Document yp9jwqkz8vMpoLEbVr9nR0k6D

PNYC 00010061 N11741 Anaconda Copper Mining Company CAPITAL STOCK December 31, 1935 Authorized, 12,000,000:shares, $30e4ch............................. $600,000,000 Issued, 8,919,086 shares, ISOeactl............................. 445,95,4,300 OFFICERS President........................................ Vice-President................................. Vice-President and Treasurer . , 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. Ho b s in s . Ro b e r t E. Dw y e r B.. Da v id He n n e s s y - Ja me s Dic k s o n B.. Ke n n e t h Fr a z e r DIRECTORS An d r e w J. Mil l e r Gr a y s o n M.-P. Mu r p h y R.Ja me s Ho b b in s D.Wil l ia m Th o r n t o n Co r n e l iu s F. Ke l l e y Jo h n A. Co e E.Ro b e r t Dw y e r He r ma n C. Be l l in g e r 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 To the Shareholders of Anaconda Copper Mining Company: The consumption of non-ferrous metals during 1935 was substantially greater than in the prior year. Consumption of copper in the foreign markets established an all-time record. In the domestic market copper consumption improved materially over the preceding year; nevertheless, it remained abnormally low*compared;: with either the high year of 1929 or the average consumption for the;five years immediately preceding 1929. During the first half of the year, although deliveries of tapper in the domestic market were maintained at a normal ratio to Consumption, buying'practically ceased during May and the first part of June due to tfiel uncertainty that attended the continuance of the National Industrial; Recovery, Act, and the price of copper in this market declined' from 8.775e to 7.775s; per pound. With the: general increase in business during the last half of the year large sales of copper were made arid the price'advanced until at the close of the year it was 9.025e per pound, f.o.b. refinery. At the beginning of the year it became evident that there was an over-production of copper outside the United Sjcates for foreign markets and foreign, production was curtailed. As a result, the stocks of refined copper abroad, which; had. Increased during the first half of the year, were thereafter materially reduced, The foreign price of copper declined to the equivalent of 6.156 i; pound in February; thereafter it advanced and reached the equivalent of 8.756 in October; and at the ehd of the year1 was quoted at the equivalent of S.375e f.o.b. refinery. The World smelter production of primary copper during the year was 1,575,838 tons, an increase of 16.7% overproduction of the prior year. Of this total 372,738 toils were domestic duty-free copper and 1,2031100 tons were foreign. Refined primary copper production totalled 1,550,745 tons, of which 368,407 tons were domestic and 1,182,338 tons were foreign. The World consumption of primary copper equalled 1,652,078 tons, an increase of approximately 19.6% compared with the prior year. Domestic consumption of primary copper totalled 415,663 tons, and foreign consumption 1,236.415 tons. Domestic con sumption including secondary copper totalled 528,194 tons, an increase of 39.0% ;r 1934. Foreign consumption in 1935 increased 11.3% pver the prior year and was the highest on record, while consumption in the United States was only 30% of that of 1929. Stocks of refined copper in the United States decreased 123,021 ton3, partially due to the exportation of duty free copper. Refined stocks abroad increased 21,688 tons. The net decrease in total refined stocks was therefore 101,333, tons. Refined stocks in the United States were approximately 292,000 tons less than at December31,1933. The production of zinc ia the domestic market totalled 431.412 tons for the year, an increase as compared with the prior year of 17.6%. Domestic consumption totalled 46S.600 3 torii lit ifttifSase of 32.1% over the prior year, and was greater than that of any year since 1929. Stocks of zinc in the United States decreased 36,072 tons, and were at the lowest point since 1929. The price fbr silver mined in. the United' States was raised to 71.lid per ounce under proclamation by the president of the United States on April '10th.and again to 77.516 per ounce on April 24th, and closed- the year at that figure. Gold remained at $35.00 per ounce throughout the year. The price of foreign silver, which reached a high of 81d per ounce in April, 1935, declined sharply during the latter half of the year, and closed the year at 49.75e per ounce. The prices for non-ferrous metals averaged for the year somewhat higher than the averages that prevailed, during the prior year, Prices of the principal instate.were reported by Engineering & Mining Journal as follows: Copper--Duty Freef.o.b, Refinery---Cents per lb----- " --Export Lo.b.Refihery--Centsper lb.............. Lead --Sew York--Cents per ib........................... --. Zinc --St. Louis--Cents per Ib.. --..... -.................Silver --N'ew York '(.Not covered by Presidents. Proclamations)--Cents per or----------------- Jan. 2 8.775 6.700 3.700 1*25 53.000 High 9.025 8.750 4.600 . 