Document wrz7eNX7zgLwXJYVaJgJ723QD

N11057 PNTC00005879 r ANACONDA COPPER MINING COMPANY CAPITAL STOCK December 31, 1936 Authorized, 18,000,000 shares, $50 each.............................3600,000,000 Issued, 8,919,086 shares, $50 each............................. 445,954,800 OFFICERS President.............................. Executive Vice-President Vice-President and Treasurer . Vice-President........................ Secretary and Assistant Treasurer General Auditor........................ Assistant Secretary .... . . Co r n e l iu s F. Ke l l e y . . Ja me s R. Ro b b in s . . Ro b er t E. Dw y er Da n ie l M. Ke l l y . Da v id B. He n n e s s y . . Ja me s Dic k s o n . . Ke n n e t h B. Fr a z e r DIRECTORS Jo h n A. Co e Ro b e r t E. Dw y e r An d r ew J. Mil l e r Gr a y s o n M.-P. Mu r p h y Ja me s R. Ho b b in s Ja me s H. Pe r k in s Co r n e l iu s F. Ke l l e y Wil l ia m C. Po t t e r Wil l ia m D. Th o r n t o n OFFICES An a c o n d a , Mo n t a n a Bu t t e , Mo n t a n a 25 Br o a d w a y , Ne w Yo r k PNYCO0005880 To the Shareholders of ANACONDA COPPER MINING COMPANY Th e demand for non-ferrous metals during the year 1936 in the United States continued to increase above that of the prior year and with the demand that had been established in foreign markets caused a rapid expansion of the industry. The monthly consumption of copper during the year reached its peak in October in both the domestic and foreign markets. Stocks of refined Copper decreased materially and production was substantially increased during the latter part of the year. World production of primary blister copper totalled 1,799,940 tons, of which 604,340 tons were domestic duty-free, and 1,195,600 tons were foreign. Production of primary copper in the United States showed an increase of approximately 62% over that of the prior year. Production abroad was approximately the same. World produc tion of primary refined copper was 1,760,299 tons, the domestic duty-free copper amounting to 621,371 tons and foreign to 1,138,928 tons. In comparison with 1935 world consumption of primary copper amounted to 1,893,543 tons, an increase of 14.2%; consumption of primary copper in the United States to 663,466 tons, an increase of 59.6%; and foreign consumption to 1,230,077 tons, approximately the same as in the previous year. The consumption in the domestic market, including secondary copper, totalled 764,560 tons, an increase of 44.7% compared with the previous year. Stocks of duty-free refined copper in the United States were reduced during the year by 70,347 tons and refined stocks abroad by 62,897 tons, a total decrease of 133,244 tons. Stocks of refined copper at the end of the year, as reported by the Cdpper Insti tute, were 161)068 tons of duty-free and 192,255 tons of foreign. A,t these levels stocks are normal and future demand must be supplied by production. Production of zinc in the United States was 524,271 tons, an increase of 21.5% compared with the prior year; and consumption amounted to 563,273 tons, an increase of 23.1%. Stocks of zinc on hand at thedose of the year totalled 44,756 tons, the lowest since June SO; 1929. The trend of non-ferrous metal prices was definitely upward during the year. The domestic price of copper was 9.025# per pound f.o.b. refinery at the beginning of the year and; was 11.775# per pound at the end. The price for export copper f.o.b. refinery was 8.875# per pound at the first of the year and at the close was 11.600# per pound. Zinc at the end of the year was 5.450# per pound St. Louis, Compared with 4.850# per pound at the beginning. The price for silver mined in the United States remained at 77.57# per; ounce throughout the year and gold at $35.00 per ounce. The price for foreign silver showed slight variation throughout the year and was 45# per ounce at the close. 2 pNYC00005381 The prices of the principal metals, as reported by the Engineering & Mining Journal were as follows: CoPFER-Duty Freef.o.b. Refinery-per ib.............. Co pper -Export f.o.b. Refinery-per ib................... Lead -New York-perlb...................................... Zircc -St. Louis-per lb................................. Sil v er -New York-fNot covered by President's Proc!amations)-per oz.......................... /an. 9.025)! 8.375 4.500 4-850 49.750 High 11.77H 11.600 6.000 5.450 49.750 Low 9.025)! 8.250 4.500 4-750 44,750 Dec. Jl 11.775)! 11.600 6.000 5.450 43.000 Average 9.474e 9.230 4.710 4.901 45.087 CORPORATE CHANGES The Chile Copper Company Twenty-Year 5% Debentures due January 1, 1947, of which $26,574,000 were outstanding at the beginning of the year, were called on Januarv 1, 1937, at the redemption price of 101. Funds to the amount of $25,000,000 for the retirement of these Debentures were obtained through serial notes of Chile Copper Company, guaranteed by Anaconda Copper Mining Company, payable to banks, $2,000,000 annually from December 10, 1937, to December 10, 1940, and $17,000,000 December 10, 1941. Subsequently and before the close of the year notes of Chile Exploration Company in like amounts similarly guaranteed were issued to the banks in lieu of notes of Chile Copper Company. The remainder of the funds required was provided from the treasury of Chile Copper Company. Through this financing sub stantial savings: were effected in yearly interest charges. The Anaconda Lead Products Company was organized in 1919, and produced at its plant at East Chicago, Indiana, dry white lead by an electrolytic process under patents acquired from the late Elmer A, Sperry. The total stock of the Company was 13,650 shares of which 10.99% had beep issued to the Sperry interests in exchange for the above patents. This stock was purchased for the sum of $80,000, in June, 1936. Thereafter the Company was dissolved and its assets transferred to the International Smelting and Refining Company. In conformity with the steps being taken to simplify and integrate the holdings of the Company, Andes Exploration Company (Delaware), Butte Electric Railway Company, Mountain Trading Company, and New York and Hastings Steamboat Company, all 100% owned subsidiaries, were dissolved during the year and their assets transferred to the parent Company or its consolidated subsidiaries. The assets of the New York and Hastings Steamboat Company were acquired by Chile Steamship Company Incorporated, a wholly-owned subsidiary of Chile Copper Company. The substitution