,196 11,288,116 3,380,077 32,509,438 21,882,315 244,906,988 6,155,000 674,000 6,829,000 4,384,038 3,502,941 49,446,736 39,700,779 35,550,293 15,036,169 881,097 9,745,957 10,627,054 20,514,124 31,141,178 3,651,228 Total 343,277,847 286,528,394 Notes: (1) At December 31, 1955 and 1954, the quoted free rate of exchange for a peso was approximately 2.7 and 7 cents, respectively. (2) The Company together with St. Joseph Lead Company own 50% of Sulfacid, S. A. Industrial and 43.3% of Compania Metalurgica Austral-Argentina, S. A. Comercial. The Company was contingently liable at December 31, 1955 and 1954 for subscriptions to additional shares of capital stocks amounting to pesos 900,000. (3) The net value of the capital assets as shown in the above balance sheets does not indicate the present value of the Company'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. 16 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPANIA MINEEA AGUILAR, S. A. Balance Sheets, December 31, 1955 and 1954 LIABILITIES Current Liabilities: Accounts payable--trade................................... . Due to St. Joseph Lead Company (including dividends payable -- 1S55, 51,104,212; 1954, 48,832,906) .......................................................... . Due to partly-owned company.............. . Wages payable............................................ .... Accrued Argentine income and other taxes Other accounts payable........................................... December SI, 1955 Argentine paper pesos (Note 1) 7,055,249 54,549,200 2,210,780 2,937,869 38,471,537 1,686,771 106,911,406 Deferred Credits--Unearned interest, etc................. RESERVES: Replacement and rehabilitation of capital assets (Note 4) ................................................................ Employees' compensation under Argentine social laws ........................................................................ Accidents.................................................................... Other .......................................................................... 17,720 80,280,300 12,490,142 6,078,784 13,753,717 112,602,943 Stockholders' Equity: Capital Stock: Authorized and issued--500,000 shares of a nominal value of 80 Argentine paper pesos each .................................................................... Less in treasury, 35,000 shares................... ' A' A ' 1 40,000,000 2,800,000 Outstanding 465,000 shares.......................... . Surplus: Capital surplus arising from 1935 valuation of ore reserves (remainder after transfer of pesos 48,000,000 to stated value of capital stock) .................................................................. Earned surplus: Appropriated: For acquisition of capital stock held in treasury...................................................... Statutory reserve ................................... Unappropriated (after charging deficits aggregating1 pesos 6,395,000 against capital sur plus arising from reduction in stated value of capital stock--Note 5) .......................... 2,800,000 2,964,005 79,335,037 37,200,000 1,446,736 85,099,042 Total Stockholders' Equity.................. 123,745,778 Total ...................................................... 343,277,847 December SI, 1954 Argentine paper pesos (Note 1) 1,586,284 50,582,971 1,457,224 2,319,351 38,213,838 2,204,705 96,364,373 30,578 06,691,863 11,563,445 3,223,225 11,934,622 83,413,155 40,000,000 2,800,000 37,200,000 1,446,736 2,800,000 2,005,787 63,267,765 68,073,552 106,720,288 286,528,394 Notes Continued: (4) Ore reserves have been estimated by the directors to exceed appreciably those indicated by former sur veys. Had depletion been provided for units sold in each of the years 1955 and 1954 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 have been approximately Argentine paper pesos 320,000 and 275,000, respectively, and net income for both years would have been correspondingly less. However, no depletion has been provided since 1950, as the amounts thereof were not considered to be material. A special appropriation of 23,588,438 Argentine paper pesos for replacement and rehabilitation of capital assets has been made out of income for the year 1955. Similar special appropriations were made out of income in the preceding four years aggregating 56,691,863 Argentine paper pesos. (5) The net profit since beginning of operations, pesos 187,095,542 (earned surplus at December 31, 1955 pesos 85,099,042 plus dividends declared pesos 108,391,500 and less aggregate deficits transferred to capital surplus pesos 6,395,000) represents aggregate net profit pesos 307,076,622 (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 and rehabilitation of capital assets aggregating pesos 80,280,300. 