Document rx9znB0QQ9yOO9zL2k6gajzJV

Anaconda Copper Mining Company CAPITAL STOCK December 31, 1934 Authorized, 12.000.000 shares, $50 each........................ $600,000,000 Issued, 8,919,086 shares, $50 each........................ 445,954,300 OFFICERS President............................... Vice-President , . . ' . . Vice-President and Treasurer . Secretary and Assistant Treasurer General Auditor .... Assistant Secretary .... CORNELIUS F. KELLEY JAMES R. HOBBINS ROBERT E. DWYER DAVID B. HENNESSY JAMES DICKSON KENNETH B. FRAZER DIRECTORS Andrew J. Miller Grayson M.-P. Murphy Charles E. Mitchell James R. Bobbins Cornelius F. Kelley Charles T. Fisher John A. Coe Robert E. Dwyer OFFICES An a c o n d a, Mo n t a n a 25 Br o a d w a y , Ne w Yo r k To the Shareholders of Anaconda Copper Mining Company: The outlook for the non-ferrous metal industry at the beginning of the year was promis ing and showed steady' iitiprovement for the first, six' months- Thereafter the rapid recession of general business in the United States affected all heavy industries including that of copper. The seasonal activity which normally may be expected at the close of the third quarter did not develop, and as a result the volume of business transacted in the domestic market during the,last half of the year Was substantially below that of the first half. At the close of the year the trend was upward, fn foreign markets the consumptive demand continued an upward trend practically throughout the veer,.reaching a peak in November. The World production of primary copper totaled 1..337.135 short tons- an increase of approximately 20% oyer 1953.1 Of this production 230,845 tons were domestic duty-free, and i.086.340 were foreign. Blister stocks in the; United States increased 21,920 tons and abroad 53,987 tons, a total of 30,917 tops. The production of refined copper was 1.256,263 torts, of which 328,91a tons were domestic and 1,027,353 were foreign. Production of pri mary refined, copper, both domestic and foreign, was under consumption. World consumption of primary copper during 1934 is estimated at 1.403.128 tons, an increase of about 14% over 1933. The domestic market consumed 297,774 tons, a gain of only 1% over 19.33, whereas consumption abroad increased 19% to a new high record of 1,110,354 tons. Consumption in the United States Was, only about 35% of 1929, the peak year. Stocks of refined copper in the United States decreased 180,407 tons, while stocks abroad increased 28,547 torts, resulting in a net reduction of 151,860 tops in World refined stocks. The decrease of stocks in the United States was due largely to the exportation of duty-free copper. As a result of such exports from the United States, together with increased pro duction abroad, the foreign supply exceeded the demand of those markets. The increased production abroad did not cause any excessive building up of stocks, which were at low levels at the beginning of the year, and that market is still in a healthy condition so far as stocks are concerned. The Statis^icalfpjiMitiOn of copper frbnji the standpoint pf the copper industry is materially better than if has jbeett for a, number oft,years. The domestic price of copper gradually improved due to heavy buying movements during the first half of the year until it reached 8.775c per pound f.o.b. refinery onJune 14th. which pride has prevailed nsincei The price abroad was fairly uniform with the domestic price in,,the earlier part' of the year, but beginning in May declined, steadily,and at the close of the year was approximately 2f per pound under the domestic price. The decline ; - the foreign price may be attributed principally to twolcauses, firstly the increased prod.ttion abroad, and secondly and the more important factor, the sales by American producers of large quantities,, of duty-free copper on the foreign market- prices for non-ferrous metals for the year averaged, better chan in the previous year, but closing quotations on foreign copper, lead and zinc were below the average prices of 3 1933 arid the closing quotations for that year. The value of silver mined in the United States continued throughout the year at approximately 64 JJe per ounce under the President's proclamation of December 21. 1933. The domestic price of gold increased from $34,06 per ounce to S34.45 per ounce in January, and was fixed on February 1st at $33.00 pec ounce.. Prices of the principal metals were reported1 by the Engineering and Mining Journal as follows: ' Copper--Duty Free f.o.b. refinery--Cents Jan. 2 , High Low Dec. 31 Average per lb...... ...................................... 