EPA-230/1-75-D6P
OCTOBER 1975
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE ORE MINING
AND DRESSING INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
USB
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This document is available for inspection through
the U.S. Environmental Protection Agency, Public
Information Reference Unit, Room 2404, Waterside
Mall, 401 M Street, S.W. , Washington, B.C. 20460
Persons wishing to obtain this document may write
the Environmental Protection Agency, Economic
Analysis Division, Waterside Mall, 401 M Street,S.W.,
Washington, D.C. 20460, Attn: Distribution Officer
(PM-220).
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ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE ORE MINING AND DRESSING INDUSTRY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
EPA-230/1-75-062
October 1975
r.:iv,>- ,;rnan-cal Protactioa
P."-:? on V, Library \
hi:T - -, Illinois 60601
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This report has been reviewed by the Office
of Planning and Evaluation, EPA, and
approved for publication. Approval does not
signify that the contents necessarily reflect
the views and policies of the Environmental
Protection Agency, nor does mention of trade
names or commercial products constitute
endorsement or recommendation for use.
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PREFACE
The attached document is a contractors' study prepared for the Office of Planning and
Evaluation of the Environmental Protection Agency ("EPA")- The purpose of the study is
to analyze the economic impact which could result from the application of alternative
effluent limitation guidelines and standards of performance to be established under Sec-
tions 304(b) and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development Document") sup-
porting the issuance of proposed regulations under Sections 304(b) and 306. The Develop-
ment Document surveys existing and potential waste treatment control methods and
technology within particular industrial source categories and supports proposal of certain
effluent limitation guidelines and standards of performance based upon an analysis of the
feasibility of these guidelines and standards in accordance with the requirements of Sec-
tions 304(b) and 306 of the Act. Presented in the Development Document are the invest-
ment and operating costs associated with various alternative control and treatment technol-
ogies. The attached document supplements this analysis by estimating the broader economic
effects which might result from the required application of various control methods and
technologies. This study investigates the effect of alternative approaches in terms of product
price increases, effects upon employment and the continued viability of affected plants,
effects upon foreign trade and other competitive effects.
The study has been prepared with the supervision and review of the Office of Planning
and Evaluation of EPA. This report was submitted in fulfillment of Task Order No. 21,
Contract 68-01-1541 by Arthur D. Little, Inc. Work was completed as of October 1975.
This report is being released and circulated at approximately the same time as
publication in the Federal Register of a notice of proposed rule making under Sec-
tions 304(b) and 306 of the Act for the subject point source category. The study is not an
official EPA publication. It will be considered along with the information contained in the
Development Document and any comments received by EPA on either document before or
during proposed rule making proceedings necessary to establish final regulations. Prior to
final promulgation of regulations, the accompanying study shall have standing in any EPA
proceeding or court proceeding only to the extent that it represents the views of the
contractor who studied the subject industry. It cannot be cited, referenced, or represented
in any respect in any such proceeding as a statement of EPA's views regarding the subject
industry.
in
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TABLE OF CONTENTS
Page
List of Tables xv
List of Figures xx'''
EXECUTIVE SUMMARY E-1
A. PURPOSE AND SCOPE E-1
B. CONCLUSIONS E-2
I. APPROACH 1-1
A. BASIS FOR IMPACT ANALYSIS 1-1
1. Price and Production Effects I-3
2. Financial Effects I-4
3. Balance of Payments Effects I-5
4. Employment and Community Effects I-5
B. LEVELS OF IMPACT I-5
C. LIMITS OF THE ANALYSIS I-6
II. WATER USAGE IN THE METALLIC ORE MINING AND
DRESSING INDUSTRY 11-1
III. IRON ORE MINING AND PROCESSING (SIC 1011) 1111
A. INTRODUCTION 111-1
B. INDUSTRY DESCRIPTION III-1
1. Reserves 111-1
2. Mining III-3
3. Beneficiation III-4
4. Water Usage III-7
5. Products and By-products III-9
C. INDUSTRY OVERVIEW III-9
D. FINANCIAL PROFILES 111-14
E. PRICE EFFECTS 111-14
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TABLE OF CONTENTS (Continued)
Page
III. IRON ORE MINING AND PROCESSING (SIC 1011)
(Continued)
1. Determination of Prices 111-14
2. Costs of Production III-20
3. Potential Constraints on Financing Additional Capital
Assets III-20
F. ASSESSMENT OF ECONOMIC IMPACT III-22
1. Effluent Guidelines III-23
2. Costs of Compliance III-23
3. Basis for Analysis III-23
4. Levels of Impact III-28
IV. COPPER ORE MINING AND PROCESSING (SIC 1021) IV-1
A. INTRODUCTION IV-1
B. INDUSTRY DESCRIPTION IV-2
1. Reserves IV-2
2. Mining IV-3
3. Beneficiation IV-3
4. Water Use IV-6
5. Products IV-6
C. INDUSTRY OVERVIEW IV-8
1. Types of Firms IV-8
2. Types of Plants IV-11
D. FINANCIAL PROFILES IV-11
1. Introduction and Background IV-11
2. Financial Performance IV-15
3. Capital Spending and Funding IV-19
VI
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TABLE OF CONTENTS (Continued)
Page
IV. COPPER ORE MINING AND PROCESSING (SIC 1021)
(Continued)
E. PRICE EFFECTS IV-22
1. Determination of Prices IV-22
2. Cost of Production IV-26
3. Potential Constraints on Financing Additional Capital
Assets IV-29
F. ASSESSMENT OF ECONOMIC IMPACT IV-29
1. Effluent Guidelines IV-29
2. Cost of Compliance IV-31
3. Basis for Analysis IV-31
4. Levels of Impacts IV-31
5. Best Practical Control Technology Currently
Available (BPCTCA) IV-31
6. Best Available Technology Economically
Available (BATEA) IV-35
7. New Source Performance Standards (NSPS) IV-36
G. LIMITS OF THE ANALYSIS IV-36
V. LEAD AND ZINC ORES (SIC 1031) V-1
A. INTRODUCTION V-1
B. INDUSTRY DESCRIPTION V-2
1. Reserves V-2
2. Mining V-3
3. Beneficiation V-3
4. Water Use V-4
5. Products and By-products V-4
C. INDUSTRY OVERVIEW V-8
D. FINANCIAL PROFILES V-16
vu
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TABLE OF CONTENTS (Continued)
Page
V. LEAD AND ZINC ORES (SIC 1031) (Continued)
E. PRICE EFFECTS V-17
1. Determination of Prices V-17
2. Costs of Production V-21
3. Potential Constraints on Financing Additional
Capital Assets V-21
F. ASSESSMENT OF ECONOMIC IMPACT V-21
1. Effluent Guidelines V-25
2. Cost of Compliance V-25
3. Basis for Impact Analysis V-25
4. Levels of Impact V-25
5. Best Practical Control Technology Currently
Available (BPCTCA) V-25
6. Best Available Technology Economically
Available (BATEA) V-30
7. New Source Performance Standards (NSPS) V-31
VI. GOLD ORES (SIC 1041) VI-1
A. INTRODUCTION VI-1
B. INDUSTRY DESCRIPTION VI-1
1. Reserves VI-1
2. Mining VI-1
3. Beneficiation VI-2
4. Water Use VI-3
5. Products and By-products VI-3
C. INDUSTRY OVERVIEW VI-3
1. Types of Firms VI-3
2. Types of Plants VI-4
D. FINANCIAL PROFILES VI-7
Vlll
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TABLE OF CONTENTS (Continued)
Page
VI. GOLD ORES {SIC 1041) (Continued)
E. PRICE EFFECTS VI-7
1. Determination of Prices VI-7
2. Costs of Production VI-8
3. Potential Constraints on Financing Additional
Capital Assets VI-9
F. ASSESSMENT OF ECONOMIC IMPACT VI-9
1. Effluent Guidelines VI-9
2. Costs of Compliance VI-10
3. Basis for Analysis VI-10
4. Levels of Impact VI-15
VII. SILVER ORES (SIC 1044) VII-1
A. INTRODUCTION VII-1
B. INDUSTRY DESCRIPTION VII-1
1. Reserves VII-1
2. Mining VII-1
3. Beneficiation VII-1
4. Water Use VII-2
5. Products and By-products VII-2
C. INDUSTRY OVERVIEW VII-2
1. Types of Firms VII-2
2. Types of Plants VII-3
D. FINANCIAL PROFILES VII-6
E. PRICE EFFECTS VII-6
1. Determination of Prices VII-6
2. Costs of Production VII-7
3. Potential Constraints on Financing Additional
Capital Assets VII-9
IX
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TABLE OF CONTENTS (Continued)
Page
VII. Silver Ores (SIC 1044) (Continued)
F. ASSESSMENT OF ECONOMIC IMPACT VII-9
1. Effluent Guidelines VII-9
2. Costs of Compliance VI1-11
3. Basis for Analysis VI1-13
4. Levels of Impact VII-13
G. LIMITS OF THE ANALYSIS VII-16
VIII. BAUXITE (SIC 1051) VIII 1
A. INTRODUCTION VIII-1
B. INDUSTRY DESCRIPTION VIII-1
1. Reserves VIII-1
2. Mining and Beneficiation VIII-1
3. Water Use VIII-2
4. Products and By-products VIII-3
C. INDUSTRY OVERVIEW VIII-3
1. Types of Firms VIII-3
2. Types of Plants VIII-5
D. FINANCIAL PROFILES VIII-7
E. PRICE EFFECTS VIII-11
1. Determination of Prices VIII-11
2. Costs of Production VI11-12
3. Potential Constraints on Financing Additional
Capital Assets VI11-12
F. ASSESSMENT OF ECONOMIC IMPACT VIII-13
1. Effluent Guidelines VIII-13
2. Costs of Compliance VIII-13
3. Basis for Analysis VIII-15
4. Levels of Impact VIII-15
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TABLE OF CONTENTS (Continued)
Page
VIII. BAUXITE (SIC 105-"' u ,,tinued)
F. ASSESSIVL *'^ ECONOMIC IMPACT (Continued)
5. u=c,c Practical Control Technology Currently
Available (BPCTCA) VI11-16
6. Best Available Technology Economically
Available (BATEA) VIII-17
7. New Source Performance Standards (NSPS) VIII-17
G. LIMITS OF THE ANALYSIS VIII-17
IX. FERROALLOYS (SIC 1061) IX-1
A. INTRODUCTION IX-1
B. INDUSTRY DESCRIPTION IX-1
1. Nickel IX-1
2. Tungsten IX-1
3. Molybdenum IX-2
4. Vanadium IX-5
C. INDUSTRY OVERVIEW IX-5
D. FINANCIAL PROFILES IX-6
E. PRICE EFFECTS IX-7
1. Determination of Prices IX-7
2. Costs of Production IX-8
3. Constraints on Financing Additional Investments IX-8
F. ASSESSMENT OF ECONOMIC IMPACT IX-8
1. Effluent Guidelines IX-9
2. Costs of Compliance IX-14
3. Basis for Analysis IX-14
4. Levels of Impact IX-14
5. Best Practical Control Technology Currently
Available (BPCTCA) IX-14
XI
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TABLE OF CONTENTS (Continued)
Page
IX. FERROALLOYS (SIC 1061) (Continued)
F. ASSESSMENT OF ECONOMIC IMPACT (Continued)
6. Best Available Technology Economically
Available (BATEA) IX-19
7. New Source Performance Standards (NSPS) IX-20
G. LIMITS OF THE ANALYSIS IX-20
X. M.ERCURY ORES (SIC 1092) X-1
A. INTRODUCTION X-1
B. MINING AND PROCESSING X-2
C. ASSESSMENT OF ECONOMIC IMPACT X-2
1. Effluent Guidelines X-3
2. Cost of Compliance X-3
XI. URANIUM-RADIUM-VANADIUM (SIC 1094) XI-1
A. INTRODUCTION XI-1
B. INDUSTRY DESCRIPTION XI-1
1. Reserves XI-1
2. Mining XI-1
3. Uranium Milling XI-5
4. Water Use XI-6
5. Products and By-products XI-6
C. INDUSTRY OVERVIEW XI-8
1. Types of Firms XI-8
2. Types of Plants XI-9
D. FINANCIAL PROFILES XI-11
E. PRICE EFFECTS XI-11
1. Determination of Prices XI-11
2. Costs of Production XI-11
3. Potential Constraints on Financing Additional
Capital Investments XI-12
xii
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TABLE OF CONTENTS (Continued)
Page
XI. URANIUM-RADIUM-VANADIUM (SIC 1094) (Continued)
F. ASSESSMENT OF ECONOMIC IMPACT XI-12
1. Effluent Guidelines XI-13
2. Costs of Compliance XI-14
3. Basis for Analysis XI-14
4. Levels of Impact XI-17
5. Best Practical Control Technology Currently
Available (BPCTCA) XI-17
6. Best Available Technology Economically Available
(BATEA) XI-18
7. New Source Performance Standards (NSPS) XI-19
G. LIMITS OF THE ANALYSIS XI-20
XII. METAL ORES: N.E.C. (SIC 1099) XII-1
A. INTRODUCTION XII-1
B. ASSESSMENT OF ECONOMIC IMPACT XII-1
1. Effluent Guidelines XII-2
2. Costs of Compliance XII-2
3. Levels of Impact XII-3
APPENDIX A - FINANCIAL PROFILES OF SELECTED
COMPANIES IN THE ORE MINING AND
DRESSING INDUSTRY A-1
1. ALUMINUM COMPANY OF AMERICA (ALCOA) A-3
2. AMERICAN METAL CLIMAX, INC. (AMAX) A-9
3. AMERICAN SMELTING AND REFINING COMPANY
(ASARCO) A-17
4. ANACONDA A-27
5. CITIES SERVICE COMPANY A-31
6. CLEVELAND-CLIFFS IRON COMPANY A-37
7. COPPER RANGE COMPANY A-57
8. CYPRUS MINES CORPORATION A 59
9. DUVAL CORPORATION (Subsidiary of Pennzoil) A-63
10. EAGLE-PICHER INDUSTRIES, INC. A-67
xm
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TABLE OF CONTENTS (Continued)
Page
APPENDIX A (Continued)
11. GULF & WESTERN INDUSTRIES (New Jersey Zinc) A-69
12. GULF RESOURCES AND CHEMICAL CORPORATION A-79
13. HANNA MINING COMPANY AND CONSOLIDATED
SUBSIDIARIES A-83
14. HECLA MINING COMPANY A-91
15. HOMESTAKE MINING COMPANY A-93
16. INSPIRATION CONSOLIDATED COPPER COMPANY A-97
17. KENNECOTT COPPER CORPORATION A-99
18. MOLYCORP, INC. A-103
19. MOORE MCCORMACK RESOURCES, INC.
(PICKANDS MATHER & CO.) A-111
20. NATIONAL ZINC COMPANY A-121
21. NEWMONT MINING A-123
22. OGLEBAY NORTON COMPANY A-127
23. PHELPS DODGE CORPORATION (PD) A-133
24. REYNOLDS METALS COMPANY A-137
25. ST. JOE MINERALS CORPORATION A-141
26. SUNSHINE MINING COMPANY A-149
xiv
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LIST OF TABLES
Table No. Page
1 Metallic Ore Mining and Dressing Industry Categories E-1
1-1 1972 Bureau of Census Data — Selected Mining
Industries I-2
11-1 Metallic Ore Mining and Dressing Industry Water
Usage and Discharge, 1968 II-2
II-2 Water Used - Selected Mineral Industries, 1962 II-3
III-1 U.S. Crude Iron Ore Production in 1972 III-2
III 2 Iron Ore Mining and Beneficiation Facilities in U.S. III-15
111-3 Employment in the Iron Ore Mining/Milling Industry 111-17
III-4 Major Companies — Iron Ore Production (1973) 111-18
III-5 Typical Cost Estimates for Taconite Mining, Milling
and Palletizing III-20
III-6 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Iron Ore Mines III-24
III-7 Parameters Selected and Effluent Limitations
Recommended for BATE A - Iron Ore Mines III-24
III-8 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Iron Ore Mills
Employing Physical Methods and/or Chemical
Reagents III-25
III-9 Parameters Selected and Effluent Limitations
Recommended for BATEA - Iron Ore Mills
Employing Physical Methods and/or Chemical
Reagents III-25
111-10 Costs of Compliance for Iron Ore Mining and
Milling III-26
111-11 Summary — Total Cost of Compliance by Companies III-26
111-12 Increase in Cost of Pellets Due to Added Cost of
Compliance III-27
111-13 Summary of Data and Costs for Meeting BPCTCA
Guidelines Iron Ore Mining and Milling Industry III-29
111-14 Summary of Data and Costs for Meeting BATEA
Guidelines Iron Ore Mining and Milling III-30
IV-1 Identified and Hypothetical Copper Resources IV-4
IV-2 Principal Copper-Producing Companies in the United
States - 1973 IV-9
IV-3 Principal Copper Producers and the Disposition of
Their Copper — United States IV-10
IV-4 U.S. Copper Mining Operations IV-12
IV-5 U.S. Mine Production of Recoverable Copper by Major
Producing States - 1971, 1972, 1973 IV-14
xv
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LIST OF TABLES (Continued)
Table No. Page
IV-6 Reference Data — Nonferrous Metals Companies IV-16
IV-7 Financial Performance Data — Copper, Lead and
Zinc Companies IV-20
IV-8 Selected Financial Data: Major U.S. Nonferrous
Metals Companies IV-21
IV-9 Parameters Selected and Effluent Limitations
Recommended for BPCTCA — Copper Mines IV-30
IV-10 Parameters Selected and Effluent Limitations
Recommended for BPCTCA — Copper Mills
Using Froth Flotation IV-30
IV-11 Copper Ores - Cost of Compliance IV-32
IV-12 Summary — Cost of Compliance by Companies IV-32
IV-13 Increase in Copper Metal Costs - for BPCTCA
and BATEA Requirements IV-33
IV-14 Summary of Data and Costs for BPCTCA Guide-
lines - Copper Ore Mining and Milling (1972) IV-34
IV-15 Summary of Data and Costs for BATEA Guidelines —
Copper Ore Mining and Milling (1972) IV-35
V-1 Major U.S. Zinc Mines and Mills V-9
V-2 Major U.S. Lead Mines and Mills V-10
V-3 Production of Lead and Zinc in the United States in
1972, by State and Class of Ore, from Old Tailings,
Etc., in Terms of Recoverable Metal V-11
V-4 Mine Production of Lead in the United States V-12
V-5 Mine Production of Recoverable Zinc in the
United States V-13
V-6 Lead Production of Some Companies in the United
States V-14
V-7 Production of Zinc in Concentrates by Some
Companies V-15
V-8 Typical Smelter Schedules V-18
V-9 Typical Zinc and Lead Mining and Milling Costs V-23
V-10 Typical Lead and Zinc Mining and Milling Costs V-24
V-11 Parameters Selected and Effluent Limitations
Recommended for BPCTCA and BATEA - Lead
and Zinc Mines V-26
V-12 Parameters Selected and Effluent Limitations
Recommended for BPCTCA — Lead and/or Zinc
Mills V-26
V-13 Lead and Zinc Ores — Cost of Compliance with
BPCTCA and BATEA Guidelines V-27
xvi
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LIST OF TABLES (Continued)
Table No. Page
V-14 Lead and Zinc Ores — Cost of Compliance by
Companies V-28
V-15 Lead and Zinc Ores — Increase in Cost of Metals
Produced Due to BPCTCA and BATEA Guidelines V-29
V-16 Summary of Data and Costs for BPCTCA Guidelines
Lead and Zinc Ore Mining and Milling (1972) V-30
V-17 Summary of Data and Costs for BATEA Guidelines
Lead and Zinc Ore Mining and Milling (1972) V-31
VI-1 Gold Ore Producers VI-5
VI-2 Mine Production of Recoverable Gold in the
United States VI-6
VI-3 Gold Production in the United States VI-7
VI-4 Parameters Selected and Effluent Limitations
Recommended for BPCTCA — Gold Mines VI-11
VI-5 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Gold Mills
Using Amalgamation Process VI-11
VI-6 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Gold Mills Using
Flotation Process VI-12
VI-7 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Gold Mines or Mills
Using Gravity-Separation Methods VI-12
VI-8 Gold Ores - Cost of Compliance with BPCTCA
and BATEA Standards VI-13
VI-9 Costs by Companies VI-14
VI-10 Added Cost Per Ounce of Gold Produced VI-14
VI-11 Summary of Data and Costs for BPCTCA Guidelines
Gold Ore Mining and Milling (1972) VI-17
VI-12 Summary of Data and Costs from BATEA Guidelines
Gold Ore Mining and Milling (1972) VI-17
VII-1 Silver Producing Companies — From Silver Ores VII-3
VII-2 Silver Production of Some Companies — United States VII-5
VII-3 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Silver Mines (Alone) VI1-10
VII-4 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Silver Mills Using
Flotation Process VII-10
VII-5 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Silver Mills Using
Amalgamation Process VII-11
xvii
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LIST OF TABLES (Continued)
Table No. Page
VI1-6 Parameters Selected and Effluent Limitations
Recommended for BPCTCA — Silver Mills Using
Gravity Separation VII-11
VII-7 Silver Ores - Cost of Compliance with BPCTCA
and BATEA Standards VII-12
VII-8 Costs by Companies VII-12
VII-9 Increase in Cost of Silver Due to BPCTCA and BATEA
Guidelines for Companies Affected (1972) VII-13
VII-1D Summary of Data and Costs for BPCTCA Guidelines
Silver Ore Mining and Milling (1972) VII-14
VII-11 Summary of Data and Costs for BATEA Guidelines
Silver Ore Mining and Milling (1972) VII-15
VIII-1 World Bauxite Reserves, 1972 VIII-2
VIII-2 Bauxite Refining Companies in the United States VIII-3
VIII-3 Bauxite Refining Plants in the United States, 1972 VIII-4
VIII-4 Bauxite Mines in the United States VIII-6
VI11-5 Reference Data on Major Primary Aluminum
Producers VI11-8
VIII-6 Financial Performance Data on Major Primary Aluminum
Producers VI11-9
VI11-7 Selected Financial Data: Major U.S. Aluminum
Companies VI11-10
VIII-8 Domestic Mine Production of Bauxite VIII-11
VIII-9 Parameters Selected and Effluent Limitations
Recommended for BPCTCA — Bauxite Mines
(Acid or Alkaline Mine Drainage) VI11-14
VI11-10 Parameters Selected and Effluent Limitations
Recommended for Alkaline Mine Drainage
BATEA — Bauxite Mines (Acid or Alkaline Mine
Drainage) VI11-14
VIII-11 Bauxite Mining - Costs for Implementation of
BPCTCA and BATEA Standards VI11-15
VIII-12 Cost for Company No. 9 Per Ton of AI2O3 Product VIII-15
VI11-13 Data and Costs for Meeting BPCTCA and BATEA
Guidelines - Bauxite Ore Mining Industry (1972) VIII-16
IX-1 U.S. Tungsten Mining Companies IX-3
IX-2 Molybdenite Mines in U.S. (1973) IX-3
IX-3 U.S. Production of Molybdenum Concentrates
(Thousands of Pounds of Contained Molybdenum) IX-4
IX-4 Principal U.S. Producing Companies
(Production in Thousands of Pounds Contained
Molybdenum) IX-4
xviii
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LIST OF TABLES (Continued)
Table No. Page
IX-5 Parameters Selected and Effluent Limitations
Recommended for BPCTCA-Ferroalloy-Ore
Mines Producing Over 5000 M.T./Yr IX-10
IX-6 Parameters Selected and Effluent Limitations
Recommended for BATEA-Ferroalloy-Ore
Mines Producing Over 5000 M.T./Yr IX-10
IX-7 Parameters Selected and Effluent Limitations
Recommended for BPCTCA-Ferroalloy-Ore Mines and
Mills Treating Less than 5,000 Metric Tons (5,512 Short
Tons) Per Year by Methods Other than Leaching IX-11
IX-8 Parameters Selected and Effluent Limitations
Recommended for BATEA-Ferroalloy-Ore Mines and
Mills Treating Less Than 5,000 Metric Tons
(5,512 Short Tons) Per Year By Methods Other Than
Leaching IX-11
IX-9 Parameters Selected and Effluent Limitations
Recommended for BPCTCA-Ferroalloy-Ore Mills Treat-
ing More Than 5,000 Metric Tons (5,512 Short Tons)
Per Year by Physical Processing IX-12
IX-10 Parameters Selected and Effluent Limitations
Recommended for BATEA-Ferroalloy-Ore Mills
Treating More Than 5,000 Metric Tons (5,512
Short Tons) Per Year by Physical Processing IX-12
IX-11 Parameters Selected and Effluent Limitations
Recommended for BPCTCA-Ferroalloy-Ore Mills
Processing Over 5000 M.T./Yr Using Flotation
Process IX-13
IX-12 Parameters Selected and Effluent Limitations
Recommended for BATEA-Ferroalloy-Ore Mills
Processing Over 5000 M.T./Yr Using Flotation
Process IX-13
IX-13 Parameters Selected and Effluent Limitations
Recommended for BPCTCA-Ferroalloy-Ore
Mills Using Leaching Process IX-15
IX-14 Parameters Selected and Effluent Limitations
Recommended for BATEA-Ferroalloy-Ore Mills
Using Leaching Process IX-15
IX-15 Ferroalloy Ores — Costs of Compliance with
BPCTCA and BATE A Standards IX-16
IX-16 Cost by Companies — Ferroalloy Ores IX-16
xix
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LIST OF TABLES (Continued)
Table No. Page
IX-17 Estimated Increase in Cost of Major Product to
Meet BPCTCA and BATEA Guidelines Ferroalloy Ores
(1972) IX-17
IX-18 Summary of Data and Costs for Meeting BPCTCA
Guidelines — Ferroalloy Ore Mining and Milling (1972) IX-18
IX-19 Summary of Data and Costs for Meeting BATEA
Guidelines — Ferroalloy Ore Mining and Milling
(1972) IX-21
IX-20 Parameters Selected and Effluent Limitations
Recommended for IMSPS-Ferroalloy Ore Mines IX-22
IX-21 Parameters Selected and Effluent Limitations
Recommended for NSPS-Ferroalloy Ore Mills
Using Flotation Process IX-22
X-1 Parameters Selected and Effluent Limitations
Recommended for BPCTCA-Mercury Mines X-4
X-2 Parameters Selected and Effluent Limitations
Recommended for BATEA-Mercury Mines X-4
XI-1 Distribution of U.S. Uranium Ore Reserves by State XI-3
XI-2 Operating U.S. Uranium Milling Plants XI-7
XI-3 Uranium Ore Mines, 1969 XI-9
XI-4 Number of Employees in Uranium Industry, 1969 XI-9
XI-5 Parameters Selected and Effluent Limitations
Recommended for BPCTCA - Uranium Mines XI-13
XI-6 Parameters Selected and Effluent Limitations
Recommended for BATEA — Uranium Mines XI-14
XI-7 Uranium — Vanadium Ores — Cost of Compliance
with BPCTCA & BATEA Guidelines XI-15
XI-8 Uranium — Vanadium Ores — Cost by Companies
for BPCTCA & BATEA Guidelines XI-16
XI-9 Estimated Increase in Cost of Product (U3 O8)
Due to BPCTCA & BATEA Guidelines - 1972 U3 O8 XI-16
XI-10 Data and Cost for Meeting BPCTCA Guidelines
Uranium/Vanadium Ore Mining and Milling (1972) XI-17
XI-11 Data and Costs for Meeting BATEA Guidelines
Uranium/Vanadium Ore Mining and Milling (1972) XI-18
XI-12 Parameters Selected and Effluent Limitations
Recommended for NSPS — Uranium Mines XI-19
XI1-1 Parameters Selected and Effluent Limitations
Recommended for BPCTCA and BATEA Platinum
and Tin Dredge Mines and Mills XII-4
xx
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LIST OF TABLES (Continued)
Table No. Page
XI1-2 Parameters Selected and Effluent Limitations
Recommended for BPCTCA and BATEA Titanium
Mines (Lode) XII-4
XI1-3 Parameters Selected and Effluent Limitations
Recommended for BPCTCA and BATEA Titanium
Mills XII-5
XII-4 Parameters Selected and Effluent Limitations
Recommended for BPCTCA and BATEA Titanium
Dredge Mine with Wet Separation Mill XII-5
XII-5 Summary of Costs of Compliance — Metal Ores Nee XII-6
xxi
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LIST OF FIGURES
Figure No. Page
11-1 Mine-Mill Complex: Typical Water Flow II-4
111-1 Beneficiation Flowsheet for a Simple Wash-Ore III-5
III-2 Beneficiation Flowsheet for Treatment of Complex
Intermediate Ore III-6
III-3 Typical Concentrator Line III-8
III-4 Water Balance — Typical Michigan-Minnesota
Taconite Mine and Mill 111-10
IV-1 Typical Flowsheet — Sulfide Copper Ore Flotation IV-5
IV-2 Water Balance — Typical Southwest Copper
Operation IV-7
IV-3 Average Annual U.S. Copper Prices (F.O.B.
Refinery) IV-24
IV-4 Copper Prices (Monthly Averages) IV-25
IV-5 Diagrammatic Representation of Variation in
Concentrate Value with Changes in Wirebar Prices IV-28
V-1 Typical Lead-Zinc Concentrator V-5
V-2 Water Balance Typical Zinc Operation V-6
V-3 Water Balance Typical Flowsheet — Missouri
Lead District V-7
V-4 Average Annual U.S. Lead Prices (New York) V-20
V-5 Average Annual U.S. Zinc Prices (E. St. Louis) V-22
VI1-1 New York Silver Price, Monthly Ranges VI1-8
XI-1 Location of Major Uranium Mining Districts of
Interest XI-2
xxni
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EXECUTIVE SUMMARY
A. PURPOSE AND SCOPE
The United States Environmental Protection Agency (EPA) is charged under
the Federal Water Pollution Control Act Amendments of 1972 with establishing
effluent limitations which must be achieved by point sources of discharge into the
navigable waters of the United States. Among the numerous industries covered by
the Act are the subgroups of the metal mining industries identified as major group
10 in the Standard Industrial Classification (SIC) Manual, 1972, published by the
Executive Office of the President (Office of Management and Budget). This
industry category includes establishments engaged in mining ores for the produc-
tion of metals, and includes all ore dressing and beneficiating operations, whether
performed at mills operating in conjunction with the mines served or at mills
operated separately. These include mills which crush, grind, wash, dry, sinter, or
leach ore, or which perform gravity separation or flotation operations.
The purpose of this study was to assess the economic impact on the U.S.
metallic ore mining and dressing industry (Table 1) of the cost of meeting EPA
standards for pollution abatement applicable to the discharge of water streams
from point sources.
TABLE 1
METALLIC ORE MINING AND DRESSING INDUSTRY CATEGORIES
SIC 1011 - Iron Ores
SIC 1021 - Copper Ores
SIC 1031 - Lead and Zinc Ores
SIC 1041 -Gold Ores
SIC 1044-Silver Ores
SIC 1051 - Bauxite Ores
SIC 1061 - Ferroalloy Ores
SIC 1092 - Mercury Ores
SIC 1094 — Uranium/Radium/Vanadium Ores
SIC 1099 - Metal Ores, Not Elsewhere Classified
Compliance with the water pollution abatement standards may require the
industry to install new physical facilities in its present operations, modify its
current technical operations, or incorporate specialized facilities in new installa-
tions. Furthermore, the industry may have to install equipment and facilities
capable of three levels of effluent water treatment such that:
• Level I - by 1977, for current industry installations, the best
practicable control technology currently available (BPCTCA) is
being used to control the pollutant content in the streams dis-
charged by the industry;
E-l
-------
• Level II— by 1983, for current industry installations, the best
available technology that is economically achievable (BATEA) is
being similarly used; and
• Level III — new source performance standards (NSPS) for new
industry installations discharging directly in navigable waters to be
constructed after the promulgation of applicable guidelines for
water pollution abatement, the incorporation of facilities that will
be capable of meeting these guidelines.
The study included the compilation and analysis of extensive data on the
industry categories, and the assessment of the impact using cost data provided by
the guidelines contractor.
B. CONCLUSIONS
The impact analysis carried out in this report has resulted in the following
conclusions:
1. Iron Ore Mining and Processing: Only 8% of the industry would be
impacted by the need to meet either BPCTCA or BATEA effluent
guidelines. The impact on this portion of the industry would be
slight with an estimated increase in product costs of only $0.03
per ton of pellet product. The impact on the whole industry
would be negligible, and we would anticipate no impact on em-
ployment or community effects and no balance of payments
effects.
2. Copper Ore Mining and Processing: Some 20% of this industry
would be impacted by the BPCTCA and BATEA effluent guide-
lines. However, the impact on the major part of this impacted group
would be negligible. A small portion of the industry (one company
equal to 0.05% of the industry) would be severely impacted and
would have a product price increase of $0.04 per Ib of copper
produced. (Note: As this report was being prepared, the operation
represented here closed for economic reasons.)
3. Lead and Zinc Mining and Processing: About 45% of this industry
would be impacted and directly affected by the BPCTCA and
BATEA effluent guidelines. For this impacted portion, the prod-
uct price increase would be slight ($.002 per Ib of combined lead
and zinc produced); however, capital outlays for facilities to meet
guidelines requirements would amount to 60-70% of the annual
capital expenditures or about 3% of the total invested capital.
E-2
-------
While these outlays may appear sizeable, we believe they can be
accommodated without significant adverse effect. As a result,
there will be no employment or community effects and no effects
on the balance of payments.
4. Gold Ore Mining and Processing: About 48% of the industry
would be impacted by the BPCTCA and BATEA effluent guide-
lines. On this group, the product price increase would amount to
$2.15 per ounce of gold produced, and the capital outlay would
be about 2.2 times the average annual capital expenditures or 10%
of the total capital investment.
These amounts of capital expenditure are sizeable; but because of
the current prosperity of the industry, the additional capital cost
can most likely be financed without evident strain. As a result,
there will be no employment or community effects and no effects
on the balance of payments.
5. Silver Ore Mining and Processing: About 80% of this industry
would be directly affected by the proposed BPCTCA and BATEA
guidelines. The impact would represent an increase of only $.014
per ounce of silver produced; however, the capital required would
amount to 17% of the average annual capital expenditures and
1.4% of the total investment. We do not believe this would have a
significant impact or adverse effect on the industry. There would
be no employment or community effects and no effects on the
balance of payments.
6. Bauxite Ore Mining: 40% of this industry would be impacted by
the BPCTCA and BATEA effluent guidelines. For this group the
product price increase would be $0.66 per ton of alumina pro-
duced. This is a small increase on a product selling for $12.82 per
ton (1972). Capital requirements would be about 10% of the
average annual expenditures and 2.0% of the total investment.
We do not believe this would have an adverse effect on this
industry, and there would be no employment or community
effects and no effects on the balance of payments.
-------
7. Ferroalloy Ore Mining and Processing: This industry would have
different impact effects for BPCTCA and BATEA.
a. BPCTCA For this guideline, 2.0% of the industry would be
impacted in a negligible way but 0.1% of the industry (repre-
senting about 17 small operators) would be severely im-
pacted. This small group would have a product increase of
$1.58 per ton of ore product and would require an invest-
ment of 2.4 times its average annual capital expenditures. It
is likely that this group will be forced to close, but being such
a small portion of the industry the lost production should
have no impact on the ferroalloy market, prices, or on the
balance of payments. Employment would be locally affected
with the loss of about 50 jobs.
b. BATEA For this guideline 93% of the industry would be
impacted in a negligible way and the same 0.1% of the
industry would be impacted as described above.
The 93% portion would have a product price increase of only
$0.01 per unit of product produced, which is essentially
negligible; but it would require a substantial investment rep-
resenting 22% of the average annual investment. We believe
that this is manageable, and that there would be no adverse
impact on the industry. There would be no employment or
community effects and no effects on the balance of pay-
ments.
8. Mercury Ore Mining and Processing: The mercury industry would
not be impacted by either BPCTCA or BATEA effluent guidelines.
9. Uranium—Vanadium Ore Mining and Processing: 45% of this in-
dustry would be impacted by imposition of the BPCTCA and
BATEA effluent guidelines. The impact on product cost would be
negligible, but the investment required would be 4-6% of the
estimated annual capital expenditures and 2-4% of the total in-
vested capital. This however would be manageable by the industry,
and we do not believe that there would be any adverse impact on
employment or community, and there would be no balance of
payments effects.
10. Metal Ores (NEC) For these ores (titanium, platinum, rare earths,
beryllium, antimony) there will be no appreciable impact due to
the imposition of BPCTCA or BATEA effluent guidelines.
E-4
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I. APPROACH
The economic impact of effluent guidelines on the ore mining and dressing
industry was assessed by characterizing in some detail each of the ten sub-
category ore mining industries. This characterization included a description of the
ore reserves, mining and beneficiation practices, water usage, products produced,
types of firms, types of plants, financial profiles, pricing policies, production and
cost of production, employment, and potential constraints on financing addi-
tional capital assets. This information was then supplemented by Bureau of the
Census data and cost data from the Guidelines Development Contractor to deter-
mine the impact of increased costs.
The Bureau of the Census data included its 1972 information on value added in
mining, cost of supplies and machinery, value of shipments and receipts, and
capital expenditures. This data is summarized in Table 1-1 for the ore mining and
dressing industries of concern in this study.
The guidelines contractor developed effluent limitations guidelines and stan-
dards of performance on the basis of numerous site visits, extensive sampling and
analysis of effluent streams, mail and telephone surveys, and detailed cost esti-
mates. The contractor studied the full range of control and treatment tech-
nologies applicable to each ore mining and dressing category and essentially
assessed the cost of compliance with proposed standards on a plant-by-plant basis.
The effluent guidelines proposed by the contractor set forth the degree of
effluent reduction attainable through the application of the best practicable
control technology currently available (BPCTCA) and the degree of effluent
reduction attainable through the application of the best available technology
economically available (BATEA). The standards of performance and pretreatment
standards for new sources (NSPS) set forth the degree of effluent reduction
achievable through the application of the best available demonstrated control
technology, processes, operating methods, or other alternatives.
A. BASIS FOR IMPACT ANALYSIS
The economic analysis carried out for each ore mining subcategory assesses
impact of compliance in terms of:
• Price effects,
• Production effects,
• Financial effects — corporate impact,
• Balance of payments effects, and
• Employment and community effects.
1-1
-------
TABLE 11
1972 BUREAU Of CENSUS DATA - SELECTED MINING INDUSTRIES
(Millions of Dollars)
Industry 1011* - Iron Ores
Industry 1021 - Copper Ores
Industry 1031 - Lead & Zinc Ores
Industry 1041 - Gold Ores
Industry 1044 - Silver Ores
Industry 1051 - Bauxite and Other Aluminum Ores
Industry 1061 — Ferroalloy Ores
Industry 1094 - Uranium - Radium - Vanadium Ores
Industry 1092 - Mercury and Ores N.E.C.
Value Added
in Mining
701.9
1025.3
199.7
46.6
13.9
24.0
135.2
155.0
30.2
Cost of
Supplies and
Machinery
423.7
772.5
77.6
12.5
7.4
7.6
61.3
114.7
28.7
Value of
Shipments & Receipts
1065.4
1588.5
251.3
55.6
19.5
28.0
160.5
227.1
44.4
Capital
Expenditures
60.1
209.2
26.0
3.5
1.9
3.6
36.0
42.4
14.5
*SIC Code Number
-------
1. Price and Production Effects
Price and production effects were considered together. Insofar as a firm
perceives the prices at which it sells as beyond its influence - a perception
characteristic of competitive relations among sellers — its decision is confined to
the quantity of output to be sold. The sum, at each possible price, of the
quantities to be sold by the firms composing the industry constitutes the supply
and this supply, in conjunction with demand, determines price and quantity.
To the extent that sellers are not competitively arrayed, they (or at least
some of them) see themselves as having some influence over price. Such firms
(which may be called oligopolists) necessarily treat both quantity and price as
associated parts of any market decision. Under these circumstances a supply
schedule independent of the demand schedule cannot be conceived, but it is
possible, by making the needed assumptions about the market behavior of sellers,
to infer from cost schedules in conjunction with the demand schedule the
quantities and prices that will move through the market.
Similar comments may be made with respect to buyers. In a competitive
situation buyers select quantities on the basis of going prices; the aggregated
quantities compose demand and thereby have an impact on price. Buyers who see
themselves as influencing price (and who may be called oligopsonists) select price
and thus the associated quantity. Although aggregate demand independent of
supply cannot then be conceived, the total consequence for price and quantity
can be estimated if the market behavior patterns of buyers can be discerned.
The costs of compliance appear as additions to the plant's fixed costs
(depreciation, interest, etc.) and variable costs (operating expenses that are
functions of output levels). The variable costs show as marginal (incremental)
costs that determine the output level that is most profitable (least unprofitable)
for the enterprise. The total costs (variable plus fixed) set a floor for sales price
below which the firm will be unwilling to go over the long term.
It is to be expected that insofar as compliance costs do prompt altered
output levels, for most firms and for the industry as a whole that change will be
downward. However, to the extent that some establishments in an industry are
less affected than others by the costs of abatement, those that are least affected
may enlarge, not reduce, the level of production. For such firms, prices will have
risen relative to costs, thereby inducing increased output. The new larger total
output may be either more profitable or less profitable than ex-compliance
output. In the rare instance, the new higher cost pattern may lead to the
enlargement of industry output, but with impaired profitability; this can happen
only as it is worthwhile for firms as part of their compliance programs to modify
production processes in a way that introduces scale economies.
1-3
-------
Were the impact of compliance costs upon the industry as a whole large
enough to affect quantity and price in the market significantly, it would be
necessary to understand the competitive/noncompetitive structure of that market
in order to appreciate the price and quantity changes that would be occasioned.
In the absence of such significant effect, a depiction of market structure is not
needed.
The dimensions of demand, including the elasticity of quantities with respect
to change in price, matter for an industry only as compliance induces some
significant modifications in the behavior of sellers in the market. Where there are
no significant modifications in response to any guideline no analysis of demand is
called for. Similarly, where there are no significant changes in the industry's
demand for inputs (apart from compliance inputs) the supply of these inputs need
not be analyzed.
2. Financial Effects
There are financial effects that deserve to be considered if the additional
capital funds that must be obtained to finance abatement can be mobilized only
at higher interest cost, or if, in the extreme case, the funds available are
insufficient to achieve compliance and to meet all the other capital requirements
of the enterprise. These adverse financial effects are likely, of course, only if the
enterprise is marginally viable even in the absence of occasion for abatement
outlays or if compliance costs are significantly large and evidently will impair
profits.
In general, the capital and operating costs to achieve pollution abatement
would not be incurred by the companies in the absence of pollution abatement
regulation; that is, they cannot be justified on the basis of conventional retum-
on-investment criteria. In plant-by-plant and company-by-company analysis of
pollution abatement impact, two viewpoints have to be considered. The avail-
ability of capital for pollution abatement equipment at each plant has to be
viewed from the standpoint of the resources available to the entire corporation.
However, the justification for spending this capital at a particular plant would
result from a study of that particular plant's economics which would take into
account alternatives such as cost of production from a refitted plant, shifting
production to other plants, and most important, the probability that this particu-
lar plant will remain a profitable entity.
It is, of course, to be expected that a large industrial corporation which is
clearly viable, profitable, and acknowledged to have strong managerial and tech-
nical resources, will have access to substantial capital — in the form of debt or
equity or both, plus pollution control bonds as a source of "off the balance
sheet" financing.
1-4
-------
3. Balance of Payments Effects
Balance of payments effects were assessed only with respect to an industry
as a whole. If the result of pollution abatement is higher prices for the output of
the industry, substitute goods may be attracted from abroad and thus enlarge the
outflow of foreign exchange. If the output is an export good, the higher prices
can occasion either higher or lower exchange inflows depending upon the elasti-
city of the foreign demand for the American good. Insofar as abatement results in
lower prices of inputs to the industry, domestic input suppliers may be inclined to
market their goods abroad, thus enlarging the inflow of foreign exchange. If
inputs are imported, lowered prices and/or quantities can reduce the exchange
outflow.