of natural gas and oil developed in the State of Montana for other fuels, so impaired the market for coal that it became advisable to discontinue operations at the plant of the Company at Washoe, Montana. The Milltown plant, no longer needed in the operation of the Lumber Department, was discarded during the year. These items, together with some raining prospects, carried on the books at $637,081.32, were written off and charged to surplus. S PHYC00005882 f in an c ial Gross sales and earnings of the Company upon a consolidated basis totalled 8160,882.734.15, compared with $127,678,576.68 for the prior year, an increase of $33,204,157.47, or 26%. This increase was accounted for both by larger sales volume and higher prices received for the products. The cost of sales, including all operating expenses, development and' maintenance charges, repairs, administrative, selling and genera) expenses, and all taxes except income and undistributed profits taxes, amounted to $129,811,064.67, compared with 8100,266,618.82 for the previous year. The resulting operating income was............................................ $31,071,669.48 Other Income, including Dividends from unconsolidated sub sidiaries, was.......... :............................................................... 2,385,648.91 Total Income was......................................................................... $33,457,318.39 Deductions from Income for Interest on Bonds and Current Obligations $3,818(412:48, Expenses pertaining to Non operating Units $2,420;080.51, United States and Foreign Income Taxes $2,975,917.76, and Discount, etc., on Bonds and Debentures retired through sinking fund operations $286,970.73, amounted to........................................................ 9,501.381.48 Leaving a balance of..................................................................... $23,955,936.91 Provision for Depreciation and Obsolescence and for Depletion of Coal Mines, Timber Lands, Phosphate Deposits and Clay Lands was $7,608,862.61, and Discount and Expenses on Bonds and Debentures was $388,210.02, a total of. ............. 7,997,072.63 Consolidated Net Income, without deduction for depletion of metal mines, was....................... .............................................. $15,958,864.28 Of which Minority Share amounted to...................................... ........... 77,034.69 Leaving Consolidated Net Income of.......................................... $15,881,829,59 The Consolidated Net Income of $15,881,829.59 compares with $11,180,087.45 for the year 1935. Sales of metals and manufactured products are included in the income account as they are invoiced and delivered to customers. Forward sales contracts are not included nor docs the income account reflect the profit that may be derived from such sales. The dividends declared and paid during the year on the capital stock of your Company amounted to $10,842,922.50, or $1.25 per share. Charges to surplus for the year totalled $2,248,761.06, consisting of write-offs on account of discarded plants and properties $637,081.32; adjustment through write-down of assets of subsidiary dissolved $73,311.49; and discount and premium applicable to 5% Debentures of Chile Copper Company redeemed up to and including December 31, 1936, $1,538,368.25. The principal subsidiaries included in the consolidated statements are Andes Copper Mining Company and its wholly-owned subsidiary ; Chile Copper Company and its wholly-owned subsidiaries; Greene Cananea Copper Company and its Mexican subsidiary; International Smelting and Refining Company, The American Brass Com pany, Anaconda Sales Company, Butte, Anaconda & Pacific Railway Company, Tooele Valley Railway Company, Diamond Coal & Coke Company; and Butte Water Companv. The assets ami liabilities of subsidiaries in which a majority but less than 75% of the issued stock is held are not distributed under the various headings in the consolidated balance sheet, but the cost of the holdings in such subsidiaries is shown as a separate item under "Investments". The consolidated income account shows as a separate item the dividends received from such subsidiaries.. The principal unconsolidated subsidiaries are Anaconda Wire and Cable Company, Mountain City Copper Company and Walker Mining Company. Current assets at the close of the year, including cash on hand of $16,282,190.76, amounted to $82,268,579.93, compared with $76,588,329.97 for the prior year, and current liabilities, including $2,000,000 of notes payable of Chile Exploration Company due December 10, 1937, were $15,442,097.08, compared with $10,016,210.13. There were purchased and, retired during the year $3,129,000 pari value of il/i% Sinking Fund Debentures of your Company and $5,000 pat value of First Mortgage Sinking Fund1 Bonds, of Butte, Anaconda & Pacific Railway Company. The sum of $3,196,129, an amount equivalent to twenty percent of the estimated consolidated net income of the year 1936, was set aside and deposited with the, Trustee for the purchase of 4Jd>% Debentures of the Company for the sinking fund andi to the extent not so used, to be paid into the sinking fund on August 15, 1937; and $7,913.21 remained in the sinking fund of Butte, Anaconda & Pacific Railway Company First Mortgage Bonds. The Twenty-Year 5% Debentures of Chile Copper Company outstanding at the beginning of the year in the amount of $26,574,000 were called for redemption. These items total $32,912,042.21. Of this isum $25,000,000 was, as previously explained, obtained by bank loans; the net result being that the outstanding indebtedness of your Company was reduced, or its reduction provided for, to the extent of $7,912,042.21 from current cash. The Inspiration Consolidated Copper Company paid in 1936 the current interest payments on its notes, and in addition paid 3330,868.08 of interest accrued prior to January 1, 1936, reducing its indebtedness to your Company to $7,864,005.00. Capital expenditures during the: year amounted to $3,426,380.19, summarized as follows: Mines, Mining Claims, and Lands (less sales)......................... Buildings, Machinery and Equipment; at the Mines, Smelting, Refining and Manufacturing Plants of the Company and its subsidiaries (less sales)..........................................,................. Miscellaneous-Including acquisition of shares of stock of sub sidiary companies............................. ........................................ $ 288,566.60 2,999,797.76 188,021.83 5 PNYC0000588A OPERATIONS The operations at the mines and the reduction, refining, fabricating and other plants of your Company and its consolidated subsidiaries were conducted continuously during the year, with the exception of the properties of the Mexican subsidiary of Greene Cananea Copper Company which were closed down by a strike for two and one-half months in the early part of the year. During' the latter half of the year the increasing demand for metals necessitated a rapid;! increase in operations, particularly of the copper producing units, and by the end of the year the consumptive demands were such that ail metal producing aud fabricating properties were operating, or were being prepared for operation, on a normal basis, with1 the exception Of the zinc plants in Montana which were obliged by low temperature and shortage of wafer for power to curtail output. (Note--Such conditions caused suspension of operations of zinc plants for one month at the beginning of 1937). Copper: The production of metals from the mines of your Company and its consolidated subsidiary mining companies through copper plant operations was 532,807,95-2 pounds of copper, 6,508,847 ounces of silver, and 30,579 ounces of gold. The metal production through custom smelting and refining operations is not included in the foregoing figures. Including copper production from purchased custom ores and concentrates and secondary metals the output was 651,365,607 pounds. 8 Deliveries of copper for. the year in both the domestic and foreign markets amounted to 849,321,306 pounds. Deliveries of copper include not only the copper production from the mines of your Company and its subsidiaries but also the custom, secondary and purchased intake. Zinc: Production of electrolytic zinc during the year amounted to 211,969,707 pounds, of which 43,448,219 pounds were from Company mines, and the remainder from custom ores and concentrates and leased mines. Deliveries of zinc amounted to 227,307,370 pounds, including the zinc delivered to the fabricating plants of subsidiaries of your Com pany and zinc used in the manufacture of zinc oxide at the zinc oxide plants. The metals paid for in zinc residues and dross sold to other companies amounted to 6,985.433 pounds of zinc, 27,227,017 pounds of lead, 330,321 pounds of copper, 2,899,867 ounces of silver, and 6,405 ounces of gold. Custom Smeiting and Refining: The custom smelting and refining plants, both copper and lead, of International Smelting and Refining Company were operating at satisfactory levels at the close of the year. 6 PN7C0000588f The custom smelting and refining operations, other than zinc, produced from the treatment of custom ores and Concentrates and secondary metals 98,557,655 pounds of copper, 67,6.29,153 pounds of lead (including 1,759,577 pounds of lead from own mines), +.620,201 ounces of silver, 78,170 ounces of gold, and certain byproduct metals and materials.' The foregoing includes production from ores and concentrates received from, the Walker and Mountain City companies. In addition, production from materials treated on toll was 132.198,838 pounds of copper, 861,251 pounds of lead, 1,513,666 ounces of silver, and 15,099 ounces of gold. Deliveries of lead during tin* year, including that used in the manufacture of white lead at East Chicago. Indiana, plant, were 100,383,367 pounds. Ores and Concentrates from Subsidiary Mining Companies: The concentrator at the mine of the Mountain City Copper Company for the treatment of the lower grade ores was completed and put into operation in August, 1936. The mine was operating at normal capacity by the close of the year, its ores and con centrates being shipped mainly to the Tooele Copper Plant of International Smelting and Refining Company for treatment. Recoverable copper production during the year amounted to 25,054,996 pounds. The Walker Mining Company operated its mine throughout the year, the concen trates being shipped to the Tooele Copper Plant for treatment. Recoverable copper production amounted to 9,614,277 pounds. Fabricating Plants: The shipments of manufactured products from the plants of The American Brass Company (including Toronto Plant), and Anaconda Wire and Cable Company, amounted to 682,287,179 pounds, an increase of approximately 28% over those of the prior year. The demand for fabricated products increased steadily throughout the year. The American Brass Company and Anaconda Wire and Cable Company, through their respective sales and research organizations, are constantly at work to widen the field for the use of copper and brass products and to meet the more exacting requirements of the trade. Miscellaneous Products: Miscellaneous products consisted of 97,541,356 feet lumber; 22,589 tons treble superphosphate and phosphoric acid; 7,442 tons arsenic; 853,018 pounds cadmium; 130,098 pounds nickel sulphate; and 359,266 pounds copper sulphate. GROUP INSURANCE The Board of Directors of your Company authorized the placement of group life insurance with The Prudential Insurance Company of America for employees of your 7 PNYC00005886 Company and those of its subsidiary companies operating in the United States and Canada, under; which joint contributions are made by the Company and each insured employee. The plan prov-ides insurance fori all eligible employeesi including officers, without physical examination. More than 75% of the eligible employees made appli cation, and the contributory insurance became effective July 31, 1936. During the period when individual applications were being made by the employees from July 6,th to and including July 31st, 1.936, the entire cost of the insurance; was paid bv the Company. The amount of insurance to which each eligible employee is entitled is approximately one-year's wage or salary, the limitations being a minimum of 81,250. and a maximum of 810,000. The charge to the employee is 60/ per month per thousand of insurance, the Company paying the cost above that amount. Employees covered at December 31st, 1936, totalled 27,067, or approximately 96% of the eligible employees. The total insurance in force was 838,514,250. EMPLOYEES During the year 1936 the average number of employees of the Company and its consolidated subsidiary companies was 36,377, of which 25,562 were within the United States. The number of employees on the payrolls at the end