4.850 8LO0Q Low 7.775 6.150 3.500 3,. 700 49.750 Dec. 31 9.025 8.375 4.500 4.S50 49.750 Average 8.649 7.533 4.065, 4.328 54.273 CORPORATE CHANGES The existing bank loans of your Company and its subsidiaries, which totalled $59,549,120 at the beginning of the year and had been reduced to $S4,322,120 at September 30, 1935, were funded during the latter part of the year, A registration statement under the Securities Act of 1933 as amended, was filed with the Securities and Exchange Com mission, covering an issue of $55,000,000 principal amount of fifteen year 4H% Sinking Fund Debentures, dated October 1, 1935, due October 1, 1950. After negotiation these debentures were sold to the underwriters on October 18, 1935. The offering price to the public was 98J% and the commission to the underwriters was 3%. These debentures are the direct unsecured obligations of the Company. Upon the sale of the debentures the outstanding bank loans of your Company and its subsidiary companies were paid. The indenture under which the debentures were issued contains a provision that on August 15, 1936, and on August 15th of each year thereafter to and including August 15, 1949, the Company will pay to the Trustee, (Guaranty Trust Company of New York), for the purposes of a sinking fund for the retirement of debentures, an amount equal to the sum of the following: (a) $1,000,000 plus (b) twenty percent (20%) of the consolidated net income of the Company, as the same is defined in the indenture, for the period of twelve months ended on the next preceding December 31st. Such consolidated net income is the consoli dated net income as published in the annual report of the Company for the respective twelvemonths period, subject to certain adjustments as set forth in the indenture. In lieu of any such sinking fund payment, the Company may deliver to the Trustee debentures to be credited at cost to the Company. There is a provision that the maximum amount of sinking fund payments required shall be so limited that the total amount of debentures issued need not be retired through the sinking fund before October 1, 1945. The shares of the capital stock of your Company were registered on the view Tork Stock Exchange and the Boston Stock Exchange under the Securities Exchange Act of 1934, and the 414% Sinking Fund Debentures were similarly registered on the '.VewVork Stock Exchange: Following steps begun in 1934 to simplify the corporate structure of the Company, the assets and business of six minor 100% owned subsidiaries were transferred in 1935 to. your Company, or other 10(5% owned subsidiaries. An adjustment was made with the Montana Power Company in connection with powercharges deferred during the period of drastic curtailment of operations in Montana when, the power used whs below the minimum provisions of the -contract with that company,- and as a part consideration the(facilities of the Electric;'hight' .Departmehti which supplied: electric light and power to the Cttydf Anaconda,-Mpniatta, were transferred to the Power Company. FINANCIAL The gross sales and earnings of the Company and its subsidiary companies upon a consolidated basis totalled $127,678,576.68, compared with $99,149,555.64 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 $100,266,618.82, compared with $82,053,027.58 for the previous year, resulting in an operating income of $27,411,957.86, compared with $17,096,508.06 in 1934. The total income, including other income of $1,011,366.88, amounted to $28,423,324.74. After deducting from income the following items: interest on bonds and current obliga tions $4,044,434.87; expenses pertaining to non-operating units $2,403,935.88; United States and foreign income taxes (estimated) $1,957,992.16; and loss on bonds retired $47,045.11; a total of $8,453,408.02, the balance was $19,969,9.16.72. Provision for depredation and obsolescence and for depletion of timber, coal and phosphate lands was $8,390,015.79, and the discount:on bonds was $266,173.96, a total for these items,of $8,656,189.75, and the re sultant net Income on a consolidated basis for the year (without deduction for depletion of metal mines), was $11,313,726.97, as compared with $1,960,093.75 for the prior