17 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPANIA MINERA AGUILAR, S. A. Summaries of Income For the Years Ended December SI, 1955 and 1954 Net Sales op Lead and Zinc Concentrates, Etc. . .. ............ Cost Thereof (exclusive of depreciation and depletion)......... 1955 Argentine paper pesos (Note 1) 177,340,943 54,922,293 1954 Argentine paper pesos (Note 1) 169,445,333 51,617,348 Gross Profit from Operations before Depreciation and Deple tion .......................................................................................................... Deduct: Selling, general and administrative expenses.... Taxes, other than taxes on income.......... ..... 5,875,415 1,913,115 122,418,650 7,788,530 117,827,985 3,000,114 4,172,503 7,172,617 Net Profit from Operations before Depreciation and Depletion Income Credits: Dividends..................................................................... Interest (including interest from partly-owned companies---1955, 173,590; 1954, 691,920) . Other, less charges ................................................. 4,957,801 2,180,413 702,432 114,630,120 7,840,646 110,655,368 1,156,467 1,924,738 254,752 3,335,957 Depreciation of Plant and Equipment (Note 2). . .................. 122,470,766 3,030,113 113,991,325 1,853,149 Provision for Argentine Income and Excess Profits Taxes, . 119,440,653 49,066,725 112,138,176 45,935,919 Net Income for the Year before Special Appropriation for Replacement and Rehabilitation of Capital Assets........ ... Special Appropriation for Replacement and Rehabilitation of Capital Assets (Note 2) ............................................................... Net Income for the Year, Less Special Appropriation . . .. 70,373,928 23,588,438 46,785,490 66,202,257 18,388,852 47,813,405 Summaries of Unappropriated Earned Surplus For the Years Ended December SI, 1955 and 1954 Surplus at Beginning of the Year ........................................................ Add--Net Income for the Year, Less Special Appropriation .. Total..................................................................................... ........... Deduct: Dividends declared or paid during the year... Appropriation to statutory reserve..................... 29,760,000 958,218 1955 Argentine paper pesos (Note 1) 63,267,765 46,785,490 110,053,255 1954 Argentine paper pesos (Note 1) 34,714,125 47,813,405 82,527,630 30,718,218 18,600,000 659,765 19,259,765 Surplus at End of the Year (after charging deficits aggregating pesos 6,395,000 against capital surplus)...... ....... *...... 79,335,037 63,267,765 Notes: . ...1 1 1 (1) Reference is made to Note 1 to the accompanying balance sheets. (2) Reference is made to Note 4 to the accompanying balance sheets. 4. 18 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS 07 BROAD STREET NEW YORK ACCOUNTANTS9 CERTIFICATE St, Joseph Lead Company: . We have examined the balance sheet of Corapania Miners Aguilar, S, A. (incorporated and doing business in Argentina) as of December 31, 1955 and the related summaries of income and unappropriated earned surplus 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. A special appropriation of 23,588,438 Argentine paper pesos for replacement and rehabilitation of capital assets has been made out of income for the year. Officers of the Company explain that lack of dollar exchange has prevented acquisition of necessary equipment and supplies for adequate replacement and maintenance, with the result that related expense accounts and net income have not been burdened with amounts which otherwise would have been charged thereagainst. In our opinion accepted accounting principles require that charges for maintenance be made against income only in the year of expenditure or other definite deter mination, and that charges for major replacements be capitalized. Similar special appropriations were made out of income in the preceding four years aggregating 56,691,863 Argentine paper pesos. In our opinion, except as described in the preceding paragraph the accompanying balance sheet and summaries of income and unappropriated earned surplus, with the footnotes thereon, present fairly the financial position of Compania Minera Aguilar, S. A. at December 31,1955 and the results of its operations for the year then ended, in conformity with gen erally accepted accounting principles applied on a basis consistent with that of the preceding year. HASKINS & SELLS February 9, 1956 19 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. PROXIES FOR ANNUAL MEETING This Report is sent to Stockholders of the Company in advance of the solicitation by the Board of Trustees of proxies for the Annual Meeting of Stockholders to be held on May 14, 1956 at 11 A.M. Proxies will be solicited commencing on April 13, 1956. ) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission Cover: Tapping iron matte from new electric sine furnace, Herculaneum, Missouri CONDENSED REPORT OF OPERATIONS: 1 THE PRESIDENT'S REPORT TO ALL ST. JOE EMPLOYEES AND THEIR FAMILIES: We Sold: Pig bad, tons . . . Slab zinc equivalent, tons Sulphuric acid, tons . *v, .. We Received: From sales . From our investments . y v. . ' From other sources . . - . <!