8.025 8.775 7.650 8.775 8.42S " --Export f.a.s. refinery--Cents per lb................ .............................. . 8.050 8.175 6-075' 6,700 7.271 , Lead --New York--Cents per lb................ 4.0OO 4.250 3.300 3.700 3.360 Zinc --St. Louis--Cehtsiper lb. ___ ______ 4.325 4.400 3.675 3.725 4.158 Silver. --New York (Not covered by Presi dent's Proclamation of Dec. 21, 1933)--Cents perOz... ............... 44.875 55.730 41.750 54.750 47,973 CORPORATE CHANGES This corporation was organized on June 18, 1895, under the laws of Montana, "for a period of forty years and for such further period as may be authorized by law." The laws of Montana limit the period for which corporations may be organized to forty years, subject to extension as provided in said laws. In accordance with an authorizing statute, the Board of Directors has extended the term of existence of the corporation to February 28, 1975. By an amendment of the By-Laws, the Board of Directors has advanced the date for the annual meeting from the third Wednesday of May to the third Wednesday of April. Steps were taken to simplify and integrate the subsidiary holdings of the company. Anaconda Sales Company, a 100% owned subsidiary, took over the sale in the United States of alt metals and metal products produced by Anaconda Copper Mining Company and its subsidiary companies including those which were theretofore sold by United Metals Selling Company, also a 100% owned subsidiary. By this change all metals and metal products of the Anaconda group are sold under the Anaconda trade name. The fabricated products manufactured by The American Brass Company and Anaconda Wire and Cable Company continue to be sold by those companies. The International Smelting and Refining Company, a wholly-owned subsidiary, (formerly International Smelting Company), acquired the assets of Raritan Copper Works and International Lead Refining Company, also wholly-owned subsidiaries, resulting in the consolidation in the one company of the domestic smelting and refining operations outside of Montana. The operations: of1 the International Company now include the copper and lead plants at Tooele, Utah, the hopper smelter at Inspiration, Arizona, the copper refinery at Perth Amboy, N. J., the lead refinery and zinc oxide plant at East Chicago, Indiana, and the zinc oxide plant at Akron, Ohio. The American Brass Company acquired the assets and business of its 100% owned subsidiaries. The French Manufacturing Company, The Waterbury Brass Goods Corpora tion, Thh American Metal Hose Company and The Ansonia Land and Water Power Com pany. The plants heretofore owned by those subsidiary companies are now operated as branches of The American Brass Company, 4 In connection with the foregoing transactions and the dissolution of the subsidiaries, the assets of which were transferred, certain adjustments were made:which are reflected in the consolidated accounts by a charge to consolidated surplus of Sl.489.o82.4Si The shares of the capital stock of your Company were temporarily registered on the Xew York Stock Exchange and the Boston Stock Exchange on October 1. 1934. under the Securities Exchange Act in accordance with the provisions of such Act and1 the regulations issued thereunder. t FINANCIAL Gross sales and earnings of the Company upon a consolidated basis, as shown by Income and Surplus Acppunt hereto annexed, totaled 399,149,5.35.64, compared with 3/2.902.49.3.35 for the prior year.' The cost of sales, including, all operating expenses, development and maintenance charges, repairs, administrative, selling and general expenses and all taxes except income taxes, amounted to $82,053.027,58.. compared with $67,941,747.96 for the previous year; resulting in an operating income of 317.096.508.06 compared with 34.960.745.891 in 1953. Other income amounted to $1,335,171,02, making total income S18.331.679.08, After deductions from income of interest on bonds and current obligations amounting to 34.527.349.60, expenses of carrying non-operating properties, including expenditures during the strike period, 33.747,090.70, and United, States and foreign income taxes (esti mated) 31.565.803.47. a total for these items of 39,840,243.77, there remained a balance of S8,491,435.31, Deducting provision for depreciation and obsolescence of, 36.295,321.70, and discount on bonds of 3236,019.36, the resulting net income for the year, (before depletion of metal mines), was $1,960,093.75, as compared with net loss on same basis for the prior year of 36,322.115.36. Additions to reserves applicable to prior years' taxes, bad debts, etc., writing off patents and experimental expenses, together with the adjustments due to dissolution of companies