year. The consolidated net income after deducting minority share of $153,639.52, was $11,180,087.45. Additional Federal income taxes for prior years plus charge-offs on dissolution of sub sidiary companies, less a credit on account of adjustment of deferred power charges, resulted in a net charge to consolidated surplus of $268,500.19, The funding of the bank loans through the issuance of the 4)^% Sinking Fund Debentures materially improved the consolidated current position of the Company and its subsidiaries as set forth in the consolidated balance sheet at December 31, 1935. Cash on hand at the dose of the year amounted to $17,869,122.46, compared with $12,245,431.10 at the close of 1934. Current assets; including cash, totalled $76,588,329.97, compared with $67,856,820.2^ for the prior year. Current liabilities were $10,016,210.18, compared with current liabilities of $67,645,362.01, including notes' payable to banks,.at the end of 1934. The improvement in the nek current position was $66,360,661.52. 5 There were duriihased arid retired during the year, or held in the treasury at the dose of the year SI.252,000 par value of Twenty Year 5% Debentures of Chile Copper Company and $108,000 par value of First Mortgage 5<rJi Sinking, Fund Bonds of Butte, Anaconda jfc Pacific Railway Company, a coral of Si,360,000. The improvement of S66.360.661.52 in the net current position- on a consolidated basis, and the decrease ot SI.360,000 in the funded debt of the subsidiary companies totalled $67.720.661-..52. Of this amount' $52,525,000 is attributable to the proceeds of the debentures and the balance, $15,195,661.52, Is accountedfor principally by earning's for the year plus depreciation charge in excess of expenditures for plant. Further advances were made to the Inspiration Consolidated Copper Company on its promissory notes: secured by First Mortgage1 Bonds of that company, making its total liability on notes'to this Company as of the close of the year $7,643,000'. on which interest accrued as of that date amounted to $557,873.08. The Inspiration Company resumed operations on a curtailed'basis during the latter part of the year. Capital expenditures during the year amounted to $2,165,432.91, summarized as follows: Mines. Mining Claims, and Lands.................................. $63,628.41 Buildings, Machinery and Equipment at the plants of the Company and its subsidiaries.......................................... 1.984,024.51 Acquisition of shares of stock of subsidiary companies___ 117,779,99 $2,165,432.91 OPERATIONS The operations of the mines, and the reduction, refining, fabricating, and other plants of your Company and its consolidated subsidiaries, while conducted at an increased scale as compared with the previous year, continued on a basis of substantial curtailment. Copper The production of metals from the mines of your Company and its consolidated sub sidiary mining companies through Copper Plant operations was 517,943,873 pounds of copper, 5,472,579 ounces of silver, and 29,629 ounces of gold. Copper deliveries for the year in both the domestic and foreign markets amounted to 828,589,950 pounds. After allowing for custom, secondary, and purchased copper, the deliveries were in excess of production and resulted in a decrease of 53,776,871 pounds in stocks of copper on hand. Deliveries were approximately 36% over the deliveries of the prior year. Zinc Production of electrolytic tine during the year amounted to 212,055,670 pounds, of which 49,235,857 pounds were from Company mines, and the remainder from custom ores 6 PNYC 00010066 ana EBncentraces and-leased mines. Deliveries of sine amounted to 197.145.190 pounds including the zinc used in the manufacture of zinc oxide at the zinc oxide plants at East Chicago-, Indiana and Akron, Ohio, The-mecals paid for in zinc residues and dross sold to other companies amounted to 1.518.574 pounds of zinc. 57.I0J.467 pounds of lead J48 149 pounds Of copper, 2,874,131 ounces of silver and 6,152 ounces of gold. '' Custom Smelting and Refining The Copper Smelting Plant at Tooele. Utah, of International Smelting and Refining Company resumed operations in October, 1955, on ores; received from the Mountain Citv Copper Company and,concentrates received from .the Walker Mining Company, aubsjdiarv companies qf the International Smelting and: Refining Company. ' The Copper Smelting Plant of the International Company at Miami, Arizona, operated intermittently; and itsLead Smelting Plant at Tooele, Ctah, and Lead Refinery at East Chicago, Indiana, operated on a curtailed basis throughout the year. Operations at the Raritan Copper Works division at Perth