of the year totalled 40,996 compared with 34,976 at the close of the prior year, of which 28,282 were within the United States, compared with 24,650 at the end of 1935. NUMBER OF SHAREHOLDERS The number of registered shareholders appearing on the transfer books of the Company at December 31st, 1986, was 106,745, as compared with 110,229 at the same date of the prior year. SILESIAN-AMERICAN CORPORATION Principal production for the year of the subsidiaries of Silesian-American Corpora tion operating in Poland was 94,669,593 pounds of zinc, 22,298,980 pounds of lead, 1,750,909 metric tons of coal, 47,148 metric tons of sulphuric acid, and 18,703 metric tons of superphosphate. Of the above 1,169,311 pounds of zinc and 4,774,652 pounds of lead were produced from custom materials. Although the currency of Poland has continued on a Gold basis, the products of the subsidiaries of Silesian-American Corporation are sold in the World markets on the basis of the Pound Sterling, which adversely affects such subsidiaries. Difficulties were further increased during the year by governmental restrictions on the transfer of funds, which still continue in effect. At current exchange rates the average price of zinc for the year on the London market was equivalent to 3.34/ per pound, and at December 31st, 1936, was equivalent to .4.38/ per pound. 8 PNYC00005887 The principal amount of bonds of, Silesian-American Corporation outstanding at the end of the year was $.5,345,000, a reduction of $885,000 during the year. FINANCIAL STATEMENTS There is attached hereto as a part of this report a Consolidated Balance Sheet showing the financial condition of the Company and consolidated subsidiary companies at the close of business December 31,1936, together with a Consolidated Income Account and a Consolidated: Surplus Account for the year, certified to by Messrs. Pogson, Peloubet & Co., Certified Public Accountants, By Order of the Board of Directors. CORNELIUS F. KELLEY, President. New York, N. Y,, March 27, 1937. 9 putcoooosa89 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet- December 31st, 1936 FIXED ASSETS: ASSETS Mines and mining claims, water rights and lands for metal producing and manu facturing plants--see note G-..............-.............................-................. _............. .. Coal mines, timber lands, phosphate deposits and day lands--see note G_............. $ Less .reserve for depletion--..................... .............. ............... ............................... $290,832,622.07 9,567,299.87 2,054,400.35 7,512,899.52 Buildings: and.machinery at mines, reduction works, refineries* manufacturing plants, sawmills, foundries, waterworks, steamships and railroads (including railroad concessions to the extent of $978,833.48)--rsee note G._... ..... ..... $284,687,354.28 Less (reserve for depreciation--................................................................. 140,842,533.87 143,844.820.41 Patents,- Investments: Securities of subsidiaries not consolidated--see notes C and F_............................ $ 15,476,172.39 Other security investments--see note F._.............................................................. 13,767,103.91 Indebtedness of subsidiaries not consolidated--not current........................ ..... .. 752,404.78 8,105.00 29,995,681.08 $472,192,128.08 CASH DEPOSITED WITH TRUSTEES--see note J: Amount deposited December 30th, 1936, equivalent to 20% of estimated con solidated net income for 1936* payable as part of sinking fund for discharge of Anaconda Copper Muring Company 4H% Sinking Fund, Debentures due 1950- Amount deposited December 10th, 1986 for holders of Chile Copper Company Twenty Year 3% Debentures due 1947 called on December 1st, 1936 for re demption January 1st, 1937, including amount required for payment of pre mium and interest--per contra... --.--------------- --.---------------- -------------- AmoUnt held in sinking fund for Butte, Anaconda & Pacific Railway Company First Mortgage 5% Sinking Fund Gold Bonds due 1944___________ 3,196,129.00 9.524,950.00 7.913.21 12.728,992.21 DEFERRED CHARGES: Stripping and development.,--...................................................................... ........... Prepaid1!expenses---................................. --....... 1.................................................... Deferred expenses.---............................... ...... .....................-..................................... Discoun^ipremiurn andeXpeiise on bonds and debentures see note J.................... $ 7,378,550.13 261,022.99 323,736.05 3.204.387.21 U.167.096.38 CURRENT AND OTHER ASSETS: Current asset*: Supplies: (Oh.hsui'd--^see note E page 13-................. ............................................. $ 12,997,040.65 Metals and manufactured products: In process--see note D page 13. 6,603,386.19 *' Finished--see note D page 13. 33,775,538.81 * Accounts and notes receivable--trade, less reserve- 10,357.903.57 ' indebtedness of subsidiaries not consolidated--Current- 865,024.26 ' Marketable securities--at cost (market value $1,206,259.35)............................. 1,387,495.69 Cashj...._........------------- --------- ------------------------------ --............... -.................. 16,282,190.76 ' 82,268,579.93 Other assets: Installment house and land sales and other accounts receivable, less reserve.... Advances to sundry Twining companies, including advances on ores, less reserve. Ores produced during development period not being currently treated during period of curtailed operations--see note H-------------------------------- -------------- Cupriferous material held for future treatment--see note L..... ..... _................. Notes receivable of Intpiratioo Consolidated Copper Company and interest accrued thereon secured by First Mortgage Bonds of that oompaay in the principal amount of $7,643,000 (being total amount of said bonds issued)------ 952,959.99 305,598.25 ' 1.300,647.92 3,151,282.25 - 7,864,005.00 ' 13.664,493.41 95,933,073.34 $592,021.800 01 See explanatory notes, pages 13 and 14. 10 NI1057.01 ""^osss. ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 1936 LIABILITIES CAPITAL STOCK <j ( Aunwuula Copper Mining Company: Authorized--12,000,000 shares of the par value of $50.00 each Issued...,............. ...... ....................................... ......................................... ...... .. 