mentioned above, resulted in a total charge to surplus of $2,673,871.79. Further advances were made during the year to Inspiration Consolidated Copper Com pany oh its: promissory notes, secured by First Mortgage 7% Gold Bonds of that company, making its total liability to this Company $6,893,788.08 as of the dose of the year. As of December 31st notes payable amounted to 359,5491120.00, a decrease of 310.348.880.00 during thelyear, There were retired during the year or held in the treasury at the close of the year, $3,063,000.00 par value, of Twenty-Year 5% Debentures of Chile Copper Company, and $163,000.00 par value of First Mortgage i% Sinking Fund Bonds of the Bujtte, Anaconda & Pacific Railway Company. The reduction for the year in notes payable and bonds outstanding amounted to $13,574,880.00. Cash on hand increased $5,669,080.89. Capital expenditures during the year amounted to $1,380,383.50. OPERATIONS The operations of the copper and sine mines, mills, smelters and refineries in Montana, which were on a curtailed basis, were suspended by a strike of the employees which continued from May 8th in Butte and Anaconda, and from June 7th in Great Fails, to the date of settlement September 20th, at which date operations were resumed. All expenditures 5 incurred in the maintenance of non-operating properties, including the additional expendi tures incurred on account of the strike, have been deducted in arriving at the net income for the year. As a result of the strike, the copper and zinc production from Montana properties was materially under the production of the prior year. Production of zinc oxide and white lead was at a satisfactory basis but somewhat lower than in 1933. Copper production from the mines of the subsidiaries operating outside1 the United States .was approximately 50^ higher than during the prior year. Copper The production of Anaconda and its subsidiary- mining companies from copper plant operations* including 1.397,669 pounds of copper from custom ores, was 395.041.304 pounds of copper. 2.786,049.15 Ounces silver, and 45.279.196 ounces gold. Deliveries for the year in both, domestic and foreign: markets amounted to 608.799,689 pounds; resulting, after allowing for custom, secondary and purchased copper, in a decrease of 86.055,211 pounds in stocks of copper on Hand. Zinc The production of electrolytic zinc amounted to 133.447,352 pounds. Deliveries were 138,758,445 pounds, resulting in a decrease in stocks of 5.311.093 pounds. Metals produced in zinc residue amounted to 14.419,071 pounds lead. 1.376.679 pounds copper, 1.491.688.45 ounces silver, and 3,929.284 ounces gold. Custom Smelting and Refining The smelting plant of the International Smelting Company at Inspiration, Arizona, remained shut down the entire year. The smelting plant of the same company at Tooele. Utah, continued operations, but on a curtailed basis. Operations of the lead refinery at East Chicago, Indiana, were on a slightly higher basis than in the previous year, treating lead bullion received from the smelting plant at Tooele, lead bullion derived from zinc residues produced by the zinc plants, and secondary lead materials. Operations of the Raritan Copper Works at Perth Amboy, New Jersey, were on a slightly improved basis, due to the larger quantities of copper refined in bond for the Greene Cananea Copper Company, Andes Copper Mining Company, and for toll account. The facilities of this plant were increased during the year by the construction of a plant to treat secondary metals. The custom smelting and refining operations produced from custom and scrap materials 22,637,432 pounds of rapper, 62,391,730 pounds of lead. 2,718,913.62 ounces of silver, and 19,424.783 ounces of gold. Deliveries of lead during the year were 71,536,593 pounds, and stocks at the end of the year were normal. Miscellaneous Products Miscellaneous products consisted of 49,741,527 feet of lumber; 20,770 tons of treble superphosphate and phosphoric acid; 4.760 tons arsenic; 575,146 pounds cadmium; 150,480 pounds nickel sulphate; and 195,515 pounds copper sulphate. 