Amboy, New jersey, were at somewhat higher levelsithan in the prior year. The facilities for the treatment of secon dary metals and by-product metals at that plant operated- throughput the year. The custom smelting and refining operations, other than zinc, produced from the treat ment of custom ores and concentrates and secondary metals 48.711,854 pounds of copper, - 52,042.186 pounds of lead(including2,127,592 pounds of lead from own mines), 2,826,513 ounces of silver, 63,974 ounces of gold, and certain by-product metpljs and materials. The foregoing production includes production from ores and concentrates received from the Walker and Mountain City Companies. In addition production frofn materials treated on toll was 76,679,238 Rounds of copper, 2,520,776 pounds of lead* 2.600,503 ounces of silver and 6,132 ounces of gold, peiiyenes of lead during the year were 68,$08,(563 pounds, includ ing the lead used in the manufacture of white lead at East. Chicago* Indiana, plant. . Ore* and Concentrate* From Subsidiaries Operations on a curtailed basis were resumed by the Waiker Mining Company in September, 1935. The concentrates produced by it are shipped to the Tooele Copper Plant of International Smelting and Refining Company. Shipments of ore from the mine of the Mountain City Copper Company, located in Elko County, Nevada, commenced in October. The company holds unpatented mining claims covering approximately 470 acres and, in addition, owns approximately 176 acres of patented agricultural lands which carry mineral rights. The property is equipped with adequate structures and machinery for mining ore and carrying on development work. Shipments are made by truck from: the mine to existing railroad faci -ties, and thence by railroad to the Tooele Copper Plant, A concentrator for the treatme't of lower grade ores than are now being shipped, is now being constructed at the mine. The Internationa! Smelting and Refining Company, a 100% owned subsidiary of .Ana conda owns 30.42% and 61.45% respectively of the stock of the Walker and Mountain City Companies. Fabricating Plants The shipments of manufactured products, of The American Brass Company, (including Toronto Plant), and of the Anaconda Wire and Cable Company totalled 531.102.747 pounds, compared with 425,516,899 pounds in the prior year, an increase of approximately 25%. Miscellaneous Products Miscellaneous products consisted of 73.128.020 feet lumber: 19.880 tons treble superphosphate and phosphoric acid: 7,929 tons arsenic: 946,051 pounds cadmium: 104,600 pounds nickel sulphate ; and 289,162 pounds copper sulphate. EMPLOYEES During the year 1935 the average number of employees of the Company and its con solidated subsidiary companies was 32.828, of which 22,134 were within the United States. The number of employees on the payroll at the close of the year totalled 34,976, of which 24,650 were within the United States. NUMBER OF SHAREHOLDERS The number of registered shareholders appearing on the transfer books of the Company at December 31, 1935, was 110,229, as compared with 118,094 at the close of the prior year. SILESIAN-AMERICAN CORPORATION Principal production for the year of the subsidiaries of Silesian-American Corporation operating in Poland was 89,457,039 pounds of zinc, 28,185,811 pounds of lead, 1,693,956 metric tons of coal, 42,453 metric tons of sulphuric add. and 9.518 metric tons of super phosphate. 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. At current exchange rates the average price of zinc for the year on the London market was equivalent to 3.106 per pound, and at December 31, 1935, was equivalent to 3.206 per pound. The prindpal amount of bonds of Silesian-American Corporation outstanding at the end of the year was 16,230,000, a reduction of $818,000 during the year. 8 FINANCIAL STATEMENTS There is attached hereto as a part of this report a Consolidated Balance Sheet showing the financial condition of the Company and subsidiary companies at the close of business December i.1, 1935. together with a Consolidated income Account and a Consolidated Surplus Account for the year, certified to by Messrs. Pogsori, Peloubet ft Company. Certified Public Accountants. *' By Order of the Board of Directors. CORNELIUS F. KELLEY. . President. New York. N. Y.. March 21. 1936- 9 PNYC 00010069 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 193S ASSETS FIXED ASSETS; Mires and mining claims, water rights and lands for metal producing and manufacturing piants--see note G.~.......................................................... Coal mines, timber lands, phosphate deposits and clay lands--see note G.