4. Employment and Community Effects
Employment and community effects are a function of the extent to which
the level of operations is reduced in any affected enterprise in the industry. If the
curtailment is significant or if the facility is completely shutdown, the employ-
ment and other community effects can be severe. On the other hand, compliance
can mean enlarged output for those firms in the industry for which output prices
have risen relative to costs. In such cases employment will be enlarged and the
effects upon the community will be those of growth rather than of decline.
B. LEVELS OF IMPACT
By means of economic impact analysis each ore mining and milling industry
can be separated into the following impact groups:
A. Those plants and companies where there will be no cost or a
negligible cost imposed directly by the effluent guideline.
B. Those plants or companies where there will be some cost of
compliance but where such a cost increase will not be sufficient to
cause any significant impact on profits or on behavior in any of
the markets in which sales or purchases are made. In other words,
production and prices will be unaffected in consequence of the
firm's own costs of compliance.
C. Those plants or companies where the costs of compliance would
affect significantly: (a) the volume of production at the going
prices of inputs and outputs and/or (b) the profitability of the
firm and the cost and availability of capital to the firm.
1-5
-------
C. LIMITS OF THE ANALYSIS
The costs provided by the Effluent Guideline Development Document are
order-of-magnitude costs and in no way can be used as definitive engineering
estimates. In using the costs developed by the Document and presented in this
study, it must be remembered that these costs are applicable only to the degree of
control proposed by the regulations described herein and cannot be construed to
apply to any other degree of control.
Furthermore, the economic impacts assessed in this report for the various
industry groups are a result of only those water pollution control requirements
and resultant costs also described herein. The assessment does not include the
economic impacts due to such things as air pollution control, OSHA standards,
toxic or hazardous materials, increases in the prices of fuel and raw materials, etc.
In fact, it should be noted that an economic impact results from any event that
affects any of the following:
• Profitability
• Volume of production
• Price of output
• Price of any input
Although the impact of water pollution controls is, considered alone, insig-
nificant for any enterprise or for the industry as a whole, the analysis does not
rule out the possibility that the controls in combination with other factors
affecting the industry may carry significant impact.
The range of error for costs developed in this manner can at best be within
plus or minus 30%.
1-6
-------
II. WATER USAGE IN THE METALLIC ORE MINING AND
DRESSING INDUSTRY
The metal mining and dressing industry is a large user of water (Table II-1).
Of the mineral industry segments under study, iron ore and copper ore mining
account for by far the major uses and discharges of water, lead and zinc ore
mining uses moderate amounts of water, and the usage of water by the other
minerals is of minor importance.
The operation of, and the associated water use and discharge of metal mining
and processing plants, is complex. Almost all of the operations involve mines
(both open pit and underground) and various types of ore dressing plants where
the valuable constituents in the ores are recovered. In the industries under study
the combinations of mines and plants vary considerably. In general, however, the
usage of water in the metallic ore mining and dressing industry is as follows:
• Underground mines consume some water, mainly for wet drilling
to control dust. The amount is very small compared to that used
in mining and milling plants. These mines often generate water
from underground sources and have to pump it to the surface.
Mine water is often used in the general milling process.
• Open pit mines consume essentially no water since dry drilling
is the usual practice. These mines, if below the local water table,
can generate substantial amounts of water, which is collected in
sumps. Water from the sump, is pumped out of the pit for dis-
charge or use in the plant system. Many of the copper mines also
use significant amounts of water for dump leaching.
• Milling plants are by far the major users and dischargers of water
in the mine-mill complex. Most milling or concentrating opera-
tions are wet processes, although there are exceptions such as the
dry processing of some mercury ores and concentrates.
Wet milling processes often require about 3 to 6 tons of water per ton of ore
processed. For example, the major method for concentrating copper ore is flota-
tion, which is often carried out at 25% solids: i.e., three tons of water (720
gallons) per ton of ore processed.
In 1962, A. Kaufman (Trans. Society Mining Engineers - March 1967)
estimated that 647r of the water used by the entire mineral industry was in pro-
cessing, 21r/f for cooling and condensing, (//f in mining, and 3r/r for miscellaneous
purposes. (See also Table 11-2.)
-------
TABLE 11-1
METALLIC ORE MINING AND DRESSING INDUSTRY WATER USAGE AND DiSCHARGE, 1968
(billion gallons per year)
Water Discharge
SIC
CODE
1011
1021
1031
1041
1051
1061
1092
1094
109
10
Industry Segment
Iron Ores
Copper Ores
Lead and Zinc Ores
Gold and Silver Ores
Bauxite and Al Ores
Ferroalloy Ores
Mercury Ores
Uranium — Vanadium
Miscellaneous Metal Ores
Metal Mining
Total Industry
Total
340
109
17
6
7
21
499
Mine
Water
10
7
6
1
2
3
27
Treated
Other Before Use
330 11
102 11
12
5
5 2
18 3
472 25
ijross vvaier usage.
Including
Recirculated
659
447
21
11
11
51
1202
Total
344
68
54
7
7
19
500
Mine
Water
17
3
40
1
1
2
67
Other
327
65
14
6
6
17
433
Treated
Before Discharge
29
12
8
1
3
12
65
'Less than 0.5.
Source: U.S. Department of Commerce 1967 Census of Mineral Industries; issued in 1971.
-------
TABLE 11-2
WATER USED - SELECTED MINERAL INDUSTRIES, 1962
(billion gallons per year)
Commodity
Iron Ores
Copper Ores
Lead and Zinc Ores
Gold Ores
Uranium — Vanadium
Totals
Intake
112.6
81.0
22.9
54.6
7.2
Gross
Water
252.1
174.6
248
58.7
8.3
Recirculated
138.7
94.4
2.0
4.1
1.0
Consumed
7.6
29.7
1.5
0.6
3.0
Discharged
(by difference)
105.8
50.5
21.3
54.0
4.3
278.3
518.5
240.2
42.4
235.9
Source: A. Kaufman, Trans. Soc. Mining Engrs., March 1967.
Tables II-1 and II-2 show some significant differences in the two estimates of
water for the same industry segments, which cannot be explained simply by the
six-year time span between the two, thus indicating the difficulty in obtaining
accurate information about water use in the mineral industry.
Figure II-1 shows tne water flowsheet for a typical mine-mill complex, but
there are many variations, depending on the particular industry segment. For
example, almost all the large copper mines in the arid southwest have no dis-
charge. Water is scarce and utilized to the utmost. The same is true of several
gold mines in Nevada and some uranium operations. Also the flowsheet does not
apply to some operations where no large amount of mill water is used, such as
some mercury operations where processing is dry, and the only water used is for
cooling purposes and is recycled.
II-3
-------
Drinking Water System
Usually Separate - Small Amount
Small Use in U.G. Mines
New
Water
"I
t
Treatment
I
^ J
Mine Water Used
I
I Treatment
T
I
0)
D
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III. IRON ORE MINING AND PROCESSING (SIC 1011)
A. INTRODUCTION
The 1972 usable iron ore shipments in the United States, exclusive of by-
product ore (sinter from pyrite roasting), amounted to about 75 million long
tons, valued at over $950 million and equivalent to a per capita consumption of
about 1,000 pounds.
About 95% of the iron ore consumed in the United States goes to iron blast
furnaces, with the remainder going to steel furnaces. Eighty-five percent of the
ore used by the domestic iron and steel industry is furnished from captive mines
owned and/or operated by the large integrated iron and steel companies. For
instance, United States Steel Corporation owns and operates five iron ore mining
and/or milling facilities in Minnesota and one in Wyoming. In addition to such
domestic captive holdings, several of the larger companies control or have an
interest in iron mines abroad.
The heart of the iron ore industry in the United States is the Lake Superior
iron mining district in Minnesota and Michigan. Relatively small but significant
production occurs also in New York, Pennsylvania, Alabama, Missouri, Texas,
Wyoming, Utah, Georgia, Wisconsin, and California. Table III-l shows the 1972
statistics of crude iron ore mined and the mine distribution by region. Over 80%
of the total 188 million long tons of crude ore comes from the Lake Superior
district. Crude ore production in 1973 was about 217 million long tons.
World-wide, and exclusive of the United States, iron ore production in 1972
was about 757 million long tons.
U.S. mine production has dropped during the last several years. In 1970, for
example, it was about 90 million long tons; in 1971 it was 80 million long tons;
and in 1973 it was 75 million long tons. In 1973, however, production increased
to about 91 million long tons.
B. INDUSTRY DESCRIPTION
The Iron Ores Industry includes establishments engaged primarily in mining,
beneficiating, or otherwise preparing iron ores and manganiferrous ores valued
chiefly for their iron content. This industry includes production of sinter and
other agglomerates except those associated with blast furnace operations.
1. Reserves
Iron ore is a mixture of iron oxide minerals occurring in combination with
various impurities. The major iron-bearing minerals of importance are hematite
III-l
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TABLE 111-1
U.S. CRUDE IRON ORE PRODUCTION1 IN 1972
District and State
Lake Superior District:
Michigan
Minnesota
Wisconsin
Total
Southeastern States
(Alabama, Georgia, North Carolina)
Northeastern States
(New York, Pennsylvania)
Western States:
Arizona
Missouri
Montana
Utah
Wyoming
Other2
Grand Total
Number of Mines
5
18
24
1
2
1
4
3
H
58
Total Production
(thousands long tons)
26,919
126,099
2,477
155,495
1,280
6,818
4,703
9
4,828
4,836
9,678
187,648
1. Exclusive of ore containing 5% or more Mn.
2. Includes California, Colorado, Idaho, Nevada, New Mexico and Texas.
Source: Department of the Interior — U.S. Bureau of Mines Minerals Yearbook, 1972.
III-2
-------
(Fe2O3) and magnetite (Fe3O4).* Most of the major ore deposits in the United
States are found in the very ancient Pre-Cambrian rock formations located in the
Lake Superior District. These deposits have resulted from the leaching of silica by
surface waters from a siliceous banded iron formation. This natural process has
resulted in an iron content ranging from about 50% to about 65%. The unleached
unenriched ore formation of the Lake Superior District is known as taconite and
in recent years has become the major source of iron units in the United States.
Oolitic iron ore, another form of ore body, occurs throughout the
Appalachian region and is popularly referred to as "red ore." It furnishes some of
the feed to blast furnaces in the Birmingham, Alabama, steel district. The iron
content ranges from 25$ to 40$ and the ore has a relatively high phosphorus
content.
Another important form of deposit is the contact-Metamorphic type found
in the Western Cordilleras in our western states. Iron exists here in the form of
magnetite, sometimes associated with minor amounts of the base-metal sulfides.
Iron content varies from 50$ to 65$.
U.S. reserves are large and have been reported as follows:
Million Long Tons
Proven 10,494
Potential 96,353
Total 106,847
The total available resources of iron ore have increased substantially in re-
cent years, primarily as a result of improved beneficiation techniques through
which the very abundant low-grade iron formations can be economically con-
verted to high-grade blast furnace charge materials. It is conceivable that this
trend will continue as more sophisticated mining, beneficiating and transportation
techniques render the very low-grade deposits economically attractive.
2. Mining
To a large extent, the physical characteristics of an ore body determine the
mining method employed to exploit it. When the deposit lies below a relatively
shallow overburden, open pit mining methods are used because of the favorable
stripping ratio — the amount of overburden that must be removed per ton of ore
mined. The economic stripping ratio varies from mine to mine, being as high as
7 to 1 for some direct-shipping ores, and no greater than 0.5 to 1 in many
taconite deposits.
111-3
-------
When the stripping ratio is too high to make open pit mining economical,
underground mining is used. In general, underground mines have less productivity
per man-hour than do open pit mines. Consequently, the number of underground
iron ore mines has been decreasing progressively over the last three decades.
U.S. crude ore production in 1972 came from six underground mines and
52 open pits. In the same year, open pit mines accounted for 94.5% of the crude
iron mined. The absolute number as well as the relative proportion of under-
ground mines has been declining steadily in recent years as high costs and
stringent consumer product specifications have forced the marginal mines to close
down operations. For example, the total number of iron ore mines in the United
States in 1969 was 92, of which 12 were underground, and in 1970 there were
74 iron ore mines, of which 10 were underground.
3. Beneficiation
Beneficiation is any method of treating an iron mineral to produce a more
desirable blast furnace burden. Thus, it includes such processes as crushing, grind-
ing, screening, concentrating, classifying, pelletizing, and sintering. However, since
sintering is generally carried out at the steelworks rather than at the mine, this
agglomeration technique is not considered relevant to the present study.
The stringency of customer specifications for iron ore has made some form
of ore beneficiation mandatory prior to shipment. The least that can be done to
an ore is to crush and screen it, since optimum blast furnace operation demands
ore sizes of +1/2 to -4 inch. In general, however, the exact beneficiation flowsheet
adopted is determined by the characteristics of the ore. As the ore grade deterio-
rates and the level of impurities increases, the flowsheet becomes more complex.
Figures III-l and III-2, for example, illustrate, respectively, the flowsheets for a
simple wash ore and a complex "intermediate" ore.
As stated previously, the ore characteristics and the ultimate use of the
concentrate jointly determine the degree and type of beneficiation practiced.
High-grade hard lump ores are generally sized to +1/2 inch -4 inches. The under-
sized material is either sold as such or agglomerated into pellets, briquettes, or
nodules. On the other hand, soft iron-bearing materials containing clay and sand
are beneficiated by washing in log washers or on screens and in various types of
classifiers. From 45% to 70% of the iron can be recovered by this treatment and
the concentrate contains 40% to 60% iron.
Coarse ore (>l/2") is gravity concentrated by jigging or heavy-media separa-
tion, whereas Humphrey spirals and wet cyclone separators are used to con-
centrate fine ores and the tailings from jigs and wash plants.
In the U.S. today, most of the salable iron units are produced in the form of
pellets. These pellets are made by plants, particularly those in Minnesota, that
process the taconite-type ores.
III-4
-------
Mined
Feeder
Scalping Screen
Oversize
Undersize
Waste Rock
Washing Screen
Undersize
Oversize
Mechanical Classifier
Undersize
Oversize
Fine Waste
Loading Bin
R. R. Cars
Source: Watkins Encyclopedia of the Steel Industry
FIGURE 111-1 BENEFICIATION FLOWSHEET FOR A SIMPLE WASH-ORE
III-5
-------
1/2"
PLANT CHUIH ORE («")
Single Deck Screen
(2" Openingl
Double-Deck Screen
Scrubber
Double-Deck Screen
1
I
-1/2" +1/8"
Heavy-Media
Treatment
Concentrate
Reiect (To Waste)
Concentrate Bin
-1/8"
Sid Con" Crusher
+ 1
1
/2" -1/2'
1
+ 1/8"
+
-1/8"
t
Classifiers
I I
65 Mesh -65 Me
To Sizer-Spiral PI
Screw-Tvpe
Classifiers
+ 65 Mesh -65 Mesh
Source: Adapted from Wttkint Encyclopedia of the Steel Induttry. 1969
FIGURE 111-2 BENEFICIATION FLOWSHEET FOR TREATMENT
OF COMPLEX INTERMEDIATE ORE
III-6
-------
Taconite ores can be magnetic (with magnetite mineralization) or non-
magnetic (with hematite mineralization) There is a significant production from
nonmagnetic taconitcs, but the magnetic type accounts for some 55^ of all U.S.
iron ore production.
The magnetic ores are processed by fine grinding and magnetic separation
techniques; a typical concentrator line is shown in Figure III-3. A large plant will
consist of many similar "lines" or units. (One plant in Minnesota has 30.)
Although the diagram shows a two-stage autogenous grinding procedure, some
plants use the conventional rod mill, ball mill system. Also shown is a cationic
flotation step which removes silica from the final magnetic concentrate to im-
prove the product quality. This step is not commonly used in all plants.
Agglomeration, as performed at the mine site, is aimed at consolidating all
-1/2 inch iron ores and ore mineral concentrates into sizes suitable for furnace
charging. Pelletizing, the principal agglomeration technique, involves forming the
moist material into balls that are then heat-hardened (induration) into durable
pellets.
In the United States about \r/< of usable domestic iron ore production is
obtained as a by-product during the processing of copper, titanium and
molybdenum ores. Where the economics justify it, iron also may be extracted as
a co-product in the mining of copper, lead and zinc sulfide ores. The iron
"cinder" derived in this manner is subsequently sintered for feeding to the blast
furnace. However, the large-scale availability of high-grade pellets has drastically
curtailed the demand for cinder. Iron may also be recovered from the processing
of complex vanadium-bearing ores as well as from nickel plants. The former
practice has been commercialized in South Africa and the U.S.S.R., and the
latter process is practiced in Canada where iron-nickel pellets are thus produced.
4. Water Usage
The process of winning a concentrate from crude iron ore involves a com-
bination of unit operations such as crushing, screening, gravity separation, cyclon-
ing, flotation and magnetic separation. Nearly all of these processes are wet
operations that together consume anywhere from 600 to 7,000 gallons of water
per ton of concentrate. Other operations also consume water: air conditioning,
power generation, boiler feed, sanitary services, and miscellaneous cooling and
condensing requirements. To satisfy these water needs, the iron ore mining/
milling industry in 1968 took in 340 x 109 gallons, and its gross water consump-
tion (including recirculated or reused water) amounted to 659 x 109 gallons. The
corresponding water discharge (including mine water drained and discharged) was
344 x 109 gallons, of which about 8% received some form of treatment prior to
discharge.
III-7
-------
S OSM SCREENS
STEAM HOOOCD
CONCENTRATE
J FILTERS
PEBBlt MILL
5\H 21*
ZTSO HP
TO .PELLET PLAN1
OH
CONC. STORAGE
CONCENTRATE
CONVCTOM
TAILINGS
FILTER PLANT
FIGURE 111-3 TYPICAL CONCENTRATOR LINE
-------
Among the treatment processes were primary and secondary settling in
ponds or lagoons, coagulation with chemicals, and trickling and sand filtration.
The need for some form of treatment can be appreciated from the fact that the
tailings wastewater generated during iron ore beneficiation contains 70,000 to
500,000 mg of suspended solids per liter, 987r of which settles very rapidly and
thus deposits large volumes of solids. Moreover, post treatment partially clarifies
the wastewater and makes it suitable for reuse in the plant operation. A water
balance for a typical Minnesota taconite mine and mill is shown in Figure III-4.
5. Products and By-products
The iron ore mining industry produces direct shipping ore, concentrates, and
agglomerates (pellets). The production of these products in 1972 and their
average grade were as follows:
Thousands of
Long Tons % Fe
Direct Shipping Ore 5,830 55
Concentrates 14,757 65
Agglomerates (Pellets) 54,847 64
The pellets represent the major product and are usually produced in pelletiz-
ing plants located at the mine and concentrator site.
Unlike the nonferrous metals industries, there are essentially no by-products
produced by the iron ore industry.
C. INDUSTRY OVERVIEW
The domestic iron ore mining industry can be divided into three major
sectors:
1. Integrated steel and iron companies that mine iron ore principally for
their own use:
Armco Steel Corp. Kaiser Steel Corp.
Bethlehem Steel Company Lone Star Steel Co.
CF&I Steel Corp. National Steel Corp.
Inland Steel Co. Republic Steel Corp.
Jones & Laughlin Steel Corp. U.S. Pipe & Foundry Co.
United States Steel Corporation
III-9
-------
Mine
(Open Pit)
Mine Water — Intermittent — Pump to Streams
or Tailings if Necessary j
Pellets
(dry)
i
T-
1 75
1
4
Milling
and Pellet
Prod.
t
Plant
— Water
Supply
(30/1) *
I
I 7280
I
I
I
i
New Water
Rivers— Lake
220
1
Legend:
Solids
Loss to Seepage
^« ^^ ^^ «•• M^ •••» ^^
Evaporation
and in Pelletizmg
10
210
Overflow
or Reuse
I J
___«._ Water (Figures are Gallons Per Ton Ore)
FIGURE III-4 WATER BALANCE
TYPICAL MICHIGAN-MINNESOTA TACONITE MINE AND MILL
111-10
-------
2. Independent mining companies that produce ore under contract with
others or for sale on the open market:
The Cleveland-Cliffs Iron Co. Pittsburgh Pacific Co.
The Hanna Mining Co. Rhude & Fryberger, Inc.
Nevada-Earth Corp. Snyder Mining Co.
Oglebay Norton Co. The Standard Slag Co.
Pickands Mather & Co.
These independent ore suppliers make up less than 20% of the industry,
but in several instances an independent company has been retained to
manage jointly financed large-scale operations.
3. Joint ventures of two or more companies that have been formed to
mine on a scale larger than any one company could practically support:
• The Marquette Iron Mining Co.
Manager and Operator: The Cleveland-Cliffs Iron Co.
Owners:
The Cleveland-Cliffs Iron Co.
International Harvester Co.
Jones & Laughlin Steel Corp.
The Wheeling-Pittsburgh Steel Corp.
• Erie Mining Co.
Manager and Operator: Pickands Mather & Co.
Owners:
Bethlehem Steel Corp.
Interlake Steel Corp.
The Steel Co. of Canada, Ltd.
The Youngstown Sheet & Tube Co.
• Pioneer Pellet Plant
Manager and Operator: The Cleveland-Cliffs Iron Co.
Owners:
Bethlehem Steel Corp.
The Cleveland-Cliffs Iron Co.
McLouth Steel Corp.
Republic Steel Corp.
III-ll
-------
• Eveleth Taconite Co.
Owners:
Ford Motor Co.
Oglebay Norton Co.
• Reserve Mining Co.
Owners:
Armco Steel Corp.
Republic Steel Corp.
• Pilot Knob Pellet Co.
Owners:
Granite City Steel Co.
The Hanna Mining Co.
• Butler Taconite Project
Operator: The Hanna Mining Co.
Owners:
Inland Steel Co.
The Hanna Mining Co.
Wheeling-Pittsburgh Steel Corp.
• Meramec Mining Co.
Owners:
Bethlehem Steel Corp.
St. Joe Minerals Corp.
• Humboldt Mining Co.
Owners:
The Cleveland-Cliffs Iron Co.
Ford Motor Co.
• Empire Iron Mining Co.
Manager and Operator: The Cleveland-Cliffs Iron Co.
Owners:
The Cleveland-Cliffs Iron Co.
Inland Steel Co.
International Harvester Co.
McLouth Steel Corp.
111-12
-------
• The Negaunee Mine Co.
Manager and Operator: The Cleveland-Cliffs Iron Co.
Owners:
Bethlehem Steel Corp.
The Cleveland-Cliffs Iron Co.
McLouth Steel Corp.
Republic Steel Corp.
• The Mesaba-Cliffs Mining Co.
Manager and Operator: The Cleveland-Cliffs Iron Co.
Owners:
The Cleveland-Cliffs Iron Co.
Detroit Delaware
Jones & Laughlin Steel Corp.
National Steel Corp.
Wheeling-Pittsburgh Steel Corp.
• National Steel Pellet Project
Manager and Operator: The Hanna Mining Co.
Owners:
The Hanna Mining Co.
National Steel Corp.
Steel companies in the United States generally are vertically integrated from
the production of raw materials to the production of semifinished steel and
industrial shapes. The larger steel companies produce their own coal, coke, lime-
stone, and some manganese and ferroalloy metals ore, in addition to iron ore that
they produce for their own use. In a few instances these companies produce iron
ore for sale. The older and larger steel companies own or control some, parts of
the transportation systems that bring raw materials to the steel mills. A few own
rail lines complete with rolling stock. Finally, many own or have an interest in
ocean-going ships, lake carriers, and barges, and many integrated steel companies
are engaged in international operations.
The industrial trend toward diversification is beginning to affect the iron and
steel industry. Kaiser Steel Corporation is a subsidiary of Kaiser Industries
Corporation. Control of the Lone Star Steel Company was acquired recently by
Philadelphia and Reading Corporation, a holding company. Several iron and steel
companies have merged with nonferrous metal mining and fabricating companies
as well as with nonmetal companies; Jones & Laughlin Steel Corporation, for
example, became part of Ling-Temco-Vought, Inc., Woodward Iron Co. was taken
over by the Mead Corporation, and Youngstown Sheet and Tube Co. became a
wholly-owned subsidiary of Lykes-Youngstown Corp.
111-13
-------
According to the Bureau of the Census data, in 1972 there were 112 operat-
ing establishments in the iron ore industry in the U.S. The Lake Superior district
(Minnesota and Michigan) accounts for most of the nation's iron ore production;
other facilities are located in New York, Pennsylvania, Alabama, Missouri, Texas,
Wyoming, Utah and California.
Table II1-2 lists U.S. mines by company, and gives production for 1972 and
1973, mine type, ore grade, stripping ratio, facilities, mill size, number of
employees, age, and product amount and type. Many of the facilities are owned
by the major steel producers; it has been estimated that captive mines (including
mines outside the U.S.) furnish about 857r of the ore used by the domestic iron
and steel industry.
Table III-3 shows employment for selected years since 1954 in the iron ore
mining/milling industry. The downward trend reflects, on one hand, the closing
of a number of smaller, high-cost mines in favor of more efficient large-scale
operations, and, on the other hand, the increasingly capital-intensiveness of iron
ore mining and milling.
The ore production in 1973 for the major companies is given in Table III-4.
This production is long tons of crude ore for companies producing over 1,000,000
tons per year.
Today, the typical iron ore establishment has on the order of 200 employees
and produces about 1.6 million long tons of ore per year.
D. FINANCIAL PROFILES
Financial profiles for the major independent iron ore producers (Cleveland-
Cliffs, Hanna Mining Co., Pickands Mather, Oglebay Norton) are given in the
appendix.
E. PRICE EFFECTS
1. Determination of Prices
Essentially all domestic iron ore is sold on the basis of a guaranteed analysis,
which is achieved by beneficiation and/or blending and grading. The blending
begins by selective sequential mining, so that as it leaves the mine the material
will be consistent and uniform in grade and physical characteristics. Ore that is
beneficiated and agglomerated near the mine site is in final form for marketing.
Natural ore and some concentrates, however, may be further blended during
transport and transfer from trains to ships.
111-14
-------
TABLE 111-2
IRON ORE MINING AND BENEFICIATION FACILITIES IN U.S.
So c
o t:
000 =3 3 -
Source Compiled by ADL from published data, June 1975
-------
TABLE 111-3
EMPLOYMENT IN THE IRON ORE MINING/MILLING INDUSTRY
Number of Mines
With 20 or More
Year Total Employees
1954 225 135
1958 243 128
1963 208 101
1967 146 79
1972 112 56
Number of Employees
Total
34,200
30,100
23,100
22,600
19,700
In Production Work
28,200
22,500
18,100
18,000
15,300
GENERAL STATISTICS BY EMPLOYMENT SIZE OF ESTABLISHMENT: 1972
1972
todi
1UM
Hem
IRON ORLS
B
81 1 r • K K3
1 000 to 2,199 employees
Es tablshments covered bv admin . records EO
Eitab
liihments
(number)
112
39
H
It
7
17
K
10
1
1
._"
companli
All employees
Number
(1,000)
19.7
:!
. i
2 . M
2. 1
f'.H
<> 7
(0)
Payroll
(million
dollars)
21U.2
.7
1 . '1
.1 . 5
b.2
'11 3
2h. 0
72 6
7 -r. . 9
U»
.3
illy wit
Production development,
and exploration workers
Number
(1 000)
15. .1
. 1
(
17.7
TiK.7
5 1 1
(U)
.2
Value added
n mining
(million
dollars)
701. '>
1 o
2.0
1 . r<
lr).(l
11.1
•11 0
7 t.'l
ion :•
30 -,.3
(U)
. H
Cost ol sup
plies, stc ,
and purchased
machinery
nslalled
(million
dollars)
123. 7
2 . I
1. 1
2ri. 1
( U)
M .H
IN . 0
.U) 1 li
foT
(U)
.2
fil from a dm
Value ol
shipments
and receipts
(million
dollirs)
1,065.-!
l< ]
3 0
2.0
20. 't
J2. 1
1 12.7
107 1
2'»O f.
<1hO '»
(D)
.9
Inlst rntiv
Capital
espendituras
(million
dollirs)
60. 1
.2
. 1
. 1
3. 4
(D)
3.2
5.3
17 6
(1))
(0)
. 1
indust rv averages to en t 1 mate the balances of the It ems shown In the table The following symbols are Bhown for those s lie clnsnea where admlnistra-
1 1 ve record1) account for 10 percent or more of the total of a size class
El --10 to 19 p.-re en t
E2--20 to ?9 percent
E3--30 to 39 percent
E-1--40 to 49 percent
f,5--5<> to f>9 portent
Kb--60 to 69 percent
E7--70 to 79 porcont
tH--HO to H9 pc-nont
L"'J--'tO to 99 percent
KO--100 percen t
tt*-y of the data obtained f rom administrative
•ecords o ml inc luci^d in the res pec tlve sl?e classes is shown in tht_i Inst line of the table.
•ed
- Represents zero (U) Withheld to avoid disciosIng figures lor individual companles Data for this 1 turn are included In the undersc
figure* above. (Z.) Leas than half of the unit of measurement shown (under 50 thousand dollar^ or man-hours, under 50 employees)
SOURCE: Abstracted from 1972 Census of Mineral Industries,
U.S. Department of Commerce, Bureau of the Census
111-17
-------
TABLE 111-4
MAJOR COMPANIES - IRON ORE PRODUCTION
(1973)
Millions Long Tons
Company Crude Ore
Cleveland-Cliffs 24.6
Hanna Mining Co. 37.8
Inland Steel 3.1
Jones and Laughlin 11.2
Kaiser Steel 10.9
Lone Star Steel 1.4
Meramec Mining Co. 2.1
N. L. Industries 1.5
Oglebay Norton 6.2
Pickands Mather 32.7
Reserve Mining 29.8
U.S. Steel 26.2
C.F. & I. 1.5
Bethlehem Mines 2.2
Pittsburgh Pacific 1.5
Total 192.7
Major defined as those producing over 1 million long tons
of crude ore per year.
111-18
-------
Most domestic iron ore originating outside the Lake Superior district reaches
consuming points in railroad cars. Most Lake Superior ore is transported in Great
Lakes iron ore carriers ranging up to 45,000-ton capacity. Those hauling ore that
originates on the shores of Lake Superior pass through the Sault Sainte Marie
locks, and this limits their size to 1,200 by 110 ft. Since the Great Lakes trans-
portation system is closed by ice three or four months of the year, the mines
either stock-pile ore or shut down during the winter. Most of the direct shipping
mines and those producing wash and gravity concentrate ores close down; mines
with complex beneficiation plants operate year round.
Iron ore prices range from about S5 per ton for some of the brown ores
in the Southeastern district to $15 per ton for high-grade iron ore agglomerates
in the Northeastern and Western districts. While these are published prices, and
they indicate only the range in which a buyer can expect to obtain ore on the
open markets, most iron ore prices are negotiated. The contracts involve time and
delivery considerations besides price. More than 80 percent of the ore is produced
by captive mines (mines producing for company blast furnaces) and therefore
does not reach the open market.
Prices for Lake Superior ores are governed by the Lake Erie price, which is
established each year by the publication of a major contract between a prominent
iron ore producer and a steel corporation. Historically, it has been the first
contract of the year, published before the start of the shipping season. Lately,
however, the Lake Erie price has been steady, except for small changes in trans-
portation costs. From 1962 until 1970. when increases were again made, most
independent ore merchants served notice early in January of each year that prices
would be unchanged.
The Lake Erie price is based on a long ton of standard ore containing 51.5
percent iron, delivered at the rail of a vessel at the lower lake ports. Prices are
adjusted in proportion to the iron content above or below 51.5 percent iron, by
penalties for excess impurities and premiums for lump structure and high
manganese content.
Phosphorus content lower than 0.045 percent commands a premium while
a higher phosphorus percent carries a penalty.
In addition to the standard deductions for iron contents of less than 50
percent, arbitrary penalties are also exacted for high silica and for fine structure.
Hard ores of high-iron, low-silica contents are often sold as lump grade,
generally priced as Old Range Non-Bessemer plus premiums for lump structure.
Ores containing more than 5 percent natural manganese are recognized as
standard manganiferrous iron ores and are generally priced as Old Range Non-
Bessemer on the combined natural iron and manganese content, plus a premium
111-19
-------
for the natural manganese in excess of 5 percent. Ores containing between 2 and
5 percent of natural manganese are also sometimes marketed as manganiferrous at
prices which recognize some small value for the manganese content.
Premiums for lump structure and high manganese content are determined by
negotiation between buyer and seller.
2. Costs of Production
Investment and operating costs for iron ore mining and milling plants vary
with different types of deposits, ores, mines and processes. To give an order of
magnitude, we have estimated the costs for a typical Lake Superior Region
taconite mining and milling operation. These are summarized in Table III-5. In
this case, the cost centers are mining, concentrating, pelletizing, general overhead,
royalties and taxes, and amortization. The usual product is pellets with 62-66%
iron.
TABLE 111-5
TYPICAL COST ESTIMATES FOR TACONITE MINING,
MILLING AND PELLETIZING
Cost
Operation S/Long Ton Ore $/Long Ton Pellets tf/Fe Unit
Mining 0.70 1.40 2.2
Concentrating 1.17 2.34 3.7
Pelletizing - 2.36 3.7
General Overhead - 0.50 0.8
Royalties & Taxes - 1.57 2.5
Amortization* - 2.44 3.9
Total - 10.61 16.8
*Based on an investment of $365 million with a 15 year amortization period and 10,000,000
L.T./yr production.
Source: ADL Estimates.
3. Potential Constraints on Financing Additional Capital Assets
An important aspect of the iron ore mining and beneficiating industry of
the Great Lakes Region is its intimate relationship to the major steel companies,
who, with a few large consumers such as Ford Motor and International Harvester,
are the customers for iron ore and pellets. The steel companies have extensive
holdings in mining companies and are participants in joint ventures producing
beneficiated ore and pellets. While this is public information, a perusal of the
list of names of iron mining companies does not indicate the full extent of steel
company involvement.
111-20
-------
A few independent companies manage iron ore properties in the Great Lakes
Region on behalf of the steel companies, and may themselves have an operating
interest. It is not uncommon for such a company to receive a reimbursement for
all operating expenses, plus a management fee based on the tons of iron ore pro-
duced, which depends in part upon the ore requirements of the steelmaking
owners. Ordinarily, the management contracts run for the economic life of the
property but may be terminated earlier. Iron ore sales to steel companies are
typically under long-term contract at prevailing published market prices at the
date of shipment. The nature of the management agreement and sales contract
terms suggest that the steel companies primarily bear the risk of cost increases.
The availability of financing for capital assets depends largely on the
prospects of large U.S. steel companies. Constraints on financing stem from im-
ports of iron ore pellets, the effect on steel company profits of higher iron ore
prices, and the effect on domestic steel consumption of a full pass-on of pollution
control cost to steel customers. In general, the constraints on financing additional
capital assets can be discussed under the categories of financial, competitive and
regulatory constraints.
a. Managerial Constraints. It is management's task to choose from among
investment alternatives and decide on the optimum utilization of the corpora-
tion's resources and borrowing power, and to formulate and implement plans
accordingly. Many steel companies are now involved in raw materials ventures
and these activities typically require a commitment of capital. The funds avail-
able to the corporation include, of course, its total cash generation, its borrowing
power, and ability to raise additional equity capital. The constraints here are the
costs of capital vis-a-vis the expected rates of return on its investment. Iron ore
mining ventures are typically expected to have good rates of return and fre-
quently involve some relatively high risks. Uncertainty over future pollution
control requirements is a factor increasing perceived risk and probably also the
cost of capital.
b. Financial Constraints. A corporation's earnings and cash flow are
generally programmed to meet dividend, reinvestment, and debt service require-
ments. When external financing is required, there are many considerations
dictating the type and amount.
In general, financial institutions and investment firms employ tests of
performance and standards or guidelines for debt-to-equity ratios and coverage of
fixed charges in a given industry to assess the credit worthiness of a corporate
issuer of securities. The capital markets, together with the corporation in
question, determine how much capital will be made available, and under what
terms, to the borrowing corporation. Existing commitments carry with them an
obligation to make certain expenditures, meet debt service schedules, etc.
111-21
-------
Loan agreements may restrict the extent to which even a large steel company
can diminish working capital, retained earnings, or issue further debt.
c. Competitive Constraints. A process breakthrough which significantly
lowers production cost may dictate that capital investments be made: 1)
defensively by competitors and 2) offensively by the innovative firm. If a pro-
prietary process is involved, it is conceivable that some firms may not remain
economically viable and will be forced to shut down. Similarly, if pollution
control costs are so onerous and if competitive market conditions do not permit
such incremental costs to be passed on to customers or taxpayers, a firm may
elect not to spend the money, assuming it could achieve a greater return on its
investment elsewhere.
d. Regulatory Constraints. The financing of certain additional capital assets
may be influenced by regulatory considerations. Tax laws and ownership limita-
tions are the most important considerations here. They play a part in regard to
both domestic projects (e.g., the effect of depletion allowances, industrial pollu-
tion control revenue bond financing) and international projects (depletion
allowance, foreign tax credits, ownership limitations).
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this section is to assess the economic impact of the guidelines
set forth by the Effluent Guideline Document for the iron ore mining and
processing industry. These guidelines are:
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial dischargers by 1977.
• Best Available Technology Economically Available (BATEA) —
to be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the iron ore mining and processing industry into the
following groups:
1. Mines.
2. Mills with physical/chemical processes.
3. Mills with magnetic and physical separation processes (Mesabi
Range).
HI-22
-------
Special exclusion: No discussion or consideration of iron ore in the U.S. is
complete without consideration of the Reserve Mining Company and their opera-
tions at Babbitt and Silver Bay. However, because of the contractor's participa-
tion in Reserve Mining's current case, the contractor is prohibited from discussing
the impact of effluent guidelines on Reserve.
1. Effluent Guidelines
For the mines category, which includes both underground and open pit
mines, the recommended parameters and BPCTCA guidelines are given in
Table III-6, and the BATEA parameters and guidelines in Table III-7.
NSPS guidelines for iron ore mines are the same as BPCTCA guidelines.
For the mills with physical/chemical processing, the recommended BPCTCA
parameters and guidelines are given in Table III-8, and the BATEA guidelines in
Table III-9. NSPS guidelines for these mills are the same as BPCTCA guidelines.
For the mills with magnetic and physical separation processes (Mesabi
Range), zero discharge is recommended and hence no parameters or guidelines
are proposed.
2. Costs of Compliance
The guidelines contractor has estimated the costs of compliance for both
BPCTCA and BATEA guidelines. These costs for iron ore mining and milling are
summarized in Table III-10 by sub-category and in Table III-11 by companies.
The costs in these tables represent the investment needed to install the required
treatment facilities and the annual costs to operate them.
The annual costs include amortization (which in turn includes an interest
cost at 8%) based on a life of 20 years for facilities and 10 years for equipment.
The fixed cost portion of the annual costs is about 20%. That is, 20% of the
total annual cost is fixed cost (amortization plus interest charges in this case).
In Table III-l 2 we have estimated the incremental cost to the two companies'
final product (pellets) due to compliance with both BPCTCA and BATEA guide-
lines. These are added costs for the particular company unit where effluent
treatment is required. Both companies are multi-unit companies.
3. Basis for Analysis
The basis for the analysis of economic impact has been discussed in the
"Approach" section of this report.
111-23
-------
TABLE 111-6
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - IRON ORE MINES
Concentration (mg/C) in Effluent
Parameter
pH
TSS
Fe (Total)
30-day average
6* to 9*
20
1.0
24-hour maximum
6* to 9*
30
2.0
*Value in pH units.
Source: Development Document.
TABLE 111-7
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BATEA - IRON ORE MINES
Concentration (mg/2)
Parameter
PH
TSS
Fe (Total)
30-day average
6* to 9*
20
0.5
24-hour maximu
6* to 9*
30
1.0
*Value in pH units.
Source: Development Document
111-24
-------
TABLE 111-8
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - IRON ORE MILLS
EMPLOYING PHYSICAL METHODS AND/OR
CHEMICAL REAGENTS
Concentration (mg/8) in Effluent
Parameter
PH
TSS
Fe (Total)
30-day average
6* to 9*
20
1.0
24-hour maximum
6* to 9*
30
2.0
"Value in pH units.
Source: Development Document.
TABLE 111-9
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BATEA - IRON ORE MILLS
EMPLOYING PHYSICAL METHODS AND/OR
CHEMICAL REAGENTS
Concentration (mg/£) in Effluent
Parameter
pH
TSS
Fe (Total)
30-day average
6* to 9*
20
0.5
24-hour maximum
6* to 9*
30
1.0
*Value in pH units.
Source: Development Document.
111-25
-------
TABLE 111-10
COSTS OF COMPLIANCE FOR IRON ORE MINING AND MILLING
Costs (Thousands $)
Sub-Category
Mines
Mills
Total 14 mines
Total Industry (1972)
No.
1-12
13
14
1-12
13
Thousands
M.T. Ore
Per Year
162,000
6,056
8,130
137,000
8,130
176,186
187,648
BPCTCA
Investment
0
118.7
31.2
0
124.3
274.2
Annual
0
87.8
12.7
0
103.6
204.1
BATEA (Total)
Investment
0
118.7
31.2
0
140.2
290.1
Annual
0
87.8
12.7
0
148.0
248.5
Sample Represents
(% of Industry)
(On Tonnage Basis)
94%
TABLE 111-11
SUMMARY - TOTAL COST OF COMPLIANCE BY COMPANIES
Costs (Thousands S)
Company No.
A
B
Total
Rest of Industry
Thousands
M.T. Ore
Per Year
6,056
8,130
14,186
173,462
BPCTCA
Investment
118.7
155.5
274.2
0
Annual
87.8
116.3
204.1
0
BATEA (Total)
Investment Annual
118.7 87.8
171.4 160.7
290.1 248.5
0 0
111-26
-------
TABLE 111-12
INCREASE IN COST OF PELLETS DUE TO ADDED COST OF COMPLIANCE
Note: Both companies with added costs produce pellets as the principal
product. Mine, mill, and pellet plants operate as a unit.
Total
I. Increase Due to BPCTCA Costs
Company No.
A
B
Pellet
Production
Thousands
M.T./Yr.
(1972)
2,177
3,945
Annual Cost
to Attain
Guideline
87,800
116,300
$/M.T.
Pellets
0.04
0.03
Value/M.T.
1972
Pellets*
14.12
14.12
% Annual
Cost/Value
0.28
0.21
6,122
204,100
II. Increase Due to BATEA Costs
Company No.
A
B
Total
2,177
3,945
6,122
87,800
160,700
248,500
0.04
0.04
14.12
14.12
0.28
0.28
"The average value of Lake Superior pellets f.o.b. mine and pellet plant in 1972 was $14.12 per
long ton. The value today (June 1975) is approximately $21.60 per long ton.
III-2"
-------
4. Levels of Impact
The levels of impact have been discussed in the "Approach" section of this
report.
In the following approach, the complete impact analysis for each effluent
guideline will be discussed before considering the next guideline.
a. Best Practical Control Technology Currently Available (BPCTCA). In
Table 111-13, we have summarized the information and costs to comply with the
BPCTCA guidelines. Shown in Table 111-13 for the three impact groups discussed
above and for the total industry are the data on tonnage and number of
employees, the added operating costs, and the added investment costs as a per-
centage of capital expenditures and total investment.
(1) Price and Production Effects. As is evident from the table, 86% of
the industry would not be directly affected by the guidelines. For the 7.6% that
is directly affected, the product cost increase of $0.03 per ton is small and could
readily be either passed on or absorbed under normal circumstances. The per-
centage increase of $0.03 per ton on a $ 14 per ton product (1972) is less than 1 %.
There is virtually no impact on the whole industry.
(2) Financial Effects. The added capital investment required for the
impacted groups of the industry is only 4% of the estimated annual capital
expenditures and only 0.08% of the total invested capital. The percentage of
annual capital expenditures (4%) is calculated on the assumption that the invest-
ment for pollution control will be accomplished in one year. However, this
investment would likely to made over a period of several years, so the effect
would actually be less than is indicated here.