3,919,086 shares Held in. treasury or through subsidiaries..... ...... ...................................................... 244,748 shares Outstanding..... .................................. .......................................................... .............. 8,6/4,338 shares $445,954,300.00 12.437,400.00 #433.710,900,00 CAPITAL STOCK AND SURPLUS of subsidiary companies owned by minority interest. 4,543,706.33 BONDS AND NOTES OUTSTANDING: Anaconda Copper Mining Company 4^2% Sinking Fund Debentures due 1950--see note J............. Chile Exploration Company--Serial Notes--payable to banks, due December 10th, 1938 to, De cember 10th. 1941, interest 2% to $p% (guaranteed as to both principal and interest by Ana conda Copper Mining Company)--.................................................. -.................................... ........... Butte, Anaconda & Pacific Railway Company First Mortgage 5% Sinking Fund Gold Bonds, due 1944 (guaranteed as to both principal and interest by Anaconda Copper Mining Company) see note J................................................. --........ ........... .................................... ......................... ............ $51,871,000.00 23,000,000.00 1,498,000.00 76.369,000.00 CHILE COPPER COMPANY 5% GOLD DEBENTURES due 1947-calIed for redemp tion January 1st, 1937--see note J--per contra: Not presented for redemption at December 31st, 1936.................... ................................................ Premium and interest thereon............. ............. ................................................................................. $ 9,077,500.00 447,450.00 9,524,950.00 RESERVES: For repairs, renewals and replacements...... ........ ................................................................................... $ 338,804.76 For workmen's compensation insurance, etc......................................................................................... 638,816.18 For contingencies................................ .................................................................................................... 275,000.00 1,252,613.9* CURRENT LIABILITIES: Chile Exploration Company--Serial Notes--payable to banks, due December 10th, 1937 (guar anteed as to both principal and interest by Anaconda Copper Mining Company)_______________ Accounts payable--trade--.-______________ _ .... ........... ................ ........................................... Wages payable.................................. ........................................................................... -........................... Accrued taxes............. ........................................... ...... ....... .................................................................. Accrued interest.................................................................................... ................................. -............ ... Other accrued liabilities... ..........................................................................-.................................. ....... Other accounts payable........ ........................................................... ...................................................... $ 2,000,000.00 6,525,827.45 1,302,040.23 4,584,115.49 671,455.41 192,707.04 165,951.46 * 15.442,097.08 DEFERRED CREDITS TO INCOME.__ SURPLUS........................................................ See explanatory notes, pages 13 and 14. II 218,820.74 50,953,796.87 <592.021,890.01 P*rC00005S90 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Income Account--Year Ended December 31st, 1936 Gross Sales and Earnings........................................................................................................ <\>st of Sales--operating expenses, development, maintenance and repairs, administrative. Jelling and general expenses and taxes except indome taxes--sales to the extent of current production being, applied at current cost;......... ...... ...... ............................................................ ;____________ ___ Income from operations,of mining, smelting, refining and manufacturing plants.,,... ......... ........ ........ Other Income^--Dividends from subsidiaries pot consolidated--see note D pageH.......................... .. --Oilier dividends and interest--see note E page 14..... ....... ..... ..................................... --Miscellaneous income^.................. ...... ..... .... ...... ........... .... ........ ............................. ..... --Profit on sale of capital assets......... ........................................ .................. ......... ......... (160,382,734.15 129.311,064.67 i 31,071,669,43 3 1,562,197.14 533,151.48 186,759.62 78,540.69 2,385,648.91 1 Total Income..... ........_.................. .. ............................ ........ ................................. ..... ........ _..... ............. Interest on bonds, debentures and serial notes..,_____________________________________________ Erpenses pertaining to non-operating units, including expenses at Cananea during strike period United Suites and Foreign Income Taxes--estimated (including (6,250.71 estimated surtax on undistributed income).............. .......... ...... --........ _........ ............... .................................................. Discount, premium and expense on bonds and debentures retired through sinking fund operations....... $ 33.457,313.39 9 3.818,412.43 2.420,080.31 2,073.917.76 286.970.73 9,501,331.43 Provision for depreciation and obsolesoence_________ _____ _________ __________________ ______ _ Provision for depletion of coal mines, timber lands, phosphate deposits and clay lands (without deduction for depletion of metal mines)................................ ............. -............................................ Discount and expense on bonds and debentures-^......................... ......................... .............................. $ 23.9.75,936.91 $ 7,525,374.10 83,488.45 388,210.02 7,997,072.63 Net Income, without deduction for depletion of metal mines................................................. ................ Minority share of income................ ................ ........... ...... -..................................... .................................. ( 15,958,864.28 77,034.69 Consolidated Net Income, without deduction for depletion of metal mines........... ............................. ( 15,381,329.59 See explanatory notes, page 14. Consolidated Surplus Account--Year Ended December 31st, 1936 Surplus, December 31st, 1935-_____ Minority Interest........................ (48.235.924.09 72.273.25 48,163,650.84 Consolidated Net Income, without deduction for depletion of metal mines. 15,881,829.59 Deduct: Dividends Nos. 113,114, 115, 116 and extra. 8 64,045,480.43 10,842,922.50 Mines and mining plant, development and other expenses on coal mining properties and sawmill written off, the projects being abandoned or discontinued-------------------------------------- Adjustment through dissolution of subsidiary arising from write-down of assets transferred to a wholly owned subsidiary-------.----------------------- ------------------------------------------------------------- Discount and premium on 5% Gold Debentures of Chile Copper Company called on December 1st, 1938 for redemption January 1st, 1937, applicable to such debentures as were redeemed up to and including December 31st, 1936 in accordance with offer to holders of debentures--. ( 037,081.32 73,311.49 1,538.388.25 53,202,557.93 2,248,761.06 Surplus, December Slst, 1930__------ ~_-------------..... ........ -- ------------- --.---.................. ......... - (51,315,365.88 Minority Interest.................................................... ............. ................-...................-.......................... 361,569.01 Consolidated Surplus, December 31st, 1936. ( 50,953,796.87 ) 12 P*rC00005an VOTES TO CONSOLIDATED BALANCE SHEET--DECEMBER Slsr, 1936 N'DTE A--PRINCIPLES; APPLVING IN' CONSOLIDATION In order- tn prewit the t*tus of the Company'* interest in subsidiaries where the interest owned (directly or through other subsidiaries) i* 75^ or wore o! the isaur-i t` c ai-Hrt* and liAbiiiliea of .'aid subsidiaries a* they appear upon the book* of said subsidiaries are distributed under appropriate heading* oa the Citoa.-.ii- 'ifli-r Itafnnre Sheet, e^rrpt that four imall subsidiaries more than T5<^ owned, the operation*: of which are not an integral part of the operations of the conWhlated *r"up- are af'ried.a* lO'-eitmenti in the Consolidated Balance Sheet, The interest of minority stockholder* o( subsidiaries, the accounts of which are cQQi*rii<iai<>i. *li-*q the1Consolidated, Balance sheet. Accounts of subsidiaries in which the Company's interest is les* than 73^ of the issued stock are not consolidated a'mf tlie shares owned m these subsidiaries are carried as investments in the Consolidated Balance Sheet. The term ''subsidiaries'' is intended to oirsn curporstiiiris id which a majority of the voting stock is oroed directly by the Company or through other corporations is which the stock interest of the Ciifiipariy is.uiiM tliati n o t e B~-8aLa NCES in f o r eig n c u r r e n c ie s Cash balances in foreign currencies (equivalent to 13*8,409.08 In United States currency) era converted into dollars at rates not more favorable than those effective at December Slit, 1930; Current assets and liabilities at the Toronto piant of Anacoods-American Braes,.Ltd. are parried in Canadian; currency sad have1 been converted into U. S. dollars at rates not ia excess of rates current at December Slat. IASS. Contingent liabilities existed at December Slst, 193 (a) for acceptance* covering foreign sales of copper discounted in the ordinary course of byiineis at various banks ott the gteiter part of which payments have already been received and fb) forextbange commitments most Of which, hive been liquidated. NOTE C--EQUITY OF COMPANY IN UNCONSOLIDATED SUBSIDIARIES The equity of the Company in thdassete of tie priacipaJ unconsoiidated subsidiaries (Anaconda Wire and CableCompaay, Mountain City Copper Company and 1 Walker Mioin* Company 1 and the four unconsolidated subsidiaries referred to in Note A had decreased at December 31st, 1933, to the extehc of S(H iSi <H_ since tbs dates of acquisition ju the result of profits, losses, distributions and surplus adjustments as ihowu by the books of said unconsolidated subsidiaries but the cost thereof as shown in the Consolidated Balance Sheet has not been adjusted for such decrease. ' NOTE D--INVENTORIES OF METALS AND MANUFACTURED PRODUCTS The metallic contents of copper ores, concentrate*, and cupriferous materials, and tine and lead ores and'concentrates, while in treatment at reduction plants up to the production ol blister copper, electrolytic copper, metallic sine and lead bullion, are classified as metals in proems. Blister and electrolytic copper, metallic sine, lead bullion, and other products sail metals produced in connection therewith or therefrom, including stock in works at fabricating plants, are classified as finished. ' Inventory in process-is calculated at "norosJ cost" which is below the equivalent of current market for metallic content of suds inventories. Finished metals and manufactured production hand at December Slit, 1938 (except silver and gold which are carried at market quotations or less), have been valued (a) as tO'jthat part of the inventory which was equal to the quantity on hand at December 31st, 1938, at the inventory price of December 31st, 1933 such inven tory bring carried either at production costs for year 1933 or for year* following according td period in which accumulated and (b] as to that part of the inven tory; Which exceeds in quantity inventory on band at December Slat, 1933 at production costs during the year' ended December' 31st. 1930. Inventory valua tion* det^Vhiine^'ilbiaccdrdso'c*! with the foregoing method were below1 market prices forthe Various, metals and'.products at December 31st, 1933.' See Note C to Consolidated Income Account. NOTE! E-SUPPUES ON HAND Supplies on hand; including replacement parts as well a* current supply items, are earned at cost. NOTE F--INVESTMENTS--BASIS Invertmeats.ih s^uniibS'iOf uacdnsdlidated subsidiaries and other security investments are carried at cost or leas, such cost being cash cost, or in the case of securities issued in: eichah'ffe:|fpr:^ihP<jrty transferred_by the Company or a consolidated subsidiary, the cost of such property to ue consolidated group after deducting deprecieUbh'i'bi idile'ipf'.tfahrfeP,; and do not indicate current value*. Other security investments include 333,000 share* of Inspiration Consolidated Copper Compapy!c*med .ati fl'^.9 NOTE G^PRO;PERTYr>LANT AND EQUIPMENT--BASIS OF VALUATION (a) Propdrtj^, iPfsMisad Equipment of the Company are carried at cash cost or in the case of physical properties acquired for stock of the Company at par value o! (b) Property, PUat and Equipment of subsidiaries (the, account* of which are included in this Consolidated Balance Sheet) are carried at the difference between (1) the investment 'baaisufotrthe respective subsidiary m set forth below, and (2) all net assets (other than property, plant and equipment) of such subsidiary a e f w r Li a * were first included tn the Consolidated Balance Sheet of the Company ana subsidiaries, to which is added the cost of subse quent iscquisitionsJ1 Such investment.basts it the cash cost to the consolidated group ol the stock of the respective subsidiary owned by such group, where tie ;.:ie was a~ :uirr<j ;>y in* group Tor bash, or where the same was acquired by the consolidated group for stock of the Company, the par value of the stittA of the Gottpacy,!