`. Less reserve tor depletion..... $290,925,372 9.629,323.09 1.970.911.90 7.653.416.19 Buildings and machinery at mines, reduction works, rehnenes. manufac ture? plants, sawmills, foundries, waterworks, steamships and railroads (including railroad concessions to the extent of 3983.719,83)--see noteG S2S3.398.333.24 Less reserve for depreciation.................................................................... ...... 136.497.350.68 148.900.982.56 6,105.00 13,469.318.65 iMsw^wisiaiHisCTaBfiBHsasiaa^ ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Balance Sheet--December 31st, 1933 LIABILITIES CAPITAL STOCK oi Anaconda Copper Minin? Company; Authorized--12.OOG.OOQ shares oi the par value or 530.00 each Held in treasury or through subsidiaries. Outstanding..-. . 3.919.086 shares 244.743 shares 8.574,338 shares .5445.954.3CO.CO I2.237.4CO.CO 5433.715.900.00 CAPITAL STOCK AND SURPLUS of subsidiary companies owned by minority interest..- 4.567, *54.73 BONDS OUTSTANDING: Anaconda Copper.Mining Company 4H9o Sinking Fund Debentures due 1950--see note J Chile Copper Co. Twenty-year 5% Gold Debentures due 1947--see note J................. ............. Butte. Anaconda & Pacific Railway Co. First Mortgage 5% Sinking Fund Gold Bonds, due 1944 (guaranteed as to both principal and interest by Anaconda Copper Mining Company)--see note J........... ..... _................... $1,588,000.00 Less held in treasury....................................................................................... 85,000.00 S35.000.000.00 26,574,000.00 . 1.503.000.00 53.077,000.00 RESERVES: For repairs, renewals and replacements........................................................................................... $ 390,800.63 For workmen's compensation insurance, etc...... ........................................................................... For contingencies......... ............................-....................................................................................... For deferred payment under power contract in connection with curtailment of operations. 532.391.29 273,000.00 450,000.00 1,648.191.02 CURRENT LIABILITIES: Accounts payable--trade Wages payable.................................... ... Accrued taxes......................................... Accrued interest-........................--..... Other accrued liabilities------ -------------Other accounts payable^------------------ $ 5,008,913.46 720.720.89 2,590.877.79 1.323,743.86 193.597.89 178,354.29 10,016.210.18 DEFERRED CREDITS TO INCOME--------SURPLUS............................................. ......... See explanatory notes, pages 13 and 14. 11 . 242,490.20 48.163.650.34 S581.531.907.87 PNYC 00010071 ANACONDA COPPER MINING COMPANY and Subsidiary Companies Consolidated Income Account--Year Ended December 31st, 1935 3127,678.576.63 100.266.618.82 NOTES TO CONSOLIDATED BALANCE SHEET--DECEMBER 31s t , 1933 NOTE A--PRINCIPLES APPLYING IN' CONSOLIDATION 3 prreesseenntt.the status of ts* Comoa/iv a .3c n jujxnUnes-where the iwerwt owned directly or thr.oush ot*er ibird;iri r, -tm , r-f issued.ftock. the aSsetj and uaotiv-ij at id suejidianei as-lriev appear upon '-He books ot-ajd mbsidianes are dist^bu- headings on the Consolidated Balance Sheet, except imat .-our sm*U tubsidiane* more t-tan rs*Z omi the ope"-4-- :=' d r iDOf p,art of the operations of the consolidated group. ire earned as investments in the Consolidated Balance Sheet of' subsidiaries. th- e 1 fits of *mch are consolidated. :a jftonon the Consolidated Balance Sheet. Account* interest .i iess than '5rr , .of the issued stock are not consolidated And the snares owned ;n these subsidiaries oafrTesVucba srridieei`dSrenus^t-~ohnfitcm-hvetwannroh-emMnnyoHetsCnsaoonc.mk;.n..pttoae.,dne,,Ty.a'si soiidated Balance Sheet.. ..... rsuBsidiar.ee.. u .-.-.tended to mean corporations <n which a maior.ty of the veueg oci is owned <-* y d the Company or through corporations : which the sioc* interest of cue Company is more thak '9J^, NOTE B--3ALA.NC.E3, IN FOREIGN CURRENCIES Cash balances in foreign currencies ^equivalent to JJ66.665.60 in United States currency) are converted into dollars at those effective at December Jlit., 1955. Current assets and liabilities atirte Toronto plant of Artaconda-Amencan 8raw currency and have been .convertedInto L'.. S. dollars1 at.rates not irt excess of rates current at Decem.ber.Jlst. i9j j. . Contingent liabilities, existed at Decemfeef 51st. 1955 for acceptances Covering foreign sales oiqobcxr? discounted in Lhe erdi-ary c-ur-se -f Vni - -.. vario.us b'aditSi. on the greater par. of A-ruch payments o^ye1 iiready been. recti'vcd'.Antffor exciunge;:Co^mitmeatsmoL/Qt wiuen .nice beeri Lquidited NOTE C--EQUITY OF COMPANY IN UNCONSOLIDATED SUBSIDIARIES . The equity of the Company in the'.assets oftftepnh^'paidrtdohSoiidatedi'.itibsidianes -.Anaconda Wire and .Cable Company, Mountain City c.