Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
C O N T E N T S
Directors, OfEcers and Staffs ........................
Results in Brief ..............................................
Letter to Stockholders ..................................
Review of Operations ..................................
Accountants’ Report ....................................
PA G E
. 3
Financial Statements .......................................... 11
Seven Year Summary .......................................... 15
MAGMA COPPER COMPANY(INCORPORATED IN MAINE , 1910 )
Arizona Office New York OfficeSuperior, Arizona 300 Park Avenue
New York 22, N. Y.
DIRECTORS
ROY C. BONEBRAKE, Chairman
LMARCUS D . BANGHART PLATO MALOZEMOFFFRANCIS CAMERON GEORGE MURNANEWESLEY P . GOSS WALTER P. SCHMID
OFFICERS
ROY C. BONEBRAKE .,................................................WESLEY P. GOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .J. F. BUCHANAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F. H. BUCHELLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .FRANCIS E. RINEHART . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .WALTER P. SCHMID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .WILLIAM F. RICHARDS, JR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .HOWARD A. TWITTY . . . . . . . . . . . . . . . . . . . . . . . . ..*.....................
Chairman and General CounselPresident and General ManagerVice PresidentVice PresidentSecretaryTreasurer and Assistant SecretaryAssistant TreasurerAssistant Secretary
OPERATING STAFFS (Arizona )
J. F. BUCHANAN, Assistant General Manager OperationsJ. E. DURKEE, Chief Accountant
Superior Division
GARVIN L. AUGUSTADT,General Manager
HUBERT J. STEELE,General Superintendent
CECIL TOXfERLIN,Mine Superintendent
ET. J. REX,Mill Superintendent
E. J, C A L D W E L L ,Smelter Superintendent
P. S. FRANKLIN,Office Manager
R. L. MEDLOCK,Purchasing Agent
San Alanuel Division
F. H. BUCHELLA,General Manager
C. L. PILLAR,Mine Superintendent
HARRY K. BURKE,hlill Superintendent
J. T. CULLOMSmelter Superintendent
J. H. JENKIN,Office Manager
J. A. GARDNER,Purchasing Agent
TRANSFER AGENT
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, 140 Broadway, New York 15, N. Y.
REGISTRAR
BANKERS TRUST COMPANY, 46 Wall Street, New York 15, N. Y.
ANNUAL MEETING
Second Monday in May, at Augusta, Maine
MAGMA COPPER COMPANY
RESULTS IN BRIEF
1962 1961
Copper Produced . . . . . . . . . . . . . . . . . . . . . ..I....................
Copper Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .._..............
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ,
Per Share ( 1,394,597 Shares) . . . . . . . . . . . . . . . .
Dividends ( Stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
198,241,898 lbs.
197,081,712 lbs.
$16,286,675
$10,005,135
$7.17
5%
$ 3,079,499
$24,938,254
$62,218,070
206,744,481 lbs.
202,403,721 lbs.
$16,119,003
$ 9,557,053
$6.85
5%
$ 6,992,977
$24,111,961
$71,629,850
4
MAGMA COPPER COMPANY
March 14, 1963
To the Stockholders:
Your Company’s consolidated net income for 1962 was $10,005,135, exceeding the $9,557,053for 1961 which was the highest previously recorded. Earnings per share were $7.17, comparedwith $6.85 in 1961 on the 1,394,597 shares presently outstanding. Net operating income beforeinterest, depreciation and depletion was $16,286,675 in 1962 and $16,119,003 in 1961. Increasedearnings of the San Manuel Division and a slight increase in the price of copper more than offseta loss at the Superior Division of approximately $1,281,000 and the effect of wage and salaryincreases. Higher production and grade of ore mined at the San Manuel property improved itsearnings, while lower production and grade of ore at Superior accounted for the loss there.
Copper production totaled 198,241,898 pounds in 1962, approximately four percent lessthan the preceding year’s 206,744,481 pounds. There were 197,081,712 pounds of copper soldduring the year compared with 202,403,721 pounds in 1961. The price of domestic refinerycopper as quoted by the Engineering and Mining Journal was 30.60 cents per pound during theentire year. The quoted price in 1961 averaged 29.92 cents per pound.
Capitalized expenditures for the year were $3,079,499, of which $2,113,343 was for develop-ment and $917,225 was for plant at San Manuel. Preparation of the second level of the SanManuel Mine for production was completed and production there commenced during the yearas anticipated.