\ Our gross income totalled * . - .4 We Paid in Taxes: Federal and State * We Earned as Net Income : Of which, we paid as dividends And kept for use in the business ; iV We Earned Per Share of Stock:. : 1. _ ' ' 1 . We paid taxes per share of: . We paid dividends per share of: Our Current Assets (at year's end) . Our Current Liabilities (at year s end). Number of Our Employees . . . . Number of Our Stockholders . . . Shares of Our Stock Outstanding . J Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1954 183,079 167,542 147,076 $95,003,072 $680,983 $274,877 $95,958,932 $4,628,764 $7,523,503 $5,432,076 $2,091,427 $2.77 $1.70 $2.00 $39,868,612 $10,354,058 5,010 10,497 2,716,222 AS A GLANCE AT THE SUMMARY on this page will show you, our company's 1955 earnings were higher than in 1954. Part of this increase in earnings was due to higher metal prices; part of it from a dividend we received late last year on our stock in the Compania Minera Aguilar, 5.A. in Argentina; and part of it was due to selling much of the stocks of lead and zinc we had built up during previous years. Although this excellent showing must be gratifying to us all, it must not blind us to the fact that certain conditions we must face in the future will be troublesome for our company unless we act now to prepare to meet them. In this report, I should like to outline these conditions and tell you what we plan to do about them, both in strengthening our company and in helping to maintain the domestic industry of which it is a part. GROWTH IS REQUIRED First, with respect to our company, the mere fact that we have been in business steadily for 92 years is no guarantee of con tinuing profits and of stability of operations. St. Joe has sur vived for 92 years, and it has prospered in that time because its management never relaxed in seeking new opportunities for growth, not only in size and scope of operations but in efficiency as well. In common with other mining companies, we must rec ognize these facts: I, our customers, the consumers of metals, are continually changing their requirements for metals, both as to kind and as to quantify; 2, the ores from which we recover these metals year by year have become lower in grade and more costly to mine and treat. Our course under these conditions is clear. On the one hand we must help consumers find new uses for our products and convince them that St. Joe's products will be the best for the job required. On the other hand, we must constantly study every phase of our operations with the objec tive of increasing their efficiency. Our present level of effici ency, high as it is, is not good enough to handle tomorrow's problems. HOW WE CAN HELP THE MINING INDUSTRY Although St. Joe is one of the largest and lowest-cost domestic producers of lead and zinc, and also has substantial interests in mining operations outside the United States, it ts your com pany's belief that it is in the best interests of the United States and of domestic consumers of metals, and also of ourselves, to maintain a healthy domestic lead and zinc mining industry, made up of many active companies. In past years, this report has pointed out that the most seri ous threat to the maintenance of a healthy domestic mining industry is a flood of unneeded imported metals that force U.S. metal prices down to levels that are unprofitable for nearly all producers of lead and zinc. As you recall, this happened four years ago, and only after the most strenuous efforts, was the domestic lead-zinc industry able to convince the Administra tion in Washington that something had to be done. Rather than the tariff relief that was recommended by the Tariff Commis sion, the Administration in mid-1954 set up a special stockpiling program for lead and zinc to take surplus metal off domestic markets^ By now, we are in a better position than we were a year ago to evaluate the results of this program. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPARISON OF DOMESTIC LEAD AND ZINC SITUATION IN SHORT TONS, 1954-1955 1955 1954 (Est.) (Final) LEAD From domestic mines ...