6 Fabricating Plants The combined output of manufactured products of The American Brass Company including: Toronto Plant) and of the Anaconda Wire and Cable Company, amounted to 425.zl6.899 pounds, compared with 384.479,098 pounds in the prior vear. an increase of 11%. SILESIAN-AMERICAN CORPORATION This company has been adversely affected by the course of international, events in recent years, particularly by the difficulty in securing dollar, payments from Germany and the extremely low price of zinc in foreign markets. Every operating improvement forecast for the Polish subsidiary of the Silesian-Afneriean company, hastbsen realized, but the price of zinc has fallen to the lowest levels recorded! in the industry, current price showing a decline of 73% measured in 'Polish currency. As Poland has remained on the gold standard, the cost of ptoduction is relatively higher than that of competing producers operating under depreciated currencies. The principal amount of bonds outstanding at the end of the year was $7,048,000.00. The average price of zinc per pound in London was equivalent to i.830c on a gold basis. At the end Of the year the average for spot and future was 1,563ji .goid. Principal production for the year was: Zinc............................................................................. Lead..........,............................ .................................... Coal............................................................................. Sulphuric Acid........ ................................................. Superphosphate........................................................ 90,331,143 pounds 16.644,073 " 1,712,781 metrictons 43.442 " " 17,930 " " NUMBER OF STOCKHOLDERS The number of registered stockholders appearing on the books of the Company at December 31, 1934, was 118,094. Your Board of Directors records with deep regret the death on September 25, 1934, of Percy A. Rockefeller who succeeded his father, the late William Rockefeller, and who served as a director of the Company from September 26, 1922, to the date of his death. . There is attached hereto a Consolidated Balance Sheet showing the financial condition of the Company and its subsidiary companies at the close of business December 31. 1934. together with an Income Statement for the year, prepared and certified to by Messrs. Pogson. Peloubet & Company, Certified Public Accountants. By Order of the Board of Directors. CORNELIUS F. KELLEY, President. New York, N. Y., March 23, 193S. 7 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31 t, 1934 ASSETS Po k ed : Mines and Mining Claims, Coal Mines, Timber Lands, Phosphate Deposits, Water Rights and Lands for Metal Producing and Manufacturing Plants......................... ................................................. Buildings , and Machinery at Mines, Reduction $296,815,108.03 Works: Refineries, Manufacturing Plants, Saw mills. Foundries, Waterworks, Steamships and Railroads (including Railroad concessions to* the extent of Si.002.976.3').........._...._............... ........... $265,746,907.57 Less Reserve for Depreciation.......... ........................... . 108.624.814.80 157,122,092.77 Patents............................................................................. Investments in Sundry Companies--ait cost....... ...... Indebtedness of Altiiiated Companies--not current.. 86,617.87 28,968.542.01 743.775.19 $483,736,135.37 De f e r r e d Ch a r g e s : Stripping and Development.......... .............................. Discount on Bonds.................,....................................... $7,628,353.88 2.705.753.09 10,334,106.97 CCRREN'T, Wo r k in g AND OTHER ASSETS: Curp^ftpASsCts: ' ' " ' Supplies on hand........................................................ Metals and Manufactured Products: In Process--at cost-.... ......................................... Eipishedf~dt cost, which is below market--...... AccduptS "Receivable: less reserves applicable thereto........... :..................................... ................... Marketable Securities -- at cost (market value $1,185,+36.49)........................................................ Cash'._uii...1................................................................... $12,333,523.16 5,383,514.80 30,493,185.61 5,862,419.24 1,538,746.37 12.245,431.10 $67,856,820.28 Wortcingand Other Assets: Instalment house and land sales and other ac- $1,1S3,762.87 265,340.23 462,893.34 271,891.57 1,559,956.05 3,336,346.76 6,893.788.08 13,943.978.90 81.800,799.18 $573.871.042.02 8 PNYC 00010057 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 1934 LIABILITIES Ca p it a l St o c k o f An a c o n d a Co p p er Mix in g Co mp an y : Authorized. 12.000,000 shares of $50.00 each Issued........................................ $.919,036 shares Held in Treasury or through Subsidiaries...,............. 244,744' shares Outstanding.................................................................. 8.674,342 shares $445,954,300.00 12.237.200.00 $433,717,100.00 Ca pit a l St o c k a n d Su r pl u s of Subsidiary Companies owned by Minority Interest......................_................................................. ............... 4.595.438.