A stock dividend of five percent was paid by the Company on November 5, 1962 to stock-holders of record October 19, 1962. Shares outstanding were thereby increased by 66,410 from1,328,187 to 1,394,597.
The United States Government loan, after being reduced to $54,000,000 by payments of$9,840,000 during 1962 and $3,000,000 in January of 1963, was fully repaid on February 8, 1963with the proceeds of a $54,000,000 loan from The Prudential Insurance Company of America.The new loan carries an interest rate of 53670, compared with the 5% rate on the former loan, butextends the maturity date from 1973 to 1982. Required prepayments under the Prudential loanare $1,500,000 each June 1 and December 1, beginning in 1965, whereas substantially all currentearnings had to be applied to the payment of the Government loan. This refinancing thereforepermits the use of available funds for payment of cash dividends and for further developmentof the Company’s properties, and is generally less restrictive.
The freedom to use funds for such development is especially advantageous because of recentfavorable discoveries in the Magma Mine which will require substantial expenditures for develop-ment and facilities for production as further discussed under “Review of Operations-SuperiorDivision.”
Following the refinancing, a cash dividend of sixty cents per share was declared February 20,1963, payable March 14 to stockholders of record March 4, 1963. This is the first cash dividend
5
since 1949, although stock dividends were paid in some of the intervening years while cashearnings were being retained for expenditures at the San Manuel Mine and payments on theGovernment loan. The Directors intend to consider the declaration of cash dividends quarterly.
A three-for-one stock split has been voted by the Board of Directors subject to approvalof the stockholders at the Annual Meeting to be held May 13, 1963. The split, if approved by thestockholders, is to be effected by amending the Company’s Certificate of Organization to reducethe par value of the stock from $10 to $3?1 per share and increase the number of authorizedshares from 3,000,OOO to 9,000,000, and by issuing certificates for two additional shares foreach share held of record at the close of business on the effective date (expected to be May 13,1963) of the amendment.
On April 30, 1962 San Manuel Copper Corporation and San Manuel Townsite Company,wholly-owned subsidiaries of Magma Copper Company, transferred all their properties and assetsto Magma Copper Company and were dissolved as separate corporations. Their operationshave been continued without change under the same management as the San Manuel and Town-site Divisions, respectively, of Magma Copper Company, and the Magma Mine is now beingoperated as the Company’s Superior Division. The two railroad subsidiaries remain separatecorporations.
Newmont Mining Corporation’s offer to exchange its new 4% Cumulative Preferred Stockfor shares of Magma Copper Company stock was accepted by owners of 784,842 shares ofMagma stock and expired on May 7, 1962. Newmont now owns 80.6 percent of the outstandingMagma shares.
A civil anti-trust action was filed in the United States District Court for the SouthernDistrict of New York on December 31, 1962 by the United States of America (Justice Depart-ment) against Newmont, Magma, Phelps Dodge Corporation, Plato Malozemoff, Roy C. Bone-brake and two other directors of Newmont. The complaint alleges that Newmont has acquiredand owns stock of Magma and Phelps Dodge in violation of Section 7 of the Clayton Actand prays that the Court require Newmont to divest itself of the stock. It also alleges thatMessrs. Malozemoff and Bonebrake are directors of Newmont and Magma in violation of Section8 of the Clayton Act and prays that the Court order them to resign their directorships in Magma.Mr. Hugh B. Cox, of the firm of Covington & Burling, Washington, D. C,, has been retainedas special counsel for Newmont, Magma and the individual defendants in this case, and answershave been filed denying the alleged violations of the law.
Mr. Marcus D. Banghart, a mining engineer and Vice President of Newmont Mining
Corporation, was elected a director of your Company at the last Annual Meeting, succeedingMr. Robert P. Koenig. On April 19, 1962, Mr. Howard A. Twitty, of the Company's counsel in
Arizona, was elected an Assistant Secretary.
The contributions of the staffs and employees of the Company towards the achievement ofa successful year are greatly appreciated.
Respectfully submitted on behalf ofThe Board of Directors
ROY C. BONEBRAKE , ChairmanWESLEY P. Goss, President
The Regular Annual Meeting of the Stockholders of Magma Copper Company willbe held on May 13, 1963. A Notice of the meeting, a form of requested Proxy and aProxy Statement will be sent to the Stockholders about April 8, 1963.