(3) Balance of Payment Effects, Employment Effects, and Community
Effects. Consideration of the price and production, and financial effects indicates
that there will be no output curtailments or plant shutdowns in the iron ore
mining and milling industry due to BPCTCA effluent limitations. As a result,
there will be no employment or community effects and no balance of payments
effects.
b. Best Available Technology Economically Available (BATEA). Table III-14
lists the data and costs for meeting the BATEA guidelines. These are only slightly
higher than the BPCTCA data and costs in Table 111-13.
For meeting BATEA guidelines, therefore, the effects and impacts are the
same as for BPCTCA. That is, there will be no significant impact on the industry
or any industry group of it in meeting BATEA standards.
111-28
-------
TABLE 111-13
SUMMARY OF DATA AND COSTS FOR MEETING BPCTCA GUIDELINES
IRON ORE MINING AND MILLING INDUSTRY
(1972 Data and Costs)
Thousands Long Tons/Yr. Crude Ore
Thousands Long Tons/Yr. Product
Percent of Industry — Tonnage Basis
Number of Employees
Percent of Employees
Added Investment for Facilities ($)
Added Investment as % of Estimated
1972 Capital Expenditures
Added Investment as % of Estimated
Total Investment
Increase in Annual Operating Cost (S)
S per ton Crude Ore
$ per ton Product
"A"
162,000
67,557
86.3
17,000
86.3
0
0
0
0
0
0
"B"
14,186
6,122
7.6
1,306
7.6
274,200
4.0
0.08
204,100
0.01
0.03
"C"
0
0
0
0
0
0
0
0
0
0
0
I uiai
Industry
187,648
78,28V
100
19,700
100
274,200
0.5
Negligible
204,100
.001
.003
'Includes pellets, sinter, concentrate, direct shipping ores
(pellet production 55,920,000 long ton or 71% of total).
111-29
-------
TABLE 111-14
SUMMARY OF DATA AND COSTS FOR MEETING BATEA GUIDELINES
IRON ORE MINING AND MILLING
Thousands Long Tons Crude Ore/Yr
Thousands Long Tons Product/Yr
Percent of Industry — Crude Ore Basis
Number of Employees
Percent of Employees
Added Investment for Facilities ($)
Investment as % of Estimated
1972 Capital Expenditures
Investment as % of Estimated
Total Plant Investment
Increase in Annual Cost ($)
$ per Long Ton of Crude Ore
$ per Long Ton of Product
(pellets)
"A"
162,000
67,557
86.3
17,000
86.3
0
"B"
14,186
6,122
7.6
1,306
7.6
290,100
"C"
0
0
0
0
0
0
I \j iai
Industry
187,648
78,281
100
19,700
100
290,100
4.3
0.5
0
0
0
0.08
248,500
.02
0
0
0
Negligible
248,500
.001
.04
.003
"Includes pellets, sinters, concentrate, direct shipping ores
(pellets 55,920 or 71% of total).
111-30
-------
c. New Source Performance Standards (NSPS). The guidelines contractor
has recommended that for new iron ore mills with magentic processing, the NSPS
guideline should be zero discharge. For iron ore mines and mills using physical
methods/chemical reagents the NSPS standards should be identical to BPCTCA
limitations.
There were no cost estimates provided by the Effluent Guideline Develop-
ment for the NSPS analysis. Therefore, any statements made with regard to the
effect of the NSPS requirement on the construction of new plants within the
U.S. must necessarily be qualitative.
However, it can be said with some degree of confidence that the costs for
a "grass roots" plant to meet the NSPS standards are no more than the costs
for an existing plant in the impact group "B" to meet the BPT and BAT re-
commended effluent limitations. This is due to the fact that in the construction
of a new plant, in-process modifications can oftentimes be made which may be
more efficient and economical than add-on treatment technologies for existing
plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. iron ore mining and milling industry to expand
domestic production capacity through the construction of new plants.
111-31
-------
IV. COPPER ORE MINING AND PROCESSING (SIC 1021)
A. INTRODUCTION
There are seven major copper producing areas in the world: (1) the western
United States; (2) the western slope of the Andes in Peru and Chile; (3) the
central African Copperbelt in Zambia and Zaire (Kinshasa); (4) the Ural
Mountains and the Kazakstan region in the U.S.S.R.; (5) the Precambrian area of
central and western Canada; (6) the Keweenaw Peninsula of Northern Michigan;
and (7) Southwest Pacific (Australia, Bougainville).
Of the many copper minerals, only chalcocite, chalcopyrite, bornite,
chrysocolla, azurite, and malachite are important commercially. Copper ores
occur in many types of deposits in various host rocks. Porphyry copper deposits
account for about 90% of the U.S. production and much of the world output, and
contain most of the estimated commercial copper reserves of the world.
From a processing viewpoint, copper ores can be classified in three categories:
sulfide ores, native copper ores, and oxide ores.
A sulfide ore is a natural mixture containing copper-bearing sulfide minerals,
associated metals, and gangue minerals (e.g.. pyrites, silicates, aluminates) that at
times have considerable value in themselves (e.g., molybdenum, silver, gold, as
well as other metals). Most sulfide ores belong to one of three major groups, all of
which are represented in the United States, namely:
• The porphyry copper and Northern Rhodesian type deposits that
carry copper mostly in the form of chalcocite (Cu2 S), chal-
copyrite (CuFeS2) and bornite (Cu5FeS4). Copper ranges from a
fraction of one percent to several percent, and iron is generally
low. The deposits in the southwestern U.S. are of this type.
• Deposits, such as those found in Rio Tinto in Spain, Cyprus, and
Tennessee, commonly known as cupriferous pyrite, which
generally have 1-3% copper as chalcopyrite, and contain abundant
amounts of pyrite and pyrrhotite. Generally, copper-to-iron ratios
and copper-to-sulfur ratios are low.
• Arsenic-bearing copper ores, such as enargite (Cu3AsS4), with
deposits occurring in Butte, Montana; Yugoslavia; Tsumeb in
South West Africa; and the Philippines.
The sulfide ores are treated primarily by crushing, grinding, and froth flota-
tion to produce a concentrate (or several concentrates) of sulfide minerals and
reject the worthless gangue as tailings.
IV-1
-------
Native copper ores are those in winch some of the copper occurs as the
native metal. The Lake Superior District in Michigan is the only major source of
ore of this type. Although the reserves ot this ore are quite extensive, it contri-
butes only a small portion of the total U.S. mine production of copper.
All non-sulfide, non-native ores of copper are termed "oxide" ores, the oxide
copper content being measured by and synonymous with solubility in dilute
sulfuric acid. An oxide copper ore can contain copper oxide, silicate or carbonate
minerals and gangue. The oxide ores have been treated metallurgically in a variety
of ways, the character of the gangue minerals having a very important bearing on
the type of metallurgical treatment used. Oxide ores in the U.S. are treated
primarily by leaching with dilute sulfuric acid.
Commonly associated with copper are minor amounts of gold, silver, lead,
and zinc, the recovery of which can improve mine profitability. Molybdenum,
lead and zinc are recovered as sulfides by differential flotation. Minor amounts of
selenium, telluriun, and precious metals are extracted in electrolytic refining. On
the other hand, arsenic, antimony and bismuth in the ores cause problems in
standard pyrometallurgical processing and electro-refining, and thus their presence
is a cost penalty. Nickel and cobalt can interfere with electrolytic refining, but
they do not occur in significant amounts with the U.S. copper deposits.
B. INDUSTRY DESCRIPTION
The Copper Ores Industry includes establishments engaged primarily in
mining, milling, or otherwise preparing copper ores. This industry also includes
establishments engaged primarily in the recovery of copper concentrates by pre-
cipitation and leaching of copper ores.
1. Reserves
In 1964, the Bureau of Mines reported domestic reserves of 75 million tons
of metal in ore averaging 0.86% copper, assuming recovery at 90% of gross metal
content. An additional 58 million tons of copper was estimated as potential re-
sources recoverable with technological or economic improvements. Arizona.
Montana, Utah, New Mexico, and Michigan accounted for more than 90% of the
total reserves.
A 1973 study* estimated the total known domestic resources of copper
economically available at various copper prices, allowing for a 12% return on
investment:
*IC 8598, "Economic Appraisal of the Supply of Copper," U.S.B.M., 1973.
IV-2
-------
Resources in
Price Millions of Short Tons
$2.00/lb 180
0.75/lb 115
0.50/lb 83
The 83 million tons of reserves indicated above represent 49 years of supply
at our present production rate of about 1.7 million tons per year.
A comparison of U.S. copper resources with those of the rest of the world
(see Table IV-1) indicates that the U.S. has about 20% of the world's copper re-
sources. It is also evident, however, that many areas of the world have significant
copper resources. The major resources are in South America, Africa, U.S.S.R.,
Canada, Mexico, and Europe.
2. Mining
About 85% of the total copper ore mined comes from open pits; the rest
comes from underground mines. Underground mining methods for copper ores
involve caving and/or cut-and-fill mining.
3. Beneficiation
The different mineral forms (sulfides, carbonates, oxides, native copper, etc.)
require different processing techniques. Many methods have been used to bene-
ficiate the ores; generally only the sulfide ores are amenable to concentration
procedures such as grinding and froth flotation.
a. Sulfide Ores
These ores, the most important source of copper, are concentrated by froth
flotation. This procedure requires crushing and grinding and classification to
about 100 mesh or finer to liberate the particles. Grinding is usually the largest
cost item in the process. After grinding, the ore-water mixture is treated with
reagents to condition the sulfide particles so that their surfaces become air-avid.
The sulfides are then collected with the froth produced in the flotation cells. The
final concentrate may contain 1 1% to 32% copper. Typically flotation is used to
separate copper sulfides from pyrite, recover molybdenum from copper con-
centrate, and recover copper concentrate from complex lead-zinc-copper ore. A
typical flowsheet for flotation of a sulfide ore is shown in Figure IV-1.
b. Oxide Ores
Oxide ores occurring in the United States are generally not amenable to
flotation, but are generally soluble in various leaching solutions.
IV-3
-------
TABLE IV-1
IDENTIFIED AND HYPOTHETICAL COPPER RESOURCES
(Millions of Short Tons)
2
Area Identified1 Hypothetical
United States:
Eastern 10 5
Western, except Alaska 64 75
Alaska 2 20
Canada 19 50
Mexico 18 20
Central America 1 6
Antilles 2 1
South America 80 50
Europe, excluding U.S.S.R. 25 20
Africa 53 50
U.S.S.R. 39 50
Middle East-South Asia 4 20
China 3 ?
Oceania, including Japan 21 30
Australia 3 3
Total 344 400
1. Identified resources: Specific, identified mineral deposits that may or
may not be evaluated as to extent and grade and whose contained minerals
may or may not be profitably recoverable with existing technology and
economic conditions. Based on all categories of reserve figures plus esti-
mates where no figures are available. Amounts are tentative and accuracy
will be refined in subsequent publications.
2. Hypothetical resources: Undiscovered mineral deposits, whether of
recoverable or subeconomic grade, that are geologically predictable as
existing in known districts. Based generally on identified resource figures
times a factor assigned according to geologic favorability of the region,
extent of geologic mapping, and exploration.
Source: Geological Survey professional paper 820, "United States Mineral
Resources," Brobst and Pratt, 1973.
IV-4
-------
ORI CAR t^—-v
ORIZUYT^ J
jt OTRATORT CRUtHIR
IUCTRO
MAONIT
k
f\
MAONITIC MIAD PUUIY
SUROI RIN
SURGI UN
MIT CONVITOR
VIBRATING SCRIIN
MIT CON vi ro«
IMORT HMO
CONI CRUtHU
FIN!
^ »
OR! BIN
i—,
i !
LJ
LJ
ADDITIONAL GRINDING AND HOTATIOH CIRCUITS
DfNNDINO ON TONAOI
n
L.J
i i
i---i
I i
R
n
f—I
r-i
LJ
G
LJ
G
I"'I
d
•All Mill
CLASSirilt
THICKINI*
*- TAIIINOS
CONCINTCATfl
DltC
FIGURE IV-1 TYPICAL FLOWSHEET - SULFIDE COPPER ORE FLOTATION
IV-5
-------
(1) Acid Leaching. The ore is properly sized, if necessary, and leached with
acid which dissolves the copper. Depending on ore grade and characteristics, the
ore is leached in vats (by percolation or with agitation), in heaps, or in place.
Sulfuric acid is the usual solvent for oxidized copper minerals. The presence
of ferric sulfate in the leach solution can solubilize some sulfide minerals such as
chalcocite. For dissolution of the oxide minerals, about 1.5 pounds of acid per
pound of contained copper is required, but total consumption of acid is often
much greater because of reaction with gangue minerals.
Copper is recovered from dilute leach solutions by precipitation with scrap
iron, and from concentrated leach solutions by electrowinning.
Other minor methods include ammonia leaching, cyanide leaching, the
segregation process, and oxide ore flotation.
c. Mixed Ores
The treatment of mixed ore, that is, ore containing both sulfide and oxide
minerals, depends on the proportions of the two types of minerals. If sulfides
predominate, flotation is used, with reagents that favor flotation of oxide
minerals. When the ore contains almost equal amounts of sulfide and oxide
minerals, combinations of leaching and flotation are used.
4. Water Use
In 1968, the copper ore mining/milling industry used a total of 109 billion
gallons, of which 90% was process water and the remaining 10% was for miscel-
laneous uses, which include air conditioning, power generation, boiler feed,
sanitary services, and miscellaneous cooling and condensing operations. The
industry's gross water consumption (including recirculated or reused water)
amounted to 447 billion gallons. The corresponding water discharge (including
mine water drained and discharged) was 68 billion gallons, of which about 17%
received some form of treatment prior to discharge. A typical flowsheet for the
water balance in a southwest sulfide copper mining and milling plant is shown in
Figure IV-2.
5. Products
The major products of the copper mining and milling industry are sulfide
concentrates and copper precipitates, although small amounts of siliceous ores
go directly to the smelting process.
Copper concentrates and precipitates are produced principally from ores in
Arizona, Montana, Michigan, Utah, Nevada, and New Mexico. In 1972,
IV-6
-------
Mine
Concentrate
Product Moist
1
Varies
Usually Small
Evaporation
Seepage
I
Mill
Water
Reservoir
49
"I
Cementation
Copper
Mill
I F
Product
-Z50.-J
354
400
• Water Makeup
1 Wells-River-Dams-Etc.
295
Only Loss - Seepage
and Evaporation — No
Overflow to Environment
250
. Solids
.Water (Figures are gallons per ton of ore.)
FIGURE IV-2 WATER BALANCE - TYPICAL SOUTHWEST COPPER OPERATION
IV-7
-------
266,831,000 short tons of ore were mined, with an average grade of 0.55%
metallic copper. From this ore, 1,664,840 short tons of copper were produced.
This production represented some 23% of the world's total; 87% of the total
production was from open pit mines.
Besides production from copper ores there is some copper production as a
by-product from certain non-copper, complex lead, zinc, ores but this is a minor
amount. In 1972 only 1.9% of the total copper produced was recovered from
these sources.
Many of the copper mines also produce by-products — principally molyb-
denite, gold and silver. Fifteen of the major porphyry copper mines together
produce about 25,000 tons of molybdenite annually. In some of the mines the
molybdenite is almost a coproduct and is important as a revenue producer to
make the mine economically viable. Such is the case at the Sierrita Mine in
Arizona.
The porphyry copper ores are also the major source of the metal rhenium
which is recovered from the molybdenite concentrates.
In 1972, 17,684,000 tons of oxidized ores were processed by leaching; this
is only 6.6% of the total ore processed.
C. INDUSTRY OVERVIEW
1. Types of Firms
The U.S. has been the largest copper producing country in the world since
before the turn of the century. In 1972, the domestic primary copper industry
was composed of 187 firms. The major producers are vertically integrated with
many plants and have mining, smelting, refining, fabricating, and marketing
interests. Other large producers mine and have processing facilities through the
smelting or refining stages, and many companies mine and concentrate their ores
and ship the product to custom plants for smelting and refining. The principal
domestic producers are shown in Table IV-2. Of these, Anaconda, Inspiration,
Kennecott, Asarco, Magma, Phelps Dodge and White Pine are integrated; Duval,
Pima and the Miami Copper Division of the Cities Service Corporation are in-
volved only in mining and milling.
Most of the smaller mining operations do not have their own smelting
facilities because of the high capital cost of such facilities. Concentrates produced
by the smaller companies are handled by custom smelters, who purchase ores or
concentrates from other producers (custom smelting), or treat them for a fee and
return the metal to the mining company (toll smelting). Asarco is the major
custom smelter and refiner.
IV-8
-------
TABLE IV-2
PRINCIPAL COPPER-PRODUCING COMPANIES IN THE UNITED STATES - 1973
1973 1972
Mine Production, Mine Production,
Company Short Tons Copper Short Tons Copper
American Smelting and Refining Co. 75,180 71,714
The Anaconda Company 200,454 233,471
Bagdad Copper Corporation 19,152 18,975
Duval Corporation 131,214 112,966
Inspiration Consolidated Copper Co. 64,705 70,079
Kennecott Copper Corporation 471,721 460,576
Magma Copper Co. 158,263 149,492
Phelps Dodge Corporation 319,566 305,432
Pima Mining Co. 88,140 82,841
Cities Service Co. 33,280 33,366
White Pine Copper Co. 78,179 70,375
Bethlehem Cornwall 1,964 2,779
Cyprus Bruce Mine 3,098 3,140
Hecla - 2 Mines 438 1,939
Idarado Mining 1,657 2,274
Eagle-Picher Ind., Inc. 2,861 4,420
Others* 77,062 41,001
Totals 1,726,934 1,664,840
*By difference
Source: American Bureau of Metal Statistics, Yearbook 1972, 1973.
In 1970 there were 16 copper smelters operating in the U.S., with an
aggregate charge capacity of 8.6 million tons; 96% of this capacity was in the
western states, and 50% was in Arizona. Four companies (Phelps Dodge, Asarco,
Kennecott, Anaconda) controlled about 70% of the mine production capacity,
85% of the smelting capacity, and 81% of the refining capacity. The same four
companies also controlled fabricating facilities that consumed over 50% of the
copper.
Table IV-3 shows the fifteen principal copper producers and the disposition
of their copper. This indicates the degree of integration from mine to smelter
to refinery and finally to product sales.
IV-9
-------
TABLE IV-3
PRINCIPAL COPPER PRODUCERS AND THE DISPOSITION OF THEIR COPPER
UNITED STATES
<
O
Company
Asarco
The Anaconda Co., Butte, Mont.
Anamax Mining Co., Twin Buttes,
Ariz.
The Anaconda Co., Yerington,
Nevada
Bagdad Copper Corp.
Cities Service Company
Miami Copper Operations
Copperhill Operations
Copper Range Co.
Duval Corporation
Inspiration Consolidated Copper Co.
Kennecott Copper Corp.
Magma Copper Company
Superior Division
San Manuel Division
Phelps Dodge Corp.
Pima Mining Co.
Quincy Mining Co.
White Pine Copper Co.
Where Smelted
Own plants.
Anaconda, Anaconda, Mont.
Inspiration Consolidated Copper
Co., Miami, Ariz. Asarco.
Hayden, Ariz.
The Anaconda Co., Anaconda,
Mont.
Asarco, Hayden, Ariz., Copper
Range, White Pine, Michigan
Inspiration Sm., Miami, Ariz.
Phelps Dodge, Douglas, Ariz.
Own Plant, Copperhill, Tenn.
White Pine, Mich.
Asarco, Tacoma, Washington,
Hayden, Ariz., and El Paso, Tex.
Own Plant, Miami, Ariz.
Own smelters, Garf ield, Utah;
Ray, Ariz : McGill, Nevada;
Hurley, N.M.
Own Plant, San Manuel, Ariz.
Own Plant, San Manuel, Ariz.
Own plants, Douglas, Morenci,
and Ajo, Ariz.
Phelps Dodge Corp., Magma
Copper, San Manuel, Arizona
Quincy Mining Co., Hancock, Mich.
White Pine, Mich.
Where Refined
Own refineries.
Anaconda, Great Falls, Mont.
The Anaconda Co., Perth Amboy,
N.J., Asarco, Perth Amboy, N.J.
U.S. Metals Refining Co.,
Carteret, N.J.
The Anaconda Co., Great Falls,
Mont.
Asarco, Perth Amboy, N.J.,
Copper Range, White Pine,
Michigan
Raritan Copper Wks. and Phelps
Dodge Ref.
Phelps Dodge Ref. Corp.
White Pine, Mich.
Asarco, Perth Amboy, N.J., Tacoma,
Washington, Baltimore, Md.
Own plant, Inspiration, Ariz.,
and Raritan Copper Wks.
Own refineries at Garf ield, Utah,
Hurley, N M. Kennecott Refining
Corp. at Anne Arundel County, Md.
Own refinery and Phelps Dodge
Ref. Corp.
Own refinery and Phelps Dodge
Ref. Corp.
Phelps Dodge Ref. Corp.
Phelps Dodge at Laurel Hill, N.Y.
Quincy, Mining Co., Hancock, Mich.
White Pine, Mich.
Sold By
Asarco
Anaconda Sales Co.
Anaconda and Amax
Copper Inc.
Anaconda Sales Co.
Asarco, Copper Range
Sales Co.
Cities Service Company
Metal Sales Dept.
Cities Service Company
Metal Sales Dept.
Copper Range Sales Co.
Asarco, Duval Sales Corp.
Kennecott Sales Corp.
International Minerals &
Metals Corp and Magma
Copper Company
International Minerals&
Metals Corp. and Magma
Copper Company
Phelps Dodge Sales Com-
pany, Incorporated
Ametalco, Inc.
Quincy Mining Co.
Copper Range Sales Co.
Source: American Bureau of Metal Statistics, Yearbook 1973
-------
2. Types of Plants
In the U.S., over 100 mines produce some amount of copper; copper ore is
the principal product of about 50 mines; the others are mostly lead and zinc
mines, which produce copper as a by-product or co-product. The largest mines
are shown in Table IV-4, as well as 14 smaller mines. The largest five mines each
produced more than 100,000 tons of contained metal, amounting to 45% of the
total.
In 1972, 94% of domestic copper mined came from Arizona, Montana,
Nevada, New Mexico, and Utah; nearly all the remainder came from Michigan,
Tennessee, and Missouri (see Table IV-5).
Table IV-4 lists available information for each of the mines and includes
mine location, type, ore grade, stripping ratio, facilities at the mine site, produc-
tion for 1972 and 1973, mill size, number of employees, age, metal production
for 1973, and pertinent remarks. Total employment is 41,839. In the cases where
there is a smelter (S code under facilities), the employment includes the
employees at the smelter.
The 1972 Census of Mineral Industries shows the following employment
statistics for the industry (excluding smelting):
Number of Establishments = 187
Number of Establishments with over 20 Employees = 70
Number of Employees = 36,400
Number of Employees in Production = 27,800
D. FINANCIAL PROFILES
1. Introduction and Background
As indicated previously the primary copper, lead, and zinc industries are
mutually interdependent to a considerable extent. Also, several major companies
are involved in the production of all three metals as well as gold and silver.
Because of this, these nonferrous industries have been treated as a group in this
chapter. In most cases, reference is made to company financial data as reported
through 1972, and information on company activities as of 1973. In some uses,
where appropriate, subsequent information has been noted.
The primary copper, lead, and zinc industries are concentrated. For example,
the top three producers in copper — Kennecott, Phelps Dodge, and Anaconda —
account for well over half of mine output and smelting capacity, are vertically
integrated, and also account for a substantial share of fabricated product sales;
IV-11
-------
TABLE IV-4
U.S. COPPER MINING OPERATIONS
Company and Mine
Kennecott Corp.
Utah Copper
Ray Mines
Ray Silicate
Nevada Mines
Chino Mines
Phelps Dodge Corp.
Morenci
New Cornelia
Copper Queen
Tyrone
Metcalf
Magma Copper Co.
San Manuel
Superior
Anaconda Co.
Twin Buttes
(Anamax)
Berkeley Pit
Butte Mines
Yerington
Continental East
White Pine Copper
Cyprus Mines Corp.
Pima Mine
Bagdad
Asarco
Mission
Silver Bell
Sacaton
San Xavier
Inspiration
Thornton (Plus
3 Others)
Christmas
Location
Utah
Arizona
Arizona
Nevada
New Mexico
Arizona
Arizona
Arizona
New Mexico
Arizona
Arizona
Arizona
Arizona
Montana
Montana
Nevada
Montana
Michigan
Arizona
Arizona
Arizona
Arizona
Arizona
Arizona
Arizona
Arizona
Mine
Type
O.P.
O.P.
O.P.
O.P.
O.P.
O.P.
O.P.
U.G.
O.P.
OP.
U.G
U.G.
O.P.
O.P.
U.G.
O.P.
O.P.
U.G.
O.P
O.P
OP.
O.P.
O.P.
O.P.
O.P.
O.P.
Ore
Grade
% Copper
0.65
0.91
1.35
0.78
0.88
0.82
0.61
4.06
087
0.74
0.69
4.40
0.82
0.76
3-5
0.86
0.50
1.00
0.56
0.70
0.70
0.70
0.70
-
0.71
0.80
Stripping
Ratio
2.6
3.2
0
3.9
2.7
2.0
1.9
0
3.7
-
0
0
7.6
3.7
0
1.4
3.2
0
1.6
5.3
2.5
3.5
-
-
1 3
5.8
Facilities*
MCLSR
MCLS
ML
MCLS
MCLS
MCLS
MCLS
MCL
MCL
MCL
MCSR
MCSR
MCL
MCL
M
MCL
M
MCSR
MCL
MCL
MCL
MCL
MCL
ML
MCLSR
MC
Millions Tons Ore
1972
35.0
7.7
2.6
6.8
6.3
17.2
9.8
0.6
11.4
-
21.9
0.4
18.9
16.6
0.5
9.4
0
8.2
18.7
2.0
8.4
3.8
—
N.A.
10.1
1.9
1973
38.3
8.6
3.7
7.8
8.1
18.4
10.3
0.6
15.4
-
21.9
0.5
15.1
17.8 1
0.6 '
11.0
0.6
8.9
20.2
2.1
8.8
3.9
—
N.A.
12.8
1.6
Mill Size
Tons/Day
107,000
25,400
8,000
21,500
22,000
60,000
34,000
1 6,000
48,000
30,000
65,000
3,500
32,000
50,000
30,000
-
25,000
54,000
6,000
22,500
1 3,000
9,000
4,000
22,000
6,000
Employees
7,200
2,100
-
1,480
1,500
2,400
1,270
1,500
690
-
2,200
1,100
1,664
I 3,500
575
-
2,925
1,050
525
720
385
250
30
1,725
275
Age
(Years)
69
20
6
67
63
33
58
19
6
-
19
65
5
12
100
22
2
20
18
35
14
21
2
3
60
13
Thousands
S.T. Copper
Produced
(1973)
255
74
25
50
68
120
54
23
104
-
136
22
74
128
-
36
14
90
88
19
47
24
_
11
43
70
By-products
and Remarks
Moly-Gold-Silver
Moly-Gold-Silver
Moly-Gold-Silver
Moly-Gold-Silver
Moly
—
—
Au-Ag-Close-
June 1975
Au-Ag
New-1975
Moly-Au-Ag
Au-Ag
-
-
Closing - 1975
-
Phase Out- 1976
-
Moly-Silver
Moly-Silver
Silver
-
New
Smelter Flux
and Leaching
Moly
-
-------
TABLE IV 4 (Continued)
<
Company and Mine
Duval Corp.
Mineral Park
Esperanza
Sierrita
Battle Mountain
Cities Service
Copper Cities (Miami)
Copperhill
Pinto Valley
Ranchers Development
Old Reliable
Big Mile
Earth Resources
Continental Copper
El Paso Natural Gas
Lakeshore (50% Hecla)
Emerald Isle
McAlester Fuel
(Zonia)
Federal Resource
Corp.
Eagle Picher Ind.
Keystone Wallace
Micro Copper Corp.
Ivey Construction
U.V. Industries
*M = Mine
C = Concentrator
L = Leach Operation
Location
Arizona
Arizona
Arizona
Nevada
Arizona
Tennessee
Arizona
Arizona
Arizona
Nevada
New Mexico
Arizona
Arizona
Arizona
Arizona
New Mexico
Oklahoma
Utah
Utah
Wisconsin
New Mexico
S
R
N.A.
Mine
Ore
Grade
Type % Copper
O.P.
O.P.
O.P.
O.P.
O.P.
U.G.
O.P.
O.P.
—
O.P.
O.P.
U G.
U.G.
O.P.
O.P.
U.G.
O.P.
O.P.
O.P.
U.G.
O.P.
= Smelter
= Refinery
0.88
0.34
0.28
0.63
0.50
1-3
0.40
0.44
0.74
2.0
-
N.A.
0.75
N.A.
N.A.
N.A.
1.92
N.A.
N.A.
N.A.
2.0
Stripping
Ratio
0.8
1.6
1.5
6.2
0.7
0
13.0
1.5
—
-
5.1
0
0
N.A.
N.A.
0
48.9
N.A.
N.A.
N.A.
3.7
Facilii
MCL
MCL
MC
MC
MC
MCS
MC
ML
L
ML
ML
N.A.
MCL
N.A.
ML
N.A.
MC
ML
N.A.
N.A.
N A.
= Not Available
Millions Tons Ore
1972
7.1
0
28.4
1.7
5.1
1.7
0
4.2
-
-
1.1
N.A.
0.3
0.1
0.3
N.A.
N.A.
N.A
0.8
1973
6.6
6.0
29.9
1.8
5.2
1.3
0.2
3.4
-
-
1.3
N.A.
N.A.
1.9
0.1
0.2
N.A.
N.A.
N.A.
1.6
Mill Size
Tons/Day
19,000
15,000
82,500
4,500
14,000
40,000
15,000
-
-
4,000
N.A.
15,500
800
3,700
450
1,000
2,000
N.A.
N.A.
7,500
Employees
403
492
1,524
306
650
1,900
210
56
15
6
125
10
400
31
30
130
100
40
11
6
330
Thousands
S.T. Copper
Age Produced By-products
(Years) (1973) and Remarks
11
17 I
5 I
8
21 \
20 f
2
11
1.5
25
N.A.
N A.
1
9
10
5
N.A.
N.A.
N.A.
IMoly
56
44
NewSched. - 1974
7
N.A. Solution
0.8 Mining — Heap
N.A. Leaching
N.A.
New - 1975
N.A.
1.9 In-Situ Leaching
N.A.
2.9
0.2
N A.
N.A. -
N.A. -
-------
TABLE IV-5
U.S. MINE PRODUCTION OF RECOVERABLE COPPER BY MAJOR PRODUCING STATES - 1971, 1972, 1973
(Short Tons)
Arizona
Michigan
Montana
Nevada
New Mexico
Utah
Others*
Amount
820,171
56,005
88,581
96,928
157,419
263,451
39,628
Rank
1
6
5
4
3
2
-
Percent
54
4
6
6
10
17
3
Amount
908,612
67,260
123,110
101,119
168,034
259,507
37,198
Rank
1
6
4
5
3
2
-
Percent
55
4
7
6
10
16
2
Amount
931,128
72,129
133,006
95,912
207,987
257,860
28,912
Rank
1
6
4
5
3
2
-
Percent
54
4
8
6
12
15
1
Total
1,522,183
1,664,840
1,726,934
"Others: California, Colorado, Idaho, Maine, Missouri, Pennsylvania, Tennessee, Oklahoma
Source: U.S. Department of Interior, Bureau of Mines
-------
St. Joe Minerals is a major factor in both lead and zinc. Because of the raw
material characteristics and the substantial by-product and co-product metal re-
covery occurring in these industries, the major producers all tend to have signifi-
cant production of all three metals, and also by-product recovery of silver and
other valuable metals. Another feature of these industries is that the major
companies have important holdings in foreign mining ventures (which include
diversification into other minerals) and participate in joint ventures with each
other. Their equity holdings in other companies tend to complement their de-
gree of direct participation in the primary nonferrous metals industries (including
aluminum).
Unlike large copper producers, the lead and zinc companies are not in-
tegrated forward into fabricated products or end products — e.g., storage batteries,
tetraethyl lead, galvanized steel products or zinc die castings.
The major influences on company earnings are operating rates and metal
prices; these fluctuate much more than annual consumption or demand. Metal
market prices, reflecting the nature of the commodity markets, are very sensitive
to small imbalances (actual or perceived) between supply and demand. Although
the nonferrous metal market is not a classis commodity market in the sense of a
very large number of small independent producers, the non-differentiated nature
of primary metal products plus the supply-demand characteristics in the
industry - including the many end uses, the foreign sources, the speculators, and
hedging transaction effects - indeed result in a commodity market in copper,
lead and zinc.
Because of costs, marketing structure, and tax laws, the commodity of
commerce is the refined metal. Smelting and refining are equivalent to toll
services on a relatively fixed margin; more, if not most, profits come from mining.
The result is that profitability of all companies is most sensitive to changes in
refined metal prices. Since metal prices are influenced by traditionally cyclical
forces, the nonferrous metals companies' revenues and earnings are highly
cyclical.
2. Financial Performance
Fifteen or so firms dominate the U.S. primary copper, lead, and zinc
industries (excluding secondary producers, independent fabricators, etc.). It is
difficult to generalize about profitability and financial conditions on an industry-
wide basis because each company has some unusual features. We present in
Table IV-6 an estimated breakdown of revenues and earnings, by source and
geographic area, as well as other information, to illustrate this point.
IV-15
-------
TABLE IV-6
REFERENCE DATA
NONFERROUS METALS COMPANIES*
Anaconda Co.
Inspi ration
Consolidated
Hie Ips
Dodge
St. Joe
Minerals
Gulf Resources
(Bunker Hill)
0\
Percent Change
In EarninRS
Due to Ic copper
price change: (low)
Due to Pb-Zn metali
price change: (low)
Due to alumlQim
price change:
Reported Income
1971 11.01
1970 22.31
Mine Production-
U.S.A.
Copper (thous. short
tons)
1971 75.8
1970 83.4
Lead (thous. short
tons)
1971 18.7
1970 28.4
Zinc (thous. short
tons)
1971 43.1
1970 63.3
Silver (million
troy ounces)
1971 6.66
1970 6.84
Aluminum Production
(thous. short tons)
1971 33.67. In-
terest in
1970 Revere Cop-
per and
Brass
The information presented at,
(high) ( high) ( med-high) (lou) (low-med) (lov)
(high) (high) (»ed.) (low) (low) (hlgh) (low) (nied _ Mgh)
(lou) do") (ned.)
$440 MM U.S. (credit) 27. 7* 151 19. 3* 35.071 29.81 171 ] exclude. nil
tai loss carry [dividend
forward 1971-81 29.41 33.11 301 32.21 37. 6Z 29.61 221 lnc<« 271
(and $190 MM '
foreign tax
credits)
Note:
Also 207. Equity in
Copper Range Co.
182.0 58 6 54.4 456.1 101 1 281.2 182. ol
242.1 67.8 67.1 518.9 112 J 313.5 215. Q f suiter
J refined
16.4JToole 68.6 Joint Note: 303.2 N.A. 44-own
f Snelter venture P-D or.
18. ij Closed '71 83.7 with owns 318.4 75.0 40^""
Asarco. 772.500 53^
Al.o holds shares
8.17. of Amax stock
St. Joe
others
0. 7 1 Great Falls 17.4 Mineral. 144.0 N.A. 67-own
V Closing '72 (cone, produced) 53-others
°'1J 21-7 66.4 mine 32.0 50-own
64-others
3.87 3.7
20.0 9 6
5.02 4.3
40.0 7.8
171.7 owns 925,000 402 Interest 260 0
shares ln Consolidated
177.3 Kaiser Aluminum Aluminum Corp. 247 0
(Lonalro)
its accuracy and completeness are net guaranteed
refined
-------
TABLE IV-6 (Continued)
Estimated Revenue
Breakdown
Coal
Anaconda Co.
Inspiration
Consolidated
Gulf
Resources
Cyprus
Mines
Copper
Hlnlng 13-171
Fabrication
Custom Smelting 13-17Z
subtotal 26-341
5-lOZ
60-651
nom.
65-751
75-851
15-20Z
94-981
2-061
50-55Z
10-151
85-90*
40-451
40-451
5-101
90-931
44Z
351
30T
25-307.
25-301
76Z,
Includes
silver
131
Aluminum
Primary
fabrication
Ocher Sales
All Other, n.e.c.
66-74Z
1001
15-171
8-202
100:
10-151
1001
7-101
1001
21Z
100Z
351
35Z
100Z
Approximate Earning!
Distribution
Copper
Mlnlng-U.S.
Mining-Foreign
aubtotal
Fabrication
Custom Smelting
i
20-25Z
40-45Z
60-70Z
2Z
5Z
60-70Z
15-20Z
80-85Z
2- 4Z
1- 2Z
95-105Z
95-105Z
(nil)
92+Z 68-721
10Z
92+Z 78-82Z
nom. nom.
nom.
40-45Z
30-35Z
70-80Z
Total, Copper 70-75Z
Zinc
Lead
____
85±I
5-IOZ
nom.
95±Z
30tZ
6 HZ
7-10Z
[Lead, tine
and silver
account for
41Z of profit
In 1970, and
a loss In
1971)
45-551
ID-IS*
Aluminum
Prlnary
Fabrication
Other Sales
All Other, n.e.c.
including interest
and dividends
100Z
10-15Z
100Z
100Z
100Z
100*
5±Z
8(HZ
Approximate Source
of Pre-tax Profits
U.S.A.
Canada
Mexico
South America
Australia
Africa
Other
40-50Z
5±Z
5-lOZ
15-20Z
25-30Z
(note, )
100Z
70-80Z
2±Z
15-20Z
(nom.)
100Z
57
(nom )
20-10
100Z
80-907.
I 5+Z
100Z
40-50%
10-157.
10-207.
10-207.
15-207.
1007.
-------
<
Oc
TABLE IV-6 (Continued)
SELECTED FINANCIAL DATA: MAJOR U.S. NONFERROUS METALS COMPANIES
(Dollar Figures in Millions)
Copper
1971
Sales (in millions of dollars)
Pre-tax Profit
(in millions of dollars)
Net Income
(in millions of dollars)
Cash Flov from Operations and
Holdings (in millions of dollars)
Increase (Decrease) in Debt
Dividends Paid
Current Ratio: Asseta'Llabilit ies
Net Working Capital
Capital Expenditures
Long-term Debt , year end
Equity, year end
Debt - (debt and equity)
Percent based on book values
Scheduled Debt Repayment
(1972 payment excluded from long-
1972
1973
1974
1975
1976
Long-term Financing
(in millions of dollars, 1971)
Employment , year end 13
Notes: p • preliminary; e » estimate
a' Before extra-ordinary charge
b/ Agreement for $13MM advances
Asarco
656 8
51 7
46 0
60.0
14 4
46 2
2 1
174 0
37 4
38 1
673 3
5.4
3 6
3.6
3 6
5 2
1 6
Anaconda
946 5
(5 2)
(8 7)"
84 5
25 0
10.9
3.1
265 0
89 9
391 5
821 0
32 3
24.6
19 2
35 5
58 1
64 0
,600 27,481 3,
Range Inspirat icn
88 6 66 2
(6 1) 12 1
(3 5) 8.7
49 14 6
12 0 (0 1)
06 48
32 37
30 3 19 0
11 9 98
36 3 nil
101 7 69.7
27 3e nil
1.3
7 °e
7.0
N A.
N A.
20 0 b
644 2,009
due to write-off of Chilean properties and
from toll
o/ Includes other revenues and/or income,
The information nresented above has been r.
customer
as reported
Stained iron
i companv annual rc'Do
Kennccot t
Q
1,066 9
102 9
87 2
180 0
52 0
58 0
2 4
269 0
150 0
(net)
314 6
1,192.9
20 9
43 4e
43 2e
62 3
5 l'
21. 7e
200.0
30,400
other expen
rts and SEC
'.'ewmont
0
240 5
67 5
54 5
86.0
93 2
28 2
3 5
79 3
129 1
201 6
444 1
31.2
8.7
26 7
31.8
44.3
33 5
101.9
N.A.
se
1 i \ inps .
Phelps
Dodge
703 6
113 7
73 8
110 3
78.7
42.9
3 4
209.0
75 5
166.0
710 2
19 0
0.1
0.1
12.9
0.1
O.lc
150.0
15,500
St Joe AnLax
194 4 756 9
27 9 65 8
19 6 55 4
29.1 86 5
(10) 130 6
13.7 36.5
3 0 3.3
46 5 302 0
21 2 139 5
10 7 392.0
171.3 625 2
59 38 5
10 15 7
23.4
27.5
20 6
29.7
156 9
4,503 16,000
(USA)
'ulf
Kes^irces
0
116 2
(3 5)
(3 9)
d
1 2
4 6
1 1
I 9
18 3
7 4
48.6
28 4
63 1
2 9
6 5
6 0
5.9
5 9
22 0
2.700
1,940
Bunker
Hill
Cyprus
Minei
203.2
58.6
27.8
Sl.i
(5.5)
9.1
1.8
35.8
38.1
34.9
207.5
14. 3
believed to be reliable, hut its accuracy and completeness are not guaranteed
-------
Table IV-7 presents financial performance data and averages for the four
years 1968-1971; this period covers two relatively good years and two relatively
poor years for most of the companies. These data, we believe, are an internally
consistent set, and provide a meaningful and representative picture. In Table IV-7,
we have not reflected the 1972 data, which would present some distortion as a
result of the advent of the U.S. Economic Stabilization Program and price con-
trols, and also because of accounting changes by several companies in that year.
We present selected 1972 financial data, as actually reported for each company,
in Table IV-8.
The highest rates of return on equity over the 1968-1971 period were shown
by Inspiration and St. Joe Minerals. Newmont Mining, which owns Magma
Copper, had the highest consolidated operating margin. Newmont also earns
substantial income from its large investment holdings, as do AMAX and Asarco.
Anaconda and Gulf Resources & Chemicals showed the lowest rates of return on
equity. Anaconda's valuable Chilean properties were expropriated and written off
in 1971, leaving the company with relatively low-margin domestic mining opera-
tions. Gulf Resources had heavy expenses and low offsetting volume at the
Bunker Hill lead-zinc operations, but, more significantly, also had substantial
write-offs associated with its other minerals and chemicals projects, i.e., Mexican
Sulphur (1969), and the Great Salt Lake project (1971).
The aggregated average annual net after-tax income of the eleven companies
in Table IV-7 exceeded $500 million. For 1972 (see Table IV-8), the aggregate
figure was $400 million.
3. Capital Spending and Funding
Annual new plant and equipment expenditures for the companies in
Table IV-7 averages about 10% of gross plant, as stated on the balance sheets. In
1971, which was a poor year for most of the companies, capital expenditures
were $710 million, and cash flow was about $650 million. (In the face of weaker
earnings in 1971, several companies cut their dividends.) For 1972, capital outlays
slightly exceeded $800 million, and cash flow totalled nearly $900 million.
Kennecott, Phelps Dodge and AMAX raised a total of $500 million in long-
term financing in 1971. The debt-to-equity ratio of the nonferrous metals
companies has been increasing as the pace of their expansion and diversification
programs has increased over the last several years.