-33 Bo n d s Ou t s t a n d in g less held in Treasury: Chile Copper Co. Twenty Year 5% Gold Debentures, due 1947........... '$27,826,000.00 Butte, Anaconda & Pacific Railway Co. First Mortgage 5% Sinking Fund Gold Bonds, due 1944.................................................................... 1,611,000.00 29,437,000.00 Re s e r v e s : For Repairs, Renewals and Replacements................................................ For Workmen's Compensation Insurance, etc......................................... For Contingencies......................................................................................... For Deferred Payment under power contract in connection with cur tailment of operations--........................................................................... $344,513.31 432,680.79 275,000.00 1,907,713.54 2.959.907.64 Cu r r e n t : Notes Payable--Banks.-............................................................................. Accrued Liabilities........................................................................................ Accounts Payable......................................................................................... $59,549,120.00 3,946,089.61 4,150,15 2.40 67,645,362.01 De f er r ed Cr e d it s t o In c o me.-. 264,169.96 Su r pl u s ______ ___-................. . 37,252.063.58 8575,871,042.02 No t e--In order to comply with the Government Income T requirements for the purpose of comp tionai valuations of the mining properties have been recorded upon the books of the companies; but the has been omitted from the current statements. 9 :ing depletion, addisult of those entries ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Income and Surplus Account--Year Ended December 31st, 1934 Gross Sales and Earnings.. Cost of Sales--operating expenses, development, maintenance and repairs, administrative, selling and general expenses and taxes except income taxes--sales to the extent of current production being applied at current cost.---............................ .............................. Income from operations of mining, smelting, refining and. manufac turing plants. ..... ..... ....................................................................... Other Income--Interest, dividends and miscellaneous income................. --Profit on bonds retired......... ............................................... :--Interest and dividends of affiliated companies................. S99.IM.535.64 82.053.027.38 $297,747.64 405,396.56 532,026.82 $17,096,508.06 1,235.171.02 Total Income- Interest on Boi Expenses pertaining to non-operating units, including expenditure during strike period,-. United States arid Foreign Income Taxes--estimated. $18,331,679.08 $4,327,349.60 3,747,090,70 1,565.803.47 9,840,243.77 Provision for depreciation and obsolescence and for depletion of timber, coal and phosphate lands. Discount on Bonds.-- $6,295,321.70 236,019.86 $8,491,435.31 6.531.341.56 Net Income--on current basis--before depletion of Metal Mines--........ Deduct: Reserved for additional charges during curtailment of operations under power contract----............................................................... Additions to reserves for contingencies and other adjustments applicable tri prior years.............................................. .................... $1,960,093.75 $443,342.65 741,146.66 1,184,489.31 Net increase in Surplus before adjustments through dissolution of sub sidiary companies-................................................................................... Deduct Adjustments through dissolution of subsidiary companies.......... $775,604.44 1.489.382.48 Minority share (income).... ........ $713,778.04 33,387.87 Net decrease in Surplus............... Surplus, December 31st, 1933__ Minority Interest (deficit).. $37,960,880.74 38,348.75 $747,165.91 37,999,229.49 Surplus, December 31st, 1934- $37,248,060.14 Minority Interest (deficit) including adjustments for Minority Interest acquired during year......................................................... 4,003.44 Surplus, December 31st, 1934, per Balance Sheet.......................................... $37,252,063.58 10 PNYC 00010059 To (he Board of Directors. Anaconda Copper Mining Company, 25 Broadway, Xew York, S', V. _\Ve have made a general auditor the books and records of Anaconda Copper Mining Company and its subsidiary corporations, which are 73^ or more owned, for the calendar year 1934 and in accordance- therewith submit herewith a Consolidated Balance Sheet and Consolidated Income and Surplus Account. In connection with our audit-'ye. examined or tested the accounting records of the companvand other support-rig evidence and made a general review of the accounting methods and'of the operating and income accounts for the year but we did nobmake a detailed audit of the transactions. Fixed As'Sets are carried on the- same- basis as in previous years, i. e.: (a) Physical properties of parent company are carried at cash cost, or in the case of phvsicaJ properties acquired for stock of parent company, at par value of such, stock, with the exception of'Certain properties appraised at approximately 4350.000. 