-oer ^-t i ' ' pariy ihdAV'alkerMi.ntng'Cpmpahy) arid the,f'olir dncbrtsoLidkted subsidianes feterred to io Note A'had decreased at O'ecemberJ'tst i9 j5 -e t o: JJ6.002.92. since the dates df accuisicioh as the reaalt -of pr&riti. losses and distributions as shown by the booka of aaid uacoxsso"udated'ia'oddii-M but the ccstther'eof as shown m the Consolidated 3iiance Sheet has not been adjusted for such decrease. ' 1' '1 ' NOTE D---;NVENTdR.IES OF METALS AND MANUFACTURED PRODUCTS . i- or copper ores, concentrates, and cupriferous materials, arid *mc a.nd lead ores and concentrates, while in treatment at re-'-c-icT production of Slis't^rcopperii'elecirplyiiiiB copper, metaluc rtnc and lead bullion, are; classified-aa metals in process. Bliste- j*d t^olytic.cdpper.'.metallic.sirifciiiead'buUion, and other products and metals produced m eapaectiou therewith or therefrom, including stock in works J fabricating piantj, are treated as Crushed. \ ' '" Inventoryfd calculate^1 ai 'inoTtrial cost'1:which idbeldw the equivalent of current market for metallic .content of such inventories. Finished n .... ...........'"""'ifa...c..t.u...red'..p...r.o...d..u...c" ts on h"an: d" a '* ' "" " ` ' .............. . " ' ' '' ' have been .valued.'*) as to that part of the iftyenibi^. iwhich was equal to the'quantity on hand at .December Jlst. 195*, at theunventury once - i I9J4, arid tbl as to that part of the inventory which exceeds m quantity inventory on hand at December jut. I9j*at prod -c-n coj^s.dundk;fhei'.^eafl ended|:Dectmberi Jlst.''i9jJ.. Inventory yaliuuoas deterauiaed i|a accordance with;the foregduig method were below market prices ulor trteivanouSlimetai*iand products at December Jlsf, 1955. See Noie'C.i'o^bdidUdatied; Income' Acecdht.. NOTE E-SUPPLIES ON KAN'D parts as well as current supply items, are carried at coat. s o t s .F^rlrfSlf'iiSSiVSASIS! Investinerv.a .i wtjni.M of uncoriradated substdiarjes and other security investments are carried at coat or lea*, such cost bon* cash cost, or:.i the case!of .secumies;'iHued m'exchaisze for property transferred by the Company or a consolidated subsidiary, the coet of such property to the ccr.iou. dated' zroupi'after ceduciin*:depreaatioa to date of transfer, and do sot indicate current values. Other security investments include shares of Inspira tion Consolidated Copper Company carried at J10.9H.107-51. NOTE F---R'Y AS-* AND EQUIPMENT--BASIS OF VALUATION (a) Proper y. P'ant and Equipment of the Company an carried at cash esat or to the cast of physori properties acquired for stock of the Company at '.i'.iiiipar.'iV,alue!or`!isuehi'.oeki . (b> Property P'sne and Equ.pment of subuidiaries fthe accounts of which are included in this Consolidated Balance Sheet) are carried at the didereoco * -f - f - -rrt m rthe^respectivesubwdiary as seifonh below, and (J) ail net asset* (other than property, plant and equipment* of m'chsuaaidisry at (he time when its accounts were hnt included in the Consolidated Balance Sheet of the Company and subsidiaries, to wmch 1 -e e it 1 j-eeviuent acquisitions, SucjS investment bast*^i* the cash cost to the consolidated group of the stock of the respective subsidiary ovred by sues group, where the same was acquired by the group for cash, or where the same was acquired by the consolidated group for stock of the Company, the par value of the stock of the Company, except as to properties of Andes Copper Minin* Company and Sam:a*o Minin* Comparty acquired by aa.d companies reipkctiyely for shares Of their capital stock, which properties are included m cue Consolidated it t:i* oriansj par value of the share* c-f thoSs companies iwsed therefor Cue., $2S per share), amountin* m the case of Andes CopperlM nro* Ccmcany to 1.000,000 chares and in the esse of Santiago Minin* Company to 70^66 sham. Of said stock of Andes Ccscer v ---* t. " .'ly issued tor prsipeiiy 99SAJ6 share* were acquired by tbe Company and subaidiar.es at lew than the original oar value tneraof 1 -l wu-1 1 * ef `w-t.ago y lg Company 6J.4JI share* were acquired fin 19JQ) by tb Company at Ic m than the original par value inereof- T 65 tJ 1 un f an_agn M *<in* Company prior to their acquisitida by the Company were carried in the consolidated financial statements as ouisMmiing misr-nts mere* ar par from the date when Santiago Msniac Company was first included in wch statements. Upon the acquisition of such scare* by the Company m 1950 the difference of $1,519,565.66 between the par value thereof and the coat of such shares to the Csmasy wa* trimrerred frr>m minuetv '.ettreat to cbnaolidafed surplus. The total amount credited to consolidated surplus an account of the. di-feirnce e-wee- r pa- 11 r-f 49ovo>mattoad *h*na of Andes Copper Mining Company and Santiago Minin* Company and cost thereot u-z* "M van ai.ifj s. as was $35,429,105.56. 