6
MAGMA COPPER COMPANY
Review of Operations
SUPERIOR DIVISION
Production
The Superior Division (Magma Mine) produced 29,825,874 pounds of copper in 1962,substantially below the 41521,458 pounds of 1961. The mine production for the year was 337,618tons of ore assaying 4.74% copper, 0.025 ounces gold, and 0.95 ounces silver, compared with410,958 tons assaying 5.16% copper, 0.036 ounces gold, and 1.58 ounces silver the precedingyear. Custom ore purchased and treated during 1962 amounted to 3,008 tons, and 6.409 tonsin 1961. The lower production was due to the interruption of operations by the previouslyreported underground fire from December 1961 to February 1962, and to lower average gradeand daily tonnage of ore mined. The lower production grade was caused partly by dilutionfrom some development headings.
Production from the main vein in the central part of the mine was sharply curtailed incomparison with previous years because of exhaustion of reserves in developed areas.
Production from the east replacement area, presently about 90% of total Magma Mineproduction, was less than normal and more costly due to a change in shape and structure ofthe ore body. As mining progressed in depth, the ore body became shorter in length and greaterin thickness, and its hanging and foot walls became weak and heavy. This change in the shapeof the ore body reduced the number of working places available for production on a given level.To overcome these difficulties the mining method is being changed from what was essentially along wall retreat, down dip from level to level, mining method to a horizontal cut and hydrau-lic sand fill method working up dip from level to level. The installation of pipe lines and equip-
ment to convey mill tailings for fill into the stoping area is about completed, and the utilizationof the new mining method is expected to start by March 1963 and to result in increased pro&c-
tion and lower costs.
A two year summary of metal production at the Superior Division follows:
1962 1961
Copper (pounds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,825,874 41,5&458Gold ( ounces) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,258 14,641Silver ( ounces) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294,811 613,442
Development
Recent development on the 4600 level of the main vein in the central area of the mine hasencountered an ore shoot 1,000 feet east of the No. 3 shaft of a better than average grade, sub-stantial thickness and a strike length of several hundred feet, the extent of which has not yetbeen determined. Development work on the 4400 and 4800 foot levels is being prosecuted inorder to prepare this ore shoot for production. Approximately 1500 feet of drifting will berequired on each of these two levels for that purpose, and in addition several hundred feet ofraises must be driven in the ore body for access and ventilation.
Development in the east replacement area has proved the continuation of ore in depth andhas been generally favorable below the horizons now under production. Additions to ore reservesin that area somewhat exceeded the production of the entire mine for the year.
Development of the limestone bed favorable for replacement mineralization north of themain Magma vein in the east area of the mine has been very encouraging. A drift on the 3200level on the bed has been in high grade ore of appreciable thickness for some 300 feet and iscontinuing in ore. Three diamond drill holes drilled to intersect this bed on the 3100, 2900 and2800 levels above the 3200 level ore occurrence all disclosed ore having a grade and thicknesscomparable to that in the 3200 level drift. The occurrence of this replacement ore body waspreviously unknown. To determine its extent and prepare it for production will require theexpenditure of considerable time and money. Further development work must be done andhaulage ways for transportation of ore, men, and supplies, ventilation raises and refrigerationfacilities must be supplied. While it appears significant, this ore body cannot be evaluated onpresently available information.
Development footage completed at the Magma Mine is summarized for the past two yearsas follows:
1962 1961
Drifts and Crosscuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,728 13,780Raises . . . . . . . . . . . . . . . . . . ..-. . . . . . . ., . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,526 5,177Diamond Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,771 9,263
Summury
In summary, the changed method of mining the bedded or replacement ore bodies andthe favorable development occurrences indicate that the Superior Division should show improvedoperating results in 1963, and that it may have a continued and profitable life for some yearsthereafter.
ProductionSAN MANUEL DIVISION
The San Manuel Division produced 168,416,024 pounds of copper in 1962, an increase ofabout 1.9% over the preceding year. The 1962 mine production was 12,565,545 tons of oreassaying 0.748% sulphide copper, compared with 12,529,243 tons of ore assaying 0.727% sulphidecopper in 1961. Tons per operating day were 35,165 in 1962, compared with 35,063 in 1961.
Pounds of copper recovered per ton of ore mined was 13.40 in 1962, compared with 13.19in 1961.
Metal production in the past two years is summarized as follows:
1962I-
Copper ( pounds ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,416,024Molybdenum sulphide ( pounds ) . . . . . . . . . . . . . . . . . . . . . . . . 4,157,051Gold ( ounces) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,025Silver ( ounces ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,953
1961
165,223,0233,869,166
17,597295,553
The quarry delivered 62,392 tons of limestone and 9,843 tons of quartzite to the plantfor metallurgical uses.