There has also been an increasing requirement for pollution abatement ex-
penditures, which was acknowledged by many of the companies back in 1970
after passage of the Clean Air Act. This may result in a further increase in
corporate debt, and hence, according to financial convention and theory, in
IV-19
-------
TABLE IV-7
FINANCIAL PERFORMANCE DATA
COPPER, LEAD AND ZINC COMPANIES*
1 "
! •(-
1171
is: i
1971
1971
196h
Con'ol idated
1971
197 1
1969
Kennccoct Copper
1971
1970
I960
typr 19 Mines
1971
I"68
Phi ' ps Ood^e
1971
197^
116"
1968
St Joe Minerals
197 1
1970
1968
Culf Resources
Chemical
1971
1970
1969
1968
1971
1070
1168
NOTE: While re
The Info
•Till! Id
"•Lxclude
•it t Sales
7S6 i)
840 7
7 S3 5
570 6
946 5
177 4
1410 6
656 8
7178
771 a ,
634 1
98 6
"75
in 23
82 1
65 8
88 8
69 5
43 9
1053 4
1133 1
1050 0
724 5
203 2
202 5
113 5 j
113 0
703 tt
716 2
672 1
550 4
1 = 4 4
161 3
179 0
150 8
115 2
114 4
113 7
104.9
197 5
214 8
197 0
154 1
asonable care was
t guarantee absol
naalion presented
9 dividends, inte
97 9
115 2
99 8
81 9
66 9
108 9
393 1
26 3
57 5
60 1
38 1
4 7
21 9
27 8
19 9
16 9
30 5
22 5
8 7
191 4
322 3
286 9
171.9
66 9
141 8 74 2
ex Plma) 24 4
21 2
140 5
Restated 184.7
628 9 138.4
531.7 98.1
Net After
55.4
83 6
69 1
59 8
Avg 67 0
(8 7)
68 1
99 . 3
Avg 52 1
46 0
88 8
99 4
73 2
Avg 76 9
(3 24)
9 6
15 9
9 7
Avg. 8 0
8 7
17 8
13 4
5 7
Avg 114
87 2
185 0
165 4
111 2
Avg 137 2
27 8
[32.6 1 27 4
[«« Ploa 1 24 0
21 3
Avj 25 1
73.8
Restated 108 0
N.A 89.5
N.A. 64 6
Rat lo if Capl tal
Tax Operating Ratio s,t After T.x Expenditures
139 5
110 2 (ex RSI)
63 0
101 2
Avg 103 5 »vg. 1J.6V. Avg 13 57. Avg 14 t..
89 9
91 5
127 0 ^ ? g p
V* Net Income/Sales
37 4
68 7
25 n
37 2 ^ 0,
1 1 9
14 ')
12 1
14 4
Avg 131 AvB 19 97. Avg 9 67. A < 7 ) .
9 8
9 4
9 0
Avg 9~~5 Avg 28 17. Avg 21 07. Avg o 6"
162 5 "i Inc ludes Av
163 2 i ^f 34 8/Yesr
152 0 f Capltsl Ued
1 50 0 1 Mining Costs
Avg T5T~9 Avg 24.47. Avg 13 17. Av* 10 5-
42 5 j In; ludes
28 1 i. F.xpl
31 5 Net
8 5 ilncli-dlng Pirns
Avg TTT »vg 27 57. 1970-1971) Avg 15 2'. ^ H 1- -'
75.5
81 2
87 3
77 7
Avg. 84.0 Avg. 82.4 Avg 20 77. Avg 14 //. »«K . .' .
29 t 19.6 21 2
35 1 20 2 15 2
53.1 37 5 13 4
36 8 25 0 10.3
Avg. 27 0 Avg. 15.0 Avg 22.87, A»x IK '' Alv ft "
7.8 (3 85) 7-4
13.1 4.56 4.0
12.1 3 77 5.4
11.7 3 45 9_5
Avg. I 96 Avg. 6 6 Avg. 10.07. Av8 3 ""• M « 6 2
55 2 54 5 12» 1
97 6 75 2 135 3
83 B f>4 1 57.0
61 "> 50 3 38 1 . ,0, „, AVR 17 47 AM, '.A
Avg 61 0 Avg. 95.0 *"B 39-07. AVB
taken in compiling this data end presenting it in ae consistent a fashion aa la possible.
above has been
teat, net gain
obtained froa company
o vlth Table Vlll-1
on sales of aecurltiea
1968 - S39.3
1969 - 40.4
1970 - 43.6
1971 - 43.0
annual reports and SEC filings, utatlatlrsl Aervl
-------
TABLE IV-8
SELECTED FINANCIAL DATA: MAJOR U.S. NONFERROUS METALS COMPANIES
(Dollar Figures in Millions)
American American
Metal Smelting Copper Inspiration
1972 Climax & Refining Anaconda Range Consolidated
Sales 863.1 814.3 1,011.6a 97.6 85.5a
Pre-tax Profit (loss) 90.8 59.0 49.6 (4.0) 16.8
Net Income 66.2 49.1 44.1 b (2.4)b 12.2
Cash Flow from Operations
and Holdings, net 123.3 59.9 181.99 6.0 18.3
Increase (Decrease) in Debt 55.1 51.7 (5.9)h (1.3) 18.0
Dividends Paid 37.3 32.1 2.7 - 4.8
Capital Expenditures and
Investments 144.8 68.7 122.6 4.1 27.4
Current Ratio Assets/ Liabilities 3.1 1.7 3.1 3.2 3.7
Net Working Capital 325.5 130.7 291.0 30.4 23.3
Long Term Debt, year-end 458.8 51.0 388.9h 35.0 19. 1k
Equity, year-end 655.5 682.6 971.4 94.8 77.1
(Debt) -^ (Debt and Equity)
% based on book values 41% 7% 29%h 27% k/
Scheduled Long Term Debt
Repayment (Less Current Maturities)
1974 18.4 8.6 18.7 1.3 3.2e
1975 41.6 15.1 11.8 1.3 6 Oe
1976 30.2 5.2 43.4 1.3 N.A.
1977 13.7 1.6 0.8 2.0 N.A.
1978 63.3 N.A. 9.25-18.5 2.6 N.A.
Long Term Financing, 1972 79.7 16.5 36.8 - 18.0
Employment, year-end 16,680 14,800f 25,907 3,770 2,113
Notes: a. Includes other revenues and/or income, as reported (Cont )
b. Before extraordinary items
c. Excludes cost value of securities sold
d. Inc'udes S2.7MM paid to minority stockholders in subsidiaries
e. Estimated
f. Average for the year
g. After extraordinary items
h. After including capitalized lease obligations
i. Includes Peabody Coal as a consolidated subsidiary, as reported
j. Gulf accounted for its investment in Great Salt Lake Minerals & Chemicals Corpora-
tion (GSL) a subsidiary not consolidated, on the equity method; effective January 1 ,
1972, GSL reverted to the preoperating and start-up stage and its 1972 net expenses
were deferred in its accounts. Gulf has written off substantially all of their investment
in GSL. At December 31 , Gulf had guaranteed S9.5MM of GSL long-term debt. Gulf
entered into a refinancing agreement in August 1972, for the rescheduling and extension
of maturities on Gulf notes payable to banks; and subject to Gulf's pledge of substantial
Gulf
Kennecott Newmont St. Joe Resources Cyprus
Copper Mining Phelps Dodge Minerals & Chemical Mines
1,145.3 301. 7a 765.8 205.0 125.61 318.8
104.0b 61 .9b 130.7 36.1 4.7 50 71
47.49 44.8 82.2a 24.8b 3.5b 28.8
192. 1b 79.2° 127.1 37.7 8.9 61.8
(45.2) 46.3 15.6 24.0 5.0> (12.7)
33.1 31 .Od 43.1 12.7 1.1 9.0
152.0 net 73.4 95.8 79.2 net 9.1 26.8
2.3 2.4 3.5 2.0 2.0 2.1
290.4 84.8 213.7 33.3 20.8 43.9
269.0 224.0 181.3 34.7 53.1 22.3
1,203.8 490.4 749.3 184.6 31.9 225.9
18% 31% 19% 16% 62% 9%
38.8 32.4 0.6 N.A. 7.7 74
10.8 34.0 0.4 N.A. 7.3 94
4.9 12.5 0.4 N.A. 7.2 0.4
5.0 19.1 25.4 N.A. 79 0.4
N.A. N.A. N.A. N.A. N.A. 2.5e
0.7 101.7 25.0 25.0 j/ nil
29,100f 11,670 15,800 3,963 2,720 l\l A.
j. assets as collateral. Gulf and subsidiaries guaranteed all the
loans under the agreement with the bank. The 1972 agree-
ment prohibited any investment by Gulf in GSL subsequent
to December 31, 1972. See text.
k. As of September 30, 1973, total debt had increased to S49.3MM
(including current portion), a large part of which was bank loans
for pollution control facilities under construction. Stockholders'
equity as of September 30, 1973 was $82.3MM.
I. Consolidated statements including Anvil Mining and Pima Mining
ma|onty-owned subsidiaries. Marcona Corp , a principal affiliate.
and subsidiaries are accounted for on an equity basis. The 1972
figures above are as reported before restatement on the pooling of
interests basis to account for the acquisition of Bagdad Copper
Corp. in June of 1973 (via an exchange of stock). Pre-tax figure
includes minority interests.
-------
further deterioration in the nonferrous metals companies' financial position as a
result of higher debt-to-equity ratios and higher fixed charges. Offsetting this,
however, is the higher stockholders' equity as a result of substantially better re-
ported earnings for most companies in 1972 (and 1973).
The requirement for spending on pollution control equipment has brought
with it federal, state, and local legislation to assist in the financing of such ex-
penditures through various mechanisms for issuance of so-called pollution control
revenue bonds. Most of the major nonferrous metals companies have now been
involved in such financings for at least a portion of their programs.
A more detailed discussion of the major nonferrous metals companies is
given in Appendix A (AMAX, Asarco, Anaconda, Cities Service, Copper Range,
Cyprus, Duval, Inspiration, Kennecott, Newmont, Phelps Dodge).
E. PRICE EFFECTS
1. Determination of Prices
The major product of the copper mining and milling industry is copper
concentrate, which is produced by the mine mill complex and either smelted in
an associated smelter or shipped by rail to a regional type smelter.
Prices for copper concentrates can be categorized as either transfer prices or
contractual sales prices. Concentrates are usually transferred to a smelter, since
the large mines and mills are captive operations. Concentrates can also be tolled
through noncaptive operations, or sold on a delivered basis to a noncaptive
smelter. The transfer value or selling price of concentrates is usually in accordance
with standard smelter schedules or formulas, which are based on the current
quoted prices of electrolytic copper as published in Engineering and Mining
Journal or London Metal Exchange. Since these toll charges have in past years
been in the neighborhood of 8-12^/lb of copper content, one can get an idea of
the recent value of copper concentrates by deducting this amount from the metal
price which in the U.S. has been sold by major producers at the so-called producer
price.
Typically, U.S. copper producers sell on the basis of the price prevailing on
the date of shipment, regardless of when the buyer placed his order. However,
not all producers follow this practice; some sell at the average for the month of
shipment as quoted in Engineering and Mining Journal or some other publication.
In addition, some sales are made at a firm price (usually that prevailing at the
time of sale), particularly to fabricators who prefer this method of fixing the
cost of raw material rather than to operate in the hedge market to protect their
profit margin.
IV-22
-------
The basic reason behind the use of the domestic producer price is to mini-
mize price changes, which are considered undesirable because users want to know
that their raw material costs will be. The wide fluctuations in copper price in
markets outside the United States and on commodity exchanges are believed to
have encouraged the substitution of other materials for copper — notably the use
of aluminum, plastics, and stainless steel. At times, the U.S. government has inter-
ceded in copper pricing, notably during World War II and the Korean War, when
price ceilings were placed on copper as well as other metals, and again during the
Vietnam War, when President Johnson, in the fall of 1965, virtually forced
domestic producers to rescind a 2$ price advance to 38
-------
I»IO 1I1| l»20 1QM ItX I9JS 1MO l»«i IWO IKS I960 IMS I»TO7I t«7t
SOURCE: E/MJ March 1972
FIGURE IV-3 AVERAGE ANNUAL U.S. COPPER PRICES (F.O.B. REFINERY)
IV-24
-------
t pt;r
140
130
120
110
100
90
80
70
60
50
\ producer,
delivered
(MW quotation)
1 I I i I
J M J S
1972
M J S
1973
M J S
1974
FIGURE IV-4
COPPER PRICES
(Monthly Averages)
IV-25
-------
During 1973, the prices charged by U.S. producers were limited by price
ceilings to 60i//lb (wire-bar basis). In December of 1973, they were permitted to
rise by the Cost of Living Council to 68
-------
of concentrates is not available. Alternately, if a particular mine does not have
other outlets for its concentrates, it has to close if the additional smelting costs
cannot be absorbed.
In the case of producers integrated from mining though smelting and re-
fining, a cathode or wirebar is the first product that is actually sold. However, the
internal transfer price of the concentrates is usually calcualted on the basis of
the primary metal price. Thus, any fluctuations in the primary metal price are
again reflected back to the mine and have a major influence on mine profitability.
Figure IV-5 illustrates this mechanism, on the basis of actual custom smelt-
ing contracts that were in effect several years ago. It can be seen that any change
in wirebar price affects the concentrate value directly, and the smelter and re-
finery margins remain unchanged.
Investment and operating costs for copper mining and milling plants vary,
since there are a variety of different types of deposits to mine and different ores
to process. It is, however, possible to estimate order-of-magnitude costs for
assumed typical situations.
In the case of copper ore mining, we shall consider the following cases:
• An open pit mine producing 30,000 tons of ore per day from an
ore of average grade O.VO'/f copper and with a 2/1 stripping ratio.
Assume 907r copper recovery (typical in southwest).
• An underground vein-type mine producing 6,000 tons ore/day by
cut-and-fill techniques from a 4.09f copper grade ore.
• An underground block-caving mine producing 30,000 tons/day
from 0.77f ore (after dilution).
• An underground room-and-pillar mine producing 25,000 tons/day
from l.O'/f copper ore.
Estimates of the costs for these mines are as follows:
S Millions Operating Costs
Mine Investment* S/Ton Ore S/lb Copper
Open Pit 26.0 0.70 0.06
Cut-and-Fill 30.0 7.20 0.10
Block-Caving 63.0 2.50 0.18
Room-and-Pillar 38.0 3.30 0.18
*Includes working capital, land and development costs.
IV-27
-------
1500
1400
1300
» 1200
I 1100
c
o
o
c
o
01
5
1000
900
800
700
600
500
Refinery
Operating
Margin
Smelter
Operating
Margin
30
40 50 60
LME* Wirebar Copper Price (U.S. i Per Lb)
* (London Metal Exchange)
Source: Arthur D. Little, Inc.
70
FIGURE IV-5 DIAGRAMMATIC REPRESENTATION OF VARIATION IN CONCENTRATE
VALUE WITH CHANGES IN WIREBAR PRICES
IV-28
-------
Milling costs for the typical sulfide copper flotation plant associated with the
mine can be estimated as follows:
Operating Costs
line sue
oils/Day)
6.000
30.000
25.000
Ore Grade
4.09r
0.77f
1.007r
1IIVCMM1L III
S Millions
18.0
61.0
52.5
S /Ton Ore
2.20
1.35
1.40
S/lb Copper
0.03
0.11
0.08
3. Potential Constraints on Financing Additional Capital Assets
The constraints on financing additional capital assets (such as pollution con-
trol equipment) have been discussed in Section 1.
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the guide-
lines set forth by the Effluent Guideline Document for the copper ore mining and
milling industry. These guidelines are'
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial discharges by 1977.
• Best Available Technology Economically Available (BATEA) -
to be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities constructed after the promulgation of these guide-
lines.
For the purpose of recommending guidelines, the Development Document
has divided the copper ore mining and milling industry into the following
categories.
1. Mines — Open pit and underground.
2. Mines/Mills - Using dump. heap, in-situ or vat leaching.
3. Mines - Flotation.
1. Effluent Guidelines
For the Mines category, the recommended parameters and guidelines for
BPCTCA are given in Table IV-9. The same guidelines are recommended for
BATEA standards.
IV-29
-------
30-day Average
6* to 9*
20
0.05
0.001
0.1
0.5
24-hour Maximurr
6* to 9*
30
0.1
0.002
0.2
1.0
TABLE IV-9
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - COPPER MINES
Concentration (mg/£) in Effluent
Parameters
pH
TSS
Cu
Hg
Pb
Zn
*Value in pH units
Source: Development Document
For category 2 (Mines - Mills dump, heap, vat leach) above, zero discharge is
recommended, and no guidelines are proposed.
For category 3 (Mills — Flotation), the recommended parameters and guide-
lines for BPCTCA are shown in Table IV-10. For this sub-category the BATEA
recommendation is zero discharge.
TABLE IV-10
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - COPPER MILLS USING FROTH FLOTATION
Concentration (mg/£) in Effluent
Parameters
pH
TSS
CN
Cd
Cu
Hg
Pb
Zn
*Value in pH units
Source: Development Document
IV-30
30-day Average
6* to 9*
20
0.01
0.05
0.05
0.001
0.1
0.1
24-hour Maximunr
6* to 9*
30
0.02
0.02
0.1
0.002
0.2
0.2
-------
2. Cost of Compliance
The guidelines contractor has estimated the cost of compliance for both
BPCTCA and BATEA guidelines. These costs for copper ore mining and milling
are summarized in Table IV-11 by sub-category and in Table IV-12 by company.
The costs summarized in these tables are investments needed to install the re-
quired treatment facilities and the annual costs which are the yearly costs to
operate the facilities. The annual costs include charges for amortization and
interest. The fixed cost portion of the annual costs is about 20%.
In Table IV-13, we have estimated the incremental cost added to the five
companies involved on the basis of increased cost per pound of recoverable
copper metal that would be produced from the concentrate product. These are
estimated for both BPCTCA and BATEA guidelines.
3. Basis for Analysis
The analysis of impact on the copper ore industry was carried out as dis-
cussed previously in Section I.
4. Levels of Impacts
The levels of impact were discussed in Section I.
5. Best Practical Control Technology Currently Available (BPCTCA)
In Table IV-14 we have summarized the data and costs for meeting the
BPCTCA guidelines for the copper mining and milling industry. The table gives
information regarding capacities, employees, and investment and operating
costs for the three selected segments of the industry described above.
As shown in Table IV-14, three large multi-unit companies (impac-t group
"B") are impacted in an insignificant way, and one operating unit of a large
multi-unit company (impact group "C") is severely impacted.
a. Price and Production Effects. Impact group "B" of the industry would
have a negligible product cost increase due to BPCTCA compliance; output levels
would be unaffected. However, impact group "C" would be severely impacted
and would have a product cost increase of 4^ per pound. This group produces
only a small amount of concentrate and sells that product to a custom copper
smelter. They would not be able to pass on such an increase and would probably
cease operation since they are a marginal producer at best. [Note: As this report
was being prepared, the operation represented in impact group "C" closed for
economic reasons.]
IV-31
-------
Mines/Mills —
Leaching
Mills — Flotation
TABLE IV-11
COPPER ORES - COST OF COMPLIANCE
Costs — Thousands $
Sub-Category
Mines
No.
1-51
52
53
54
Thousands
M.T. Ore
Per Year
245,000
16,553
1,215
130
BPCTCA
Investment
0
2.5
3.2
429.8
Annual
0
0.5
0.6
212.2
BATEA
Investment
0
2.5
3.2
429.8
Annual
0
0.5
0.6
212.2
Total Industry
262,898
18,000
-
1- 3
4
5
6
7
180,000
33,000
8,058
1,215
130
34,738
0
0
0
30.5
8.0
279.1
0
0
0
6.4
10.0
249.6
0
0
1,819.3
134.5
3.9
188.7
0
0
480.1
39.6
1.0
62.9
262,898
753.1
479.3
2,581.9 796.9
TABLE IV-12
SUMMARY - COST OF COMPLIANCE BY COMPANIES
(Combine Mine and Mill where Necessary)
Costs — Thousands S
Company
A
B
C
D
E
Total
Rest of Industry
Thousands
M T Ore
Per Year
16,553
1,215
130
34,738
8,058
60,694
202,204
BPCTCA
Investment
2.5
33.7
437.8
279.1
0
753.1
0
Annual
0.5
7.0
222.2
249.6
0
479.3
0
BATEA
Investment
2.5
137.7
433.7
188.7
1,819.3
2,581.9
0
Annual
0.5
40.2
213.2
62.9
480.1
796.9
0
262,898
IV-32
-------
TABLE IV-13
INCREASE IN COPPER METAL COSTS - FOR BPCTCA AND BATEA REQUIREMENTS
I. COSTS FOR BPCTCA STANDARDS
Company
"A"
Total Company
Affected Division
"B"
Total Company
Affected Division
"C"
"D"
"E"
Total Company
Affected Division
Thousands Short Tons/
Yr Metal Produced
233
100
34
4
3
70
461
258
Annual
Cost
-
500
-
7,000
222,200
0
-
249,600
$/lb Coppei
-
negligible
.000116
.000875
.037
0
.000271
.000484
Total Industry
1,665
479,300
.000144
II. COSTS FOR BATEA STANDARDS
"A"
Total Company
Affected Division
"B"
Total Company
Affected Division
"C"
"D"
"E"
Total Company
Affected Division
Total Industry
233
100
34
4
3
70
461
258
-
500
40,200
213,200
480,100
_
62,900
negligible
negligible
.00059
.00503
.036
.00343
.000068
.000122
1,665
583,600
.000175
IV-33
-------
TABLE IV-14
SUMMARY OF DATA AND COSTS FOR BPCTCA GUIDELINES
COPPER ORE MINING AND MILLING (1972)
Thousands M.T. Ore per year
Thousands ST. Metal product/yr
% of Industry - Ore Basis*
Number of Employees
% of Employees
Added Investment ($)
as % of Annual Capital Expenditure
as % of Total Investment
Added Annual Cost ($)
$ per Ton Ore
$ per Pound Copper Product
"A"
210,392
1,283
78.9
26,509
72.8
0
0
0
0
0
"B"
52,506
362
19.7
9,450
26.0
315,300
1.3
0.06
257,100
.005
"C"
130
3
0.05
77
0.2
437,800
437.8
15.0
222,200
1.71
1 Uldt
Industry
266,800
1,665
100
36,400
100
753,100
0.36
negligible
479,300
negligible
negligible
0.04 negligible
*98.7% of industry tonnage covered.
Note: Impact Group "B" — Three large multi-plant companies. Group data for impacted
operating units of those companies. Not for entire company.
Impact Group "C" — One small mining and milling unit of a large multi-unit company
also with small operations in lead and zinc industry.
b. Financial Effects. Table IV-14 indicates that the capital investment re-
quired for impact group "B" is only 1.3% of the average annual expenditures
and only 0.06% of the total estimated investment. This is not considered severe,
and this group should be easily able to provide the funds and pay the costs with-
out any significant impact. However, impact group "C" is again severely affected,
with the investment required for BPCTCA compliance being over four times its
average annual capital expenditure and 15% of its total plant investment.
c. Other Effects. The discussion above and Table IV-14 indicate that there
will be no significant impact on 99% of the copper mining and milling industry,
and for these two impact groups there will be no plant closures or production
curtailments (or increases). It follows, therefore, that there will be no employ-
ment impact within this large portion of the industry.
IV-34
-------
It appears that one operation (impact group "C") will be forced to close
and its production would be lost. This is, however, such a small amount that it
would have no impact on the copper market, copper prices or balance of pay-
ments. Employment would be locally affected since 77 jobs would be lost with
consequent secondary impact on the community around the operation.
6. Best Available Technology Economically Available (BATEA)
Table IV-15 summarizes the data and costs for meeting BATEA guidelines
for the copper mining and milling industry.
TABLE IV-15
SUMMARY OF DATA AMD COSTS FOR BATEA GUIDELINES
COPPER ORE MINING AND MILLING (1972)
Thousands M.T. Ore/Yr
Thousands S.T. Metal Product/Yr
% of Industry — Ore Basis
Number of Employees
% of Employees in Segment
Added Investment ($)
as % of Annual Capital Expen.
as % of Total Investment
Added Annual Cost ($)
$ per Ton Ore
$ per Pound Copper Product
Impact Group
"A"
202,334
1,213
75.8
23,584
64.8
0
0
0
0
0
0
"B"
60,564
432
22.7
12,375
34.0
2,148,200
6.7
0.37
583,700
.010
negligible
"C"
130
3
0.05
77
0.2
433,700
433.7
14.0
213,200
1.64
0.04
Total
Industry
266,800
1,665
100
36,400
100
2,581,900
1.2
negligible
796,900
negligible
Note: Impact Group "B" — Four major companies (three multi-unit operations and one
single unit operation).
Impact Group "C" - One small mining and milling unit of a large multi-unit company.
For BATEA compliance, one more large company is added to impact group
"B" which substantially increases the investment and annual costs for that group.
However it would still not cause any important impact on that group represent-
ing 23% of the industry or on the industry itself.
IV-35
-------
However, it is important to realize that these conclusions with regard to the
economic impact of BATEA guidelines (which require zero discharge) are based
on the guidelines contractor's assumption that total recycle will need to handle
only the mill process water and that this water will require no treatment (if it is
not treated it will affect the copper recovery). In cases where there is heavy rain-
fall and where there are large amounts of mine water, smelter water, etc., zero
discharge will require some treatment plants and perhaps even water evaporation
to meet BATEA requirements.
The contractor's costs do not consider those items. If they are considered,
the impact could be very extensive and severe.
The BATEA compliance impact on the small unit operation (impact group
"C") would be severe and would reinforce the effect of BPCTCA.
7. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new copper ore mines,
the NSPS guidelines should be identical to the BPCTCA guidelines as indicated
in Table IV-9. For the other four sub-categories, zero discharge of process water
is recommended.
There were no cost estimates provided by the Effluent Guideline Develop-
ment Document for the NSPS analysis. Therefore, any statements made with
regard to the effect of the NSPS requirement on the construction of new plants
within the United States must necessarily by qualitative.
However, it can be said with some degree of confidence that the costs for a
"grass roots" plant to meet the NSPS standards are no more than the costs for an
existing plant in the impacted group (impact groups "B" and "C") to meet the
BPCTCA and BATEA recommended effluent limitations. This is due to the fact
that in the construction of a new plant, in-process modifications can oftentimes
be made which may be more efficient and economical than add-on treatment
technologies for existing plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. copper ore mining and milling industry to ex-
pand domestic production capacity through the construction of new plants.
G. LIMITS OF THE ANALYSIS
The limits of this analysis were discussed in Section I.
IV-36
-------
V. LEAD AND ZINC ORES (SIC 1031)
A. INTRODUCTION
In 1972 the lead and zinc mining amd milling industry was composed of 102
establishments with 7,700 employees. The industry processed about 76 million
tons of ore containing 478,000 tons of zinc and 619,000 tons of lead.
A variety of ores are mined and the lead and zinc industries are closely
associated because lead and zinc minerals often occur in close association in the
ores and are mined and processed together. For example, most lead ores contain
zinc and many zinc ores contain appreciable amounts of lead. Such ores also often
contain copper, antimony, bismuth, gold, and silver, all of which may be
recovered as by-products.
The common lead minerals are galena (lead sulfide). cerussite (lead car-
bonate), and anglesite (lead sulfate). Galena is by far the most abundant lead
mineral found in deposits that have been exploited in the United States. Galena is
often associated with antimony, copper, zinc, and iron sulfides and also with
silver and gold. In a few districts, however, the ore is characterized by simple
mineralization, with lead minerals present to the virtual exclusion of other ore
minerals. A noteworthy example is the "lead belt," southeastern Missouri, which
accounts for more than 74% of U.S. lead production.
The more important economic deposits of lead in the United States occur
either as cavity fillings or replacements. Examples of the cavity-filling deposit are
the San Juan, Colorado, and the Upper Mississippi Valley districts. Replacement
deposits are classified further as follows: massive, as at Leadville, Colorado as well
as at Bingham and Tintic, Utah; lodes, as at Park City, Utah, and in the Coeur
d'Alene district, Idaho; disseminated, as in the Tri-State district and in southeast
Missouri; and metasomatic, as represented by the Central district, New Mexico.
Numerous minerals contain zinc but the principal ore mineral is the sulfide,
sphalerite, sometimes called "zinc blende." An exception is the unique and very
important deposit found at Ogdensburg, New Jersey, composed of zincite (ZnO),
willemite (Zn2SiO4), and franklinite (Fe, Zn, Mn)O. (Fe, Mn)2O3). Zinc sulfide
oxidizes readily to the common minerals smithsonite (ZnCO3) and hemimorphite
(H2Zn2SiO5).
Sphalerite is commonly associated with lead and iron sulfides and to a lesser
degree with copper sulfides and gold and silver minerals. The zinc ores of the
Mississippi Valley and eastern United States are characterized by simple mineral-
ization, the zinc being present with relatively minor quantities of lead and little or
no copper, gold, and silver. Most sphalerite has associated cadmium as a coating or
V-l
-------
solid solution in quantities from traces to 27, Other metallic elements commonly
associated with sphalerite in small quantities include germanium, gallium, indium
and thallium.
Most economic deposits of zinc are cavity fillings, leplacements, or combina-
tions believed to have been deposited by mineral bearing solutions of magmatic
origin. Cavity fillings include the fissure veins in San Juan and San Miguel
Counties, Colorado, the breccia ores in the Jefferson City Mascot area of
Tennessee and the Austinville area of Virginia, and the cave and fracture fillings
"pitches and flats" of the upper Mississippi Valley area. Replacements also play a
part in these same deposits. The extensive replacement deposits in limestones are
typified by deposits at Leadville, Colorado: Bingham and Tintic, Utah; eastern
Tennessee; New York State; and Metalme area of Washington. Fissure fillings
with wall rock replacement from the lode deposits of Butte, Montana; the Coeur
d'Alene district, Idaho; and Park City, Utah.
Zinc is the major product in just one region, the upper New York State area
near the Canadian border. Some by-product lead is produced here but the mines
are essentially zinc mines and account for about 139? of the zinc mined in the
United States. The largest true zinc producing mine in the United States is in this
area.
B. INDUSTRY DESCRIPTION
The Lead and Zinc Ores Industry includes establishments engaged primarily
in mining, milling, or otherwise preparing lead ores, zinc ores, or lead-zinc ores.
1. Reserves
The Bureau of Mines evaluated the domestic lead and zinc reserves in 1964
and its results are summarized as follows.
Lead Reserves.
Millions Short
Tons Recoverable
State Lead
Missouri 31.5
Arizona, Colorado, N. Mexico, Utah, Wyoming,
S.Dakota 1.9
Idaho, Montana, Oregon, Washington 1.6
Alaska, Arkansas, California, Kansas, Nevada,
Oklahoma. Texas 0.3
35.3
V-2
-------
Zinc Reserves:
Millions Tons
Recoverable
Zinc
East of Mississippi River 21.73
Arkansas, Kansas, Missouri, Oklahoma, Texas 5.31
Arizona, Colorado, New Mexico, Utah, Wyoming,
N. Dakota 3.75
Idaho, Montana, Oregon, Washington 2.59
California, Nevada .32
Alaska .03
33.73
2. Mining
Most lead and zinc ores are mined using underground mining methods, prin-
cipally classed as open, shrinkage, cut-and-fill, room and pillar, or square-set
stoping methods. A few mines, particularly in their early stages of operation,
haul mined zinc ores by open pit methods but there is no production from such
mines at present. Open stopes with pillars (room and pillar mining) are employed
exclusively in mining the near-flat lying ores of the Metaline, Tri-State
(Oklahoma, Kansas, Missouri), Upper Mississippi Valley, Tennessee, and Virginia
mining districts. The rock structure overlying the ore deposit being mined is sup-
ported by the walls of the stope and such pillars as are necessary to assure safe
working conditions. If the width of the ore body is such that the roof-span will
stand without pillar supports, the entire ore body may be extracted. Very wide
ore bodies require a system of pillars to support the roof, with the position and
size of the pillars dependent on mass rock properties of the pillars, walls, roof,
and floor.
Most of the western lead and zinc mines are vein-type occurrences and are
usually mined by shrinkage and cut-and-fill stoping techniques. The upstate New
York and Tennessee zinc mines use similar techniques.
3. Beneficiation
Few lead or zinc ores are rich enough in lead or zinc or low enough in
deleterious impurities to be smelted directly; consequently, the first step in the
conversion of ore into metal or compounds is the physical separation of lead and
zinc minerals from other valued ore constituents and from waste material. Simple
lead ores, such as coarsely disseminated lead or zinc-lead minerals occurring with
a low-specific-gravity gangue, are concentrated by heavy media separators, jigs,
V-3
-------
and tables after being crushed and ground in a closed circuit \vith screens or clas-
sifiers to give properly-sized feed. Bulk or differential flotation of the slime prod-
ucts or of a reground middling product completes the flowsheet. Ores of this kind
are common in the mines of the Mississippi Valley and eastern United States, but
in some instances the ores are concentrated wholly by flotation.
Complex sulfide ores such as those of the western United States consist of
disseminated mixtures of fine-grained lead and zinc sulfides. usually accompanied
by pyrite. copper sulfides and gold and silver in a quartz or quartz-calcite gangue.
Such ores may be complicated further by partial oxidation of the sulfides and the
presence of high-specific-gravity gangue minerals. The usual procedure on such an
ore is to crush and grind in closed circuit with classifying equipment to a size at
which the ore minerals are freed from the gangue minerals. When the ore minerals
are closely associated the practice is to make a bulk sulfide concentrate, then
follow this with regnnding and selective flotation. (A typical flowsheet for a lead-
zinc concentrator is shown in Figure V-l.)
4. Water Use
The process of producing a lead or zinc concentrate from a crude ore con-
sumes considerable quantities of water. In addition to process water, other opera-
tions that consume water include air conditioning, power generation, boiler feed,
sanitary services, and miscellaneous cooling and condensing requirements. To
satisfy these water needs, the lead and zinc ore mining/milling industry in 1968
experienced a total water intake of 17 billion gallons, of which 1\7( was process
water and the remaining 29% was for miscellaneous uses as mentioned above.
The industry's gross water consumption (including recirculated or reused water)
amounted to 21 billion gallons. The corresponding water discharge (including
mine water drained and discharged) was 54 billion gallons, of which about 15%
received some form of treatment prior to discharge.
The milling procedure for New York State zinc ores requires about three
tons of water (720 gallons) per ton of ore which is conventional for this kind of
processing since flotation separations are carried out at about 25% solids (3:1
ratio of water to solids). (A typical water balance for a New York State zinc
operation is shown in Figure V-2, while that for a Missouri lead mine plant is
shown in Figure V-3.)
5. Products and By-products
The lead and zinc mining and milling industry produces two basic prod-
ucts - a lead concentrate and a zinc concentrate. These are produced from lead
ores which usually have a small but recoverable amount of zinc; from zinc ores
which have recoverable amounts of lead; from the combined lead-zinc ores; and
V-4
-------
SOQ-TQN BIN
48" X 20' FEEDER AND GRIZZLY
1 I
UNOERSIZE
20' GYRATORY CRUSHER
36" X 60' HORIZONTAL
BELT CONVEYOR
-J—
J6 X 120 INCLINED BELT
CONVEYOR AND MAGNET
36* X 125' INCLINED BELT
CONVEYOR
I - 5' X 8' ROD DECK SCREEN
1 I
OVERSIZE UNOERSIZE
ii' SHORTHEAD 24" X l?0'
-SECONDARY CRUSHER BELT CONVEYOR
SAMPLER
2,000-TON BIN
J
2- 48" X 45'
BELT FEEDER^
24" X 145' BELT CONVEYOR
AND WEIGHTQMETER
VE1GI
9' X 12' ROD MILL
PUMP
r
UNDERFLOW
J
2- 9'X 9'
BALL MILLS
<—SAMPLER
2- CYCLONES
SAMPLER
OVERFLOW
2- 10' X 10'
CONDITIONERS
I
PUMP
2- LEAD ROUGHERS
(10 CELLS)
PUMP
AMPLER
T"
CONDITIONERS PUMP PUMP-
CLEANER
(4 CELLS!
FROTH
I.
PUMP
2- ZINC ROUGHERS
JIO CELLS)
J
THICKENER
TAILS,
FROTH
CLEANER
14 CELLS)
"1
TAILS-,
Eypp
SAMPLER
18! X 10' THICKENER
J T-
OVERFLOW UNDERFLOW
SAMPLER
24' X 12' THICKENER
1 I
QVE_RF_LSW. UNDERFLOW.
WASTE PUMP
-J
6' x 6-QI5C FILTER
1
STORAGE
Lead Concentrate
Zinc Concentrate
FIGURE V-1 TYPICAL LEAD-ZINC CONCENTRATOR
V-5
-------
Underground
Mines
Mine
H20
Quantity
Varies
To Local
^ Drainage
10-200
Zinc
Concentrate
By-product Lead
Cone.
1
Mill
New Water Supply
(Lakes-Rivers-Wells)
720 Gallons/Ton Ore
724
Tailings
Dams
Clear Water
Effluent
To Local Drainage
(Sometimes—Portions
Recycled)
524
' Evaporation
' and Seepage
I 200
Legend:
Solids
— Water (Figures are Gallons Per Ton of Ore)
FIGURE V-2 WATER BALANCE
TYPICAL ZINC OPERATION
V-6
-------
Lead & Zinc
Concentrates
1
850
Mine
460 150 1
t I
Mill
464
310
700
854
Legend:
Solids
Water (Figures are Gallons Per Ton of Ore)
FIGURE V-3 WATER BALANCE TYPICAL FLOWSHEET
- MISSOURI LEAD DISTRICT
V-7
-------
also in small amounts from copper ores. In addition some copper is produced
from the lead and zinc ores. There is, therefore, an interdependence between the
copper, lead and zinc industries particularly in the smelting and refining opera-
tions.
In addition to the lead and zinc concentrate major products, lead and zinc
ores contain other valuable and recoverable metals: antimony, arsenic, bismuth,
cadmium, gallium, germanium, indium, manganese, silver, and thallium. Sulfur is
a valuable by-product since substantial amounts of suifuric acid are produced
from the sulfide concentrates.
All the above by-products leave the lead and zinc mining and milling indus-
try as constituents of the lead and zinc concentrates. They are not recovered until
later stages of the smelting and refining part of the industry.
C. INDUSTRY OVERVIEW
The bulk of lead and zinc production is from large, integrated companies,
many of them having many plants. The lead and zinc industries are closely allied
and to a large extent lead and zinc have been considered as a single industry.
A few large, integrated firms do their own smelting and refining. Others
which do not do any smelting and refining but do have their own marketing firms,
pay toll smelters and refineries to process their concentrates. They then market
the product themselves. The small firms, however, sell their concentrates to
custom smelters and refineries, which in turn sell the zinc metal product.
Asarco, Amax, St. Joe, and Bunker Hill are integrated and operate mines,
mills and smelters to produce lead. These same companies plus New Jersey Zinc
and National Zinc are integrated with respect to zinc production.
All the production of primary lead and zinc in the United States comes from
underground mines in about 20 states. These mines range in size from very small
to modest; that is, from 200 tons per day of ore to about 6,000 tons per day for
the largest. The typical size is 1,500 to 2,000 tons of ore per day. This is small in
comparison with the large copper and iron ore mines.
Table V-l lists the major U.S. zinc mines and mills and Table V-2 the major
lead mines and mills. The information includes ore production for 1972 and
1973, the facilities, the mill size, and the employment.
The production of lead and zinc in 1972 by states and by type of ore is
shown in Table V-3, the historic mine production of lead in Table V-4, the
historic mine production of zinc in Table V-5, the lead production of U.S. com-
panies in Table V-6, and the zinc production of U.S. companies in Table V-7.
V-8
-------
TABLE V-1
MAJOR U.S. ZINC MINES AND MILLS
Company
St. Joe Minerals
New Jersey Zinc
"^ American Smelting
& Refining Company
U.S. Steel
Eagle-Picher
Cyprus Mines
Standard Metals
U.V. Industries
United Park City
Day Mines
Resurrection Mining Co.
(Newmont)
Kerr American
*M =Mine
C = Concentrator
Mine
Balmat-Edwards
Flat Gap
Jefferson City
Austinville
Friedensville
Sterling
Eagle
Coy, Immel, Mascot,
Young, New Market,
Ground Hog
Zinc Mines
Shullsburg-Black Jack
Bruce
Silverton
Continental
Summit
Dayrock-Grayrock
Resurrection
Blue Hill
Thousands
Tons Ore
Location
New York
Tennessee
Tennessee
Virginia
Pennsylvania
New Jersey
Colorado
Tennessee
New Mexico
Tennessee
Illinois-Wisconsin
Arizona
Colorado
New Mexico
Utah
Idaho
Colorado
1972
869
246
466
639
435
211
249
2,392
135
NA
839
96
187
763
NA
85
NA
1973
1,058
NA
NA
NA
383
NA
226
1,167
128
±500
447
93
191
710
84
88
208
Facilities*
MC
NA
MC
MC
MC
M
MC
MC
MC
M
MC
MC
MC
NA
MC
NA
MC
NA
Mill
Cj7p
OI£C
T/Day
600
NA
1,700
2,500
2,400
-
750
7,500
3,600
-
NA
1,500
275
NA
8,000
NA
55
NA
Employment
275
155
190
292
200
155
460
850
105
NA
122
116
140
407
200
65
NA
Maine
NA
MC
1.000
NA
-------
TABLE V-2
MAJOR U.S. LEAD MINES AND MILLS
<
o
Company
St Joe Minerals
Cominco American
Ozark Lead
(Kennecott)
Amax Lead Co of
Missouri
Bunker Hill
Hecla Mining Co.
Kennecott (Tintic)
Idarado (Newmont)
Pend Oreille
Camp Bird Mines
American Smelting &
Refining
Minerals Engineering Co.
Homestake Mining
Mine
Fletcher
Viburnum
Indian Creek
Brushy Creek
Magmont
Sweetwater
Buick
Location
i ssouri
IVi souri
M souri
M -louri
M iouri
IV 5ouri
l\ ouri
Employment
140
250
100
NA
240
192
247
Bunker Hill
Star-Crescent
Lucky Friday
Star
Burgin
Idarado
Pend Oreille
Camp Bird
Leadville
Creede
Bulldog
kk.hO
Idaho
Idaho
Utah
Colorado
Washington
Colorado
Colorado
Colorado
Colorado
724
192
264
203
370
217
NA
190
NA
94
793
177
266
197
443
212
104
201
50
99
MC
MC
MC
MC
MC
MC
MC
MC
MC
MC
2,400
800
1,000
500
1,700
2,400
500
700
300
320
641
290
380
340
355
100
NA
30
25
120
-------
TABLE V-3
PRODUCTION OF LEAD AND ZINC IN THE UNITED STATES IN 1972, BY STATE AND CLASS
OF ORE, FROM OLD TAILINGS. ETC.. IN TERMS OF RECOVERABLE METAL
(Short Tons)
Lead ore
GroM weight Lead
(dry but*) content
Anton*
Ctlifur&ik
ln
Wtomwln
T»UI
P»rrrnl of
tfltil line-
le.ri
2S6.793 25.ZJ7
1.48S.76* 469.397
11* 1*
1.742.611 il4.6&3
83
•nil ni|i|«rr-tlnr-lrncl on*
OrlfKt eimlemt cimtrnt
(ilry BM|»)
MOO. 171 i|0.07l 1167
4fll,64~6 1 1.4X1 I.W4
107.S52 1.037
1.741. WW t.tnt
114. M4 **» (.6
2,41X1.374 20,4(17 13,7*2
6 2
Zinc ore Letd-»mc ore
Zmr CroM weight Le»d Zinc Grow weight l>e»d Zinc
content (dry butf) content content (dry bu») content content
'.! '14,660
249.098
2.273
M.IM
41.923
210.768
! 852.453
43S.277
1.522.626
'.'. 638,929
i; 293.445
211.867
64.1*6 6.486.8H
14
All olhrr »..urcr««
('.rum Zinc l^-lil
wrttfht rontrnl rontrfit
(ilry liMl")
fa, 1*4. 807 40 1 .09(1
(') ('» Ci
112, MK • I.KI4 I.H.IK
3.11.046 KM l.on-l
13.323 12 . 2«H
U,8 .. (-1
S. 176, 870 314 ii
«6.ni !' "i
ttf.fl'i «.2r,i Mi
M, 123. 426 K.AH4 4.«l!»
2 1
<5&3 M.OIO 2.M7 600 192
3.1U 25.456 SO*. 694 16,721 25,350
6H1.401 35.166 35.821
85 3.7*3
38.096 '.'. .- '.