1 (O , Zjj etn *e^rart-w I * C-m...p_a_n_y_,_c_o__a_a_a__u_m_tly a__p_p_l_ie_dtot its own properties ami tboeaof rabwdUrie* the stock* of which have been acquired ki and the accounts of w_h__ic_h_a_r_*.aindculuddeeddiinntthheeCCoonnssoolildidaatteeddBEalance Sheets to carry Property. Plant and Equipment a* described above. Pun-., - t ____ .. jb/AW United States Treasury Department, valuations as of March 1st, 1915 of mining properties then owned have on (- iwcaa lor fJMtlgmrpok* of computing the amount allowsblq as a deduction for "depletion" in arriving at taxable income under -.--.e Federal'inco0M!Uuc iawsi. but these values have not been included in the published accounts of the Company. The Company has coninjtentfr followed the practice of not deducting any amount for depiction on account of metals mined in any of iu pubi.ir.ed accounui' cad no such deduction u included in any of the financial statements submitted herewith, l*cK v j- based co met has i '*** cue of umber, coal, day and phbephate lands, bees deducted from iacose la the finsanal statements subm.-.i-d Herewith' and 449 f^m the -ast bssu showu in the Consolidated Balance Sheet. Id] 1 "e r-irsH ' >vi isUaee ymi -f the Company and its subsidiaries heretofore published, the depreciation reserve, shown oa the bocks -r American Brass*- mpanv <sd v-i-un other subsidiaries as of the date* the stbcksof thoM companie* were icquired by the Company was ai_ .m in itauzrg.Che pisust, and equipment account of those; companies la the Consolidated Balance Sheet and was not included in depreciation v o r me t,':.'n*oudatd Lis:i ifieefii' The foregoing Consolidated Balance Sheet include* *ucb accumulation in th* depreciation reverve. -1 0',-w* nct'rf*a r.iis.nri sm<mnt at which such fixed assets are carried, aor does it affect consolidated-surplus, or any item otaer i-taa es>* ( piaatHfcod equipment aod depreciaiioa muvt 13 CtriAin transfers between the accounts "Mines and Minin? Claims". "P'-ant and Equipment." and '.'Reserve for Denceciation" have b**n . ec*.t!? 1 q t*'i* '-on*Lidated Balance sheet- They consist entirely ir iransiers set ween t.nese t.nree ac-r- - at xhicn Property, Plant and Equipment are earned nor do t.-.ey affect onscud. ated- surpius c ciauon reserve- . .................. - i The values of Property. Plant and Equipment are shown on cmy oy current appraisals. 1 bases above set. forth and -do not indicate current values which could be established .VOTE H--(ORES PRODUCED DURING DEVELOPMENT PERIOD Ores produced d-.-.ng development period not betas currently treated areearned'at cost of extraction which is less than a conservatively estimated reaUaaole NOTE I--CUPRIFEROUS MATERIAL . C jpn/eroua material neid .1 or ? attire treatment is valued at United States Treasury Department valuation for income tar.purposes, which :j approximately :r,e va.ue oi me recoverable metais contained tnerein at current metal prices alter deducting treatment costs, beta as estimated oy metallurgists of the Company. 1 NOTE J--SINKING FUND REQUIREMENTS . Under the.smiune fund provisions of. the indenture covering the S55.OCO.GOO 4Sinicin? Fund Debentures of Anaconda Cooper Minin? Company, the Company will be obligated on August1 tith, ti3J6.;and on August1 iith. of each year thereafter, to and including August litn. iu u O. to 34-,- Trtit.i fof't.de purposes of -tne ssnksngfund for tne retirement of debentures. .an.amount.elguai to ll.pOO.OOO plui iOfT- oi meonnaoudated.net income 01 the Company as defined in theAndentiUrei, for theipenod oftwelve months endedonthe next preceding December Jlst of m .:e,'j if.iuch,.payment, the Cp.rrvpany may deliver to.:t1he , Tlrus1tee,debentures1'to 'te received by`: the Trustee iin lieu of an amount at .ciash equal to the pure base price i such debentures paid by the Company in the acquisition thereof. '. ' '' '" '' ' ' ' The sinking-fund prevision of the indenture providing fo;f the issue of Chile Copper Co. S% Debentures requires the redemption nr cancellation . of debentures annually1 and such,reguirementj 'call for1 redemption or cancellation of 91,967.000 pnacjpai/amouat of decent-area agamst wmc.s 91.460.000 had been deposited with the Trustee pnor to December Jlst. I93S. ' , ' ' ' '. '' ' Uader'iAfteiSihkWi'fand