1 (b) Physical properties-of, subsidiary companies.are carried as follows: . From the amount at which the investment in the stocks of such subsidiary companies are included in :the;CbrtsoHdate^ :iBa)adcfe.Sheet there was, deducted, the net current assets of such subsidiaries and the remainder of such amount was applied cp physical properties. The basis for the amount shown as investment .in subsidiary companies is the cash cost of such stock to the consolidated group of the stock of the respective subsidiary companies owned, or where such stock was acquired for stock of parent company the par value of such stock, except as tb. properries of-Andes Copper Mining Company acquired by it for 1.229.143 shares of stockof Andes Copper Mining Company, such properties being carried at the original par valbe of Such shares..i! e., $25 per share, and as to properties of Santiago Mining Company acquired by it-for 65.431 shares :of Santiago Mining. Company, such properties beingcarried at the original par value of such shares, i, e.. $25 per share. Owing to curtailment of operations and distance from source of supply and markets, supplies on hand are somewhat in excess-of current requirements- ' ' ' ' " ' ' ' ' '' Metals in process are carried, at normal cost .which approximates current production cost. Silver and gold are carried at market quotations-orless; In accordance with the principle used in the preparation of the accounts for the year 1933 nnshed -eta's s<jid have ben valued at current production costs to the extent of mefals produced during the year. rpeCjemlbSfi: 1st, 1933 inventory costs, have been applied to sales made in excess of production and. inventor es now on nai i. being smaller than those at December 31st, 1933, are valued: at prices used in those.inikjentorjesivJwh': ' ,ow current market.: Certificates for refined1 copper of a market value of approximately-; $2,450,000 :s ' with holders of notes payable. "' Ores producecl during di which ` period not being currently treated are carried at cost of extraction d realizable value. . ' Cupriferous;' v .,.^,.r. for income tax purposes, .which: a metallurgists bf !l treatment is valued at United States Treasury Department valuation .....es realizable value based on current metal prices as estimated by Investments, Marketable Securties Inventories, Cpllateral, Cash. Notes Receivable and Payable, Bonds and Capital Slock have oeen ver hid bv inspection, certificate, or correspondence, and found in order and all known liabilities, except as noted below are provided for up the Balance Sheets A contingent UaoiJity existed at December 3lsc, 1934 for acceptances covering foreign sales of copper, discounted in the ordinary course of business at'various bank*i on the greater part of which payment has already been received and for exchange^ commitments most of which have been liquidated. A contingent liability also exists in respect of Umted-:Scates Federal Income taxes but the amount payable, if any, can not be stated until a settlement is jrnvea at *irn :ne tmteii state? Treasury Department. ' The usual depreciation has been-charged, that of metal producing plants being calculated on a unit of production basis. . Mo depletion on metal mines, either on a cost or on the Treasury Department valuation basis, has been charged itn the Accounts. ! / J;'- 'l'"; While there have been no changes of principle m the methods of accounting employed by the company during the year, we nave- made certain irecommehdation# as to changes in classification and description of items which have be-n g en etfec? to in these ac :ouncs. . In our opinion the accotnpanving Balance Sheet and related statement of Income Mid Surplus fairly present on the basis outlined.:abbv^ the'-finkncikl position of the company at December 31st, 1934 and the results of its operations for the year. . v / _ We hav also audited the: books and records of your principal affiliated companies (Anaconda Wire and Cable CompsMt^li:!:CT^irporatibin.'..art4 Walker Mining Company-~not consolidated m these Accounts) and!.'iilfti'up^hrii' ht-c-!report separately. ' ' New York, March 7th, 1935. BOGSON, PELOUBET 4 CO. Certified Public Accountants. li