138.273 3.571 12.421
1.089 60.749
IS. 344
96,433
191.119 J1.175 21.264
1.441 16,789
217.983 2,566 4.4M
757 6.K73
644 6.907
(.762 274.440 1.742.687 75.799 101. Ml
2 (7 .. 12 21
Tot.l
r.n.« Zinc U..I
Wright cimtont ennlrnt
(ilry )>imi»)
M.291.77* 10. Ill 1.163
17.377 1.202 • I.IK3
1.271 000 A3. KOI 31,3411
1.271.240 .1*.«47 61.407
ITiX RO'j S K20 K!S
K.4H5.7IJ9 61,*23 4M.3'J7
13.412 12 2K7
IS9 .. (•>
210. 7AH 3H.09A
2.314.943 I2.7.1S ».$»2
43n',277 IK'.J44 ' ..
1.2X4.62* 101.722
305.72.1 21. KM 20.706
K1K,*29 I6.7H9 3,441
2X.1.KI4 6.4X3 2.K47
2!)3.46S 6.H73 7S7
447. 7KS IS. UK 1,336
7K.r>H2.0«l 47K.31K 41K.9U
100 100
Ampitny rnnflflrnlliil lints.
1 Zinc net and DTK fritm nil ulnrr iimtrrcii mmtilnril tn nvodl il(*rliw(nK lii'ltvtflunl romfutny rnnAiU*ntlBl
' Lfitl *KI\ «lrx rttnirrrtl ttnm r«t>i
-------
TABLE V-4
MINE PRODUCTION OF LEAD IN THE UNITED STATES (a)
(In tons of 2,000 Ib. Computed as tho load rontrnt of ore recoverable in mneltitiiz and by other nirlnl
processes, thtl.s including lead pausing directly from ore into pigim
2, I'M
25,7-10
00,010
1.23S
420,031
0 1 5
1 1 1
2,071
877
38 270
3.3SO
5,177
752
20
678,660
1973
1,703
1,1 '<:;
31, .{10
01,1(17
1,335
. .
SI
4S!),:;'i7
2S7
3, '.82
l.oso
20 700
3,4 II
2,507
i •><
618,916
1973'M
77S
111
27,7'Hi
Oi,i:;i!
511,3
IMS
|S|,S71
100
2,179
2,3(13
13 870
_>,0 12
2,230
Ml
600,267
(a) U. S. Bureau of Mines, (b) Preliminary, (c) Included in Undistributed, if any.
V-12
-------
TABLE V-S
MINE PRODUCTION OF RECOVERABLE ZINC IN THE UNITED STATES
(In tons of 2,000 lb., as reported by U. S. Bureau of Mines.) Compiled on a basis of zino content in ores and
concentrates produced and adjusted to account for average losses in smelting. Includes lino recovered as lino
pigments and salta directly from ore.
Arizona ....
California
Colorado
Idaho
Illinois
Kansas. . .
Kentucky.
Maine ...
Missouri
Montana
Nevada
New Jersey
New Mexico
New York
Oklahoma
Oregon
Pennsylvania
Tennessee
Utah
Virginia
Washington
Wisconsin
Other States
Totals
1964
24 690
143
53,682
59,298
13,800
4,665
2,063
1,501
29059
582
32,926
29,833
60,754
12,159
(c)
30,754
115,943
31,428
21 004
24296
26,278
674,858
1066
21,757
225
53,870
58,034
18,314
6,508
5,654
4,312
33,786
3,858
38,297
36,400
69,880
12,715
(c)
27,635
122,387
27,747
20,491
22,230
26,993
611,163
1066
15 985
335
54,822
60,997
15,192
4 769
6,586
3,968
2!) 120
5 827
25,237
29,290
73,454
11,237
28,080
103,117
37,323
17,666
24,772
24,775
672,668
1067
14 330
441
52,442
56,528
20,416
4 765
6,317
7,430
3 341
3 03")
26,041
21,380
70 55.r>
10670
35 007
113 ()6.r)
34 25 1
18 840
21 540
28 953
640,413
1068
5 44 1
3,525
50,258
57,248
18,182
3 012
M)
(
-------
TABLE V-6
LEAD PRODUCTION OF SOME COMPANIES OF THE UNITED STATES (a)
BY MINING COMPANIES (6)
Company
Amax I>ead Co. of Missouri and Homo«tako Ix:ad
Co. of Missouri. . , .
Bunker Hill:
Bunker HiU Mine (/)(:)
E*gle Picher Lead
Hecla (a)
Star Mine d)
Kennprott Copper Corp.
Ozark Irf-a.l Co. \
Tintic Dmmon | ' '
Pend OreilU
Et&Ddard Mctalt Corp. (k)
United Pmrk City Mine*
1969
3,189
8 888
25,031
7,432
1,431
£.104
1,850
20 106
4,781
3.185
113
7, (136
4,314
1,877
1. '18,7 IS
3.585
229
4,336
1968
2,142
7 000
25,074
8,028
3,311
5,052
1.064
21,079
6,007
3,436
74
18, 137
6,H5!>
3,790
1,100
l.')0,7l:i
3.021
238
5,482
1967
150
3 218
25331
7 554
2,072
4,601
2,010
15 467
5,530
3,242
198
I0.:i21
7,277
1,754
1,285
157/127
4.486
487
4 090
1S68
27
3 592
2.1 007
fi 12:)
2 ri7
4,329
2,027
0 3'lO
4,753
2,627
79
10,800
7.052
4,9H»
1 871
100 I. II
3,:t90
248
5 314
1969
0 362
20 5.11
5 :i''7
4 2'il.
3,128
1, 81 5
19 IKS
fi.OS.'j
2,271
133
VI, 200
7,r/00
6.522
7,6ft5
1,281
210 '.158
4,1.11
304
5 802
1970
5 442
21 (i:i7
7,270
2,750
2,189
1 ,COO
10 102
5. HO
3,135
W>, ,I8I>
6,300
172
787
1972
HI7,IMi7
1 1 °75
2J 872
S OK'I
7.012
1.42 ">
I'l ri.tO
:i,riHii
;i,8.r>4
Ci'.l, 11)11
1 t,200
2.510
22 f. 7.51
5,020
51
1973
107.818
21 OVl
K MM 1
7,M8'I
1,1 SO
10 .172
;i.H:io
50,200
1 I. .'JO
I 7.17
2. I'll
21 Hi. -I H
•i, •! in
51
BY SMELTING AND REFINING COMPANIES (e)
Buoker Hill . .
UV Industries. Inc. (d)
221,701
93,753
7 004
133,601
37,831
227,480
113,194
16 024
118,354
39,745
120,078
122,247
8062
124,480
40,038
10,111 1
153,106
124 134
11 758
175,717
35,486
71., 3 HI
207,275
123,080
13 102
2M,lt>U
30,002
1 1 5,080
225,0(iH
12:1 mo
1 1 004
2dtt, S43
[20,088
ION, 710
IKK, »07
I2',l 1 10
11 IU8
22'2.2\;(
N A
l.i:i,:n,r,
220,1 in
i:s 1,801
518
207,877
N V.
i:r, niii
217.1 U
l.(l) 208
215.012
N A.
(a) la tons of 2,000 Ib. (6) In general, figures show lead content of ore or concentrates, 0) fiiriudott production for outmde com-
panies, except Hecla. (d) Chiefly refined metal; production from own mine* and minus uf controlled corn pa HUM, alio from purchased
ores, (e) Refined lead output from ore or bullion received from all sources. These totals duplicate to some e\ti>nt tiic reports of nuumg
companies. (/) Pig lp&d oqutvalrnt. (g) Includes Ilecta'e shun- of production from ouch mining jiroporty HIIUT date uf aofpncLtmn uf
such property, (h) All production from Hunnyside Mine. UK I. Wajjlimeton-ltcllc Creole, and Hrfnntnuar ore bodies—o\vned 1)\* \Vasli-
inpton Mining Co. in which UV Industries, Inc. holds 100'',', nil crest—Standard Mrtals Corp lut-* totij; Conn U-nsp. (j) HrlltHt-* i.nU
Hunker Hills 70 ",'. ownership of Star production. 0) [ntcrnational Xim-llmn and !it>fining Company curries their operations through the
smelting of their product which is then refined by the American Smelting and Refining Company
V-14
-------
TABLE V-7
PRODUCTION OF ZINC m CONCENTRATES BY SOME COMPANIES ( 1
Tintic Division I
Lurky l-'ntlav Silver-Lead
New Jersey Zinc Co.
Ne\\ Park
IVml Oreille ....
Kirn Argentine
St Joe Minerals Corp. (g)
Stanilard Melala Corp. (,)
l.'nilcij Park C'ltv Mines
UV Induslries. Inc. (/)
mi
44.846
0,30.1
2. 207
7,820
25 205
1 1 ,W18
18,:i78
18,07.)
2,1107
:i,M8
27,221
008
7,7ir>
2,058
N.A.
15,030
1,252
58,118
1.05.-1
8.2K
21,401
1961
58,102
«,:i-i2
2,171
U.242
18 1>21
12,d28
I7,f.!ll
17,7-12
2,185
2,248
•)(),.'. 11)
5,4-1(1
7,1.0.1
1,1143
N.A.
(0
10,532
1.180
54,78.r
4,287
f»,.r>r»1
20,-40.r
19«4
58,811
3,827
SI7
10,8111
10,1101
1 U .{80
in, Sim
10,817
17.. WO
2,737
3.2I7
•)8,(i7:i
7,513
1,1131
1,113
7,5.))
112,494
(1)
6,525
93.052
0,260
N.A.
V-15
-------
These tables show quite clearly the interrelationship of lead and zinc produc-
tion and the substantial amount of lead and zinc produced from the complex
copper, lead, zinc ores. They also indicate that the major production of lead is in
Missouri but other important producers are in Idaho, Colorado, and Utah and
minor production comes from Arizona, California, Illinois, Maine, Montana, New
Mexico, New York, Virginia, Washington, and Wisconsin.
The major production of zinc is from Tennessee with other important
production coming from Arizona, Colorado, Idaho, Illinois, New Jersey, New
Mexico, New York, Pennsylvania, Utah, and Virginia. Minor production is
reported from California, Kentucky, Maine, Nevada, Washington, and Wisconsin.
In 1972 the Bureau of the Census figures indicated the following employ-
ment in the lead and zinc mining and milling industry:
Total Number of Establishments - 102
Total Number with Over 20 Employees = 47
Total Employees = 7,700
Total Employees in Production = 6,200
Additional information on employment is given in Tables V-l and V-2 for
most of the major lead and zinc producers.
The total employment as we have summarized it in Table V-l and V-2 comes
to 7,382.
D. FINANCIAL PROFILES
Appendix A contains financial profiles of the following companies that are
important to the lead-zinc mining and milling industry:
American Metal Climax
American Smelting and Refining Company
Cyprus Mines Corporation
Gulf Resources and Chemical Corporation
Kennecott Copper Corporation
National Zinc Company
New Jersey Zinc
St. Joe Minerals Corporation
Eagle-Picher Industries
V-16
-------
E. PRICE EFFECTS
1. Determination of Prices
The major products of the lead and /.inc mining and milling industry are
lead and zinc concentrates. These concentrates are transferred to the appropriate
smelter for further treatment to recover the valuable metals and by-products.
Because of the different smelting practice required for each, the lead con-
centrates go to lead smelters and the zinc concentrates to zinc smelters.
The value of the concentrate at the producing mine-mill complex is deter-
mined by the use of smelter schedules. If the freight charge from the mine to the
smelter is deducted from the smelter value, the value at the mine is determined.
Because a large sector of the lead industry is vertically integrated it is diffi-
cult to discuss lead concentrate pricing when concentrates are transferred to
captive smelters. Concentrates sold to custom smelters account for only a small
fraction of lead value sales and are usually done on a long-term contract basis.
"Open schedules" are typically used by only the smallest operators and generally
reflect the high end of the range in smelting-refining costs. However, one can get
an idea of the value of lead concentrates by deducting smelting-refining charges of
approximately 4-6
-------
TABLE V-8
TYPICAL SMELTER SCHEDULES
Schedule
Treatment Charge
Payments
Gold
Silver
Copper
Lead
Zinc
Cadmium
Lime
Deductions
Moisture
Zinc
Iron
Lime and Magnesia
Sulfur
Arsenic
Antimony
Bismuth
Lead Smelter
$35.00 per dry ton on
lead content 25% wet
assay plus 10tf per ton
for each unit under 25%.
If .02 troy oz. per ton
or over pay for 95%
less deduction of .015 oz.
If 1 troy oz. or more
pay 95% of market price
less 1<^ per oz.
Deduct 20 Ibs. copper per
ton and pay for 95% at
market price less deduc-
tion of 10tf per Ib.
Deduct 30 Ibs. lead per
ton from wet assay and
pay for 90% of balance
at market price less
2.77cfper Ib.
Pay 5d per unit if 5% or
more.
5tf per unit over 10%.
30
-------
occurred in the previous month. The average price is usually that quoted in
Metals Week. Most of the remaining sales are made on the prices prevailing on the
date of sale.
Since the end of World War II, the New York price has ranged from 2 to
3eVlb above the price prevailing at the London Metal Exchange (L.M.E.). This
"traditional spread" is accounted for by the U.S. import duty (1.0625(//lb), ocean
freight (about ltf/lb) and the cost of delivery to the consumer (usually below
O.SeYlb).
Lead prices, New York basis, over the years are shown in Figure V-4. This
price is the delivered price to consumers in major consuming areas. Caution
should be used in evaluating present prices because a new pricing structure for
lead was adopted in December 1971, the price being quoted as a delivered price to
consumers anywhere in the United States. This price structure is the same as the
U.S. producer pricing used in the copper industry.
There are three major grades of zinc: Prime Western zinc, sold primarily to
the galvanizing industry; Regular High Grade zinc, sold primarily to the brass
trade; and Special High Grade zinc, sold primarily for the production of die-
casting alloys.
Until recently pricing practices were not uniform with respect to these
grades. Prime Western zinc was sold on the basis of a price at East St. Louis,
Illinois, the freight from East St. Louis to consumer's destination being charged
to the buyer. The origin of the East St. Louis basing point resulted from the fact
that early in the century the bulk of U.S. mine production of zinc was obtained
from the Tri-State district, now largely exhausted, which supplied zinc smelters
in the area around St. Louis.
Both Regular High Grade and Special High Grade zinc have long been sold
at a uniform price delivered to consumer's plant, regardless of location. Premiums
for these higher qualities, however, were stated, in terms of a specified amount
over the East St. Louis Prime Western zinc base price.
In early 1971, a new pricing structure was adopted, for zinc the price being
quoted as a delivered price to consumers anywhere in the United States. This
pricing structure is the same as the U.S. producer pricing used in the copper indus-
try.
Recently, there has been pressure to change from a pricing system based on
Prime Western (PW) zinc since the plants producing PW zinc are gradually closing
down because of air pollution problems, obsolete facilities, higher operating costs,
etc. Since Special High Grade (SHG) zinc is now the most common product,
V-19
-------
c
0)
CJ
56
52
48
44
40
36
32
28
24
20
16
12
4 -
1910
19701975
Source: E/MJ March 1974
FIGURE V-4 AVERAGE ANNUAL U.S. LEAD PRICES (NEW YORK)
V-20
-------
some groups have been pushing a plan to base the new pricing system on an SHG
zinc basis. Others have favored a "product pricing" basis where each product is
priced independently from the others. This has not yet been settled as an
industry-wide practice. Until it is, prices are still being quoted on a PW zinc basis.
Zinc prices (East St. Louis basis) over the years are shown in Figure V-5.
2. Costs of Production
There are basically two types of lead and zinc mines: those mining bedded
type deposits with room and pillar systems, and those mining vein-type deposits,
often using a cut-and-fill technique.
For illustrative purposes we have estimated the costs for these two types of
operations. Typical room and pillar costs are shown in Table V-9 and cut-and-fill
costs in Table V-10.
The room and pillar mine costs are for a 5,000-ton/day operation which is
more or less typical of the Missouri lead district. For the cut-and-fill vein mining,
the capacity is 2,000 tons/day which is perhaps the average size for this kind of
operation.
3. Potential Constraints on Financing Additional Capital Assets
The constraints on financing additional capital investments in the lead and
zinc industry are similar to those for the copper industry. See Section IV-E.
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the guide-
lines set forth by the Effluent Guideline Document for the lead and zinc ore min-
ing and processing industry. These guidelines are:
• Best Practical Control Technology Currently Available (BPCTCA) -
to be met by industrial dischargers by 1977.
• Best Available Technology Economically Available (BATEA) -
to be met by 1983.
• New Source Performance Standards (NSPS) -- to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the lead and zinc ore mining and processing industry into
the following groups:
V-21
-------
c
-------
TABLE V-9
TYPICAL ZINC AND LEAD MINING AND MILLING COSTS
Room and Pillar System - Flat Bedded Deposits - 8-90 ft. Thick Ore Bodies - Vertical Shaft
Access - 500-1,000 Feet Deep - Dumping 2,000-5,000 gpm Water - Capacity - 5,000 Tons/
Day = 1,500,000 Tons/Year - $5,000,000 in Mine Investment - $15,000,000 in Mill
Investment.
Mining Costs
Underground Development
Mining
Transportation
General Expense
Surface
Transportation to Mill
Depreciation (10 Years)
Interest Charges (6%)
$/Ton Ore
0.29
1.58
0.80
0.60
0.03
0.10
0.29
0.19
3.88
Milling Cost
Crushing
Conveying and Screening
Fine Grinding
Flotation and Thickening and Filtration
Concentrate Handling
Tailing Disposal
Water Supply
Misc. — Maintenance
Supervision
Depreciation (10 Years)
Interest Charges (6%)
Total
Grand Total
$/Ton Ore
0.08
0.10
0.35
0.45
0.03
0.08
0.06
0.20
0.20
0.86
0.56
2.97
6.85 P.T. Ore
V-23
-------
TABLE V-10
TYPICAL LEAD AND ZINC MINING AND MILLING COSTS
(Cut-and-Fill System)
Vein-Type Deposit - Cut-and-Fill Mining - Vertical Shaft Access - Pumping Water - Capacity
2,000 Tons Ore/Day - ±3,000'Deep- 600,000 Tons/Year - $5,000,000 in Mine invest-
ment - $8,500,000 in Plant Investment
Mining Cost
Materials and Utilities
Direct Labor
Maintenance Labor and Supplies
Payroll Overhead
Administrative Costs
Taxes and Insurance
Depreciation (10 Years)
Interest Charges (6%)
Total
$/Short Ton Ore
1.30
1.80
1.60
0.60
0.55
0.15
0.78
0.47
7.25
Milling Cost
Crushing
Conveying and Screening
Fine Grinding
Flotation and Thickening and Filtration
Concentrate Handling
Tailing Disposal
Water Supply
Maintenance
Supervision
Depreciation (10 Years)
Interest Charges (6%)
Total
Grand Total
$/Short Ton Ore
0.10
0.12
0.40
0.50
0.05
0.10
0.10
0.25
0.25
1.25
0.75
3.97
11.22
V-24
-------
1. Mines
2. Mills.
1. Effluent Guidelines
For the first sub-category above (mines) the recommended parameters and
guidelines for BPCTCA and BATEA are given in Table V-ll. The guidelines
recommended for NSPS are the same.
For the second sub-category (mills), the recommended parameters and
guidelines for BPCTCA are given in Table V-12. BATEA and NSPS requirements
for this sub-category are zero discharge.
2. Cost of Compliance
The guidelines contractor has estimated the cost of compliance for both
BPCTCA and BATEA guidelines. These costs for lead and zinc ore mining and
milling are summarized in Table V-13 by sub-category and in Table V-14 by com-
pany. The costs summarized in these tables are investment costs which represent
the amount of money needed to install the required treatment facilities and the
annual costs which are the costs to operate the facilities. The annual costs include
charges for amortization and interest. The fixed cost portion of the annual costs
is about 20%.
In Table V-15 we have estimated the incremental cost to the ten companies
involved on the basis of increase in cost per pound of total metal (combined lead
and zinc) produced by each company. These costs are estimated for both
BPCTCA and BATEA guidelines.
3. Basis for Impact Analysis
The basis used for analysis of the impact was discussed previously in the
"Approach" section of this report.
4. Levels of Impact
The levels of impact are the same as those discussed previously.
5. Best Practical Control Technology Currently Available (BPCTCA)
a. Price and Production Effects. As is evident from Table V-16, 43% of the
industry would not be directly affected by the guidelines. For the 40% that is
directly affected, the product cost increase of $.002 per pound of combined lead
and zinc produced is small and could readily be passed on or absorbed under
normal circumstances. The percentage increase of S.002 per pound on a $0.165-
per-pound product (1972) is about 1.2%. There is virtually no impact on the
whole industry.
V-25
-------
TABLE V-11
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED FOR
BPCTCA AND BATEA - LEAD AND ZINC MINES
Concentration (mg/£) in Effluent
Parameter
PH
TSS
Cu
Hg
Pb
Zn
*Value in pH units
Source: Development Document
30-day Average
6* to 9*
20
0.05
.001
0.1
0.5
24-hour Maximum
6* to 9*
30
0.1
.002
0.2
1.0
TABLE V-12
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA - LEAD AND/OR ZINC MILLS
Concentration (mg/£) in Effluent
Parameter
pH
TSS
Cyanide
Cd
Cu
Hg
Pb
Zn
*Value in pH units
Source: Development Document
30-day Average
6* to 9*
20
0.01
0.01
0.05
0.001
0.10
0.10
24-Hour Maximum
6* to 9*
30
0.02
0.02
0.1
0.002
0.2
0.2
V-26
-------
TABLE V-13
LEAD AND ZINC ORES - COST OF COMPLIANCE WITH BPCTCA AND BATEA GUIDELINES
Costs — Thousands $
Sub-Category
Mines
No.
1-14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
1,000
M.T./Year
7,300
873
118
545
204
544
544
495
19
116
159
62
333
1,450
354
998
BPCTCA
Investment
0
194.7
68.6
923.1
78.2
433.3
183.6
150.3
126.1
107.0
126.1
22.6
251.8
100.6
42.0
234.0
Annual
0
82.0
28.4
628.8
32.8
251.5
79.0
21.8
53.6
43.6
53.6
15.5
118.0
13.9
6.8
35.5
BATEA
Investment
0
194.7
68.6
923.1
78.2
433.3
183.6
150.3
126.1
107.0
126.1
22.6
251.8
100.6
42.0
234.0
Annual
0
82.0
28.4
628.8
32.8
251.5
79.0
21.8
53.6
43.6
53.6
15.5
118.0
13.9
6.8
35.5
Subtotal
14,114
3,042.0 1,464.8
3,042.0 1,464.8
Mills
Subtotal
Total Industry
1-18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
—
187
1,450
847
873
545
495
354
998
118
159
62
333
204
544
544
7,713
14,114
0
0
0
0
0
0
106.1
0
0
72.3
41.8
0
0
0
851.3
0
1,071.5
4,113.5
0
0
0
0
0
0
19.6
0
0
55.3
29.2
0
0
0
282.6
0
386.7
1,851.5
0
62.7
137.0
391.1
143.1
58.8
175.0
16.6
79.7
58.5
38.6
35.9
89.3
49.7
918.7
45.4
2,300.1
5,342.1
0
13.3
32.5
66.1
33.2
16.0
37.7
3.4
23.8
16.0
8.9
8.3
25.8
12.2
301.4
10.8
609.4
2,074.2
V-27
-------
TABLE V-14
LEAD AND ZINC ORES - COST OF COMPLIANCE BY COMPANIES
Costs — Thousands $
Company
A
B
C
D
E
F
G
H
1
J
Division
1
Total
1
IV
Total
1
1
Total
1
1
1
1
1
1
1,000
M.T.
Ore/Year
873
118
544
1,535
545
204
544
354
1,647
495
19
116
159
294
62
333
1,450
998
847
187
BPCTCA
Investment Annual
194.7
140,9
0
335.6
923.1
78.2
1,468.2
42.0
2,511.5 1,
256.4
126.1
107.0
167.9
401.0
22.6
251.8
100.6
234.0
0
0
82.0
83.7
0
165.7
628.8
32.8
613.1
6.8
281.5
41.4
53.6
43,6
82.8
180.0
15.5
118.0
13.9
35.5
0
0
BATEA
Investment Annual
337.8
127.1
45.4
510.3
981.9
127.9
1,535.6
58.6
2,704.0 1,
325.3
126.1
107.0
164.7
397.8
58.5
341.1
237.6
313.7
391.1
62.7
115.2
44.4
10.8
170.4
644.8
45.0
631.9
10.2
331.9
59.5
53.6
43.6
62.5
159.7
23.8
143.8
46.4
59.3
66.1
13.3
4,113.5 1,851.5
5,342.1 2,074.2
V-28
-------
TABLE V-15
LEAD AND ZINC ORES - INCREASE IN COST OF METALS PRODUCED
DUE TO BPCTCA AND BATEA GUIDELINES
Thousands Short Tons
1972 Production
Increase in Costs Per
Pound Combined Lead and Zinc
Company
A
B
C
D
E
F
G
H
Lead
224
6
32
11
7
1
138
69
70*
_
Zinc
76
131
33
102
2
15
46
26
25*
9*
Tota
300
137
65
113
9
16
184
95
95
9
BPCTCA
$.00028
.0047
.00032
.00079
.00086
.0037
.000037
.00019
0
0
BATEA
$.00028
.0049
.00045
.00076
.0013
.0045
.00013
.00031
.00035
.00074
Major effect on Company "B" and Company "F".
Within Company "B" the estimated cost increases for the various company units are as follows:
Unit I
Unit II
Unit III
Unit IV
45
17
45
30
$.0070
.0009
.0068
.0001
$.0072
.0013
.0070
.0002
"Estimated by Arthur D. Little, Inc.
V-29
-------
TABLE V-16
SUMMARY OF DATA AND COSTS FOR BPCTCA GUIDELINES
LEAD AND ZINC ORE MINING AND MILLING (1972)
Impact Group
Thousands M.T. Ore/Yr
% of Industry-Ore Basis*
Thousands S.T./Yr Metal Content
Number of Employees
% of Employees
Added Investment ($)
as % of Annual Capital Exp.
as % of Total Investment
Added Annual Cost ($)
$ per ton Ore
$ per Ib Combined Lead and Zinc
"A"
7,300
43.2
454
"B"
6,814
40.3
462
Total
Industry
16,900
100
1,097
2,606
33.8
0
0
0
0
0
0
3,824
49.7
4,113,500
63.5
3.0
1,851,500
0.27
.0020
0
0
0
0
0
0
0
0
7,700
100
4,113,500
15.8
1.2
1,851,500
0.11
.0008
*83.5% of industry tonnage covered.
b. Financial Effects. The capital outlays required to achieve compliance
would total only 3.0% of the total invested capital of the impacted group ("B")
of the industry. Annual capital expenditures for noncompliance purposes now
average 4.7% of total invested capital in the impacted group. Thus if all of the
capital outlays needed for compliance were to be concentrated in one year, total
outlays in that year would be raised by almost two-thirds to 7.7% of invested
capital. If, as is likely, the capital outlays for abatement can be distributed over
two or more years, the burden can be less severe. While these outlays may appear
sizable to some of the companies in the impacted group, we believe they can be
accommodated without significant adverse effect.
c. Balance of Payment Effects, Employment Effects, and Community
Effects. Consideration of the price and production, and financial effects indicates
that there will be no output curtailments or plant shutdowns in the lead and zinc
ore mining and milling industry because of BPCTCA effluent limitations. As a
result there will be no employment or community effects and no balance of pay-
ments effects.
6. Best Available Technology Economically Available (BATEA)
Table V-17 lists the data for and costs of meeting the BATEA guidelines.
These are only slightly higher than the BPCTCA data and costs shown in
Table V-16.
V-30
-------
TABLE V-17
SUMMARY OF DATA AND COSTS FOR BATEA GUIDELINES
LEAD AND ZINC ORE MINING AND MILLING (1972)
Impact Group
Thousands M.T. Ore/Yr
% of Industry-Ore Basis
Thousands ST. Metal Produced
(Combined Lead and Zinc)
Number of Employees
% of Employees
Added Investment ($)
as % of Annual Capital Exp.
as % of Total Investment
Added Annual Cost ($)
$ per ton of Ore
S per Ib Combined Lead and Zinc
"A"
6,266
37.1
376
"B"
7,848
46.4
540
2,316
30.1
0
0
0
0
0
0
4,114
53.4
5,342,100
72.4
3.4
2,074,200
0.26
.0019
"Cr
0
0
0
0
0
0
0
0
0
0
Total
Industry
16,900
100
1,097
7,700
100
5,342,100
20.6
1.6
2,074,200
0.12
.0009
For meeting BATEA guidelines, therefore, the effects and impacts are the
same as for BPCTCA. Thus, there will be no significant impact on the industry or
any impact group of it in meeting BATEA standards.
7. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new lead and zinc mills
the NSPS guideline should be zero discharge. For lead and zinc ore mines the
NSPS standards should be identical to BATEA limitations.
The Effluent Guideline Development Document provided no cost estimates
for the NSPS analysis. Therefore, any statements about the effect of the NSPS
requirement on the construction of new plants within the United States must be
qualitative.
However, it can be said with some degree of confidence that the costs for a
"grass roots" plant to meet the NSPS standards are no more than the costs for an
existing plant in the impacted group (impact group "B") to meet the BPT and
BAT recommended effluent limitations. In the construction of a new plant, in-
process modifications can oftentimes be made which may be more efficient and
economical than add-on treatment technologies for existing plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. lead and zinc ore mining and milling industry
to expand domestic production capacity through the construction of new plants.
V-31
-------
VI. GOLD ORES (SIC 1041)
A. INTRODUCTION
Gold was first mined in the United States in 1799 in the southeastern states,
but it was not until the 1848 discovery of placer gold in California that the
industry really started to develop. The industry's production grew to about 4
million troy ounces per year in the 1905-1917 period. After a drop in production
in the 1920's the industry produced its all-time record of about 5 million ounces
in 1940. In recent years total annual production has been about 1.5 million ounces.
Gold occurs not only in straight gold and gold-silver lode and placer ores but
also in small but economically recoverable amounts in many base metal ores. The
major production today from the gold ores in the United States is from the vein
type deposit at Lead, South Dakota, and the two operations in Nevada mining
carboniferous gold containing shales by open pit methods.
B. INDUSTRY DESCRIPTION
The Gold Ores Industry includes establishments engaged primarily in mining
gold ores from lode deposits or in the recovery of gold from placer deposits by
any method. In addition to ore dressing methods such as crushing, grinding,
gravity concentration, and froth flotation, this industry includes amalgamation,
cyanidation, and the production of bullion at the mine, mill, or dredge site.
1. Reserves
The Bureau of Mines has estimated (1968) that total domestic reserves of
gold amount to 237 million ounces, available at prices up to $145 per ounce. An
additional 60 million ounces was estimated to be recoverable as a by-product
from base metal ores.
2. Mining
Gold ores are mined by placer, open pit, and underground methods. Not
much gold is produced by placer methods (±13,000 ounces in 1972), but the
practice goes on in a number of small operations in the western states and Alaska.
Placer mining involves digging the surface material by hand or machine and
feeding it to a sluice box or other concentrating device where the gold settles out
and is recovered. Dredging is a type of placer operation where the dredge floats on
a pond and digs the ore with a bucket line. Most dredges also concentrate the ore
right on the dredge using regular gravity concentration equipment. Dredge spoils
are then discharged over the back end of the dredge by conveyor belt to fill in the
pond.
VI-1
-------
Regular open pit mining, consisting of overburden removal and ore mining
and hauling, is practiced by the two gold producers in Nevada. Standard equip-
ment is used for drilling, blasting, shovel loading and truck haulage.
Underground mining is carried out by the major gold producer (from a gold
ore) in the United States (Homestake - Lead, South Dakota). In this mine a cut
and fill system is generally used which involves sloping out the ore then filling the
space with sized tailings from the milling operation. Shafts are used to gain access
to the mine and to remove ore.
3. Beneficiation
Processing of the gold ores to recover the gold values can be simple (gravity
separation and amalgamation) or complex (cyanidation or carbon adsorption).
Gravity processing equipment such as sluice boxes, blanket tables, vibrating
tables, jigs, and gold traps relies on the great difference in specific gravity between
gold particles and the waste particles to make a separation. Such processes are the
sole separation method used at small operations, and some of them are often a
part of more complex processes used at larger gold milling plants.
Amalgamation relies on the great affinity of gold for mercury to separate
free gold particles. Mercury is simply added to the ore slurry or gold concentrate,
mixed, and then recovered for retorting and separation of the gold. The mercury
is recovered and reused. Until recently amalgamation was practiced at Homestake
but we understand this has recently been stopped because of the pollution hazard.
The cyanidation process is used at the three gold producing plants in the
United States and at many gold-ore processing plants around the world. The basic
process involves the dissolution of gold (and silver, if present) in cyanide solution,
the separation of the pregnant solution from the waste solids, and the precipita-
tion of the gold (and silver) from the solution by using zinc dust.
An adaptation of the cyanide process that has been used in the past and has
recently been installed at Homestake is the carbon cyanidation process. Coarse
particles of activated charcoal are added to the cyanide-ore slurry. The carbon
particles adsorb the gold from solution and then are removed from the pulp by a
simple screening operation. The loaded carbon is processed in a small electrolytic
cell to remove the gold and the char is recycled. The process has advantages for
the fine, slimy, ore fraction since it precludes the need for large thickening
circuits.
VI-2
-------
4. Water Use
The 1967 Census of Mineral Industries lists the water usage of gold and silver
ores together as 11 billion gallons of gross water per year with 7 billion gallons per
year being discharged.
Of the three major gold mines in the United States, the two in Nevada
(Carlin and Cortez) have zero discharge of water or plant effluents. In these
mines, tailings go to tailings dams where the solids settle out, and the clear water
is decanted and reused. Nothing is discharged. At Homestake, however, water is
discharged and meeting water quality standards will have some impact on the
operation.
The water consumed at Carlin has been reported as 144 gallons per ton of ore
processed. This is water lost in evaporation, seepage, etc. The total water used at
Homestake has been reported at 850 gallons per ton of ore but there is no
estimate of water consumed.
5. Products and By-products
The gold ore mining and processing industry produces gold bars (usually
about 1,000-ounce) for shipment to the buyer. The bars are rarely pure gold but
often contain some silver as well which is separated and recovered in later refining
steps.
Gold bars produced at the mine refineries are often 850 to 990 fine. That is,
850 to 990 parts out of 1,000 are gold, with the rest being silver. Silver is the
major by-product but in the final refining stages a significant amount of platinum
group metals also is recovered.
Some gold ores in other parts of the world yield valuable by-products, e.g.,
uranium, osmium and iridium from ores in South Africa, and platinum from the
gold placer mines in Colombia.
C. INDUSTRY OVERVIEW
1. Types of Firms
The gold mining and milling industry is made up of a diverse group of
companies that can be divided into three principal sections:
• Large base metal mining companies which produce gold as a
by-product. These are large integrated companies such as Asarco,
Anaconda, Kennecott, and Phelps Dodge where the principal
VI-3
-------
production is copper, lead, and zinc, but where gold is recovered
in the final refining stages.
• A large number of very small mines, usually placer mines where
only a few people are employed and where only small amounts of
gold are produced.
• The true gold mines. There are three of these: Carlin, Cortez, and
Homestake, which produce about 60% of the gold in the United
States.
These major gold producing companies can be described as follows:
• Homestake Mining Company is a large diversified company with
about $115 million in total annual metal sales. It operates the
famous Homestake gold mine at Lead, South Dakota; the Buick
lead mine in Missouri (jointly owned with AMAX); a small silver
mine at Creede, Colorado; a uranium operation in New Mexico; a
copper mine in Peru; and a forest products company in South
Dakota. The company is very active in exploration for mineral
resources with an exploration budget of approximately $1.5 million
per year.
• Carlin Gold Mining Company is a wholly owned subsidiary of
Newmont Corporation. Newmont is a very large holding company
whose major holdings are: Magma Copper (100%), Carlin Gold
(100% owned), O'Okiep Copper (57.5%), Tsumeb Corp. (29.2%),
Idorado Mining (80.1%), Dawn Mining Co. (51%), Newmont Oil
(100%), Resurection Mining (100%), Granduc (100%.),
Swailkameeu (100%), Palbora Mining Co. (28.6%), Southern Peru
Copper (10.25%), Sherritt Gordon (39.4%), Foote Mineral
(32.8%), and Atlantic Cement (50%). Numerous other investments
are also held.
• Cortez Gold Mines is owned by Placer Amex, Inc. and Bunker Hill.
It is managed and operated by Placer Amex, a subsidiary of Placer
Development, a large Canadian company. Bunker Hill also is a
large diversified mining company.
2. Types of Plants
The three major gold-ore mining and processing companies and two smaller
U.S. firms are listed in Table VI-1. The three large companies account for about
80% of the gold produced from siliceous gold ores and produce gold bullion as
their finished product.
VI-4
-------
TABLE VI-1
GOLD ORE PRODUCERS
1973 Tons
Company Mine Type Location Ore/Year Employees Mill
Carlin Gold Carlin O.P. Nevada 729,000
Cortez
Gold Mine Cortez O.P. Nevada
Homestake South
Mining Lead U.G. Dakota
Knob Hill
Mines Knob Hill U.G. Washington 69,000
Sunnyside Silverton U.G. Colorado
803,000
1,578,021 ±500
68
170,000
160 Cyanide
100 Cyanide
Age
(Years)
10
8
75
N.A.
Cyanide
Gravity
Flotation
Cyanide
N.A. Amalgama- N.A.
tion
The remaining producers — small companies engaged in placer and under-
ground mining — have simple gravity concentration plants.
The Cortez Gold Mine encountered a heavy flow of water into its pit which
prevented full recovery of the remaining ore, and mining of the Cortez ore body
terminated in February of 1973. The company, however, is milling 800,000 tons
of ore (0.124oz gold per ton) from a nearby property and will continue
heap-leaching of 2 million tons of low grade ore (0.041 oz per ton).
Tables VI-2 and VI-3 list the production of gold in the United States, the
production by companies and the production by types of ore. In 1972, 41% of
the gold produced was a by-product from the base metal ores, and 59% came
from true gold ores. Placer production was very small, less than 1% (0.9%), so the
dry and siliceous gold ore production was 58% of the total.
The U.S. is a minor factor in world gold production, accounting for only
3.3% of the total.
The 1972 Census statistics on employment in the gold-ore segment of the
industry can be summarized as follows:
Total Number of Establishments = 81
Total Number with Over 20 Employees = 5
Total Number of Employees = 1,800
Total Number in Production = 1,500
VI-5
-------
TABLE VI-2
MINE PRODUCTION OF RECOVERABLE GOLD IN THE UNITED STATES (a)
(Troy Ounces)
By Stute
Al..k.
Amona . . . .
California
Colorado
Idaho ..
Maine
Micltifcan ....
Missouri
Montana
Nexaila .. .
New Mrxico
New Vork
South Dakota . . .
Trnneaae« ...
Utah
Other Stain
Toltl
m*
2I.2_'7
110 878
7. mil
2.1 777
rt -10:1
21 IS'l
41I..2'.H
8.11 12
50.\ Hfi
I2d
«3.1H-ri
47,H'I.'>
1,733. 17»
1*70
:I4.77G
10(1 8-13
LOW)
37,1 14
3.128
22.11<~i
480. 1 -1 1
8.710
578. 7 If.
121
40H.02'!
SB.zr.l
1,743,322
1*71
IM.OI2
OLD IH
2.0(>h
V.'.OII
3.5110
i.i. ni i
37 I.K78
10.1181
51:1.127
\'.I2
.IdS.d'lli
.1.1. (17«
1.49I.109
1*71
8 {>l'l
102 H'lli
:(.!I7I
01.100
2.881
2 1.721
4 111. 7 IH
1 I.8'I7
107. 1 id
I7ii
.102.11 1
11.71)1
1, 441,771
1»TJ(I>)
li/>(KI
ini.i'ii
'_' , ' 1 7 7
.10. 1 Hi
2.120
2'i.2KI
2d 1 IKI
1.1,117
Itl'l.llti
11
:iiis.,'HI7
!r_»7,'.i-'l
l,(i:i.s,l-J(i
l,iw.r,,rii I
!l.f I.VJ'J
l,n:t:.,x.i.(
1,(M!),U'2
8!)1,-18S
8-H.-J2.-j
Copper Ores
'«:«»,.VJH
.r.(i7,4il!i
.llli.'l'.ll
:rj i,'-'i 7
-ii|-),7J'i
.07'), 171
:.;..', DU'j
47,s/j:u
170,004
I,crnl and
X/uit Ores
»i,l)J(i
(v'iJl
.v.-.i
:i,l II
•J, '-'.'ID
•1,120
,V)4
1.S02
l.'.I.VJ
Lead-Copper
(Iros
'.)(•,,« ».-|
l(«l,
-------
TABLE VI-3
GOLD PRODUCTION IN THE UNITED STATES
By Year Fine Ounces
1967 1,525,500
1968 1,539,250
1969 1,716,850
1970 1,743,322
1971 1,495,108
1972 1,449,776
1973 1,165,858
By Company 1972 1973
Anaconda* 22,278 20,856
Asarco* 45,976 44,288
Carlin ±200,000 ±200,000
CortezGold 190,629 75,660
Hecla* 48,037 1,271
Homestake 407,462 357,634
KennecottCorp.* 350,080 342,284
Phelps Dodge* 69,722 68,151
*By-product producer
D. FINANCIAL PROFILES
Financial profiles for the major non-ferrous metal producers who produce
gold as a by-product (Anaconda, Asarco, Kennecott, Phelps Dodge, Hecla) are
given in the Appendix. Also included are profiles for Newmont Corp., which is
the owner and operator of one of the major true gold producers (Carlin Gold
Mining), and the Homestake Mining Co.
E. PRICE EFFECTS
1. Determination of Prices
Because of its monetary function, the price of gold (1,000 fine) was set by
the U.S. Treasury in 1934 at $35 per troy ounce.
The U.S. policy of purchasing all gold offered and redeeming dollars offered
by foreign central banks and governments at $35 per ounce established the
official world price for gold. Devaluation of the pound sterling on November 18,
1967, sparked an upsurge in gold speculation and hoarding; prices for gold at the
end of 1967 in gold markets outside the United States ranged from $35.95 at
Beirut to $57.50 at Bombay. In March 1968, a two-tier price system was
established by the seven-nation "Gold Pool" under which internal monetary
VI-7
-------
transactions remained at the official price of $35 per ounce; purchases and sales
by the "Gold Pool" countries in the private market were terminated, and a
floating price for all private transactions began. During the remainder of the year
the U.S. price for gold fluctuated between $37.50 and $42.05 per ounce. The
average upper-tier price in 1968 was $39.26 per ounce.
The two-tier agreement was abrogated in November of 1973 and since then
the freedom to sell gold bullion was restored to monetary authorities.
Recent important developments in the gold price area have been policy
changes in the valuation of monetary gold by nation-states and international
monetary institutions, legalization of gold ownership for U.S. citizens, and the
commercial auction of gold by the U.S. Treasury early in 1975.
The "Metals Week" gold price averages for the last several years have been as
follows:
S/troy oz
1971 41.05
1972 58.40
1973 97.58
1974 140.02
1975 (April) 169.84
2. Costs of Production
The production costs for the three major gold mines and mills have been
reported* as follows:
Dollars per Siiort Ton of Ore
Homestake Carlin Cortez
Mining 7.13 0.75 0.25
Milling L50 2.35 L38
Total 8.63 3.10 1.63
These costs are direct operating costs; they do not include depreciation or
amortization, home office expense, cost of sales, capital charges, etc.
*F.W. McQuiston, Jr. and R.S. Shoemaker, "Gold and Silver Cyanidation Plant Practice,
AI ME, 1975.
VI-8
-------
3. Potential Constraints on Financing Additional Capital Assets
Constraints on financing additional capital assets for gold mining and milling
plants are similar to those already discussed in previous chapters of this report.
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the
guidelines set forth by the Effluent Guideline Document for the gold ore mining
and processing industry. These guidelines are:
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial dischargers by 1977.