--------- . Scrap............................... .............. . Imports............... ................. ..... . From producers' metal stocks ... . Available supply..................... .. . Consumption ................................. . Surplus .......................................... . 333,000 490,000 430,000 50,000 1,303,000 1,200,000 103,000 325.000 481.000 438,000 (5,500)* 1,238,500 1,095,000 143,500 ZINC From domestic mines............... . Secondary sources .................. . . i.. . Imports..................... ............... .. . From producers' metal stocks ... , 394,000 80,000 611,000 118,000 Available supply......................... .. . 1,203,000 Consumed and exported................ . 1,102,000 Surplus ........................................... . 101,000 * Denotes increase in stocks 370,000 68,000 538,000 41,000 1,017,000 909,000 108,000 Unquestionably, stockpiling did increase prices for lead and line, and thereby benefited U.S. mines. However, foreign mines, selling to the United States, received equal benefit. Imports of zinc, after declin ing somewhat in 1954, climbed back in 1955 nearly to their 1953 level of 669,000 tons. Domestic mine output at 507,000 tons for 1955 was only about 10% over the 1954 level. In lead, domestic mine output for 1955 rose 2.5% over the 1954 level, and imports were lower by 1.8% for the year. In other words, domestic mining of lead and zinc has not been greatly stimulated and is considerably below the 1951 level, even though strong demands for both metals during 1955 pushed zinc consumption in the United States to an all-time high of 1,060,000 tons, and lead consumption to the very high level of 1,200,000 tons. Furthermore, no provision has been made for con trolling imports of unneeded metal in the future if de mand should again slacken. Therefore, it is evident that the Administration in its announced intention to aid domestic mining in order to "maintain an ade quate mobilization base", must turn to measures that offer a permanent solution to the problem rather than the temporary aid of stockpiling. We, in St. Joe, approve the suggestion of an import tax of 2c per lb. of metal to be applied to imports of lead and zinc whenever the domestic prices of these metals fall below a specified base level. This level would be determined by some Governmental agency or Congress after consultation with producers and consumers. It would be fixed with the underlying thought of maintaining a domestic mine production at approximately the 1951 rate. When domestic prices of lead and zinc rose above the base price levels, imports Right: Headframe at neiv mine (No. 25) near Doe Run Junction, . Lead Belt. would again come in free of the import tax. It is believed that such a tax would tend to stabilize metal markets at a reasonable level, would control im ports without cutting off needed metal from abroad, and would benefit consumers of metals by avoiding the expense and uncertainty of widely fluctuating metal markets. We intend this year to do what we can to convince other producers, the Administration, and consumers of metals that this measure is in the best interests of each of them. However, further study by the Administration, producers, and consumers may de velop some other method than the suggested import tax--if it is practicable and fair we will work toward its adoption. We know from our foreign investments that lead and zinc can be produced more cheaply out side the United States, but we are convinced that it is to the best interests of the free world to maintain a profitable mining industry in the United States, I have explained these matters in some detail be cause, as an employee of St. Joe, it is in your interest to aid the management and the stockholders to solve the problem of the control of unneeded imports. ST. JOE'S PROGRESS IN 1955-By Divisions The following table gives a comparison of our produc tion and sales figures for 1955 with those for 1954. Note that sales of all products were substantially Reproduced with permission of the copyright owner. Farther reproduction prohibited without permission. ZINC 1955 Tons . 162,552 . 42,100 Pig lead equivalent of produced and purchased concentrates . 136,668 . 138,796 Pig lead sales: . 155,755 . 56,345 Zinc concentrates: . 109,303 . 111,868 Slab zinc equivalent of: . 134,012 . 138,201 . 136,723 . 