provision of the indenture providing for the1 issue; pt First!' Mortgage S% Staking Fund Bonds of Butte; Anaconda A Pacific Rail way Co. tfte unnuai cash smiting fund1 payments for iffJb'Wli.amount to IIQ2.00G. ' '' ' NOTE K---SURPLUS .' ' ' Included i n Consolidated Surplus are-, 'a) A credit of 921,909,539.72 arising from inclusion in Consolidated Balance Sheet of assets and liabilities of Andes Copper Mining Company at the amounts snown on its books * see Note G). ib) a credit! of 91,519.563.66 arising from acquisition in 19J0 of mmomy $HsLres:ift isahtiagoi Mtiung Company issued fdr property'and earned at their par value, said amount representing the ercess of par value over accui- siti&ri cdit!l:ifc?' a credit of 920,816.153.*9. beiifg the excess of the proceeds 'of the issue of 3.;i09.598.J+ shares of stock of Company aver the oar value thereof and :di a cnar?* of. *J i.90',498.50. being discount and expense on issuance, and premium on redemption of bonds, redeemed through roads otnajced by issuance or stock above referred:- ic bee p&ragrapn ic j of Note G as to practice regarding depletion. ' NOTES TO CONSOLIDATED INCOME ACCOUNT--YEAR ENDED DECEMBER 31s t , 1935 NOTE A--BASIS . Basis is same as set forth in Note A to .Consolidated Balance-Sheet. The equity of the Company inthe income of four small subsidiaries more chan orii owned tne operations of winch are not an integral pan of the operations of the consolidated group, amounted for the year ended December Jlst, L9J5 to 9124.916120. NOTE B--INTER-COMPANY SALES AND PROFITS Sales to consolidated subsidiaries have been-eliminated and the sales shown in the Consolidated Income Account include only sales to others thaa the Company and consolidated subsidiaries.' . ' Inter-company profits, where these, are material, have been eiiminated In the Consolidated Income Account. The principal intercompany cnnsac-u-rs are sales .of copper and other metals to manufacturing subsidiaries. The inventories of manufacturing subsidiaries include so far as is ascertainable, no interlfampafiy profit* !' Any inter-company profits resulting from transactions in connection with purchases and sales of supplies and furnishing of services and in connection with refining' .and smelting operations are not' material in amount and have oot been eliminated. NOTE C--COST OF SALES The general practice of.inventory valuation followed in the year ended December Jlst, 1935 was as follows: In ascertaining consolidated' income during the year 1935. the Consolidated Income Account was stated on the basis of last-ia first-out. that ;s. apply ing current cost of metai production to sales to the extent of current production and sales m excess of current production were earned ;a the C.asolidated lccom*1 Account at the inventory cost, such cost being the same as the inventory cost used for Balance Sheet purposes. NOTE D--DIVIDENDS AND EARNINGS, OF PRINCIPAL UNCONSOLIDATED SUBSIDIARIES No dividends were paid'to the Company by any unconsolidated subsidiary during the year 1935. The amount of the Company's proportion of the com bined net- current earnings of the principal unconsolidated subsidiaries (Anaconda Wire and Cable Company, Mountain City Copper Company and ' Walker Mining Company! and the four Unconsolidated subsidiaries referred ta in Note A amounted to 1761.742.73. NOTE E--INTEREST--INSPIRATION CONSOLIDATED COPPER COMPANY There is included ih Interest and Dividends inure* on notes of inspiration Coanlidated Copper Company, in the amount of 9438.095.00 for the year ended December 31st, 1935. POGSON, PELOUBET & CO. PERCY W. POGSON | NEW Y0RX - 25 BROADWAY MACRICE E; PELOC3ET j EL PASO, TEXAS - HILLS SLOG. LEWIS X. NORTON 1 SIDNEY W, PELOL'BET j AGENTS CONDON - KENflPi CHAITIRIS, NTCHQC5, SENDELt ft CO. i<5 VAI.aKOOJC, . C. +. P.vATS TVRQC V NO. YOCN.-.S. XEMP ft CO. J 5L.4 DC H 21.0 SR ' 3ERUN r-SC'.'v.'O. YO'N'CS. KZHP ft CO. EGYPT HE'*r. 3Rt05r,H * NSW3Y ALE.T.V.SOR4A AND CAIRO c a b l e Asonjcsa "cEaTirno" n e w y o r c 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 51st, 1935, of Anaconda Copper Mining Company and of the ocher 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 1955. . 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 1935, but we did not make a detailed audit of the transactions. The practice of the Company and its subsidiaries with respect to the computation of their net income or net loss without deduction fordepletion 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, 1935 and the combined results of their operations for the calendar year 1935, POGSON, PELOUBET & CO.. Certified Public Accountants. New York, March 12th, 1936. IS