• Best Available Technology Economically Available (BATEA) - to
be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purposes of recommending effluent guidelines and estimating the cost
of implementing these guidelines, the Guideline Contractor for metallic ore
mining and milling has categorized the gold ore industry into the following
groups:
a. Mines
b. Mills using Cyanidation process
c. Mills using Amalgamation process
d. Mills using Flotation process
e. Mills using Gravity separation
For category "b" zero discharge is recommended, and operations using this
process are now at zero discharge.
For categories "a," "c," "d" and "e," effluent guidelines are recommended,
and costs of implementation have been estimated for plants in these categories for
both BPCTCA and BATEA standards.
1. Effluent Guidelines
For the mines category, which includes both open-pit and underground
mines, the recommended parameters and BPCTCA guidelines are given in Ta-
ble VI-4. The BATEA guidelines are the same as BPCTCA for mines.
VI-9
-------
For category b (Mills — Cyanidation Process) zero discharge is recommended
and hence no parameters or guidelines are proposed for either BPCTCA or
BATEA.
For category c (Mills — Amalgamation) the recommended parameters and
BPCTCA guidelines are those given in Table VI-5. Zero discharge is recommended
for BATEA standards.
For category d (Mills — Flotation) the recommended parameters and
BPCTCA guidelines are those given in Table VI-6. Zero discharge is recommended
for BATEA for this category.
For category e (Mills — Gravity Separation) the recommended parameters
and BPCTCA guidelines are those given in Table VI-7. For this category, BATEA
guidelines are the same as BPCTCA guidelines.
2. Costs of Compliance
The guidelines contractor has estimated the costs of compliance for both
BPCTCA and BATEA guidelines. These costs for gold ore mining and milling are
summarized in Table VI-8 by category and in Table VI-9 by company. The costs
summarized in these tables are investment costs, which represent the amount of
money needed to install the required treatment facilities, and the annual costs,
which are the yearly costs to operate the facilities. The annual costs include a
charge for amortization which is based on a useful life of 20 years for facilities
and ten years for equipment. They also include a charge for capital recovery
computed with an 8% interest rate.
In this category of the mineral industry the fixed cost portion of the
annualized costs is about 20%. That is, 20% of the total annual cost is fixed cost
(amortization plus interest charges in this case).
In Table VI-10 we have estimated the incremental cost to the three com-
panies' final product (gold metal) that is due to compliance with both BPCTCA
and BATEA guidelines. These are added costs for the particular company unit
where effluent treatment is required.
3. Basis for Analysis
The impact analysis for gold ores was carried out on the same basis as that
described in Section I. However, because of the singular position of gold as a
monetary metal, the impact of altered gold mining costs and output on the U.S.
balance of payments must be considered from a unique standpoint. Increased
imports (or decreased exports) of gold are not seen as tendencies toward deficit,
VI-10
-------
TABLE VI-4
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - GOLD MINES
Concentration (mg/C) in Effluent
Parameter 30-day Average 24-hour Maximum
pH 6* to 9* 6* to 9*
TSS 20 30
Cu 0.05 0.1
Hg 0.001 0.002
Zn 0.50 1.0
Pb 0.10 0.20
"Value in pH units
Source: Development Document
TABLE VI-5
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - GOLD MILLS
USING AMALGAMATION PROCESS
Concentration (mg/K) in Effluent
Parameter
pH
TSS
Cu
Hg
Zn
30-day Average
6* to 9*
20
0.05
0.001
0.2
24-hour Maximum
6* to 9*
30
0.1
0.002
0.1
*Value in pH units
Source: Development Document
VI-11
-------
TABLE VI-6
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA - GOLD MILLS USING FLOTATION PROCESS
Concentration (mg/C) in Effluent
Parameter
pH
TSS
Cyanide
Cu
Hg
Zn
Pb
Cd
30-day Average
6* to 9*
20
0.01
0.05
0.001
0.2
0.1
0.01
24-hour Maximum
6* to 9*
30
0.02
0.1
0.002
0.1
0.2
0.02
"Value in pH units
Source: Development Document
TABLE VI-7
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA - GOLD MINES OR MILLS USING GRAVITY-SEPARATION METHODS
Concentration (mg/£) in Effluent
Parameter 30-day Average 24-hour Maximum
pH 6* to 9* 6* to 9*
TSS 30 50
"Value m pH units
Source: Development Document
VI-12
-------
OJ
TABLE VI-8
GOLD ORES - COST OF COMPLIANCE WITH BPCTCA AND BATEA STANDARDS
Category
Mines
Mills - Cyanide
Mills — Amalgamation
Mills — Flotation
No.
1-4
5
1-2
3
1
1
1,000
M.T. Ore
Per Year
3,330
170
1,450
1,430
170
69
Cost (Thousands $)
BPCTCA
Investment
0
110.2
0
3,469.1
45.3
20.3
Annual
0
47.2
0
856.8
31.4
16.6
BATEA
Investment
0
110.2
0
3,469.1
254.5
31.1
Annual
0
47.2
0
856.8
54.5
18.1
Placer Mines (50-60 -
No Cost Estimates)
Total Industry 6,619 3,644.9 952.0 3,864.9 976.6
-------
TABLE VI-9
COSTS BY COMPANIES
Company
A
B
C
Total
Rest of Industry
1,000
M.T. Ore
Per Year
170
69
1,430
1,669
1,831
Costs (Thousands $)
BPCTCA
Investment Annual
155.5
20.3
3,469.1
3,644.9
0
78.6
16.6
856.8
952.0
0
BATEA
Investment
364.7
31.1
3,469.1
3,864.9
0
Annual
101.7
18.1
856.8
976.6
0
Company
A
B
C
TABLE VI-10
ADDED COST PER OUNCE OF GOLD PRODUCED
Estimated Added Cost (S/Troy Ounce)
Gold Production (1972) For BPCTCA For BATEA
(troy ounces)
2.62 3.39
1.19 1.29
2.10 2.10
Gold Price Average 1972
Price June 1975
30,000*
14,000*
407,462
$ 58.40/Troy Ounce
$ 169.80/Troy Ounce
(H&H)
'Estimated by Arthur D. Little, Inc.
VI-14
-------
nor are increased exports (decreased imports) regarded as tendencies toward
surplus. Moreover the volume of gold production in the United States is small
relative to U.S. international transfers of gold.
4. Levels of Impact
The three levels of impact used in the following analysis were described in
Section I.
a. Best Practical Control Technology Currently Available (BPCTCA)
In Table VI-11 we have summarized the information and costs to comply
with the BPCTCA guidelines. Shown in Table VI-11 for the three impact groups
discussed above and for the total industry are the data on tonnage and number of
employees, the added operating costs, and the added investment costs as a percent-
age of capital expenditures and total investment.
(1) Price and Production Effects. As is evident from the table, 52% of the
industry would not be directly affected by the guidelines. For the 48% that is
directly affected, the product cost increase of $2.11 per troy ounce of gold
produced is small and could readily be either passed on or absorbed under normal
circumstances. The percentage increase of $2.11 per ounce on a $58.40-per-ounce
product (1972) is 3.6%. The percentage increase in product cost for the total
industry is 1.9%.
(2) Financial Effects. The added capital investment required for the im-
pacted group of the industry is 218% of the estimated annual capital expenditures
and 9.5% of the total invested capital. The percentage of annual capital expendi-
tures is calculated on the assumption that the investment for pollution control
will be accomplished in one year. In actuality, however, this investment would
likely be made over a period of several years so the annual percentage would
actually be less than indicated.
Despite the softening of the impact by spreading the outlays over the years,
the amounts are still sizable and, in an industry other than gold mining and
milling, would have a notable effect. In gold, however, because of the current
prosperity of the industry, the additional capital cost can be financed without
evident strain.
(3) Balance of Payment Effects, Employment Effects, and Community
Effects. Consideration of the price and production, and financial effects indicates
that there will be no output curtailments or plant shutdowns in the gold ore
mining and milling industry because of BPCTCA effluent limitations. As a result
there will be no employment or community effects and no balance of payments
effects.
VI-15
-------
b. Best Available Technology Economically Available (BATEA)
Table VI-12 lists the costs for meeting the BATEA guidelines. These are only
slightly higher than the BPCTCA costs in Table VI-11.
For meeting BATEA guidelines, therefore, the effects and impacts are the
same as for BPCTCA, as discussed above.
c. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new gold mills using
flotation, cyanidation or amalgamation, the NSPS guideline should be zero
discharge. For gold ore mines and mills using gravity separation, the NSPS
standards should be identical to BPCTCA limitations.
The Effluent Guidelines Development Document provided no cost estimates
for the NSPS analysis. Therefore, any statements about the effect of the NSPS
requirement on the construction of new plants within the United States must
necessarily be qualitative.
However, it can be said with some degree of confidence that the costs for a
"grass roots" plant to meet the NSPS standards are no more than the costs for an
existing plant in the impacted group (impact group "B") to meet the BPCTCA and
BATEA recommended effluent limitations, because in the construction of a new
plant, in-process modifications can oftentimes be made which may be more
efficient and economical than add-on treatment technologies for existing plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. gold ore mining and milling industry to expand
domestic production capacity through the construction of new plants.
VI-16
-------
TABLE VI-11
SUMMARY OF DATA AND COSTS FOR BPCTCA GUIDELINES
GOLD ORE MINING AND MILLING (1972)
Impact Group
"A"
1,831
52.3
"B"
1,669
47.7
"C"
0
0
Total
Industry
3,500
100
Thousands M.T. Ore'/Year
% of Industry — Ore Basis
Ounces Gold Produced/Year
(thousands)
Number of Employees
%of Employees
Added Investment ($)
as % of Annual Capital Expenditure
as % of Total Investment
Added Annual Cost ($)
$ per Ton Ore
$ per Ounce of Gold
*Only production from true gold ores (dry siliceous ores). By-product gold production from other
base metal ores not included.
403
830
55.3
0
0
0
0
0
0
451
670
44.7
3,644,900
218
9.5
952,000
0.57
2.11
0
0
0
0
0
0
0
0
0
854
1,500
100
3,644,900
104
4.5
952,000
0.27
1.11
TABLE VI-12
SUMMARY OF DATA AND COSTS FROM BATEA GUIDELINES
GOLD ORE MINING AND MILLING (1972)
Thousands M.T. Ore/Year
% of Industry — Ore Basis
Thousand Ounces Production/year
Number of Employees
% of Employees
Added Investment ($)
as % of Annual Capital Expenditure
as % of Toal Investment
Added Annual Cost ($)
$ per Ton Ore
$ per Ounce Gold
Impact Group
"A"
1,831
52.3
403
830
55.3
0
0
0
0
0
0
"B"
1,669
47.7
451
670
44.7
3,864,900
232
10.1
976,600
0.59
2.17
"C"
0
0
0
0
0
0
0
0
0
0
0
Total
Industry
3,500
100
854
1,500
100
3,864,900
110
4.8
976,600
0.28
1.14
VI-17
-------
VII. SILVER ORES (SIC 1044)
A. INTRODUCTION
In 1972, mines in the United States produced 37,233,000 troy ounces of
silver. Of this amount about 75% was produced as a by-product from base metal
ores, and 25% came from dry and siliceous ores.
Silver normally occurs in deposits associated with other metals such as
copper, lead, zinc, and gold. The principal silver minerals are argentite (Ag2 S),
argentiferous tetrahedrite (Cu3Sb, AsS3) and argentiferous galena (PbS). The last
two have part of their crystal lattices replaced with silver atoms.
The major silver occurring location in the United States is the Coeur d'Alene
district in Idaho where silver ores occur in fault zones and fissures. These are
usually steeply dipping and narrow (6-8') veins. In this district ores contain from
3 to 45 ounces of silver per ton.
B. INDUSTRY DESCRIPTION
The Silver Ores Industry includes establishments engaged primarily in
mining, milling, or otherwise preparing silver ores. The production of bullion at the
mine or mill site is included also.
1. Reserves
Domestic resources of silver have been estimated at 4.9 billion ounces, of
which 1.3 billion are classified as reserves. Most of the reserves are present as a
potential by-product from base metal ores. About 75% of the reserves are in the
western states of Arizona, Idaho, Nevada, Montana, and Utah.
2. Mining
The true silver ores are all mined by underground methods through shafts,
some of which are very deep (5,000-6,000'). From the shafts ore is developed
through a series of drifts, cross-cuts, and raises with stoping commonly being done
by cut and fill methods. In this procedure mined-out areas are filled with the sand
fraction from the milling operation.
3. Beneficiation
Silver ores are almost universally processed by the flotation process which
produces a concentrate for further refining by smelting or leaching techniques.
VII-1
-------
In flotation, reagents are added to condition the valuable mineral particles so
they can be collected in a froth product. Since silver commonly occurs with base
metals it is quite common to beneficiate the ore to produce two flotation
concentrates. In Idaho, for example, they often produce a zinc concentrate and a
lead concentrate with most of the silver going along with the lead.
4. Water Use
In processing the silver ores by flotation, water is used in a ratio of about
four tons of water to one ton of ore. Most of the water leaves the operation in the
tailings, which are collected in tailings dams from which water is recycled for
reuse.
No information is available on water consumption or discharge by the silver
mining industry. The census data combines gold and silver and their combined
usage in 1968 was as follows:
Gross Water Used - 11 Billion Gallons
Total Water Discharged - 7 Billion Gallons
5. Products and By-products
The silver mining and processing industry's major product is usually a sulfide
metal concentrate containing the silver. The ores in which silver is the major
valuable component also usually contain lead, zinc, copper, and iron sulfides. The
processing by flotation produces a high-grade silver concentrate that contains
some lead or other base metals which require further refining to recover the silver.
By-products can be considered to be copper, lead, zinc and at times small
amounts of gold.
C. INDUSTRY OVERVIEW
1. Types of Firms
The major silver producing companies are all subsidiaries of large integrated
metal mining companies.
For example, the largest single silver producing mine is the Galena mine in
Idaho owned and operated by ASARCO, a large diversified metal producer. (See
Appendix A.)
The Sunshine mine, 33.25% owned by Hecla Mining Co., is also a major
producer. Hecla operates four lead-silver-zinc mines in Idaho, a mine in Utah, and
VII-2
-------
mines in British Columbia, Canada, and is developing a large copper project in
Arizona. They produce about $20 million of copper, lead, zinc, silver, and gold
per year.
The other two major mines, the Bulldog mine in Colorado and the Crescent
mine in Idaho, are owned by Homestake and Bunker Hill, respectively. Both
Homestake and Bunker Hill are large integrated mining companies.
The Clayton silver mine in Idaho also produces appreciable amounts of
silver. Clayton is a small privately owned mining company that produces lead,
zinc, and silver concentrates which it sells to nearby smelters.
2. Types of Plants
The major silver producing companies are listed in Table VII-1. This list
includes only those companies whose major product is silver. The by-product
silver producers are considered in the lead-zinc section of this report.
TABLE VII-1
SILVER PRODUCING COMPANIES - FROM SILVER ORES
Mine
Galena
Location
Idaho
Tons Ore
Per Year
(1973)
200,911
Ounces
Ag/Year
4,220,000
No.
Employees
200
Age
NA
Sunshine
Crescent
Bulldog
Clayton
Idaho
Idaho
Colorado
Idaho
123,539
33,359
86,693
80,976
3,070,000
595,326
2,091,483
121,407
580
75
120
25
91
23
6
41
Company
Asa r co
Sunshine Mining Co.
(Hecla - 33%)
Bunker Hill
Homestake
Clayton Silver Mines
Note: All companies operate underground mines and flotation milling plants.
Source: Compilation by ADL from industry publications.
Of the listed companies, ASARCO, Bunker Hill and Homestake are large
integrated opera*: >ns; they mine, mill, smelt and refine silver.
U.S. mine production of silver for 1968 through 1972 was as follows:
VII-3
-------
1968 1969 1970 1971 1972
Thousands Troy Ounces 32,729 41,906 45,006 41,564 37,233
Percentage from:
Gold and Silver Ores 39 36 33 37 25
Base Metal Ores 61 64 67 63 75
About 87% of the total production in 1972 came from five western states:
State
Idaho
Arizona
Utah
Colorado
Montana
Missouri
New Mexico
Michigan
Nevada
California
South Dakota
Tennessee
New York
Oregon
Others
Total
Thousands
Troy Ounces
14,251
6,653
4,300
3,664
3,325
1,972
1,017
785
595
175
100
83
25
2
286
37,233
The historic production by U.S. companies is shown in Table VII-2. The
major producers are: ASARCO, Anaconda, Kennecott, Phelps Dodge, Hecla, and
Bunker Hill.
Bureau of Census figures for silver ores are:
Number of Establishments = 53
Number of Establishments with over 20 Employees = 7
Number of Employees = 1,000
Number of Employees in Production = 800
Total employment for the true silver mines is 1,000 (Table VII-1).
VII-4
-------
TABLE VII-2
SILVER PRODUCTION OF SOME COMPANIES
(In fine uutic i'x)
UNITED STATES
Company
• TO (o«n mine) (gl
k«r 11,11
inker 11.11 Mine
( r*'V vnl Mine
-' ir Mine ,/ i
Mmi-j
1 ,-nus
n« Mine unsl,me Mine
oroll
• k> rri.lnj MKir-li'sd
\ 'in ( ,>upr- C.iinpanj M,,n
^iM'.'Nur !>,' ,«i,,n
„ Ipi II'. IB- '.)
l,,r Minor, ,N Cun, (a)
•1..II,. (,J)
,d I'ark Cm Mini's
19«
1,450,010
9.0.10.113
1.741,181
121 710
.181,237
55.414
300,83.1
1.340,514
3.472.011
39.5, JOS
357,784
105,101
1,550,432
2.077..VI2
(e)
282,334
300.269
2,001.575
3,102,817
2.''2,7.1l
19CI
4,4;,O.J70
9 148,145
1.5S'I,007
0(11.211
43'i.'J54
03,300
2)8,717
4,358.345
3,1.12 012
412,921
058.470
188.5.12
2,124.099
3 -'SO. Ml
(«)
27.1,610
408.300
2,091,505
340,289
4,112,521
271,718
1966
4.1.07,719
8.005.170
1.52'i .'2'l
XI0.77I
I',0.lil9
2X5,102
173.817
4.205.011
3,189,180
039. \U2
COS. 880
llil.lilZ
2.3X0,8(19
4,71,3,118
W
310,099
4(S'.. ( ( 1
2,125.1180
'
4, "28, 179
1967
1 S7J 05.x
5.121.820
1,410.171
U9J.I71
J91.405
157,2,13
158, r,9
2,032. ',22
2.114,1111
S.il.Ul
52X..VU
11,8 0^2
2 r,nu '.78
2.:i.''.JU2
1')
KiO.S'.ll
I»7 1 HI
1.202,1,11
2WI.771
.1,210, t'1.1
J17.113 21.0 10.1
19(S
1.752.078
5.180,005
1,504.198
1.400,719
208,143
550,207
1.10.11 1
l.l'UO.23.1
1.407,727
.14J.OOO
I'l 1,0 IS
11 '>.()5I
2.1'. 1.011
J,;."i,.''<8
(')
2 11 tin
317,1 I'J
I.7SO. 100
410. 1 10
5,110.786
121.0(12
196*
2. .157. MM
6.407.979
1.4'10.2'IJ
1.401.451
211 '-'xf,
407 .11 il
1.11. I'll
2 958.7(17
2,M10.1 10
0X0 '172
1)8 3'HI
1(15. 2O1J
2 7.11 7-'l
J.XCI.J.Itf
(<)
.'(2,1 ShO
5(ix,(,ii.(
2,1-M 078
.1J1.:il2
,1.1)44.011
444,11.1
19TO
4.73M (,.'((
(. X 1 , l'i(j 1, Luck v 1 r ,,ln
in Mm. s l.ni.ln, nun (',) Hunker Hill i 70', uiMicr-l f lnui iirndiK in.n
S srce: 1973 Year Book - American Metal Statistics
VII-5
-------
D. FINANCIAL PROFILES
The major silver-ore processing companies are: ASARCO, Anaconda,
Kennecott, Phelps Dodge, Hecla, and Homestake. Financial profiles for these are
given in Appendix A.
E. PRICE EFFECTS
1. Determination of Prices
Silver was the first monetary standard established in America when the first
financial law passed by the Continental Congress in 1776 made the silver dollar
the unit of value. The dollar was defined by Congress in 1792 as 371.25 grains of
fine silver and the silver monetary value of $1.2929 per ounce, although not
defined in such terms in the law, could be derived by dividing the number of
grains in a troy ounce (480) by the number of grains of pure silver in the silver
dollar (371.25).
At the end of 1933, with the market price of silver at about $0.44 per
ounce, Congress enacted legislation authorizing U.S. Treasury purchase of newly
mined domestic silver with a seigniorage deduction of 50% thus fixing the price at
$0.6464 per ounce. In 1934 the Silver Purchase Act directed the Secretary of the
Treasury to purchase silver at home and abroad until the market price reached the
mint price of $1.2929 per ounce or until the monetary value of Treasury's stock
reached one-third of the monetary value of gold stock. During the next decade
the support price changed on several occasions and eventually was set at $0.9050
in 1946. In the late 1950's world-wide industrial and coinage demand exceeded
world-wide production. Consequently, U.S. Treasury stocks not earmarked for
currency backing or coinage were sold. In November 1961, by Presidential order,
U.S. Treasury sales were suspended, the use of free silver for coinage was
suspended, and silver required for coinage was to be obtained by retiring from
circulation $5 and $10 certificates.
Public Law 88-36, June 1963, repealed the Silver Purchase Act of 1934; this
new policy provided for the eventual demonetization of silver except for subsidi-
ary coinage.
In 1964 foreign demands actually comprised a drain on Treasury stocks and
this country became a net exporter of silver for the first time since lend-lease in
World War II. The sharp upsurge in silver usage in the early 60's took place in
spite of a 40% increase in silver price between November 1961 and June 1963.
The mint was not able to keep up with demand for coins by vending machines,
coin collectors and speculators. This expansion of silver usage in coinage was the
largest drain on U.S. Treasury stocks.
VII-6
-------
To meet the growing demand and rising price of silver, Congress passed the
Coinage Act of 1965. Under the act, some 90% of silver formerly used for coinage
was available for industrial use; the melting, treating, or exporting of any U.S.
coin was prohibited, and a Joint Commission on Coinage was established. On
July 14, 1967, the Treasury, upon recommendation by the Joint Commission,
halted all Government sales of silver at the old monetary value of $1.2929 and
announced it would sell only 2 million ounces per week, with the General Services
Administration (GSA) handling sales.
Demonetization was, in effect, completed on June 24, 1968, when the right
to redeem silver certificates for silver was terminated.
The actual silver price history since 1967 is shown in Figure VII-1 where the
large increase in price in 1973 and 1974 is evident. As of June 1, 1975, the Metals
Week price was 420.9 cents per troy ounce.
Silver is believed by knowledgeable people to have a promising future market
and there should be a continuing upward trend in the price.
2. Costs of Production
The silver mines discussed in this section are all small, deep underground
mines that work vein type deposits.
We have estimated the basic costs for a mine and mill producing 500 tons of
ore per day (160,000 tons/year) and milling the same amount to produce
concentrates that are the final product. The mine is assumed to be 2,500-3,000
feet deep and to use a cut and fill system. The mill is a conventional flotation mill
producing two concentrates.
Our cost estimate for this kind of operation is as follows:
a. Investment
Mine $5,500,000
Mill 2,500,000
Total $8,000,000
b. Operating Cost
S/Ton Ore
Mine $13.50
Mill 5.35
Total $18.85 (Includes amortization and depreciation.)
VI1-7
-------
CENTS PER
TROY OUNCE
620
580
540
500
460
420
.140
300
260
220
180
140
KEY
-" ..
-
HIGH
AVERAGE
LOW ~
-— —
_
.-.
-- _
- - -
- -
-
- -
_ -
SALES OF TREASURY
SILVER LIMITED TO
- DOMESTIC USERS — -
—
1 1 1
__ J
^;l
FIR
AU
I
jl
*
STOP V
:TIONS
1 1 1 1
1967
-V
WEEKLY
BY GS A
ill i i i i i i
1968 |
-
--
_
~ LAST OF WEEKLY
_. AUCTIONS BY G.S.A
ON NOV 10, 1970
f
IT
'
1 1 1 1 1 1 1 1 1 1 1
1969
\
\ AUG 1
- . V- -- PRICE F
\ IMP
- \
V
r t-ft+hf,
1 1 1 1 1 1 1 1 1 1 1
1970
_
I
ALL TIME HIGH 670.0 -
ON FES 26, 1974
-
-----
- -----
SECOND PRICE FREEZE IMPOSED
JUNE 12 TO AUG 13, 1973
J.1971
REEZE
3SED
\- — NEW LOV
\ AUG 2
\ OF 1288
i- \ ON NOV
\
, l»*f \ 1
1 1
*»
III 1 1 1 1 1 1
1971
| \- -
V
J \
AUG. 10, 1972 \
SILVER EXEH
FROM PRI
CONTRO
V SINCE -
'. 1963 I
CENTS 1
3, 1971 - |
"I****
|+t*T*
: i i i i i i i i i
1972
(PTED \ + I
DE \ ij|
w
J _..."
1 1 1 1 f 1 1 1 1 1 1
1973
--
--
--
-
- - - - -
I
-H j -/fl
/
- - /
_y. _
7
t
BAN ON PRIVATE
OWNERSHIP OF
GOLD L FTED _|
DEC 31, 1974
.
1974
Source: Engineering and Mining Tl—McGraw Hill — January, 1975
FIGURE VII-1 NEW YORK SILVER PRICE, MONTHLY RANGES
VII-8
-------
3. Potential Constraints on Financing Additional Capital Assets
The financing constraints on companies that mine and process silver ores are
the same as those of other ore mining companies as discussed in Chapter III.
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the
guidelines set forth by the Effluent Guideline Document for the silver ore mining
and processing industry. These guidelines are:
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial discharges by 1977.
• Best Available Technology Economically Available (BATEA) — to
be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the silver ore mining and processing industry into the
following groups:
a. Mines
b. Mills — Flotation Process
c. Mills — Cyanidation Process
d. Mills — Amalgamation Process
e. Mills — Gravity Separation
For category "c" zero discharge is recommended and plants in these groups
are now at zero discharge.
For categories "a," "b," "d," and "e" effluent guidelines are recommended
and costs are estimated for those plants requiring additional control.
1. Effluent Guidelines
The recommended parameters and BPCTCA guidelines for category "a,"
which includes only underground mines in this case, are given in Table VII-3. The
recommended BATEA guidelines are the same as those for BPCTCA.
VII-9
-------
TABLE VII-3
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - SILVER MINES (ALONE)
Concentration (mg/C) in Effluent
Parameter
PH
TSS
Cu
Pb
Zn
Hg
30-day Average
6* to 9*
20
0.05
0.1
0.5
0.001
24-hour Maximurr
6* to 9*
30
0.1
0.2
1.0
0.002
"Value in pH units
For category "b" (Mills - Flotation) the recommended parameters and
BPCTCA guidelines are given in Table VIM. The recommended BATEA guide-
lines are the same as those for BPCTCA.
For category "c" (Mills - Cyanidation Process), zero discharge is recom-
mended and hence no parameters or guidelines are proposed.
The recommended parameters and guidelines for category "d" (Mills -
Amalgamation Process), are given in Table VII-5. For these mills the recom-
mended BATEA guideline is zero discharge.
TABLE VII-4
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - SILVER MILLS USING FLOTATION PROCESS
Concentration (mg/C) in Effluent
Parameter
PH
TSS
Cu
Zu
Pb
Hg
Cd
Cn
30-day Average
69
20
0.5
0.10
0.10
0.001
0.01
0.01
24-hour Maximum
6-9
30
0.1
0.2
0.2
0.002
0.02
0.02
VII-10
-------
TABLE VII-5
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - SILVER MILLS USING AMALGAMATION PROCESS
Concentration (mg/£) in Effluent
Parameter
pH
TSS
Cu
Hg
Zn
30-day Average
6* to 9*
20
0.05
0.001
0.10
24-hour Maximum
6* to 9*
30
0.1
0.002
0.20
*Value in pH units
Source: Development Document
The recommended parameters for category "e" (Mills - Gravity Separation),
are given in Table VI1-6. BATEA guidelines for this category are the same as those
for BPCTCA.
TABLE VII-6
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - SILVER MILLS USING GRAVITY SEPARATION
Concentration (mg/8) in Effluent
Parameter
pH
TSS
30-day Average
6* to 9*
30
24-hour Maximum
6* to 9*
50
*Value in pH units
Source: Development Document
2. Costs of Compliance
The guidelines contractor has estimated the investment costs and annual
operating costs of compliance for both BPCTCA and BATEA guidelines. These
costs for silver ore mining and milling are summarized in Table VII-7 by category
and in Table VII-8 by companies. The annual costs include charges for amortiza-
tion. The amortization charge includes an interest cost (at 8%), and is based on a
useful life of 20 years for facilities and ten years for equipment.
In this silver ore group of the mineral industry about 20% of the total annual
cost is fixed cost (amortization plus interest charges in this case).
VII-1
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TABLE VII-7
SILVER ORES - COST OF COMPLIANCE WITH BPCTCA AND BATEA STANDARDS
Category
Mines
Mills-Flotation
Total Industry
Source: ADL Summary of data from Development Document.
No.
1
2
3
1
2
3
1,000
M.T.
Ore/Year
183
75
182
440
75
183
182
440
440
Costs (Thousands $)
BPCTCA
Investment
54.3
128.2
31.3
213.8
0
55.0
55.0
110.0
323.8
Annual
25.8
45.7
19.9
91.4
0
35.0
35.0
70.0
161.4
BATEA
Investment
54.3
128.2
31.3
213.8
0
33.4
48.0
81.4
295.2
Annual
25.8
45.7
91.4
91.4
0
7.0
11.3
18.3
109.7
TABLE VII-8
COSTS BY COMPANIES
1,000
Company M.T. Ore/Year
Costs (Thousands S)
BPCTCA
A
B
C
Total Industry
183
75
182
440
Investment Annual
109.3 60.8
BATEA
Investment Annual
87.7 32.8
128.2
86.3
323.8
457
54.9
161.4
128.2
79.3
295.2
45.7
31.2
109.7
Source: ADL Summary of data from Development Document.
In Table VII-9 we have estimated the incremental cost to the three com-
panies' final product (silver, metal) due to compliance with both BPCTCA and
BATEA guidelines. The table shows the added costs for the particular company
unit where effluent treatment is required and for the companies' total silver
production. Two companies are multi-unit companies, and the third is a large
single unit silver producer.
VII-12
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TABLE VII-9
INCREASE IN COST OF SILVER DUE TO BPCTCA AND BATEA GUIDELINES
FOR COMPANIES AFFECTED (1972)
Company Unit
A 1
Total Co.
B 1
Total Co.
C Total Co.
Source: ADL Calculations.
Estimated
Silver Content
of Production
(M troy oz)
4,222
7,688
1,962
2,577
Cost Increase per
Silver ($)
BPCTCA
0.014
0.008
0.023
0.018
Ounce
BATEA
0.008
0.004
0.023
0.018
1,890
0.029
0.017
3. Basis for Analysis
For the silver ore mining and processing category the basis for analysis is
identical to that described in Section I of this report.
4. Levels of Impact
The levels of impact for the silver ore impact analysis are the same as those
described in Section I of this report.
a. Best Practical Control Technology Currently Available (BPCTCA)
In Table VII-10 we have summarized the costs for compliance with the BPCTCA
guidelines. Shown in Table VII-10 for the three impact groups discussed above
and for the total industry are the data on tonnage and number of employees, the
added operating costs, and the added investment costs as a percentage of capital
expenditures and total investment.
(1) Price and Production Effects. As is evident from the table, 20% of the
industry would not be directly affected by the guidelines. For the 80% that is
directly affected the product cost increase of $0.020 per ounce of silver is small
and could readily be passed on or absorbed under normal circumstances. The
percentage increase of $0.020 per ounce on a $1.68-per-ounce product (1972) is
less than 1%. There is virtually no impact on the whole industry.
VII-13
-------
TABLE VII-10
SUMMARY OF DATA AND COSTS FOR BPCTCA GUIDELINES
SILVER ORE MINING AND MILLING (1972)
Impact Group Total
"A" "B" "C" Industry
Thousands M.T. Ore/Year 113 440 0 553
% of Industry-Ore Basis 20.4 79.6 0 100
Thousands Ounces Silver
Produced 716 8,074 0 8,790
Number of Employees 100 900 0 1,000
% of Employees 10.0 90.0 0 100
Added Investment ($) 0 323,800 0 323,800
as % of Capital Expenditure 0 17.0 0 17.0
as % of Total Investment 0 1.4 0 1.2
Added Annual Cost ($) 0 161,400 0 161,400
$ per Ton Ore 0 0.37 0 0.29
$ per Ounce Silver 0 0.020 0 0.018
(2) Financial Effects. The added capital investment required for the im-
pacted group of the industry' is 17.0% of the estimated annual capital expendi-
tures and 1.4% of the total invested capital. The percentage of annual capital
expenditures is calculated on the assumption that the investment for pollution
control will be accomplished in one year. However, in actuality this investment
would likely be made over a period of several years so the effect would actually
be less than indicated.
(3) Balance of Payment Effects, Employment Effects, and Community
Effects. Consideration of the price and production, and financial effects indicates
that there will be no output curtailments or plant shutdowns in the silver ore
mining and milling industry because of BPCTCA effluent limitations. As a result
there will be no employment or community effects and no balance of payments
effects.
b. Best Available Technology Economically Available (BATEA)
For meeting BATEA guidelines the effects and impacts are given in Ta-
ble VII-11. These are very similar to the BPCTCA effects and there will be no
significant impact on the industry or any group in meeting BATEA standards.
VII-14
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TABLE VII-11
SUMMARY OF DATA AND COSTS FOR BATEA GUIDELINES
SILVER ORE MINING AND MILLING (1972)
Impact Group Total
"A" "B" "C" Industry
Thousands M.T. Ore/Year 113 440 0 553
% of Industry-Ore Basis 20.4 79.6 0 100
Thousands Ounces Silver
Produced 716 8,074 0 8,790
Number of Employees 100 900 0 1,000
% of Employees 10.0 90.0 0 100
Added Investment ($) 0 295,200 0 295,200
as % of Capital Expenditure 0 15.5 0 15.5
as % of Total Investment 0 1.3 0 1.1
Added Annual Cost ($) 0 109,700 0 109,700
$ per Ton Ore 0 0.25 0 0.20
$ per Ounce Silver 0 0.014 0 0.012
c. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new silver ore mills
using flotation, cyanidation, or amalgamation processes, the NSPS guideline
should be zero discharge. For silver ore mines and mills using gravity separation
the NSPS standards should be identical to BPCTCA limitations.
The Effluent Guideline Development Document provided no cost estimates
for the NSPS analysis. Therefore, any statements made with regard to the effect
of the NSPS requirement on the construction of new plants within the U.S. must
necessarily be qualitative.
However, it can be said with some degree of confidence that the costs for a
"grass roots" plant to meet the NSPS standards are no more than the costs for an
existing plant in the impacted group (group "B") to meet the BPCTCA and BATEA
recommended effluent limitations, because in the construction of a new plant,
in-process modifications can oftentimes be made which may be more efficient
and economical than add-on treatment technologies for existing plants.
VII-15
-------
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. silver ore mining and milling industry to expand
domestic production capacity through the construction of new plants.
G. LIMITS OF THE ANALYSIS
The limits of this analysis are the same as those discussed in Section I of this
report.
VII-16
-------
VIM. BAUXITE (SIC 1051)
A. INTRODUCTION
Bauxite is a naturally occurring material composed of hydrated aluminum
oxide minerals. The principal ores are gibbsite, the trihydrate (65.4% Al2O3), and
boehmite, the monohydrate (85% A12O3). Bauxites are rarely pure and usually
contain impurities — principally iron oxides, clays (aluminum silicates), and
titanium oxides.
Bauxites are not common or extensive in the United States and the bulk of
the needs for alumina (from which aluminum is made) is imported from such
places as Jamaica, Guyana, and Surinam. In the United States bauxite occurs
primarily in Arkansas but there are some small operations in Alabama and
Georgia. The Arkansas bauxites are used to make alumina but the small mines in
Alabama and Georgia produce principally refractory bauxite products. Additional
small amounts are used for activated alumina and abrasives.
B. INDUSTRY DESCRIPTION
The Bauxite and Other Aluminum Ores Industry includes establishments
engaged primarily in mining, milling, or otherwise preparing bauxite and other
aluminum ores. Associated activities such as drying, calcining, activating, and
sintering are also included.
1. Reserves
U.S. reserves of bauxite are very small and have been estimated by the
Bureau of Mines (1972) as 45 million long tons of 50% A12O3 ore. This is only
0.3% of the world's total and it is clear that most U.S. needs for bauxite will
have to be met by imports. Large reserves are located in Africa, Australia, Jamaica
and Surinam. A summary of world reserves is given in Table VIII-1.
2. Mining and Beneficiation
Bauxite mining in the United States will be carried out entirely by open pit
techniques when Reynolds' underground operation in Arkansas closes later this
year. The open pit mines use conventional equipment such as scraper-loaders,
shovels, front-end loaders, and trucks. The two principal operations in Arkansas
strip a considerable amount of waste overburden to reach the ore (stripping ratio
about 4/1 but it varies considerably).
VIII-1
-------
TABLE VIII-1
WORLD BAUXITE RESERVES, 1972
(Thousand Long Tons)
Country
United States
Australia
France
Greece
Guinea, Republic of
Guyana
Jamaica
Surinam
Other Free World
Communist Countries
(Except Yugoslavia)
World Total
Grade
(%AI203)
50
50
58
54
54
58
50
58
55
50
Quantity
45,000
4,500,000
60,000
150,000
4,000,000
100,000
800,000
600,000
4,000,000
700,000
Percent of
Total
0.3
29.8
0.4
1.0
26.8
0.7
5.4
4.0
26.8
4.6
15,000,000'
100.01
1. Totals may not add because of independent rounding.
Source: Commodity Data Summaries, Bureau of Mines, 1973
The mined bauxite is generally beneficiated in a simple process involving
crushing, grinding and washing although more complex processes such as gravity
separations and flotation are used sometimes. The object of beneficiation is to
reduce the amount of waste silica as much as possible. Finished beneficiated
bauxite is usually dried before shipment to alumina plants for the further steps
in producing alumina.
Bauxite is also often calcined before it is used to manufacture refractory
shapes.
3. Water Use
Water use in bauxite ore mining and processing has not been tabulated in the
Bureau of Census data. However, since there are only a few operations, the
industry is not an important discharger of water-borne pollutants.
In the washing operation the primary effluent problem would probably be
the control of suspended solids. The major water problem in the aluminum indus-
try is in the handling, discharge and storage of the "red mud" resulting from the
production of alumina from bauxite. This was not a part of this study.
VIII-2
-------
4. Products and By-products
The only product of the bauxite mining and milling industry is a washed,
sized, and dried bauxite ore which is the feed to alumina production for the
production of aluminum metal or for other uses.
No by-products are associated with the bauxite mining industry.
C. INDUSTRY OVERVIEW
1. Types of Firms
Until 1940 the Aluminum Company of America (Alcoa) was the only pri-
mary aluminum producer and bauxite refiner in the United States. The domestic
bauxite refining industry presently consists of only five large corporations, all of
which are fully integrated from bauxite mining through to, and including, fabrica-
tion of aluminum products. These companies, their dates of entry into alumina
production, and their respective capacities for domestically produced alumina are
shown in Table VIII-2. Of these, Alcoa, Kaiser, and Reynolds are 100% self-
owned, Ormet is owned 50% by Olin Corporation and 50% by Revere Copper
and Brass, Inc., and Martin Marietta Aluminum, Inc., is owned 82.7% by Martin
Marietta Corporation.
TABLE VIII-2
BAUXITE REFINING COMPANIES IN THE UNITED STATES
Alumina Capacity, 1973
Company Date of Entry (Short Tons/Year)
Aluminum Company of America 1888 2,750,000
Kaiser Aluminum & Chemical Corp. 1942 1,935,000
Martin Marietta Aluminum, Inc. 1967 400,000
Ormet Corporation 1958 618,000
Reynolds Metals Company 1942 2,300,000
Total 8,003,000
Source: Arthur D. Little, Inc., estimates.
There are nine bauxite refining plants in the United States. These are dis-
tributed fairly equally among the five large corporations (see Table VIII-3).
Seven of the plants produce alumina primarily for the eventual production of
aluminum metal. The alumina produced at each plant is consumed by the parent
company for that specific purpose.
VIII-3
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TABLE VIII-3
BAUXITE REFINING PLANTS IN THE UNITED STATES, 1972
Company and Plant
Aluminum Company of America
(Alcoa)
Bauxite, Ark.
Mobile, Ala.
Point Comfort, Tex.
Totals
Kaiser Aluminum & Chemical Corp.
Baton Rouge, La.
Gramercy, La.
Totals
Martin Marietta Aluminum, Inc.
St. Croix, V.I.
Ormet Corporation
Burnside, La.
Reynolds Metals Company
Corpus Christ!, Tex.
Hurricane Creek, Ark.
Totals
Grand Totals
Source: Arthur D. Little, Inc., estimates.
Alumina Capacity Date
(Annual Short Tons) Built
375,000 1951-52
1,025,000 1937
1,350,000 1957-58
2,750,000
1,040,000 1941-42
895,000 1959
1,935,000
400,000 1966
618,000 1957
1,460,000 1952-54
840,000 1941
2,300.000
8,003,000
Employment
1,375
650
650
2,675
720
500
1,220
430
430
900
1,000
1,900
6,655
The other two plants, both located in Arkansas, produce a variety of prod-
ucts for industries other than the aluminum metal industry. These two plants
process primarily low-grade Arkansas bauxite using the Combination process.
This process utilizes a sintering step which results in a very pure, low-organic
product. This alumina is purer than that needed for aluminum production and
is also a higher cost product than alumina produced by the American and Modi-
fied Bayer processes and, therefore, may not be competitive as a raw material for
the aluminum reduction industry. Products from these two plants are marketed
world-wide for numerous applications in such areas as chemicals, refractories, and
cements.
VIII-4
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Of the five companies involved in domestic alumina production, Alcoa and
Reynolds can be considered as being involved solely in the aluminum industry.
The other three companies either are diversified or are owned by diversified com-
panies. Kaiser is perhaps the most diversified of the five, with about 80% of its
sales in aluminum but with appreciable interests in refractories, chemicals,
fertilizers, and nickel. A portion of Martin Marietta's aluminum volume is in non-
aluminum products such as titanium and special metals. The parent company,
Martin Marietta Corporation, is a diversified conglomerate with interests in
chemicals, metals, and construction among others. Ormet is not itself diversified
but is owned by two well-diversified companies: Olin Mathieson Chemical Corp.
and Revere Copper and Brass, Inc. Olin's primary interests are in the chemical
industry, while Revere is one of the largest U.S. fabricators of copper, brass, and
aluminum mill products.
2. Types of Plants
Table VIII-4 lists the bauxite mines in the United States together with their
production and estimated number of employees. The major producers by far are
Alcoa and Reynolds, both of which operate mines in Arkansas. Both are large
companies integrated from raw material to finished metallic aluminum and to the
production of alumina for many other uses. The other listed companies produce
bauxite for refractories and for other minor uses such as activated bauxite and
abrasives.
The Bauxite, Arkansas, plant of Alcoa was built in 1951-1952. The plant
was designed to use a combination Bayer process to refine the domestic bauxite
supplied by the nearby mines. It has had a fairly constant production of about
400,000 tons of alumina per year. About 85% of the output of this plant is
marketed around the world for various uses other than the production of
aluminum metal.
The Reynolds Hurricane Creek Plant in Arkansas was built for the Govern-
ment and operated by Alcoa during World War II. Production began in July 1942.