183,609 1954 Tons 164,171 39,373 133,932 129,766 123,273 59,806 109,547 61,640 105,610 111,021 117,611 147,076 higher. This, coupled with higher metal prices, resulted in the increased earnings already referred to. The table on the first page of this report provides a brief picture of our income and our payments for wages and salaries, taxes, and dividends. Additional financial and other information is given in the 92nd Annual Report to our stockholders. You are again urged to ask your Division Manager for a copy of the Annual Report if you are interested and have not already received one as a stockholder. OUR ADVERTISEMENTS To supplement the efforts of the individual members of our sales staff, we regularly take advertising space to inform consumers of new developments in our products. The advertisements included in this report show: I, how improved galvanizing techniques greatly in crease the usefulness of zinc coatings; 2, how St. Joe zinc is now "tailor-made" to suit the needs of our gal vanizer customers; 3, how lead has proved useful in the atomic energy field. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. NEOPRENE GASKET' STAINLESS STEEL BODY ALUMINUM CAN Above! Directional gamma radiography equipment is shown in the photograph. The drawing shows how the lead container serves both to direct the rays and to shield personnel from dangerous radiation exposure. Courtesy: Technical Operations, Inc. Left: Returnable container for Cobalt 60. Courtesy: Oak Ridge Nat'l. Laboratory Thanks to - Co60 is becoming industry's "seeing-eye" in non-destructive testing! CTOYNPTEAINOEFR Rgfwrnobf# Garnma radiography, utilizing Cobalt 60 as the self-generating "light" source, has now become a practical and low-cost industrial tool in the vital field of quality control. This has been made possible by (a) the availability of Cobalt 60 from the nation's nuclear reactors and (b) by taking advantage of the inherent and incomparable density of the metal lead as a material of construction for portable "safes" containing Cobalt 60 or other high-energy radioisotopes. As a shielding material, lead prevents off-target penetration of the dangerous gamma rays. The thickness of the lead shield is, of course, governed by the penetrating power of the rays emitted. Oak Ridge National Laboratory specifications for a Cobalt 60 container read as follows: MATETRYIAPLE SOHFIPPED MAXIMUM ACTIVITY ftod'otsofope Amount LETAHDICSKHNEIESLSDO(Fm.) ASSETMOBTLAEDL WCOEINGTHATINOEFR (lb) UgflofvmpmograafrtndttsHorl*ids, Co40 1 airro , , 4 $ curie. 5 2& curios 180 curie. ' 67 1/2 450 650 810 1320 The property of density has made lead, one of the first metals util ized by man, an important factor in a new and rapidly expanding in dustry with unlimited potentials... the harnessing of nuclear energy. ST. JOSEPH LEAD COMPANY - The .largest Producer of Lead in the United States _ 250 PARK AVENUE, NEW YORK 17, NEW YORK Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Lead Belt, MISSOURI With the average tonnage of ore and chat milled per operating day only slightly below that of the record output of last year, it is gratifying to note that operat ing costs increased only in proportion to increases in wages. Efficiency in general has been improved, and it is hoped that still further improvement will be made. The establishment in July 1955 of a mine research de partment, which is now studying problems of rock breaking and ground support, should be of benefit. The work of the milling staff and metallurgical research de partment has resulted in better recovery in the Lead Belt mills. For the district as a whole, lead content of mill tailing has been reduced from 0.14% lead to an average of 0.11%. The No. 25 shaft was completed Southeast of Flat River. Equipment was installed, and development work begun. This is the completion of the first step in a five-year program for opening a new mining area. The new Pirn pump station was com pleted, replacing two less efficient installations. The Indian Creek mine and plant at the end of 1955 was nearing its goal of full production. Mill metallurgy was being steadily improved and efficiency in costs of min ing showed similar improvement during the year. The Leadwood mill staff is to be congratulated on a year without a lost-time accident. Herculaneum^ MISSOURI Operation of the new baghouse and surrounding units during 1955 increased lead output to about 100,000 tons, one of the best years Herculaneum has ever had. All units are operating satisfactorily. The new zinc slag furnace was started during the year and as familiarity with it is gained, it is proving easier to control and to work with than the original smaller unit. About onehalf of Herculaneum's output is now shipped in the one-ton ingots, resulting in easier handling both for ourselves and our customers. Balmat-Edwards, NORTHfN N.Y. STATE The i Balmat-Edwards Division operated continuously throughout the year, and over-all costs and mining efficiencies were well-maintained in the face of higher wage and supply costs. The countershaft at the Ed wards mine was completed during the year to the 3100-ft. level. Top: New Pirn mine pump station replaces two less efficient units in Lead Belt. Center: Herculaneum smelter, where new units and improved methods are increasing output. Bottom: New electric zinc furnace at Herculaneum begdn operating in mid-1955. This shows electrodes at top of fwmace. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. . Joseph town, PENNSYLVANIA companies on acreage in Roosevelt County, Montana, jointly owned with Continental Oil Company. Production at Josephtown increased during the year and although plans were not announced until February 1956, they were formulated in 1955 with the objective of increasing Josephtown's production to 12,000 tons per month of slab zinc in early 1957 from the present 10,000 tons. In order to insure steady operation and for possible further expansion to 15,000 tons, we have started to build a coal-fired power plant at Josephtown with a capacity of 100,000 kw. In all, this planned expansion will require a total capital expenditure of about $20,000,000 including the power plant and addi tions to the roaster, the sinter, the furance, and the acid plants and subsidiary facilities. This work is now underway and will be carried on over the next two years. Research in all phases of our zinc smelting op eration continues intensively at Josephtown with the objective of still further improvement in what is re garded as one of the most efficient zinc smelting processes. In addition to the slab zinc production, ample facilities will of course be available to take care of requirements of our lead-free zinc oxide customers. FOREIGN OPERATION^ Argentina The Aguilar mine and mill located in Northern Argentina produced 27,879 metric tons of lead concentrate and 42,204 metric tons of zinc con centrate in 1955. A substantial increase over the 22, 581 metric tons of lead concentrate and 36,240 metric tons of zinc concentrate produced in 1954. Excellent progress has been made in improving the production facilities at Aguilar, owing to the granting of foreign exchange with which to purchase new equipment. De velopment work in the mine continues encouraging, and labor relations are excellent. Late in 1955, a dividend of $754,188 was received by St. Joe on its Aguilar stock, the first of any consequence in many years. Elsewhere in Argentina, the 50% Aguilar-owned sul furic acid and fertilizer plant at Borghi increased its sales of sulfuric acid by 50% over 1954. The outlook for improved sales to Argentine industry is good. The Austral zinc smelter at Comodoro Rivadavia in South- With the completion of the C-9 well on the Harris Ranch Property in Crockett County, Texas, our com pany now has a one-half interest in seven producing oil wells. Continental Oil Company is our partner in this venture. Total net cost to St. Joe, after tax sav ings, of this oil exploration through 1955 is $952,120. Income from these wells for the year 1955 amounted to $136,954.66. This figure would have been higher except that production from all wells is regulated by the State of Texas and this figure represents our maxi mum allowable. Exploration on this property of about 4,500 acres is continuing. A joint wildcat well drilled with Cerro de Pasco in Wharton County, East Texas, resulted in a dry hole, as did a farm-out drilled by other Center: Steel sets line new water drift, driven with jumbo, at Bahnat-Edwards Division, Bottom left: New acid plant under construction at Josephtown zinc smelter. Bottom right: Long-hole drilling in Bahnat mine, New York, proves effective in increasing efficiency. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ern Argentina showed further improvement in operat ing technique and in staff performance. Although prof its for the year were only nominal at Austral, the out look is encouraging. We believe that if the new government of Argentina receives the whole-hearted cooperation of the Argen tine people, the difficult economic problems the coun try faces will be solved in the next few years. The long-range future for Argentina and Aguilar can be quite bright. North Africa The operating results, the discov ery of new ore, and the earnings of the lead-zinc opera tions in North Africa, in which St. Joe has an interest, continue satisfactory. Although the political unrest prevalent in North Africa is troublesome, it has not yet interfered seriously with mining and milling operations. Canada The project of the Brunswick Mining & Smelting Corporation Ltd., in which St. Joe