*0!iii*ued. excepts* te properties of Andes Copper Mining Company and Santiago Mining Company acquired by said companies respec ts eiy for stares of their capital stock; which properties are included is the Consolidated Balance Sheet it the original par value of the shares of those com- pani*i|'iMUedl|therefori|(i.e-i. i<83 per share); amounting in the case of Andes Copper Mining Company to 1.000,000 shares and in the case of Santiago Mining < a l * /' * r ** saiditock of Andes Copper Mining Company issued for property 998,038 *hare* were acquired by the Company and subsidiaries s -ii1 m`> ' r*. ''ar value thereof and of said stock of Santiago Mining Company 83,431 share* were acquired (in 1930) by the Company at less * . r -a. ai i r r ` The 83,431 share* of Santiago Mining Company prior to Lbcir acquisition by the Company were carried in the consolidated a atari* is m ti*a-dinf miribrity interest it par from the date When 'Santiago Mining Company u first included in such statements. Upon the acquisition of sudr shares by the Company in 1930 (he mfferaace of *1.319,363.68 between the par value thereof and the cost of such share* to tbs Company was transferred from minority Interest to consolidated surplus. The total amount credited to consolidated surplus oa account of the difference between the par value ol theiabove mentioned shares ol Andes Copper Mining Company and Santiago Mining Company and cost thereof to the Company and its sub sidiaries was *3,9; i03.38; (c) It has been the practice of the Company, consistently applied to its own properties and those of subsidiaries the stocks of which have been acquired and the ac counts of wpici included in the Consolidated Balance Sheet, to carry Property, Plant and Equipment aa described above. Pursuant to the requirements f i. mit'1 '-lairs Treasury Department, valuations as of March 1st. 1913 of mining properties then owned have been recorded on the books for the pur- piite OfUcOmpUtiSg itheiiambunt allowable as a deduction for "depletion" in arriving at taxable income under the Federal income tax laws, but these values have not bwm i mduded mi the published accounts oil the Company. The Company hasconaurtently followed tbie practice! of not deducting is any of its published accounts, any amount foe depletion on account ol metals mined, and no such deduction is included ia any of the financial statements submitted herewith. Depletion based on. cwt has in the case of timber, coL day and phosphate lands, been deducted from income in the financial statements submitted herewith and also fijom the cost basis shown in the Consolidated Balance Sheet. (d) The value* of^PVojpertr,: Plant and Equipment are shown on the bases above set forth and do not indicate current values which could be established only by is PNVC0000589.2 NOTE H--ORES PRODUCED DURING DEVELOPMENT PERIOD Or produced.cfuriny development period not being currently treated are earned at cost of extraction which is lew than a conservatively estimate,1 -eulriablc iaiur. NOTE I--CUPRIFEROUS MATERIAL Cupriferous materia] beid: for future treatment is valued *t. United State* Treasury Department valuation for income tax purpose* which is less than the value ..f the. recoverable metals contained therein at current metal price* after deducting treatment coats, both as estimated by metallurgist* of the Company. NOTE J--SINKING. FUND REQUIREMENTS. Under the sinking fund provisioni of the indenture prodding for the iasue of the 4H% Sinking Fuad Debenture* of Anaconda Copper Mining Company, due jo.to. the Company wa* obligated on August 13th, 1936, and will be obligated on August 13th of each year thereafter, to and including August 13th. 1949, to pay to the Trustee, for the purpo^s orthe .inJong fund for the retirement of debenture*, an amount equal to 11,000.000 plus <0% of the consolidated net income of the Company ..a* defined m thejodenture) (or the period of twelve month* ended on the nest preceding December 3lst or in lieu of such payment, the Company may deliver to the Trustee debenture* to be received by the Truiteejo lieu of an amount of cash equal to the purchase pr.ee of Mich debenture* paid by the Company in the acquisition thereof. Under these provisions there were deposited with the Trusty on August 14th; 1933 debentures of the par value of 43.U9 OiW m,full*t!U*f*ctioQ of the sinking fund {jayment due do that date. There was also on December 30tb, 1936 set aside out of the profit* ofthe year 1933 ami de ported in trust with Guaranty Trust Comoaay fif New \erk 3,19,U9, being *a aoouBt equivalent to 40% of the estimated consolidated net income of the year *933, to be used either the purchase of debenture* for cancellation m the sinking fund or to-,the extent not so used to be paid into the unking fund on August On December lit,' 1933 the outstanding Chile Copper Company 3% Debentures we called lor redemption. On December [Otb. 1933 Chile Copper Cbmpenv offered to make full payment of principal, .premium and interest due January 1st-. 1937 on debentures presented at any time after December I0tb. Of the total' amount of debentures covered by the call for: redemption. 113,989.300 face value,Were ptpsented for redemption before January lit, 1937. The renaming debentures *9,077,300 principal amount, were retired in accordance with the ptcmsioosof the callfor redemption u ol January 1st. 1937. 