Operations
All facilities operated satisfactorily during the year. Mining on the second level commencedin April and approximately fifty percent of the mine tonnage was coming from this level by the
8
end of the year. One hundred fifty-four flotation cells were added to the concentrate circuitin order to improve metal recovery. A second holding furnace was installed in the smelter toinsure uninterrupted production of anodes when a holdin,u furnace requires relining or otherextensive repairs.
Mill operating results for the last two years were as follows:1962 1961
Ore milled (tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . ..“........................ 12,484,251 12,448,549Ore milled per operating day (tons) . . . . . . . . . . . . . . . . . . . . 34,938 34,837Recovery, percent total copper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.20 85.25Recovery, percent sulphide copper .._............... . . . . . . 91.00 91.14
The smelter processed 303,223 tons of copper concentrates during 1962 and 301,781 tons in1961. Tons smelted per operating day averaged 857 in 1962 compared with 848 in 1961.
Mr. J. T. Cullom was promoted from Assistant Smelter Superintendent to Smelter Super-intendent on October 1, 1962, replacing Mr. R. C. Wilson, who resigned.
TOWNSITE DIVISION
Average occupancy in the Townsite at San Manuel dropped from 94% in I961 to 85% in1962 due principally to decreases in the number of employees required by the San ManuelDivision as its second level development program was completed. No material additions weremade to the Townsitc.
THE RAILROAD COMPANIES (100~ OWNED)The Magma Arizona Railroad Company, serving the Superior Division, handled 13,217 tons
of inbound and 42,005 tons of outbound freight in 1962. Comparable figures for 1961 were:18,080 tons of inbound and 47,205 tons of outbound freight.
The San Manuel Arizona Railroad Company, serving the San Manuel Division, hauled106,843 tons of inbound and 88,637 tons of outbound freight during 1962, compared with 116,605tons of inbound and 85,794 tons of outbound freight in 1961. Included as inbound freight in1962 were 72,235 tons of limestone and quartzite from the Company’s quarry to the San Manuelplant.
Roth railroads operated normally and satisfactorily throughout the year.
GENERALIn February 1963, the Company entered into a Lease And Option Agreement with The
Anaconda Company under which Anaconda leased to the Company the Anaconda propertyadjoining the San Manuel Mine and containing a small part of the San Manuel ore body. Thelease is for a term expiring December 31, 1987, and requires annual payments of rent or royaltycommencing January 1964. The option to purchase the property expires July I, 1983.
The Company received patents in 1962 for seven of its lode claims and for two of its mill-site claims at the Superior Division. Seven of the 112 unpatented lode claims acquired thepreceding year were reconveyed to the former owner. At the San Manuel Division some addi-tional lands were purchased. No other material change occurred in the real property of theCompany or of its subsidiaries.
The patent suits against the Company mentioned in previous reports are still in suspense.The similar patent infringement suit against Kennecott Copper Corporation has been adjudicatedin favor of the defendant.
9
ACCOUNTANTS’ REPORT
To the Board of Directors ofMAGMA COPPER COMPANY:
We have examined the Consolidated Balance Sheet of Magma CopperCompany and subsidiaries as of December 31, 1962 and the related ConsolidatedStatements of Income and Surplus for the year then ended. Our examinationwas made in accordance with generally accepted auditing standards, andaccordingly included such tests of the accounting records and such other audit-ing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying Consolidated Balance Sheet and Con-solidated Statements of Income and Surplus present fairly the financial positionof Magma Copper Company and subsidiaries at December 31, 1962 and theresults of their operations for the year then ended, in conformity with generallyaccepted accounting principles applied on a basis consistent with that of thepreceding year.
POGSON, PELOUBET & Co.Certified Public Accountants
New York, February 21, 1963
10
MAGMA COPPER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
December 31, December 31,1962 1961
CURRENT ASSETS :Cash and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,785,330United States Government securities, at cost . . . . . . . . . . . . . . . . . . . . . . 6,294,941Accounts receivable, including amounts for metals sold.... 4,245,003Ores and metals inventories-note B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,891,940Materials and supplies, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,510,740Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,681
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,077,635
PROPERTY, PLANT AND EQUIPMENT--note C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,167,904DEFERRED CHARGES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,221
$143,495,760~-~
$ 5,363,7675,529,5175,638,1119,099,6795,891,152
391,678
31,913,904
111,256,911394,152
$143,564,967- -~ _ _ _ _
LIABILITIES AND CAPITAL
CURRENT LIABILITIES :Long-term debt, due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LONG-TERM DEBT, due after one year-note F:United States Government loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F.H.A. insured mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,896,899 $ 2,533,7243,448,084 3,481,7491,032,065 902,849
762,333 883,621
7,139,381 7,801,943
55,307,720 64,502,8656,910,350 7,126,985
62,218,070 71,629,850
CAPITAL STOCK AND SURPLUS :Capital stock:
Authorized 3,000,OOO shares of $10 par valueOutstanding ( excluding 155 treasury shares) :
1962-1,394,597 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1961-1,328,187 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Earned surplus-note F . . . . . . . . ..*...............................................