has a 40% ownership and the responsibility of management, de voted 1955 to intensive study of the metallurgical problems presented by the two major orebodies it is developing near Bathurst, New Brunswick. The ex tremely complex nature of the ores has required estab lishment of a research staff at Bathurst and literally hundreds of samples have been subjected to flotation test work last year. This work will continue in 1956, and it is hoped that a feasible treatment technique will be worked out. Mine development both underground at the No. 12 orebody and on the surface at the No. 6 orebody continues according to plan. The orebody in general has thus far turned out to be higher in grade in lead, zinc, and copper than had been expected. NEW PROJECTS During 1955, the Company had under study a proposal to join Pittsburgh Consolidation Coal Company in construction and operation of an alumina reduction plant to be located at Josephtown, Pennsylvania. This plant would have had a capacity of 66,000 tons ot aluminum annually. Power could be supplied by an addition to the coal-fired steam power plant recently authorized for the Josephtown zinc smelter. It has been impossible as yet to come to a decision concern ing this aluminum project, because the Government discontinued granting fast amortization on new alumi num projects, and to date it has proven impossible to secure an adequate supply of low-cost alumina. Our exploration department has developed several interesting prospects both in the United States and abroad, which may well prove of value in the future. Understandably, no details can be released at present until the economic value of these prospects has been determined, but it should be of interest to all employees that geological teams representing St. Joe are in the field. Reproduced with permission of the copyright ovyher. Further reproduction prohibited without permission. ST. JOE eleetrothermie ZINC... continuous-line galvanizing As more and more lines come into production, it becomes increasingly evident that the compositions of the various zincs required for continuous galvan izing are more exacting than those established by A.S.T.M. specifications. In fact, the grades are almost as numerous as the lines in operation, since each company's metallurgists feel that the compo sition of the metal they specify is best suited for their particular product Depending on operating variables, a line might require a controlled lead content with low cadmium either with or without the addition of aluminum by the smelter. Another Ime might specify a different lead content and a fixed amount of aluminum with rigid limits on other ingredients. St. Joe's patented eleetrothermie smelting process, coupled with a highly flexible roasting, Zinc slabs being fed by conveyor into the melting pot of a continuous galvanizing line. sintering and blending operation, permits a degree of control in the metal's composition which cannot readily be achieved by any other method. As a result, the St. Joseph Lead Company is m the unique position of being able to supply zinc to virtually any specification which operators of con tinuous galvanizing lines consider most desirable for their individual requirements. ST, JOSEPH LEAD COMPANY 250 PARK AVENUE, NEW YORK 17, N. Y. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. OUTLOOK 1956 Throughout this report you will have noted evidence of the management's belief: first, that there exists an opportunity for growth for St- Joe in the production of lead and zinc; and second, that the company is seeking new opportunities for growth outside our accustomed field- This report has indicated how our production facilities, both above and below ground, are being expanded, and our organization is being strengthened in order to take full advan tage of both these opportunities. Thus we can be confident of $t. Joe's ability to meet the problems that the future will bring. It is pleasant to observe that for 1956 at least the outlook is excellent. I hope this report has made clear to you why each St. Joe employee still faces the ob ligation to do all he can to help strengthen our company through more intensive sales effort, through keener research in mines, mills, and smelters, through steady improvement of day- to-day operations, and through constant search for new and sound avenues for growth. If each of us feels, and acts upon, that obligation, our company's future is indeed Above: Exploration by diamond drilling testa pew prospects in Argentina. Right: Drilling in cut-and-fill stapes at Aguilar, Argentina. Outlook here is encouraging. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.