After operating the facilities under lease for three years, Reynolds purchased the
plant in 1949, subject to a modified National Security Clause. The plant employs
the Combination process on locally-mined ore. It uses a small amount of imported
bauxite from company-owned operations in Guyana to bring the silica content of
the overall ore within practicable processing tolerances. Similar to Alcoa's
Bauxite, Arkansas, plant, it has experienced very little growth because of its heavy
reliance on limited domestic reserves. It produces about 800,000 tons of alumina
per year. Also, like Alcoa's plant, it produces only about 15% of its alumina for
eventual use in the production of aluminum metal. It has over 300 customers and
produces more than 30 products.
VIII-5
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TABLE VIII-4
BAUXITE MINES IN THE UNITED STATES
Mine
Bauxite
Benton
Porocil
Arkansas
-
Barbour
Barbour
Eufaula
Southern
Type
O.P.
O.P.
-
O.P.
+ U.G.**
O.P.
O.P.
O.P.
O.P.
O.P.
Location
Bauxite, Arkansas
Benton, Arkansas
Little Rock, Arkansas
Hurricane Creek,
Arkansas
Little Rock, Arkansas
Alabama*
Alabama*
Alabama*
Georgia
(1973)
Tons Ore/Year
750,000
N.A.
N.A.
765,000
25,000
41,967
64,000
35,000
Process
Alumina
Calciner
Calciner
Alumina
Cone.
Mine
Mine
Mine & Cone.
Mine and
Calcine
Employees
1375***
20
29
1000***
17
12
27
36 1974
50
Company
Alcoa
American Cyanamid
Engelhard Min.
and Chem.
Reynolds
Stauffer Chem. Co.
A.P. Green
Harbison Walker
Wilson Snead Co.
General Refractories
* Annual Report 1974 - State Div. Mines
*Reynolds — U.G. mining production about 10% or 76,OOOT/year will be discontinued Nov. 1975
O.P. production will continue
^Includes employment in bauxite refinery.
-------
Each alumina plant, in our opinion, is utilizing the best known technology
available for the particular ore it is processing. Efficiencies range from 70 to 90%
recovery of the alumina from the bauxite depending on the difficulty of the ore.
U.S. production of crude bauxite in the last several years has been as
follows:
Thousands of Long Tons
(Dry Equivalent)
Year Alabama & Georgia Arkansas Total
1968 83 1,582 1,665
1969 88 1,755 1,843
1970 213 1,869 2,082
1971 207 1,781 1,988
1972 319 1,493 1,812
About 90% of the bauxite mined is used for alumina production, as can be
seen from the figures for crude and processed bauxite consumed in 1972:
Thousands of Long Tons
Type (Dry Equivalent)
Crude 1,748 (for alumina)
Dried 18
Activated 7
Calcined _178_
Total 1,950
The 1972 Census of Mineral Industries has summarized the general statistics
for bauxite and other aluminum ores as follows:
Number of Establishments = 10
Number with 20 or More Employees = 5
Number of Employees = 500
Number of Employees in Production = 300
D. FINANCIAL PROFILES
Financial data for the three major primary aluminum producers are given in
Tables VIII-5, VIII-6, and VIII-7. Financial profiles for the two largest, Alcoa and
Reynolds, are given in Appendix A.
VIII-7
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TABLE VIII-5
REFERENCE DATA ON
MAJOR PRIMARY ALUMINUM PRODUCERS
Percent Change in Earnings
Due to Aluminum price change
Reported Income Tax Rate
1971
1970
Estimated Breakdown of Revenue
Primary
Fabrication
Other Sales
All Other, n.e.c.
Alcoa
high
32%
40%
10- 15%
65 - 70%
10-15%
5%
100%
Kaiser
med. — high
31%
31%
5-10%
60 - 70%
5- 10%
23 - 29%
100%
Reynolds
high
nil
32%
23 - 27%
62 - 66%
10- 12%
100%
Note: While reasonable care was taken in compiling this data and presenting it in as con-
sistent a fashion as is possible, we cannot guarantee absolute comparability from one
company to the next, due to differences in the nature of earnings, and differences in
their accounting for certain balance sheet and income statement items. To the best of
our knowledge the above data present an accurate and meaningful basis for selective
comparisons.
The information presented above has been obtained from company annual reports
and SEC filings, statistical services, financial manuals, and other sources believed to be
reliable, but its accuracy and completeness are not guaranteed.
VIII-8
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TABLE VIII-6
FINANCIAL PERFORMANCE DATA ON MAJOR PRIMARY ALUMINUM PRODUCERS
<
Company
Alcoa
1971
1970
1969
1968
Reynolds
1971
1970
1969
1968
Kaiser
1971
1970
1969
1968
Net Sales
for the Year
1,441.2
1,522.4
1,545.2
1,352.8
1 ,093.2
1,035.2
1,012.7
843.8
904.5
880.9
925.8
850.1
Operating
Income Before
Depreciation
251.2
323.5
330.8
308.7
114.6
171.3
173.3
121.5
104.2
122.3
148.9
138.2
Net After-Tax
Earnings (before
Extraordinary
Items)
mill ion
55.30
114.30
122.40
104.70
5.89
47.46
57.07
31.09
27.00
50.80
60.20
52.00
Operating Net After-Tax Ratio of
Ratio: Return on Capital Expenditures to
Capital Op. Income Stockholder's Gross Plant at
Expenditures Sales -f Equity Year End
D
199.4
284.9
247.3
177.2
av. 20.7% av. 8.8% av. 8.6%
79.7
112.7
128.6
127.4
av. 14.8% av.7.3% av.7.1%
107.4 Includes
121.6 Avg.of
158.1 $37.6/yr.
132.8 Investments
av. 14.5% av. 9.0% av. 9.7%
Note: While reasonable care was taken in compiling this data and presenting it in as consistent a fashion as is possible, we cannot guarantee absolute
comparability from one company to the next, due to differences in the nature of earnings, and differences in their accounting for certain
balance sheet and income statement items. To the best of our knowledge the above data present an accurate and meaningful basis for selective
comparisons.
The information presented above has been obtained from company annual reports and SEC filings, statistical services, financial manuals, and
other sources believed to be reliable, but its accuracy and completeness are not guaranteed.
-------
TABLE VIII-7
SELECTED FINANCIAL DATA: MAJOR U.S. ALUMINUM COMPANIES
1971
Sales (in millions of dollars)
Pre-Tax Profit
(in millions of dollars)
Net Income
(in millions of dollars)
Cash Flow from Operations and
Holdings (in millions of dollars)
Increase (Decrease) in debt
Dividends Paid
Current Ratio: Assets/Liabilities
Net Working Capital
Capital Expenditures
Long-Term Debt, year end
Equity, year end
Debt v (debt and equity)
Percent based on book values
Scheduled Dept Repayment
(1972 payment excluded from
long-term debt at year end 1971)
1972
1973
1974
1975
1976
Long-Term Financing
(in millions of dollars, 1971)
Employment, year end
Alcoa
1,462.1a
76.7
52.0
187.9
71.5
41.2
3.2
520.0
199.4
954.0
1,268.6
43.0
21.9
40.3
28.0
42.0
36.3
203.9
44,064
Kaiser
Aluminum
904.5
39.2
27.0
69.0
85.9
1.6
189.0
589.0
631.6
48.1
35.9
31.7
31.3
33.1
53.1
123.1
24,500d
Reynolds
1,106.5a
5.5
5.9b
72.9
70.3
18.0
3.2
408.0
79.7
878.0C
699.1
55.5
50.4
64.1
52.7
66.7
92.9
122.0
35,900
a. Includes other revenues and/or income, as reported.
b. $47.5 for 1970.
c. Includes S125.0 of convertible debentures.
d. Estimated.
Note: While reasonable care was taken in compiling this data and presenting it in as con-
sistent a fashion as is possible, we cannot guarantee absolute comparability from one
company to the next, due to differences in the nature of earnings, and differences in
their accounting for certain balance sheet and income statement items. To the best of
our knowledge the above data present an accurate and meaningful basis for selective
comparisons.
The information presented above has been obtained from company annual reports
and SEC filings, statistical services, financial manuals, and other sources believed to be
reliable, but its accuracy and completeness are not guaranteed.
VIII-10
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E. PRICE EFFECTS
1. Determination of Prices
It is very difficult to determine a market price for either bauxite or alumina
since both are sold almost exclusively to company-owned plants and, therefore,
are not readily available on the open market. However, alumina is becoming more
available, one reason being that economies of scale require alumina plants to be
very large in order to be competitive. This need for large plants has brought with
it a need to form worldwide consortia to exploit new bauxite deposits and
produce alumina. The participation of different aluminum producers and of inter-
ests other than aluminum producers in alumina investments has led to a greater
readiness on the part of alumina plants to sell their product under long-term con-
tracts to non-participants in the venture.
The two Arkansas plants produce a variety of products, each with its own
market price, which tends to make price determination very complicated.
Table VIII-8 shows the domestic mine production of bauxite and the f.o.b.
value in dollars per short ton for a ten year period. Also shown are similar data
for Arkansas mine production of bauxite. The Arkansas values are considered to
be the most accurate representation of the f.o.b. cost of domestic bauxite to an
alumina plant since 90% of the domestic bauxite production and essentially all of
the domestic supply for alumina production in 1971 came from Arkansas mines.
TABLE VIII-8
DOMESTIC MINE PRODUCTION OF BAUXITE
Quantities
(Thousand Long Tons)
Arkansas Total U.S.
Year
1962
1963
1964
1965
1966
1967
1968
1969
1970'
1971
1972
1. Includes data for Oregon and Washington.
Source: Minerals Yearbook. (U.S. Bureau of Mines.)
Total Value
(Thousand Dollars)
Arkansas Total U.S.
Average Value f.o.b.
(Dollars/Long Ton)
Arkansas Total U.S.
,270
,478
,562
,593
,718
1,571
1,582
1,755 1
1,869 2
1,781 1
1,624 1
,369
,525
,601
,654
,796
,654
,665
,843
>,082
,988
,812
14,606
16,701
17,431
17,974
19,439
18,269
23,058
24,706
26,293
24,979
21,010
15,609
17,234
17,875
18,632
20,095
19,079
23,752
25,725
30,070
28,543
23,238
.50
.30
.16
.28
.31
.63
1.58
1.08
1.07
1.03
2.86
11.40
1
1
1
1
1
.30
.16
.26
.19
.54
14.27
13.96
14.44
14.36
12.82
VIII-1
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2. Costs of Production
The cost of producing a washed and dried bauxite ready for alumina produc-
tion is quite variable and depends to a large extent on the type of deposit being
mined and in particular on the stripping ratio or the amount of waste that must
be moved to reach the ore.
Direct mining costs for bauxite mines outside the United States are esti-
mated to vary from $1.65 to $4.52 per short ton.
For a typical U.S. open pit mining operation producing about 750,000 tons
of bauxite per year with a 4:1 stripping ratio and with sizing, washing, and drying
of the bauxite, we estimate the cost as follows:
S/ton
Stripping 1.25
Mining .30
Hauling .70
Road Maintenance .05
Overhead & General .35
Royalty .25
Washing & Sizing .95
Drying 1.3Q
Total $5.15
Included in the cost for each item is amortization or depreciation of the
investment.
3. Potential Constraints on Financing Additional Capital Assets
The aluminum industry is probably one of the most, if not the most, capital
intensive manufacturing industries in the world. The capital expenditure pro-
grams as well as the long-term financing of the large aluminum producers have
been massive. In general, aluminum properties have been financed largely with
long-term mortgages secured by their assets. The companies have benefited in
the early days from various forms of government financial assistance (both
domestically and internationally); more recently in the U.S. community indus-
trial revenue bond financing has been utilized by these companies.
Aluminum companies typically have relatively high debt-to-equity ratios.
The companies thus are highly leveraged financially and, depending on the par-
ticular circumstances, may or may not be in a position to attract any additional
capital at any given moment.
VIII-12
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F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the guide-
lines set forth by the Effluent Guideline Document for the bauxite ore mining
industry. These guidelines are:
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial discharges by 1977.
• Best Available Technology Economically Available (BATEA) -
to be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to
all new facilities that discharge to navigable waters constructed
after the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the bauxite ore mining industry into only one sub-
category as follows:
1. Mines.
1. Effluent Guidelines
For the mines sub-category, which includes only open-pit mines in this case,
the recommended parameters and guidelines for BPCTCA are given in
Table VIII-9. The BATEA guidelines are shown in Table VIII-10.
2. Costs of Compliance
The guidelines contractor has estimated the costs of compliance for both
BPCTCA and BATEA guidelines. These costs for bauxite ore mining are sum-
marized in Table VIII-11 for nine companies — two large multi-unit companies
that produce alumina, and seven small producers of refactory bauxite. The annual
costs include charges for amortization, which in turn include an interest cost (at
8%), based on a useful life of 20 years for facilities and 10 years for equipment.
In this bauxite ore category of the mineral industry about 20% of the total
annual cost is fixed cost (amortization plus interest charges in this case).
In Table VIII-12, we have estimated the incremental cost that Company 9
would have to add to its final product (alumina) because of compliance with both
BPCTCA and BATEA guidelines. These are added costs for the particular com-
pany unit that must treat its mine effluent.
VIII-13
-------
TABLE VIII-9
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - BAUXITE MINES
(ACID OR ALKALINE MINE DRAINAGE)
Concentration (mg/C) in Effluent
Parameters
PH
TSS
Al
Fe
Zn
"Value in pH units
Source: Development
30-day Average
6* to 9*
20
0.60
0.50
0.10
Document
24-hour Maximurr
6* to 9*
30
1.2
1.0
0.20
TABLE VIII-10
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR ALKALINE MINE DRAINAGE
BATEA - BAUXITE MINES (ACID OR ALKALINE MINE DRAINAGE)
Concentration (mg/C) in Effluent
Parameter
pH
TSS
Al
Fe
Zn
*Value in pH units
Source: Development
30-day Average
6* to 9*
20
0.5
0.3
0.1
Document
24-hour
Maximum
6* to 9*
30
1.0
0.6
0.2
VIII-14
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TABLE VIII-11
BAUXITE MINING - COSTS FOR IMPLEMENTATION
OF BPCTCA AND BATEA STANDARDS
Costs (Thousands $)
Company No.
1-8
9
Total Industry
Thousand
Metric Tons
Ore/Year
1,150
750
1,900
BPCTCA
Investment
0
383.2
383.2
Annual
0
224.8
224.8
BATEA
Investment
0
383.2
383.2
Annual
0
224.8
224.8
TABLE VIII-12
COST FOR COMPANY NO. 9 PER TON OF AI2O3 PRODUCT
AI203 Produced (1972)
BPT Cost Per Year
Incremental Cost Per Long Ton
% Increase in Product Value*
(Same for BAT)
Total Production Company No. 9
Cost Per Long Ton of Total Production
341,000 Long Tons
$224,800
$0.66
5.2
2,500,000 Long Tons
$0.09
*Approximate Average Value AI203 = $12.82 Per Long Ton (U.S.B.M. - 1972)
3. Basis for Analysis
For the bauxite industry, the basis of analysis is the same as that discussed
in section I of this report.
4. Levels of Impact
For the impact analysis of bauxite the same impact levels are used as those
previously discussed in section I of this report.
VIII-15
-------
5. Best Practical Control Technology Currently Available (BPCTCA)
In Table VIII-13, we have summarized the costs incurred to comply with the
BPCTCA guidelines and data on tonnage, number of employees, added operating
costs, and added investment costs.
TABLE VIII-13
DATA AND COSTS FOR MEETING BPCTCA AND BATEA
GUIDELINES - BAUXITE ORE MINING INDUSTRY (1972)
Impact Group
Thousands M.T Ore/Yr
% of Industry-Ore Basis
Thousands M.T. Alumina
Equivalent in Ore
Number of Employees
% of Employees
Added Investment for Facilities (S)
as % of Annual Expenditure
as % of Total Investment
Added Annual Operating Cost (S)
S per ton Ore
S per ton Alumina Equivalent
"A"
1,150
60.5
518
"B"
750
39.5
341
0
0
300
60.0
0
0
0
0
0
0
200
40.0
383,200
10.6
2.0
224,800
0.30
0.66
0
0
0
0
0
0
0
0
Total
Industry
1,900
100
859
500
100
383,200
10.6
0.81
242,800
0.12
0.26
a. Price and Production Effects. Sixty-one percent of the industry would
not be directly affected by the guidelines. For the 39.5% that would be directly
affected, the product cost increase of SO.66 per ton is small and could readily be
either passed on or absorbed under normal circumstances. The percentage increase
of SO.66 per ton on a S12.82-per-ton product (1972) is 5.27f. The cost increase
on the whole industry is 2.07&.
b Financial Effects. The added capital investment required for the im-
pacted group of the industry is only 11% of the estimated annual capital expendi-
tures and only 2.0T of the total invested capital. The percentage of annual capital
expenditures is calculated on the assumption that investment for pollution con-
trol will be completed in one year. In actuality, however, this investment would
likely be made over a period of several years so the effect would actually be less
than indicated.
VIII-16
-------
c. Balance of Payment Effects, Employment Effects, and Community
Effects. Consideration of the price and production, and of the financial effects
indicates no output will be curtailed or plants shut down in the bauxite ore min-
ing industry because of BPCTCA effluent limitations. As a result there will be no
employment or community effects and no balance of payments effects.
6. Best Available Technology Economically Available (BATEA)
For meeting BATEA guidelines, the effects and impacts are the same as
those for BPCTCA (summarized in Table VIII-13). There will be no significant
impact on the industry or on any group in meeting BATEA standards.
7. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new bauxite mines the
NSPS standards should be identical with BATEA limitations.
The Effluent Guideline Development Document provided no cost estimates
for the NSPS analysis. Therefore, any statements about the effect of the NSPS
requirement on the construction of new plants within the U.S. must necessarily
be qualitative.
However, it can be said with some degree of confidence that the costs for a
"grass roots" plant to meet the NSPS standards are no more than the costs for an
existing plant in the impacted group (group "B") to meet the BPCTCA and BATEA
recommended effluent limitations, because in the construction of a new plant, in-
process modifications often can be more efficient and economical than add-on
treatment technologies for existing plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. bauxite ore mining industry to expand domestic
production capacity through the construction of new plants.
G. LIMITS OF THE ANALYSIS
The limits of the analysis for bauxite are the same as discussed previously.
VIII-17
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IX. FERROALLOYS (SIC 1061)
A. INTRODUCTION
The Ferroalloy Ores Industry includes establishments engaged primarily in
mining, milling, or otherwise preparing ferroalloy ores.
The general group of metals commonly called ferroalloys includes chro-
mium, manganese, molybdenum, tungsten, vanadium, nickel, and silicon.
In this section we have excluded vanadium that is produced as a by-product
of uranium ores in the Colorado Plateau area. Vanadium produced as a mines
major product is included in this ferroalloy section.
No chromium or manganese is mined in the United States. The mining of
quartz, quartzite, and sandstones as a source of silicon is a domestic industry but
is not considered as a metallic ore mining industry and is not a part of this study.
We are therefore concerned here with nickel, tungsten, molybdenum, and (in
part) vanadium.
B. INDUSTRY DESCRIPTION
1. Nickel
Hanna Mining Company, in Oregon, is the sole U.S. producer of ferronickel.
Hanna operates an open pit mine and a smelter operation to produce ferronickel.
In 1973, this company mined 2,125,000 tons of lateritic ore and employed 442
people.
Hanna's operation at Riddle produces about 13,000 tons of nickel per year
as ferronickel. No water is used for milling and only a small amount for cooling
purposes and general use.
2. Tungsten
In 1971 the Bureau of Mines reported 66 active tungsten mines in the United
States, but the total annual production from 59 of them was less than 1000
metric tons. Most of the production comes from Union Carbide's California
operation. The small properties operate intermittently and are very difficult to
locate and contact.
Commercially important tungsten ores are scheelite (CaWO4) and the wolfra-
mite series: wolframite ((Fe,Mn) WO4), ferberite (FeWO4), and huebnerite
(MnWO4). Most tungsten ores are mined underground in small mines and are
IX-1
-------
processed by gravity concentration methods such as jigging, tabling and heavy
media separation. In some cases flotation is also used. Concentrates sometimes are
treated with acid to improve the grade and reduce the phosphorus content.
The tungsten mining and milling industry is rather small. In 1973, for
example, 3,500 tons of tungsten in concentrates was produced and shipped with
over 90% coming from Union Carbide in California and AMAX in Colorado
(produced as a by-product from molybdenite mining).
The tungsten mining companies are listed in Table IX-1.
3. Molybdenum
In the United States molybdenum is recovered through the processing of
molybdenum ores and also as a by-product or even a co-product from the large
open pit copper mines in the southwestern states.
There are two major operating molybdenum mines today: one in Colorado
(AMAX) and one in New Mexico (Moly Corp.). Information on these is listed in
Table IX-2, while production information is listed in Table IX-3.
The total production of molybdenum concentrates in 1973 was 115,859,000
pounds of contained molybdenum (approximately equal to 100,000 tons of
molybdenite - MoS2). Of this amount 58% was from the two molybdenum mines
and the remaining 42% was from approximately 12 by-product producers.
a. Reserves
The United States has reserves of about 6.3 x 109 pounds of molybdenum or
about 60% of the estimated world total. It is estimated that 80% of these reserves
are in deposits in Colorado and New Mexico; these are deposits in which
molybdenum is the principal product. The remaining 20% occurs in the porphyry
copper ores in Arizona, New Mexico, Nevada and Utah. Molybdenum is produced
as a by-product from these latter ores.
b. Mining and Processing
Molybdenite ores are mined by both underground and open pit methods.
The AMAX operation in Colorado produces most of its ore by block caving, an
underground technique in which large blocks of ore are undercut to cause them to
cave. Caved and broken ore is withdrawn from underneath in a series of ore passes
and haulage systems. AMAX has also a small open pit operation at Climax that
uses conventional equipment. The Moly Corp. mine is entirely an open pit mining
operation.
IX-2
-------
TABLE IX-1
U.S. TUNGSTEN MINING COMPANIES
Company
Union Carbide
Bullion Monarch
Tungsten Prop. Ltd.
Ranchers Expl.
Union Carbide
Rawhide Mining Co.
All mines are underground.
Source: ADL compilation from published data.
Location
Bishop, Calif.
Nevada
Nevada
North Carolina
Austin, Nevada
Nevada
Tons Ore
Per Year
720,665
240,000
120,000
N.A.
Employees
N.A.
20
7
N.A.
- New Planned Tungsten
20
N.A.
Comments
Moly By-product
Custom Milling
-
On Standby
Not Operating
Mine —
_
Company
TABLE IX-2
MOLYBDENITE MINES IN U.S.
(1973)
Mine
Type
Location
Tons Ore
Per Year
Employees
Climax Molybdenum
Climax O.P. Colorado
U.G.
Moly Corp. Questa O.P. New Mexico
Source: ADL compilation from published data.
153,506
13,142,788
5,351,008
2,351
410
-------
TABLE IX-3
U.S. PRODUCTION OF MOLYBDENUM CONCENTRATES
(Thousands of Pounds of Contained Molybdenum)
Year Production
1966 90,532
1967 88,930
1968 93,447
1969 99,807
1970 111,352
1971 109,592
1972 112,138
1973 115,859
1974 (estimated) 125,000
Source: U.S. Bureau of Mines - Mineral Yearbooks
TABLE IX-4
PRINCIPAL U.S. PRODUCING COMPANIES
(Production in Thousands of Pounds Contained Molybdenum)
Company 1971 1972 1973
American Metal Climax 61,273 59,832 56,194
Anamax Mining 1,208 2,119 3,244
ASARCO 1,659 2,031 814
Bagdad (Cyprus) 459 418 500
Miami Copper (Cities Service) 208 164 200
DuvalCorp* 5,485 3,503 7,160
Duval Sierrita 9,846 11,677 14,297
Inspiration 230 28 105
Magma Copper 3,165 4,954 4,542
MolyCorp. 10,062 10,975 10,866
Kennecott 13,353 13,980 14,288
Pima Mining 1,429 1,021 1,876
Source: American Bureau of Metal Statistics.
IX-4
-------
These molybdenum ores commonly contain about 0.5% MoS2 and are
treated by the flotation process to produce relatively pure molybdenite (MoS2)
concentrates. Molybdenite concentrates are further treated (usually away from
the mine site) to produce the various molybdenum compounds, alloys, or metal as
desired.
c. Water Use
No separate or specific information is readily available on water use by the
two molybdenum mines. Both companies have taken measures to control efflu-
ents to meet BPCTCA water quality standards but will incur additional costs to
meet BATEA standards in their milling operations.
d. Employment
The total employment in this industry segment is 2,761, as indicated in
Table IX-2.
4. Vanadium
Only Union Carbide's operation in Arkansas, near Hot Springs, mines and
processes a straight vanadium ore. The ore occurs as vanadiferous clays with an
average grade of about 1% V2O5. The operation, which started in 1965, consists
of two open pit mines and a 1600-ton-per-day processing plant where a roasting-
leaching-precipitation process is used to produce a black, powdered vanadium
oxide. This product is shipped in steel drums to a plant in Ohio for further
processing.
Mining is carried out with conventional open pit equipment. The region is
subject to high annual rainfall and good surface drainage around the pits is
essential.
Reserves in this region have not been reported but there are said to be some
minor occurrences of similar ore that may eventually be mined.
C. INDUSTRY OVERVIEW
The firms in the ferroalloy mining and milling industry vary from small
family type operations to large integrated corporations.
Hanna Mining Company, the only U.S. company to produce ferronickel, is a
large iron ore producer with operations and interests in iron ore mining, con-
centrating and pelletizing in the United States, Canada, Australia, and Brazil. The
company also produces manganese and trades in ores and concentrates around the
world.
IX-5
-------
Firms in the tungsten mining and processing business consist of one major
company and a series of small companies about which information is difficult to
obtain. The major corporation, Union Carbide Corp., is a large integrated com-
pany that produces uranium, vanadium, tungsten, molybdenum, manganese, chro-
mium, and copper. It has operations in Arkansas, California, Colorado, and
Wyoming. Union Carbide is the owner and operator of the Arkansas vanadium
mine. The company is also engaged in the exploration for and development of
mineral resources.
Climax Molybdenum and Moly Corp. are the major producers of molyb-
denum. Climax Molybdenum is a 100% owned subsidiary of AM AX, which is a
very large integrated corporation engaged in the world-wide exploration and
development of mineral resources. AM AX produces aluminum, copper, nickel,
cobalt, lead, zinc, iron ore, coal, potash and various chemicals and specialty
metals.
Molybdenum Corporation of America is smaller than AMAX. It produces
molybdenum, rare earths, columbium, tungsten, rhenium and boron, and also
explores for, buys and sells ores and concentrates. Its U.S. operations are in
California, Colorado and New Mexico.
For the ferroalloy group as a whole, the Census of Mineral Industries gives
the following data:
Number of Establishments = 42
Number of Establishments
with over 20 Employees = 14
Number of Employees = 3,700
Number of Employees in Production = 2,800
These figures very likely include the manufacture of ferroalloys from im-
ported ores and concentrates and therefore probably are not representative of just
the mining and processing of U.S. ores.
D. FINANCIAL PROFILES
Financial profiles for three of the major producers of ferroalloys, AMAX,
Hanna, and Moly Corp., are given in Appendix A.
IX-6
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E. PRICE EFFECTS
1. Determination of Prices
a. Nickel
In 1949-1950 the price of nickel was about 75i per pound but by 1968 had
increased to about $1.00 per pound. This increase was caused by the necessity of
mining lower-grade sulfide ores and more lateritic ores to supply the demand.
Since then the price has been adjusted to approximately parallel the inflation
trend and cathode nickel is now $2.01 per pound at the major producers' plants.
b. Molybdenum
Prices of molybdenum products are quoted in dollars per pound of con-
tained molybdenum. Usually the price for processed material depends upon the
purity of the product and the form in which it is sold. Prices for particular
products also vary slightly according to whether they are briquetted or packaged
in bags or cans.
The price of molybdenum products has fluctuated very little in the past 25
years, but prices (in constant dollars) have followed a slight upward trend,
reflecting the increased demand and relatively small number of supply sources.
They reflect also a decline in the average grade of the ore mined. The most recent
price increases by all major producers established an f.o.b. plant price of $2.43
per pound of contained molybdenum in molybdenite concentrate (May 1975).
The current quoted price of bagged molybdic-oxide and technical-grade
molybdic-oxide in cans is $2.69 per pound of contained molybdenum. Ferro-
molybdenum is being sold at $3.25 per pound of contained molybdenum.
c. Tungsten
Government stockpiling of tungsten, and the potential of mainland China to
supply substantial quantities of tungsten to Western Europe were the principal
reasons for erratic fluctuations of world prices for tungsten concentrate from
1948 through 1965.* However, world prices have been relatively stable since
then, because the U.S. Government has sold tungsten concentrate at a fixed price
of $43 per short-ton unit of WO3, equal to $2.71 per pound of contained
tungsten. In terms of 1968 dollars, the price of tungsten concentrate is expected
*ln constant 1968 dollars.
IX-7
-------
to remain relatively stable until 1980-85, unless the U.S. Government changes its
sales policy. Present prices are quoted as $84.21 per short ton unit of WO3.
Hydrogen-reduced tungsten metal is quoted at $10.21-12.01 per pound.
d. Vanadium
From 1949 to 1951 the average annual price of technical grade vanadium
pentoxide (V2O5) was about $3.00 per pound of contained V2OS. From that
point they declined to as low as $1.70 per pound (in 1969). However, they have
increased since then to, at present May 1975, $2.45-3.06 per pound.
Ferrovanadium prices have also increased from $2.90 per pound of con-
tained vanadium in 1968 to a present quotation of $6.35 per pound for standard
grade and $5.10 per pound for the "Carvan" and Ferrovan grades.
2. Costs of Production
In the ferroalloy mining and processing business as described above, there are
a great variety of mining and processing systems with very diverse and different
costs.
The larger operations such as Climax Molybdenum, Moly Corp. and Union
Carbide will have costs similar to those estimated for copper, lead, and zinc mines
and mills since they operate similar facilities.
Costs for the smaller operations can not be estimated.
3. Constraints on Financing Additional Investments
For the large companies in the ferroalloy business the constraints will be
similar to those discussed in Chapter I.
The smaller companies have very little ability to finance any additional
investment.
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the
guidelines set forth by the Effluent Guideline Document for the ferroalloy ore
mining and processing industry. These guidelines are:
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial dischargers by 1977.
IX-8
-------
• Best Available Technology Economically Available (BATEA) - to
be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the ferroalloy ore mining and processing industry into the
following groups:
a. Mines - producing over 5000 metric tons/yr.
b. Mines and Mills — processing less than 5000 metric tons/year by
methods other than leaching.
c. Mills — processing over 5000 metric tons/year — physical processing.
d. Mills — processing over 5000 metric tons/yr — flotation.
e. Mills - processing ores by leaching.
For all these categories, effluent guidelines have been recommended and
implementation costs estimated for these operations that do not meet the guide-
lines.
1. Effluent Guidelines
The recommended parameters and guidelines for BPCTCA for category "a"
(mines over 5000 metric tons/yr) are given in Table IX-5. The guidelines for
BATEA are given in Table IX-6.
The recommended parameters and guidelines for BPCTCA for the category
"b" (mills — less than 5000 metric tons/yr) are given in Table IX-7 and those for
BATEA in Table IX-8.
The recommended parameters and guidelines for BPCTCA for category "c"
(mills - over 5000 metric tons/yr - physical processing) are given in Table IX-9
and those for BATEA in Table IX-10.
The recommended parameters and guidelines for BPCTCA for category "d"
(mills - over 5000 metric tons/yr - flotation) are given in Table IX-11 and those
for BATE A in Table IX-12.
IX-9
-------
TABLE IX-5
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA-FERROALLOY-ORE MINES
PRODUCING OVER 5000 M.T./YR
Concentration (mg/2)
in Effluent
Parameter 30-Day Average 24-Hour Maximum
pH 6* to 9* 6* to 9*
TSS 20 30
As 0.5 1.0
Cd 0.1 0.2
Cu 0.05 0.1
Pb 0.10 0.2
Zn 0.5 1.0
*Value in pH units.
Source: Development Document.
TABLE IX-6
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BATEA-FERROALLOY-ORE MINES
PRODUCING OVER 5000 M.T./YR
Concentration (mg/8)
in Effluent
Parameter
pH
TSS
As
Cd
Cu
Mo
Pb
Zn
*Value in pH units.
Source: Development Document.
IX-10
30- Day Average
6* to 9*
20
0.5
0.05
0.05
1.0
0.10
0.1
24- Hour Maximum
6* to 9*
30
1.0
0.1
0.1
2.0
0.2
0.2
-------
TABLE IX-7
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA-FERROALLOY-ORE MINES AND MILLS TREATING LESS THAN 5,000
METRIC TONS (5,512 SHORT TONS) PER YEAR
BY METHODS OTHER THAN LEACHING
Concentration (mg/£)
in Effluent
Parameter 30-Day Average 24-Hour Maximum
pH 6* to 9* 6* to 9*
TSS 30 50
*Value in pH units.
Source: Development Document.
TABLE IX-8
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BATEA-FERROALLOY-ORE MINES AND MILLS TREATING LESS THAN 5,000
METRIC TONS (5,512 SHORT TONS) PER YEAR
BY METHODS OTHER THAN LEACHING
Concentration (mg/2)
in Effluent
Parameter 30-Day Average 24-Hour Maximum
pH 6* to 9* 6* to 9*
TSS 30 40
*Value in pH units.
Source: Development Document.
IX-11
-------
TABLE IX-9
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA-FERROALLOY-ORE MILLS TREATING MORE THAN 5,000
METRIC TONS (5,512 SHORT TONS) PER YEAR BY PHYSICAL PROCESSING
Concentration (mg/S)
in Effluent
Parameters
pH
TSS
As
Cd
Cu
Zn
30- Day Average
6* to 9*
20
0.5
0.05
0.05
0.1
24-Hour Maximum
6* to 9*
30
1.0
0.1
0.1
0.2
*Value in pH units.
Source: Development Document.
TABLE IX-10
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BATEA-FERROALLOY-ORE MILLS TREATING MORE THAN 5,000
METRIC TONS (5,512 SHORT TONS) PER YEAR BY PHYSICAL PROCESSING
Concentration (mg/2)
in Effluent
Parameters 30-Day Average 24-Hour Maximum
pH 6* to 9* 6* to 9*
TSS 20 30
As 0.5 1.0
Cd 0.05 0.1
Cu 0.05 0.10
Mo 1.0 2.0
Zn 0.1 0.2
*Value in pH units.
Source: Development Document.
IX-1
-------
TABLE IX-11
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA-FERROALLOY-ORE MILLS PROCESSING OVER 5000 M.T./YR
USING FLOTATION PROCESS
Concentration (mg/£)
in Effluent
pH
TSS
COD
Cyanide
As
Cd
Cu
Zn
6* to 9
20
50
0.05
0.5
0.05
0.05
0.1
Parameters 30-Day Average 24-Hour Maximum
6* to 9*
30
100
0.1
1.0
0.1
0.1
0.2
*Value in pH units.
Source: Development Document.
TABLE IX-12
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BATEA-FERROALLOY-ORE MILLS PROCESSING OVER 5000 M.T./YR
USING FLOTATION PROCESS
Concentration (mg/8)
in Effluent
Parameters 30-Day Average 24-Hour Maximum
6* to 9*
30
50
0.04
1.0
0.1
0.1
2.0
0.2
*Value in pH units.
Source: Development Document.
IX-13
pH
TSS
COD
Cyanide
As
Cd
Cu
Mo
Zn
6* to 9*
20
25
0.02
0.5
0.05
0.05
1.0
0.1
-------
The recommended parameters and guidelines for BPCTCA for category "e"
(mills — leaching) are given in Table IX-13 and those for BATEA in Table IX-14.
2. Costs of Compliance
The guidelines contractor has estimated the investment costs and annual
operating costs of compliance for both BPCTCA and BATEA guidelines. These
costs for ferroalloy ore mining and milling are summarized in Table IX-15 by
category and in Table IX-16 by companies. The annual costs include charges for
amortization. The amortization charge in turn includes an interest cost (at 8%),
and is based on a useful life of 20 years for facilities and ten years for equipment.
In this ferroalloy ore category of the mineral industry about 20% of the total
annual cost is fixed cost (amortization plus interest charges).
In Table IX-17 we have estimated the incremental cost added to the five
companies' final product due to compliance with both BPCTCA and BATEA
guidelines. These are added costs for the particular company unit where effluent
treatment is required. Four companies are large multi-unit companies. The other
category is called small companies of which there are approximately 15.
3. Basis for Analysis
The analysis of economic impact will be carried out in the same way as
described in Section I.
4. Levels of Impact
The same impact levels or groups are used in this analysis as those described
in Section I.
5. Best Practical Control Technology Currently Available (BPCTCA)
In Table IX-18 we have summarized the costs of complying with the
BPCTCA guidelines. Shown in Table IX-18 for the three impact groups and for
the total industry are the data on tonnage and number of employees, the added
operating costs, and the added investment costs as a percentage of capital
expenditures and total investment.
As shown in the table one large multi-unit company (group "B") is impacted
to some extent and the small company group (group "C") is severely impacted.
IX-14
-------
TABLE IX-13
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA-FERROALLOY-ORE MILLS
USING LEACHING PROCESS
Concentration (mg/C)
in Effluent
Parameters
pH
TSS
Ammonia
As
Cd
Cu
Zn
*Value in pH units.
Source: Development Document.
TABLE IX-14
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BATEA-FERROALLOY-ORE MILLS
USING LEACHING PROCESS
Concentration (mg/8)
in Effluent
30- Day Average
6* to 9*
20
30
0.5
0.05
0.05
0.1
24- Hour Maximum
6* to 9*
30
60
1.0
0.1
0.1
0.2
Parameters 30-Day Average 24-Hour Maximum
pH 6* to 9* 6* to 9*
TSS 20 30
Ammonia 5 10
As 0.5 1.0
Cd 0.05 0.1
Cr 0.05 0.1
Cu 0.05 0.1
Mo 1.0 2.0
Zn 0.1 0.2
*Value in pH units.
Source: Development Document
IX-15
-------
TABLE IX-15
FERROALLOY ORES - COSTS OF COMPLIANCE WITH BPCTCA AND BATEA STANDARDS
Costs (Thousands S)
Sub- Category
Mines
Mills- Flotation -
1 000
MT
No. Ore/Year
1-5 20,300
6 20
7 410
over 5,000 M.T./yr.
1 600
2 3,710
3 15,100
Mills- Physical Processing- over 5,000
Mills — Leaching
Mills — Less than 5,
Totals
1 1,620
2 20
1 410
.000 M.T./yr.
1-35 17
15 8
-
BPCTCA
Investment
0
1.1
284.5
0
0
0
M.T./yr.
0
135.4
424.2
0
101.0
946.2
Annual
0
0.2
157.2
0
0
0
0
20.1
463.1
0
24.0
664.6
BATEA
Investment
0
1.1
284.5
0
204.0
734.4
0
1354
486.5
0
125.0
1970.9
Annual
0
0.2
157.2
0
88.9
209.3
0
20.1
488.4
0
48.0
1012.1
TABLE IX-16
COST BY COMPANIES - FERROALLOY
ORES
Costs (Thousands $)
Company
A
B
C
D
II others — small Co
1,000
M.T.
Ore/Year
20
3,710
15,100
410
's 8
BPCTCA
Investment
136.5
0
0
708.7
101.1
Annual
20.3
0
0
620.3
24.0
BATEA
Investment
136.5
204.0
734.4
771.0
125.0
Annual
20.3
88.9
209.3
645.6
48.0
19,248
946.2
664.6
1970.9
1012.1
IX-16
-------
TABLE IX-17
ESTIMATED INCREASE IN COST OF MAJOR PRODUCT TO
MEET BPCTCA AND BATEA GUIDELINES FERROALLOY ORES (1972)
Cost/Unit to Meet Guidelines ($)
Company
A
B
C
D
Small Companies
Product
Tungsten ore
Moly Cone.
Moly Cone.
Vanadium
Pentoxide
Tungsten ore
Amount/Year
20 000 M.T.
10,975,000 Ib*
59,832,000 Ib*
8,000,000 Ib**
8,000 M.T.
BPCTCA
$1.02
—
-
0.078
3.00
BATEA
$1.02
.008
.003
0.081
6.00
'Contained molybdenum
**Estimated
Approximate product values: 1972 1975
Molybdenum Concentrate - FOB - per pound contained molybdenum $ 1.72 $ 2.43
Tungsten Concentrate - FOB - per short ton unit 55.00 84.20
Vanadium Pentoxide— Technical grade — per pound contained V205 1.50 2.45-3.06
IX-17
-------
TABLE IX-18
SUMMARY OF DATA AND COSTS FOR MEETING BPCTCA GUIDELINES
FERROALLOY ORE MINING AND MILLING (1972)
Impact Group
"A"
"B"
"C"
Total
Industry
Thousands M.T. Ore/Yr 20,292 410 28
% of Industry - Ore Basis 97.9 2.0 0.1
Thousands Units Product
Tungsten Ore-M.T. N.A. - 28
Moly Cone. - (Contained Mo) - Ib 70,807 - -
Vanadium Pentoxide - Ib - 8,000 -
Number of Employees 3,530 120 50
% of Employees 95.4 3.2 1.4
Added Investment for Facilities (S) 0
as % of Annual Capital Expenditures 0
as % of Total Invested Capital 0
Added Annual Cost ($) 0 620,300
$ per M.T. of Ore 0 1.51
S per Unit of Product Indicated 0 0.08
708,700 237,500
27.6 238
6.9 33.9
20,730
100
3,700
100
946,200
2.6
0.2
44,300 664,600
1.58 .03
1.58 Negligible
IX-18
-------
(1) Price and Production Effects. As is evident from the table, 98% of the
industry would not be directly affected by the guidelines. For the 2.0% that is
directly affected (group "B") the product cost increase of S0.08 per pound is
small and could readily be passed on or absorbed under normal circumstances.
The percentage increase of S0.08 per pound on a S1.50-per-pound product (1972)
is 5%. There is virtually no impact on the whole industry.
For group "C" the impact is about the same, with a cost increase of SI.58
per metric ton or 2.9% on a S55-per-metric ton product.
(2) Financial Effects. The added capital investment required for impacted
group "B" of the industry is 28% of the estimated annual capital expenditures
and 6.9% of the total invested capital. The percentage of annual capital expen-
ditures is calculated on the assumption that investment for pollution control will
be accomplished in one year. In actuality, however, this investment would likely
be made over a period of several years so the effect would be less than indicated.
This impact is not considered severe and this group should be able to provide the
funds and pay the costs without any significant impact.
However, group "C" is severely affected. The investment required for
BPCTCA is about two and one half times its average annual capital expenditure
and 35% of its total plant investment.
(3) Balance of Payment Effects, Employment Effects, and Community
Effects Consideration of the price and production and financial effects indicates
there will be no output curtailments or plant shutdowns in 99.9% of the
ferroalloy ore mining and milling industry (groups "A" and "B") because of
BPCTCA effluent limitations. As a result there will be no employment or
community effects and no balance of payments effects on this portion of the
industry.
For group "C". however, it appears that some 17 small operations will most
likely be forced to close. This is. however, a very small portion of the industry
(0.1%) and the lost production should have no impact on the ferroalloy market.
on ferroalloy prices, or on the balance of payments.
Employment would be locally affected since about 50 jobs would be lost
with consequent secondary impact on the communities around the operations.
6. Best Available Technology Economically Available (BATEA)
Table IX-19 summarizes the costs for meeting BATEA guidelines for the
ferroalloy ore mining and milling industry.
IX-19
-------
For BATEA compliance, two large multi-unit companies are added to group
"B". which substantially increases the investment and annual cost for that group.
However, it would still not cause any important impact on the groups ("A" and
"B") that represent 99.9^ of the industry or on the industry itself.
The BATEA impact on group "C" would be severe and would reinforce the
effect of the BPCTCA impacts discussed above.
7. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new ferroalloy ore
mines the parameters and guidelines should be as given in Table IX-20. For mills
processing less than 5000 metric tons/yr by processes other than leaching, mills
producing over 5000 metric tons/yr with physical processes, and mills processing
by leaching, the contractor has recommended that standards be the same as
BATEA guidelines.