13,945,970
29,613,46530,578,874
13,281,87026,625,01524,226,289
74,138,309 64,133,174
$143,495,760 $143,564,967~~
See Notes to Financial Statements
11
MAGMA COPPER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
INCOME:Sales of metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Interest, dividends and other income-net . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..*.........
EXPENSES :Operating costs, including development, maintenance
and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Taxes, other than Federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Depreciation and depletion-note C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Provision for Federal income taxes-note G . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1962
$ 65,545,212321,108
__-_____65866,320
45,887,201 46,744,9793,371,336 3,238,1363,168,256 3,145,9673,434,392 3,825,328
- -
55,861,185
$ 10,005,135~-___---.__
CONSOLIDATED STATEMENT OF SURPLUS
CAPITAL SURPLUS :Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Excess of market value over par value of capital stock
issued as stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EARNED SURPLUS:Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5% stock dividends at approximate market value on datesdeclared:
66,410 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63,247 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 26,625,015
2,988,450
$ 29,613,465-I___-
$ 24,226,28910,005,135
34,231,424
3,652,550
$ 30,578,874
1061
$ 66JO2JI.8409,345
66,511,463
56,954,410
$ 9,557,053
$ 23,826,336
2,798,679
$ 26,625,015
$ 18,100,3859,557,053
27,657,438
3,431,149
$ 24,226,289
See Notes to Financial Statements
12
MAGMA COPPER CO1MPAN-Y AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE A-BASIS OF C ONSOLIDATION
The consolidated statements include the accounts of Magma Copper Company and itssubsidiaries all of which are wholly owned. All significant intercompany items and trans-actions have been eliminated in consolidation. As of April 30, 1962 San Manuel CopperCorporation and San Manuel Townsite Company were dissolved. Their operations havebeen continued without change as the San Manuel and Townsite Divisions.
XOTE B--ORES AND M ETALS INVENTORIES
Finished copper is carried at cost on the first-in, first-out basis and copper in processis carried at current cost or less. By-product molybdenite concentrates are carried at mar-ket value.
NOTE C-PROPERTY , PLANT AND EQuIPhmn
Property, plant and equipment consist of:
December 31,1962
December 31,1961
iMining claims and land, at cost . . . . . . . . . . . . . . . . $ 3,014,004 $ 2,999,398
Accumulated depletion . . . . . . . . . . . . . . . . . . . . . .
Deferred mint development, less amor-tization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings, machinery and equipment, atcost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,6@4,815 1531,304
1,409,189 1,468,094
48,358,654 46,154,180
96,540 604> 95,589,063
Accumulated depreciation . . . . . . . . . . . . . . . . 35,o 40,543 31,954,426__.
61,500,061 63,634,637- -
Net property, plant and eqraipmcn t-perConsohdated Balance Sheet . . . . . . . . . . . . . . . . . . $111,3_67 > 903 $111,256,91X
- - - -__-_---~----- ~. - - -----_
No representation is made that the above amounts indicate current values.
The general policy with respect to depreciation and depletion is to make provision sothat the remaining cost of the property, plant and equipment of the Superior Division willbe reduced to estimated salvage value over a five-year period from the beginning of theyear, and that the cost of such assets of the San Manuel Division will be reduced to esti-mated salvage value over a twenty-year period from December 31, 1960.
13
Expenditures for development of the Magma Mine are being charged to operatingcosts currently as incurred. Expenditures for development of the San Manuel Mine arebeing charged to operating costs ratably as copper is produced from the ore developed.The deferered mine development account further increased in 1962, largely due to the devel-opment of the second level of the San Manuel Mine prior to any substantial production there-from. This is being amortized by charges to operating costs as the ore benefited by suchdevelopment is extracted. For Federal income tax purposes development expenditures forthe Magma Mine to date and for the San Manuel Mine through 1959 were taken as deduc-tions in the years in which incurred. Subsequent expenditures at the San Manuel Minehave been deferred and are being amortized for Federal income tax purposes.