'The amount of *8dl 931 0i included :is discount, premium and expense on bonds and debentures in respect Of aid *9,07'7.300 principal amount ofdebenture* will, be written off sis of January 1st. 1937. Under the sinking fund provision of the indenture providing for the issue of First Mortgage 3% Sinking Fuad Bonds of Butte, Anaconda St Pacific Railway Gjmpiny the anhual c**h .sinking fund 'requirements for, 1937 jrill amount to 1103,000. H NOTE K--SURPLUS Included in Consolidated Surplus are: (a) a credit of 121.909,339.74 arising from1 inclusion in Consolidated Balance Sheet.of asset* and liabilities of Andes C..pr>Mining; Company at the amounts shown 00 its books fsee note |G). (bj a credit of tl.319,333.83 arising from acquisition in 1930 of minority shares in Saati3g'Mining'Company issued for property and carried at their par value,, aaid amount representing the excess of par value over.acquisition cost. <:) a credit of #20,813.138,49; i.bei'ng^the'hxcesi^ ofjthe'ipr'pceedi of, the' iwue of 3,109,393.34 shares of stock of Company over the par value thereof ta<{ <dl a cha-ce <d *11,907,498.50, being discount and expense oh issuance, and premium on redemption of bonds, redeemed through funds obtained by issuance of stock ao<>V.e referrted'tb. See'!par^grtph,(c) of NotaG as to' practice'regardmgdepletioa. : NOTES TO CONSOLIDATED INCOME ACCOUNT--YEAR ENDED DECEMBER 31sr, 1936 n o t e a --b a s is Principles applying to:,the Consolidated Income Account are the same as set forth in Note A to the Consolidated Balance Sheet. The equity of the Company m the income of four small unconsolidated subsidiaries more than 74% owned, tha operations ol which are not an integral part of the operations t the conudidatci group, amounted for the year ended December 31st, 1933 to 119,939.17. Sales of metals and manufactured products sire included in income as hilled and delivered to customers. Undelivered sales contracts and purchase commitments are not given effect ta in the Income Account. NOTE B-INTER-COMPANY SALES AND PROFITS Sales to consolidatadsubaidiaria have been eliminated and the tales shown in the. Consolidated Income Account include only sale* to others than the Company end consolidated subsidiaries. Inter-company profits, where these are material; have been eliminated in the Consolidated Income Account. The principal inter-company transactions are sales ->f copper iadother.metsl* to masuiacturihesubu^diarie*; 'The inventories of manufacturing subsidiaries include, softr uii ascertainable, no i.nter-company pmtit. Any inter-company profit*.resulting from/transactione-in connection with purchase* and sales of supplies and furnishing of services and in connection with redoing and smelting operational are not material ia amount and have not been eliminated. NOTE C--COST OF SALES The genera! practice of inventory valuation folioWedj: in the year ended December Slit. 1933 waa as follows: la ascertaining consolidated income during the year 11930, the Consolidated Income Account was.stated.on the bads of last-in first-out. that is, applying current coet 'nietil production to^saJe* (seeNoteiA): to .tile extant of current production and tale* in excess of current production were^carried in the Consolidated Income Accbiint at-the inventpry 'cost,"such costbeing the same as the inventory coat used for Balance Sheet purpose*. (See Note D to Consolidated Bal ance StHjtitiT'l. . NOTE I>--DIVIDENDS: AND EARNINGS OF PRINCIPAL UNCONSOLIDATED SUBSIDIARIES in the year 193# tha equity of the Company in tit combined net current earnings o! the principal unconsolidated subsidiaries (Anaconda Wire and Cable Company. Moutitaid CityGopper Company end Walker Mining Company) and the four unconsolidated subsidiaries referred to in Note A amounted to 4l.933.4ie.aj. Out of that equity tbeke was paid to the Company the amount of ;lM3t,I97.14 id dividend* by aaid unconsolidated subsidiaries. NOTE E--INTEREST--INSPIRATION CONSOLIDATED COPPER COMPANY There is included in Income Account uadertbe itoai "Other Dividends and Interest" interest oa notes of Inspiration Consolidated Copper Company, in the amount of gJ8841. l3 fqc the year, ended December 31st, 1933. Such iatamt has been paid during the year aa well aa 8333,838.08 on account of interest accrued prior to January 1st, 1933. ' 14 PNVC00005893 PQGSO.V, PELOUBET & CO. HERCY \v, rOCSON j NEW YORK - 25 BROADWAY Ma u r ic e e . p e l o u b e t : e l p a s o . t e x a s -mil l s b l d g . LEWrs M. NORTON 1 SIDNEY W. PELOUBET HOWARD L. GUYETT AGENTS LuSUON- KEMP. CHATTERIS. NICHOLS, ^ENUEI.l. Ji CO. 36 WAt.8ROOK, C. 4. PARIS- TUROL'a NU. YOVNCS. KEMP * CO. .: 8 SCE OC HELPER BERLIN - TURtjOAND/YOL'NCS, KEMP * CO. UJiTER pEN UNBEN 56 tCYET - HEWAT, BRIOSON A NEWBY 1 ALEXANDRA AND CAIRO c a bl e a d d r e s s "cEunfito" stw To the Board of Directors, Anaconda Copper Mining Company, 25 Broadway, New York, N. Y. We have made an examination of the Consolidated Balance Sheet as of December 31st, 1936, of Anaconda Copper Mining Company and of the other corporations whose accounts are consolidated with its accounts as stated in Note A to the Consolidated Balance Sheet (which other corporations are hereinafter referred to as consolidated subsidiaries) and of their Consolidated Income and Surplus Accounts for the calendar year 1956. In connection with our audit we examined or tested the accounting records of Anaconda Copper Mining Company and its consolidated subsidiaries together with other supporting evidence and made a general review of the accounting methods and of the operating and income accounts for the calendar year 1936, but we did not make a detailed audit of the trans actions. The practice of the Company and its subsidiaries with respect to the computation of their net income or net loss without deduction for depletion of metal mines is, in our opinion, in accordance with accepted principles of accounting in industries engaged in the mining of copper, gold, lead, silver and zinc. In our opinion, based on our examination, such Balance Sheet, Income and Surplus Accounts, together with the notes attached thereto or appearing thereon, fairly present, in accordance with accepted principles of accounting in the industries in which the Company and its subsidiaries operate, consistently maintained by the Company and its subsidiaries, the consolidated position of the Company and its consolidated subsidiaries as of December 31st, 1936 and the combined results of their operations for the calendar year 1936. POGSON, PELOUBET & CO.. Certified Public Accountants. New York, March 15th, 1937. ' 15 N11057.02 Pyre 00c 589* PNYCCC005B95