N OTE D-CONTINGENT L IABILITIES
Two previously reported suits against the Company, commenced in 1960, remainpending in the United States District Court in Phoenix, Arizona. One suit claims infringe-ment by the San Manuel Division of a patent on an alleged smelter converter process inven-tion, and the other claims $800,000 as the fair value of the alleged use of the inventionprior to issuance of the patent in 1959. The Company denies all liability as well as thepatent’s validity.
NOTE E -PENSION AND RETIREMENT PL A N S
These plans provide for pensions to employees of the Company upon retirement. Thecosts of the plans are paid by the Company. The unfunded past service cost (not recordedon the books) as of the beginning of the year was estimated to be $893,307. Both planswere amended in 1962, providing additional benefits and vesting of benefits in certain cases.
N OTE F-LO N G- TERM DEBT
As of February 8, 1963 the Company refinanced the unpaid balance of the UnitedStates Government loan with a $54,000,000 unsecured 5fB% note due December 1, 1982.The note is payable in semi-annual installments of $1,500,000, starting June 1, 1965, withcertain rights of prepayment. The new note agreement permits the payment of cash divi-dends out of certain earnings, subject to certain conditions, and requires maintenance ofat least $10,000,000 of consolidated working capital.
There are 984 F.H.A. insured mortgages covering housing units operated by theTownsite Division. Principal, interest at 434% per annum, and escrow payments for taxesand insurance are due in monthly installments totalling approximately $628,000 per annumto maturity in 1984.
NOTE G-FEDERAL INCOME T A X E S
No provision for Federal income tax has been provided for 1962 and 1961 because ofloss carry-overs available for income tax purposes. If such loss carry-overs had not beenavailable provision for Federal income tax could have been required of approximately$3,4OO,OOO and $4,000,000, respectively, in those years. In addition, substantial loss carry-overs are available which, subject to review by the Internal Revenue Service, should reduceor eliminate taxable income for 1963 and 1964.
willThe Company also has anapply against taxes
unused investment credit of approximatelyarising after the loss carry-overs have been used.
$62,100 which
14
MAGMA COPPER COMPANY AND SUBSIDIARIES
COPPER PRODUCED ( Pounds )
Magma Mine ................................
San Manuel Mine ........................
Total ......................
COPPER SOLD (Pounds) ........................
METAL SALES ........................................
OPERATING Iwohm ..............................
O THER IN C O M E ( N e t ) ........................
DEPRECIATION AND DEPLETION ..........
INTEREST EXPENSE ................................
NET INCOME OR (Loss) ......................
PEX SHARE (1,394,597 Shares) ......
DIVIDENDS (Stock) ..............................
CAPITAL EXPENDITURES
(Including Deferred MineDevelopment ) ..................................
N ET C U R R E N T A S S E T S ............................
LONG-TERM DE B T ................................
COPPER PRICE* ( Per Pound) ..............
(CONSOLIDATED)
SEVEN YEAR SUMMARY
1962 1961 1960 1959 1958 1957 1956
29,826168,416
198,242
197,082
$65,545
$16,287
321
3,168
3,434
$10,005
$7.17
5%
$ 3,079 $ 6,993 $ 5,956 $ 2,903 $ 2,456 $ 3,634 $ 4,452
$24,938 $24,112 $24,014 $20,726 $21,063 $18,218 $20,433
$62,218 $71,630 $77,309 $80,497 $79,443 $78,615 $78,782
30.60# 29*92(t 32.05# 31.18# 25.76# 29.58# 41.82#
( In Thousands )
41,521 37,834
165,223 163,448- -206,744 201,282~ -202,404 187,750
$66,102 $63,613
$16,119 $15,950
409 122
3,146 3,958
3,825 4,034
$ 9,551$6.85
5%
8,080$$5.79
5%
26,022
92,340
118,362
130,238
$42,096
$ 5,329
177
3,960
4,052
$ ( 2,506 >
$( 1.80)-
41,315
149,402
190,717~-190,080
$54,533
$ 8,738
75
3,965
4,154
694$$.50-
43,787
119,798
163,585
150,558
$47,061
$ 5,373
104
3,924
3,894
W4341)
$( 1.@3>-
47,93578,152
126,087
100,997
$43,839
$15,387
77
4,091
3,897
$ 7 , 4 7 6
$5.36
5%
a Average domestic refinery prices quoted by the Engineering and Mining Journal.
Related Documents