For mills producing over 5000 metric tons/yr and using the flotation
process, the NSPS guidelines proposed are those given in Table IX-21.
The Effluent Guideline Development Document provided no cost estimates
for the NSPS analysis. Therefore, am statements about the effect of the NSPS
requirement on the construction of new plants within the United States must
necessarily be qualitative.
However, it can be said with some degree of confidence that the costs for
a "grass roots" plant to meet the NSPS standards are no more than the costs for an
existing plant in the impacted group (group "B") to meet the BPCTCA and BATEA
recommended effluent limitations, because in the construction of a new plant.
in-process modifications can often-times be made which may be more efficient
and economical than add-on treatment technologies for existing plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the cost
of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the ferroalloy ore mining and milling industry to expand
domestic production capacity through the construction of new plants.
G. LIMITS OF THE ANALYSIS
These are the same as discussed in Section I of this report.
IX-20
-------
TABLE IX-19
SUMMARY OF DATA AND COSTS FOR MEETING BATEA GUIDELINES
FERROALLOY ORE MINING AND MILLING (1972)
Impact Group
Thousands M.T. Ore/Yr
% of Industry - Ore Basis
Thousands Units Product:
Tungsten Ore - M.T.
Moly. Cone. (Contained Mo)— Ib
Vanadium Pentoxide — Ib
Number of Employees
% of Employees
Added Investment for Facilities ($)
as % of Annual Capital Exp.
as % of Total Invested Capital
Added Annual Cost ($)
$per M.T. Ore
$ per Unit of Product Indicated
"A"
1,482
7.2
"B"
19,220
92.7
"C"
28
0.1
Total
Industry
20,730
100
N.A.
770
20.8
0
0
0
0
0
0
70,807
8,000
2,880
77.8
1,709,400
22.2
0.4
943,800
.05
.01
28
50
1.4
261,500
262
37.3
68,300
2.44
2.44
3,700
100
1,970,900
5.4
0.4
1,012,100
.05
Negligible
IX-21
-------
TABLE IX-20
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR NSPS-FERROALLOY ORE MINES
Concentration (mg/C)
in Effluent
Parameters 30-Day Average 24-Hour Maximum
pH 6* to 9* 6* to 9*
TSS 20 30
As 0.5 1.0
Cd 0.05 0.1
Cu 0.05 0.1
Pb 0.10 02
Zn 0.1 0.2
*Value in pH units.
Source: Development Document.
TABLE IX-21
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR NSPS-FERROALLOY ORE MILLS USING FLOTATION PROCESS
Concentration (mg/C)
in Effluent
Parameters
pH
TSS
COD
Cyanide
As
Cd
Cu
Zn
*Value in pH units.
Source: Development Document.
30-Day Average
6* to 9*
20
25
0.02
0.5
0.05
0.05
0.1
24-Hour Maximum
6* to 9*
30
50
0.04
1.0
0.1
0.1
0.2
IX-22
-------
X. MERCURY ORES (SIC 1092)
A. INTRODUCTION
The Mercury Ores Industry includes establishments engaged primarily in
mining, milling, or otherwise preparing mercury ores and mercury metal. This
industry includes the production of metallic mercury by furnacing or retorting at
the mine site.
The mercury mining and processing industry in the United States is very
small and is subject to great fluctuations. The mines are small and open and close
as the price goes up and down.
Most of the production is from numerous small undergound mines in
California with minor production from Idaho, Nevada, Alaska, Oregon, and
Texas.
The statistics for the last five years are as follows:
1969 1970 1971 1972 1973
Producing Mines 109 79 56 37 24
Production - Flasks 29,640 27,296 17,883 7,333 2,171
Tentative figures for 1974 indicate a continued drop to only 1,700 flasks
and only ten mines operating.
Production in 1973 by states was as follows:
No. Mines Flasks Produced
California 18 1,219
Nevada 3 698
Alaska, Oregon, Texas _3_ 254
24 2,171
The principal operating mines in 1973, as reported by the Bureau of Mines,
were:
Red Bird Mine
Culver - Baer -
Guadalupe —
New Almaden -
White Mountain -
Nevada —
California —
California —
California —
Alaska —
Flask/yr
500-1,000
100-500
100-500
1 00-500
100-500
(Retorted in Oregon)
X-l
-------
A recent announcement indicates that Placer Amax is planning to reopen the
McDermitt mine in Nevada at a cost of $9.7 million. This deposit is said to
contain 3 million tons of ore averaging 0.5% Hg. The operation will produce
20,000 flasks per year from an open pit mine, flotation plant, and furnace
operation. Complete control of all water is planned and there will be zero
discharge.
B. MINING AND PROCESSING
Mercury ores are mined by underground techniques (which are generally
open stopes with some timbering) and also by open pit techniques. All the
operations are small and the mine ores have an average mercury content of 5.9
pounds per ton of ore. A mine producing 500 flasks per year would mine about
7,000 tons of ore per year, or around 50 tons per day.
The major mercury mineral in the ores is cinnabar (HgS) although free
mercury does occur at times. The common processing method is simply to mine,
size, and retort the ore to vaporize the mercury and then collect it in water-cooled
condensers. Water is used only in the condensing step and then only a very small
amount.
There are ways to concentrate mercury ores, with flotation being the
preferred procedure. In this process, water is used but at the dry locations
involved we believe there is no discharge. The flotation process results in a
concentrate that is retorted to recover the metal.
There is no readily available information on employment in the mercury
industry.
C. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the
guidelines set forth by the Effluent Guideline Document for the mercury ore
mining and processing industry. These guidelines are:
• Best Practical Control Technology Currently Available (BPCTCA) -
to be met by industrial dischargers by 1977.
• Best Available Technology Economically Available (BATEA) — to
be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
X-2
-------
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the mercury ore mining and processing industry into the
following groups:
1. Mines.
2. Mills using gravity separation and/or flotation.
1. Effluent Guidelines
The recommended parameters and guidelines for BPCTCA (for both under-
ground and open pit mines) are given in Table X-l. For BATEA limitations the
recommendations are given in Table X-2.
For the milling sub-category for BPCTCA and BATEA zero discharge is
recommended and hence no parameters or guidelines are proposed.
2. Cost of Compliance
The guidelines contractor has not estimated costs for any particular mercury
ore mines or mills.
The mercury mining and processing industry in the United States is very
small and both the numbers of mines operating and the amount produced
fluctuate widely.
The contractor reports that the one known open-pit mercury mine has no
effluent discharge. No mills currently use flotation; as noted, one is scheduled to
be open in 1975 but it will have zero discharge. One mill employs gravity
separation but this mill also has zero discharge.
In view of the above there will be no impact on the mercury ore mining and
processing industry because of the imposition of BPCTCA or BATEA guidelines.
For NSPS guidelines mercury mines are required to meet BATEA guidelines
and mercury mills are required to have zero discharge.
X-3
-------
TABLE X-1
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA-MERCURY MINES
Concentration (mg/t)
in Effluent
rameter
PH
TSS
Hg
Ni
30-day Average
6* to 9*
20
0.001
0.1
24-hour Maximum
6* to 9*
30
0.002
0.2
"Value in pH units
Source: Development Document
TABLE X-2
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BATEA-MERCURY MINES
Concentration (mg/£)
in Effluent
Parameter 30-day Average 24-hour Maximum
pH 6 to 9 6 to 9
TSS 20 30
Hg 0.0005 0.001
Ni 0.1 0.2
X-4
-------
XI. URANIUM-RADIUM-VANADIUM (SIC 1094)
A. INTRODUCTION
In the United States uranium minerals occur in, and are recovered from, two
types of deposits: stratiform or vein. Stratiform deposits are tubular masses with
their length and width larger than their thickness. These masses usually lie parallel
to the bedding planes of the host rocks, which are commonly sandstones. Vein
deposits usually dip steeply and are localized along fractures or other structural
features.
By far the most common in the United States are the stratiform deposits,
which have accounted for 95% of the production and which also have about 95%
of the reserves.
There are more than 100 known uranium minerals but the most common are
uraninite, a primary uranium oxide, and coffinite, a hydrated uranium silicate.
These minerals occur as the major constituents of most U.S. deposits. The one
exception to this is in the Uravan Mineral Belt in the Colorado plateau where
there are predominant vanadium bearing minerals which make this region a source
of both uranium and vanadium.
Figure XI-1 shows the general location of major uranium producing districts
in the U.S. Not shown are operations in Texas where there are two mines and
mills.
B. INDUSTRY DESCRIPTION
The Uranium-Radium-Vanadium Ores Industry includes establishments
engaged primarily in mining, milling, or otherwise preparing uranium-radium-
vanadium ores.
1. Reserves
A great deal of work has been done by the A.E.G. in the past on uranium ore
reserves. We have summarized the information in Table XI-1 (1970 data). It is
evident that the major reserves occur in New Mexico and Wyoming.
2. Mining
Uranium deposits are mined by both open pit and underground techniques.
Uranium open pit mines are operating in Wyoming, New Mexico and Texas while
most of the underground mines are in Colorado, Utah and New Mexico.
XI-1
-------
X
s
x
tOUUCCS- 'Oil OCFOSITJ M TMC UHITCO ST»TtS,
nSViM''. COlteO It
PU«LI5"CO !»»• It »««ICMI
IN5TITUT€ Of »H«N6
• NO rT!"OUU« ENCIMff'S.'NC
tDTHU* D LirTLC.MC
FIGURE XI-1 LOCATION OF MAJOR URANIUM MINING DISTRICTS OF INTEREST
-------
TABLE XI-1
DISTRIBUTION OF U.S. URANIUM ORE RESERVES BY STATE
$6 Reserves
$8 Reserves
$10 Reserves
State
New Mexico
Wyoming
X
r Utah
Colorado
Texas
Others'
Totals
Ore
(Tons)
19,177,461
21,028,825
2.129,353
1,631,875
2,616,782
7,170,521
53,754,817
U3°8
(Tons)
66,181
53.566
8.070
5,501
5.753
10,069
149,140
% Total
Tons
U3°8
44.38
35.92
5.41
3.69
3.85
6.75
100
Properties
64
93
166
380
12
31
746
Ore
(Tons)
34,905,227
44,020,039
2.952,856
2,550.689
3,812,529
8,363,004
96,604,344
U3°8
(Tons)
86,042
82,275
9,483
7,039
7,015
12,180
204,084
% Total
Tons
U3°8
42.16
40.31
4.65
3.47
3.44
5.97
100
Properties
74
138
205
405
18
133
973
Ore
(Tons)
51 ,444,246
70,868.073
3,677,602
6.667.117
4,776,099
11.726,603
149,159,740
U3°8
(Tons)
101.112
103.879
10540
10.320
7,716
13380
247,447
X Total
Tons
U3°8
40.86
41.98
426
4.17
3.12
5.61
100
Properties
80
205
219
441
19
166
1,130
1. Include Arizona, Washington, South and North Dakota, California. Idaho, Montana, Nevada, Oklahoma, Oregon, and Alaska.
Sources:"Statistical Data of the Uranium Industry," AEC/GJO. 1 Jan. 1970, and informal communication. AEC, June 22.1970.
-------
a. Open Pit Mining
Open pits usually require a substantial amount of waste to be stripped to
expose the first of the ore bodies constituting the reserves in the deposit. How-
ever, in a few uranium open pit mines that have been developed, the ore out-
cropped, so stripping and ore production started together.
In general, stripping ratios (cubic yards of waste moved to tons of ore
mined) in uranium open pit operations are higher than the same ratios in pits
operated for the recovery of other metals, such as copper or iron ore. The
stripping ratios for these latter metals usually range from 2 to 4; whereas in
uranium open pits, it is not uncommon to have stripping ratios of 30 to 35. For
example, published information for one Wyoming open pit indicates the need to
move 13.5 million cubic yards of waste per year to lay bare 400,000 tons of ore,
a ratio of about 34. The higher stripping ratios prevailing for uranium open pits
are principally a reflection of the greater value of the ore being mined.
Waste stripping and ore mining are carried out with conventional earth-
moving equipment. In waste stripping, it is common practice to use scraper-
loaders assisted by bulldozers for ripping and push loading. Ore can be mined
using conventional shovel-truck equipment or smaller, more specialized equip-
ment. For example, in the pits in some districts in Wyoming where ore bodies
are small and variable in size and shape, backhoes have been found to be the most
economic device for digging and truck-loading the ore.
b. Underground Mining
Several underground mining techniques are used. The best combination
varies with the size, type, location, number, and position of the ore bodies to be
mined. The techniques to be used are determined when the underground mine is
planned.
Most of the presently operating important underground mines require shaft
entry, and those that might be anticipated in the various regions, probably will
also, although some ore no doubt will continue to be mined by inclines and adits.
Circular concrete-lined shafts have become standard for many of the deeper
deposits. Water is a problem in many mines and must be considered.
The stoping methods most commonly in use and planned for in new mines
are various forms of room and pillar methods; there is also some minor use of
modified long-wall retreat systems.
In general, ground support is provided in underground uranium mines by
rock bolting wire mesh or steel plate to the back (i.e., roof) to stabilize the
ground.
XI-4
-------
The ore is broken by conventional drilling and blasting. In general, the sand-
stone ores are soft and easy to drill and blast, although powder consumption can
be as high as it is for hard rock mines.
Slusher scrapers are commonly used to pull the ore from slopes, particularly
in the smaller ore bodies. Trackless diesel-operated front-end loaders and trucks
equipped with exhaust scrubbers often are used when the ore bodies are thicker.
For sub-ore haulage, electrically driven trains are standard, but for on-level ore,
haulage trucks may be used.
Uranium can also be leached and recovered by solution mining from mined-
out stopes and from passageways of abandoned mine areas. Uranium can also be
recovered from mine water. Some mine waters contain 5-10 parts per million of
uranium as U3O8, and this can be recovered profitably by ion exchange pro-
cessing.
3. Uranium Milling
Uranium ores typically contain about 4 pounds of U3O8 per ton, and are
rarely concentrated by the flotation or gravity procedures commonly used in
dressing other ores. Usually all the ground uranium ore is subjected to the action
of dissolving chemicals to produce the high-grade concentrate known as "yellow-
cake." First the raw ore is crushed and finely ground, and then leached to dis-
solve the uranium minerals from the rock. Next, the uranium-bearing solution
that results from the leaching is separated from the undissolved material. Finally,
the uranium is recovered as a chemically precipitated concentrate.
Uranium is separated from unwanted substances in the leaching solution by
one of two well-known chemical processes: "ion exchange" or "solvent extrac-
tion." Both processes concentrate the uranium in a refined solution, from which
it is precipitated in the form of a pure compound.
Ion exchange utilizes a property of certain organic resins to remove the
uranium ions from either acid or alkaline leach solutions. In the process, an ionic
component of the resin is exchanged for an ionic portion of the solution in
which the resin is immersed. In this process virtually all uranium in solution can
be transferred to the resin.
Solvent extraction is a similar chemical process. In this process an organic
liquid solvent with a selective affinity for uranium is thoroughly mixed by agita-
tion with the impure aqueous solution of leached uranium.
Processes now used in the domestic uranium milling industry can recover as
much as 95% of the uranium content. Concentrates in the form of uranium oxides
containing 75 to 98% uranium are shipped from the mill to central locations for pro-
cessing to the hexafluoride.
XI-5
-------
Table XI-2 lists the operating U.S. uranium milling plants and indicates the
type of process used at each.
4. Water Use
Many of the small uranium mines in the four corners region are dry and have
no water problem. Other uranium mines are quite wet and must pump and pro-
vide for handling of mine water. The large underground mines in the Ambrosia
Lake area of New Mexico are examples of mines below the water table and can
be very wet.
Milling uranium and vanadium ores by the leaching processes described
previously uses a considerable amount of water. For example, the Bureau of
Census data for 1968 indicates the following (for uranium ores only):
Gallons
(Billions)
Total Water Intake 7
Mine Water Used 2
Other Water Used 5
Treated Prior to Use 2
Gross Water Used (includes recirculated) 11
Total Water Discharged 7
Mine Water Discharged 1
Water Treated Prior to Discharge 3
Mr. Kaufman's study (1967) indicated that for uranium and vanadium ores
the gross water used was 8.3 billion gallons with a total water intake of 7.2
billion gallons.
In most cases all liquid and solid wastes from the uranium and vanadium
mining and milling plants are completely contained in tailings ponds and no
effluents are discharged. Where the climate permits, some evaporation ponds are
used to get rid of the final effluent. There are, however, a number of wet mines
and some milling operations that will require some effluent treatment additions.
5. Products and By-products
As indicated in the previous sections, the product from this industry is
"yellowcake" which is shipped in drums to other locations for further processing.
The only by-product produced is vanadium, which is associated with
uranium in the Colorado plateau ores.
XI-6
-------
TABLE XI-2
OPERATING U.S. URANIUM MILLING PLANTS
Company
The Anaconda Co.
Atlas Corp.
Conoco
Cotter Corp.
Dawn Mining Co.
Exxon
Federal-American
Partners
Humble Oil
Kerr McGee Corp.
Mines Development,
Inc.
Petrotomics
Rio Algom
Susquehanna
Western, Inc.
Susquehanna
Western, Inc.
Union Carbide
Union Carbide
Union Carbide
United Nuclear —
Homestake
Utah International
Utah International
Western Nuclear
Location
Bluewater — New Mexico
Moab - Utah
Falls City — Texas
Canon City — Colorado
Ford — Washington
Powder River Basin — Wyoming
Fremont City — Wyoming
Powder River Basin — Wyoming
Grants — New Mexico
Edgemont — S. Dakota
Carbon City — Wyoming
La Sal - Utah
Falls City — Texas
Ray Point — Texas
Rifle - Colorado
Uravan — Colorado
Natrona City — Wyoming
Grants — New Mexico
Fremont City — Wyoming
Shirley Basin — Wyoming
Jeffrey City — Wyoming
*AL = Acid Leach
ALKL = Alkaline Leach
CCD = Countercurrent Decantation
CPPT = Caustic Precipitation
Rated
Capacity Ore
(Tons/Day) From
3,000
1,500
1,750
450
500
2,000
950
2,000
7,000
650
1,500
500
1,000
1,000
1,500
1,500
1,000
3,500
1,200
1,200
1,200
O.P.
U.G.
O.P.
U.G.
O.P.
O.P.
O.P.
O.P.
U.G.
O.P.
O.P.
U.G.
O.P.
O.P.
U.G.
U.G.
O.P.
U.G.
O.P.
O.P.
O.P. )
U.G.''
RIP
IX
SX
Date
Started
1956
1956
1974
1958
1968
1972
1959
1974
1958
1956
1962
1973
1961
1970
1958
1950
1960
1958
1958
1972
1957
Process Used*
AL-RIP
AL-CCD -SX
ALKL- RIP
—
AL-SX -
ALKL -CPPT
-
-
AL- RIP-ELUEX
-
AL-CCD -SX
AL- RIP -ELUEX
AL - CCD - SX
-
AL-CCD -SX
_
AL-CCD -SX
AL-CCD - IX
AL-RIP
ALKL - CPPT
AL-CCD -IX -
ELUEX
-
AL- RIP-ELUEX
= Resin in Pulp
= Column Ion Exchange
= Solvent
Extraction
ELUEX = H2SO4 Elution of Resin
Followed by SX
XI-7
-------
C. INDUSTRY OVERVIEW
1. Types of Firms
This industry is made up of two types of firms, a large number of small
uranium mines, and a group of medium and large companies integrated from
uranium mining to the production of "yellowcake." Many of the large com-
panies are also involved in numerous other mining activities. The major firms are
as follows:
• Anaconda: Produces uranium in New Mexico but is also a pro-
ducer of aluminum and large amounts of copper, from mines in
Montana, Nevada and Arizona. It also has numerous foreign
interests.
• Atlas Minerals Corporation: Atlas is a small company only operat-
ing uranium mines and a mill in Utah. It is a subsidiary of the
Atlas Corporation.
• Ken McGee Corporation: Kerr operates uranium mines and mills
in New Mexico and Wyoming. It is a large diversified company
producing petroleum and natural gas, manganese, potash, trona,
soda ash, boron, and lithium. It is also involved in developing
coal mines and in mineral exploration. Kerr's sales in 1974 were
$1,550,348,620.
• Utah International: Utah operates uranium mines and mills in
Wyoming. It is a large mining company producing copper con-
centrates, coal and iron ore in addition to uranium. Other by-
products produced are gold, silver, molybdenum and rhenium.
It is also active in real estate developments and exploration for
mineral resources around the world. Utah's sales in 1973 were
$315,645,000.
• Humble Oil, Exxon and Conoco - all very large multi-national
petroleum corporations — also operate uranium producing sub-
sidiaries.
• Smaller companies in the business are Susquehanna Western,
which operates two open pit uranium mines and mills in Texas;
Cotter Corporation with a mine and mill in Colorado; Dawn
Mining Company (Newmont subsidiary) with a mine and mill in
Washington; Western Nuclear in Wyoming, mine and mill; Petroto-
mics Corporation in Wyoming, mine and mill; and Rio Algom
which operates an underground mine and mill in Utah.
-------
2. Types of Plants
As indicated above, the uranium and vanadium industry comprises a number
of companies engaged in the exploration, mining and milling of ores to produce
"yellowcake" and vanadium in some cases. These are the medium and large
integrated companies listed in Table XI-2 whose plants consist of mines, ore
transportation systems, and milling plants.
In addition to these companies, a number of small mines, particularly in the
Colorado-Utah region, mine and supply ore to the two Union Carbide milling
plants at Rifle and Uravan, Colorado.
A study completed in 1970* summarized information on the number of
mines reporting uranium ore production in 1969 (Table XI-3) and on the number
of employees in the uranium industry in that year (Table XI-4).
TABLE XI-3
URANIUM ORE MINES, 1969
State Open Pit Underground Total
New Mexico 1 22 23
Wyoming 8 9 17
Utah 1 34 35
Colorado 0 78 78
Others 224
12 145 157
TABLE XI-4
NUMBER OF EMPLOYEES IN URANIUM INDUSTRY, 1969
Underground
State Open Pit In Mines Surface Total
New Mexico 156 1,198 227 1,581
Wyoming 585 119 39 743
Utah 8 198 32 238
Colorado 8 612 150 770
Others 57 6 0 63_
814 2,133 448 3,395
* Assessment of Economic Impact of Radiation Standards, ADL Report C-72257, September
1970.
XI-9
-------
The Census of Mineral Industries for 1972 listed the following information:
Total Number of Establishments = 145
Total Number of Establishments with Over 20 Employees = 34
Total Number of Employees = 5,900
Total Number of Employees in Production - 4,600
These data include uranium and vanadium.
The mine production of recoverable U3O8 by states has been reported as
follows:
Thousands of Pounds
of U3Q8
1971 1972
Colorado 2,536 1,877
New Mexico 10,567 10,808
Utah 1,445 1,496
Wyoming 6,986 8,544
Other (Alaska, South Dakota,
Texas and Washington) 2,981 3,033
24,515 25,758
In 1971, 53% of the production came from the open pit mines, 45% from
underground mines, and about 2% from heap leaching, in-situ processing and mine
water recovery. A similar percentage would probably apply today.
Vanadium is produced as a by-product from the uranium ores and operations
around Grand Junction, Colorado and also produced from a single vanadium open
pit mine in Arkansas. Total production in recent years was as follows:
Short Tons
Gross Wt.
12,120
11,035
10,492
10,410
8,226
V2OS Content
10,542
9,986
9,448
9,367
8,683
1969
1970
1971
1972
1973
There is no breakdown of actual production as by-product or from the
Arkansas mine; however, the production in Arkansas might be about 4,000 tons
of V2O5 per year.
XI-10
-------
D. FINANCIAL PROFILES
Some of the important companies in the uranium mining and milling indus-
try are: Anaconda, Newmont, and Homestake.
Profiles for these companies are given in Appendix A.
E. PRICE EFFECTS
1. Determination of Prices
The most important form of primary uranium that moves in commercial
channels is the uranium oxide known as "yellowcake." Prices for this material
are quoted in dollars/pound of U3O8. Prices have fluctuated from $19.96/lb in
1953, to $9.43 in 1968. The price buyers were willing to pay for spot delivery
reportedly climbed steadily during 1974 and at year's end was reported at $15/lb
of U3O8. Likewise, the reported prices that buyers were willing to pay for 1980
delivery rose from $12.30/lb U3O8 at the start of the year to $25.35/lb U3O8 at
the end of the year (prices estimated at time of delivery). For comparison, an
AEC survey of contracts made during the years 1967 through mid-1974 reported
prices in the year of delivery at $7.65/lb U3O8 in 1974 and $11.40/lb U3O8 in
1980. Several purchase contracts were reported to have included front money at
the time of signing. While some buyers are interested in making firm contracts
for post-1980, there does not appear to be much material being offered. Foreign
buyers were unsuccessful in competing in the United States for available yellow-
cake to be delivered pre-1980.
2. Costs of Production
We have estimated the costs for two uranium ore mining and milling cases
which we believe cover the major situations.
• A typical open pit mine in the Wyoming region, 1,200 tons ore/
day, 400,000 tons/year, average grade 0.19% U3O8 , 95% recovery
in milling, 30/1 stripping ratio. Initial investment in mine develop-
ment is $4 million paid off in seven years. Hauls ore ten miles to
mill.
S/Ton Ore
Stripping 2.90
Ore Mining 1.95
Overhead 1.15
Development (Amortized) 1.45
Royalty 1.40
XI-11
-------
Loading and Hauling 1.10
Milling (Includes Amortization) 7.50
Total $17.45
= $4.83/lbU3O8
A typical medium to large underground mine, 600 tons/day,
150,000 tons/year, 0.20% U3O8 grade, 700 feet deep, sub-level
development, ore hoisted.
S/Ton Ore
Labor - Direct 7.50
Labor — Administration 0.75
Operating Supplies 2.50
Maintenance Supplies 0.65
Haulage to Mill 0.60
Taxes — Insurance 0.55
Royalty 1.55
Amortization 1.75
Total $15.85
= $4.18/lbU3O8
Several mines like this often deliver to a single mill so milling
costs are the same as above.
3. Potential Constraints on Financing Additional Capital Investments
Constraints on financing additional investments for the large companies in
this industry are similar to those already discussed in previous sections of this
report.
For the portion of the industry represented by the small individual uranium
mines the situation is different. These small mines operate on a very limited
financial base and any additional investment for effluent control and treating
would likely be catastrophic. They also have a limited marketplace. That is, they
have to sell their mined ore to the nearest milling plant that will accept it and that
is usually only one company (Union Carbide). They cannot just pass on any
additional cost.
F. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the guide-
lines set forth by the Effluent Guideline Document for the uranium ore mining
and processing industry. These guidelines are:
XI-12
-------
• Best Practical Control Technology Currently Available
(BPCTCA) - to be met by industrial discharges by 1977.
• Best Available Technology Economically Available (BATEA) —
to be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the uranium ore mining and processing industry into the
following groups:
a. Mines.
b. Mills with acid, alkaline or acid/alkaline leaching.
1. Effluent Guidelines
The recommended parameters and guidelines for BPCTCA for both open-pit
and underground mines are given in Table XI-5 and the parameters and guidelines
for BATEA in Table XI-6.
TABLE XI-5
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS
RECOMMENDED FOR BPCTCA - URANIUM MINES
Concentration (mg/£) in Effluent
•ameter
pH
TSS
COD
As
Cd
Zn
Ra226
Total U
30-day Average
6* to 9*
20
100
0.5
0.05
0.5
3**
2
24-hour Maximum
6* to 9*
30
200
1.0
0.1
1.0
10**
4
"Value in pH units
**Value in picocuries per liter
Source: Development Document
XI-13
-------
TABLE XI-6
PARAMETERS SELECTED AND EFFLUENT
LIMITATIONS RECOMMENDED FOR BATEA - URANIUM MINES
Concentration (mg/£) in Effluent
Parameter
PH
TSS
COD
As
Cd
Mo
V
Zn
Ra226
Total U
"Values
tValues
30-day Average
6* to 9*
20
50
0.1
0.004
1.0
5
0.1
3t
2
in pH units
in picocuries per liter
24-hour Maximurr
6* to 9*
30
100
0.2
0.008
2.0
10
0.2
10t
4
Source: Development Document
For both milling categories zero discharge is recommended for both
BPCTCA and BATEA and hence no parameters or guidelines are proposed.
2. Costs of Compliance
The guidelines contractor has estimated the investment and annual operating
costs of compliance for both BPCTCA and BATEA guidelines. These costs for
uranium/vanadium ore mining and milling are summarized in Table XI-7 by
category and in Table XI-8 by companies. The annual costs include charges for
amortization. The amortization charge includes an interest cost (at 8%), and is
based on a useful life of 20 years for facilities and 10 years for equipment.
In this uranium-vanadium group of the mineral industry about 20% of the
total annual cost is fixed cost (amortization plus interest charges in this case).
In Table XI-9 we have estimated the incremental cost added to the seven
companies' final product (yellowcake) due to compliance with both BPCTCA and
BATEA guidelines. These are added costs for the particular company unit where
effluent treatment is required.
3. Basis for Analysis
The analysis of economic impact for this group will be carried out in the
same way as described in section I of this report.
XI-14
-------
TABLE XI-7
URANIUM - VANADIUM ORES - COST OF COMPLIANCE
WITH BPCTCA & BATEA GUIDELINES
Mills
Costs (Thousands $)
Category
Mines
No.
1-158
159
160-161
162
163-167
168
169
170
171-175
1,000
MT
. 1 .
Year
3,300
145
662
182
907
154
318
454
91
BPCTCA
Investment
0
75.7
63.2
199.8
77.2
571.6
924.4
145.7
72.2
Annual
0
(24.7)
32.9
12.4
64.4
(161.4)
(368.3)
(6.2)
59.4
BATEA
Investment
0
164.8
91.6
336.6
214.0
1,049.7
1,772.0
247.5
197.6
Annual
0
0.9
51.3
44.0
95.2
(85.4)
(253.6)
20.9
89.6
6,213
Totals
2,129.8 (391.50)
4,073.8
(37.1)
1-17
18
19
20
5,142
432
324
315
5,113
12,426
0
421.7
1,101.8
4.8
1,528.3
3,658.1
0
71.4
207.7
1.0
280.1
(111.4)
0
421.7
1,101.8
4.8
1,528.3
5,602.1
0
71.4
207.7
1.0
280.1
243.0
XM5
-------
TABLE XI-8
URANIUM - VANADIUM ORES - COST BY COMPANIES
FOR BPCTCA & BATEA GUIDELINES
Costs (Thousands $)
Company
A
B
C
D
E
F
G
Totals
1,000
M.T.
Year
145
662
1,243
772
91
432
648
BPCTCA
Investment
75.7
63.2
848.6
1,074.9
72.2
421.7
1,101.8
Annual
(24.7)
32.9
(84.6)
(373.5)
59.4
71.4
207.7
BATEA
3,658.1 (111.4)'
Investment
164.8
91.6
1,600.3
2,024.3
197.6
421.7
1,101.8
5,602.1
Annual
0.9
51.3
53.8
(231.7)
89.6
71.4
207.7
243.0
*(111.4) Numbers in brackets indicate net gain due to recovery of uranium, vanadium,
molybdenum by ion exchange from mine waters.
TABLE XI-9
ESTIMATED INCREASE IN COST OF PRODUCT (U3O8)
DUE TO BPCTCA & BATEA GUIDELINES
1972 U3O8
Added Cost/lb U3O8 $
Company
A
B
C
D
E
F
G
Production* (Ib)
585,000
2,700,000
5,012,000
3,113,000
367,000
1,742,000
2,613,000
BPCTCA
(.00004)
.00001
(.00002)
(.0001)
.0002
.00004
.00008
BATEA
Negligible
.00002
.00001
(.00007)
.0002
.00004
.00008
*Estimated by ADL. Most companies do not reveal their actual production.
(Yearly tons x .002 x .9 x 2240)
XI-16
-------
4. Levels of Impact
The levels of impact are the same as those described in section I of this
report.
5. Best Practical Control Technology Currently Available (BPCTCA)
In Table XI-10 we have summarized the information and costs for com-
pliance with the BPCTCA guidelines. Shown in Table XI-10 for the three impact
groups discussed previously and for the total industry are the data on tonnage and
number of employees, the added operating costs, and the added investment costs
as a percentage of capital expenditures and total investment.
a. Price and Production Effects. As is evident from the table, 51% of the
industry would not be directly affected by the guidelines. For the 45% that is
directly affected there is no product cost increase, because for this impacted
group there is actually a net gain from the recovery of uranium, molybdenum,
and vanadium values from mine waters with ion-exchange. For the same reason,
there is no impact on the whole industry.
TABLE XI-10
DATA AND COST FOR MEETING BPCTCA GUIDELINES
URANIUM/VANADIUM ORE MINING AND MILLING (1972)
Impact Group _ ,
Total
"A" "B" "c" Industry
Thousands M.T. Ore/Yr 3,300 2,913 0 6,430
% of Industry-Ore Basis* 51.3 45.3 0 100
Thousands Ibs/Yr - U308** 13,235 11,687 0 25,800
Number of Employees 3,026 2,673 0 5,900
%of Employees 51.3 45.3 0 100
Added Investment for Facilities ($) 0 3,658,100 0 3,658,100
as % of Annual Capital Expenditure 0 41.8 8.6
as % of Total Investment 0 2.3 0 1.0
Added Annual Cost ($) 0 (111,400)***0 (111,400)
$ per ton Ore 0000
$ per Ib Yellowcake 0 00 0
*96.6% of industry covered.
**Also produced some byproduct vanadium — not included.
'""Indicates net gain due to recovery of uranium, molybdenum and vanadium by ion exchange
from mine waters. Uranium valued at $8 per pound and molybdenum and vanadium at S1.60
per pound.
XI-17
-------
b. Financial Effects. The added capital investment required for the im-
pacted group of the industry (group "B") is 42% of the estimated annual capital
expenditures but only 2% of the total invested capital. The percentage of annual
capital expenditures is calculated on the assumption that the investment for pollu-
tion control will be accomplished in one year. However, in actuality this invest-
ment would likely be made over a period of several years so the effect would be
less than indicated.
c. Balance of Payment Effects, Employment Effects, and Community
Effects. Consideration of the price and production, and financial effects indicates
that there will be no output curtailments or plant shutdowns in the uranium ore
mining and milling industry because of BPCTCA effluent limitations. As a result
there will be no employment or community effects and no balance of payments
effects.
6. Best Available Technology Economically Available (BATEA)
Table XI-11 lists the costs for meeting the BATEA guidelines. These are
very similar to the BPCTCA costs in Table XI-10, but in this case there is an
added annual cost increase of $0.02 per pound of yellowcake produced for the
impacted group. This is not significant for a product selling for about $8.00 per
pound (1972).
TABLE XI-11
DATA AND COSTS FOR MEETING BATEA GUIDELINES
URANIUM/VANADIUM ORE MINING AND MILLING (1972)
Impact Group
»A" "B" "C" Industry
Thousands M.T. Ore/Yr 3,300 2,913 0 6,430
% of Industry-Ore Basis 51.3 45.3 0 100
Thousands Ibs/Yr Product 13,235 11,687 0 25,800
Number of Employees 3,026 2,673 0 5,900
% of Employees 51.3 45.3 0 100
Added Investment for Facilities ($) 0 5,602,100 0 5,602,100
as % of Annual Capital Expenditure 0 64.0 0 13.2
as % of Total Investment 0 3.5 0 1.6
Added Annual Cost ($) 0 243,000 0 243,000
$ per ton Ore 0 0.08 0 .04
$ per tb Yellowcake 0 0.02 0 .009
XI-18
-------
For meeting BATEA guidelines, therefore, the effects and impacts are the
same as for BPCTCA. That is, there will be no significant impact on the industry
or any group in meeting BATEA standards.
7. New Source Performance Standards (NSPS)
The guidelines contractor has recommended that for new uranium ore mines
the NSPS standards should be as given in Table XI-12. This table lists the recom-
mended parameters and guidelines.
TABLE XI-12
PARAMETERS SELECTED AND EFFLUENT
LIMITATIONS RECOMMENDED FOR NSPS - URANIUM MINES
Concentration (mg/C) in Effluent
Parameter
pH
TSS
COD
As
Cd
Zn
Ra226
Total U
"Values in pH units
tValues in picocuries per liter
Source: Development Document
For uranium mills of both types the NSPS recommendation is zero dis-
charge.
The Effluent Guideline Development Document provided no cost estimates
for the NSPS analysis. Therefore, any statements about the effect of the NSPS
requirement on the construction of new plants within the United States must
necessarily be qualitative.
However, it can be said with some degree of confidence that the costs for
a "grass roots" plant to meet the NSPS standards are no more that the costs for an
existing plant in the impacted group (group "B") to meet the BPCTCAand BATEA
XI-19
30-day Average
6* to 9*
20
50
0.1
0.004
0.1
3t
2
24-hour Maximum
6* to 9*
30
100
0.2
0.008
0.2
10t
4
-------
recommended effluent limitations, because in the construction of a new plant,
in-process modifications can oftentimes be made which may be more efficient and
economical than add-on treatment technologies for existing plants.
For the above reasons, a new plant designed with the NSPS effluent limita-
tions in mind could be constructed without much difficulty. Therefore, the
cost of water pollution control due to the NSPS standards alone will have minimal
effect on the decision of the U.S. uranium ore mining and milling industry to
expand domestic production capacity through the construction of new plants.
G. LIMITS OF THE ANALYSIS
The limits of the analysis in this section are the same as those discussed in
previous sections of this report.
XI-20
-------
XII. METAL ORES: IM.B.C. (SIC 1099)
A. INTRODUCTION
For metal ores, not elsewhere classified, the guidelines contractor considered
a group of ores which included antimony, beryllium, platinum group metals, rare
earths, tin, titanium, and zirconium. The contractor presents a detailed discussion
of these segments of the mining industry and the reader is referred to his report
for details.
From this group of metal ores the guidelines contractor identified the
following cases for which he recommended guidelines and estimated control
costs:
• One antimony mine which is not now discharging effluent but
may in the future.
• One titanium mine discharging 700,000 gpd of wastewater that
would require an investment of $94,315 and an annual cost of
$39,650 for level A control.
• One titanium mill discharging 9.45 million gpd that would require
an investment of $12,000 and an annual operating cost of $1,700
for zero discharge.
• One platinum mine/mill that discharges 8.64 million gpd that
would require an investment of $17,000 and an annual cost of
$77,000 for level B control.
The guidelines set forth by the EPA, however, do not address antimony, rare
earths or beryllium because of the limited number of these operations and
because all of these operations are at zero discharge and no benefit to the
environment can be shown by establishing effluent limitations. There are there-
fore no guidelines for those metals.
B. ASSESSMENT OF ECONOMIC IMPACT
The purpose of this analysis is to assess the economic impact of the
guidelines set forth by the Effluent Guideline Document for the metal ores NEC
mining and processing industry. These guidelines are:
• Best Practical Control Technology Currently Available
(BPCTCA) — to be met by industrial dischargers by 1977.
XII-1
-------
• Best Available Technology Economically Available (BATEA) - to
be met by 1983.
• New Source Performance Standards (NSPS) - to be applied to all
new facilities that discharge to navigable waters constructed after
the promulgation of these guidelines.
For the purpose of recommending effluent guidelines, the Guidelines Con-
tractor has categorized the affected metal ore NEC mining and processing indus-
try into the following groups:
1. Platinum and Tin Ores
a. Mines or mines and mills combined (includes placer or dredge
operations)
2. Titanium Ores
a. Mines — (Lode)
b. Mills — Electrolytic/magnetic and gravity/flotation.
c. Mines and Mills — Physical processes with dredge mining.
1. Effluent Guidelines
The recommended parameters and guidelines for BPCTCA for platinum and
tin mines and mills are given in Table XII-1. For BATEA they are the same.
The recommended parameters and effluent guidelines for titanium lode
mines for BPCTCA are given in Table XII-2. BATEA recommendations are the
same.
For titanium mills using electrostatic, magnetic, gravity or flotation pro-
cesses the recommended parameters and guidelines for BPCTCA are given in
Table XII-3. BATEA recommendations are the same.
The recommended BPCTCA guidelines for titanium mills associated with
dredge mining are given in Table XII-4. BATEA recommendations are the same.
2. Costs of Compliance
The guidelines contractor has estimated the investment and annual operating
costs of compliance for both BPCTCA and BATEA guidelines for the operations
affected (Table XII-5). The annual costs include charges for amortization. The
XII-2
-------
amortization charge includes an interest cost (at 8%), and is based on a useful life
of 20 years for facilities and 10 years for equipment.
In this metal ores NEC segment of the mineral industry about 20% of the
total annual cost is fixed cost (amortization plus interest charges).
In Table XII-5 we have also estimated the incremental cost added to the two
companies' ore production due to compliance with both BPCTCA and BATEA
guidelines. These added costs are not appreciable.
3. Levels of Impact
There will be no appreciable impact on the metal ores NEC mining industry
because of the imposition of BPCTCA or BATEA guidelines.
For NSPS guidelines platinum and tin ore mines and mills will be required to
meet BPCTCA and BATEA guidelines which are the same. NSPS for titanium lode
mines will have to meet BPCTCA-BATEA guidelines. Titanium mills will be
required to have zero discharge. Titanium dredge mines/mills will be required to
meet BPCTCA-BATEA guidelines.
XII-3
-------
TABLE XII-1
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA AND BATEA PLATINUM AND TIN DREDGE MINES AND MILLS
Concentration (mg/C)
in Effluent
Parameter 30-day Average 24-hour Maximum
pH 6* to 9* 6* to 9*
TSS 30 50
*Value in pH units
Source: Development Document
TABLE XII-2
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA AND BATEA TITANIUM MINES (Lode)
Concentration (mg/£)
in Effluent
Parameter 30-day Average 24-hour Maximum
pH 6* to 9* 6* to 9*
TSS 20 30
Fe 1.0 2.0
*Value in pH units
Source: Development Document
XII-4
-------
TABLE XII-3
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA AND BATEA TITANIUM MILLS
Concentration (mg/C)
in Effluent
ra meter
PH
TSS
Fe
Ni
Zn
30-day Average
6* to 9*
20
0.10
0.1
0.1
24-hour Maximum
6* to 9*
30
0.2
0.2
0.2
*Value in pH units
Source: Development Document
TABLE XII-4
PARAMETERS SELECTED AND EFFLUENT LIMITATIONS RECOMMENDED
FOR BPCTCA AND BATEA TITANIUM DREDGE MINE
WITH WET SEPARATION MILL
Concentration (mg/C)
in Effluent
rameter
PH
TSS
COD
Fe
30-day Average
6 to 9
20
15
1.0
24-hour Maximum
6f to 9f
30
30
2.0
Value in pH units
Source: Development Document
XII-5
-------
TABLE XII-5
SUMMARY OF COSTS OF COMPLIANCE - METAL ORES NEC
Thousands of Poll.irs
BPT BAT
Classification
Titanium Mines (7)
Titanium - Mine
- Mill
Platinum - Dredge
Rare Earth Mines
Beryllium Mines
Antimony Mines
Zirconium Mines
M.T. Ore/yr
±10,000,000
1,180,000
M
2,267,500
207,239
N.A.
10,300
N.A.
Investment
0
94,315
1,865
17,970
0
0
0
0
Annual
0
39,650
260
39,405
0
0
0
0
Investment
0
94,315
12,035
16,840
0
0
0
0
Annual
0
39,650
1,665
77,275
0
0
0
0
Totals
114,150 79,315 123,190 118,590
Increased Cost Per Unit of Production:
Titanium Mine & Mill:
Platinum Dredge:
$.03 per M ton ore for BPT
$.04 per M ton ore for BAT
$.02 per M ton ore for BPT
$.03 per M ton ore for BAT
XII-6
-------
APPENDIX A
FINANCIAL PROFILES OF SELECTED COMPANIES
IN THE ORE MINING AND DRESSING INDUSTRY
A-l
-------
1. ALUMINUM COMPANY OF AMERICA (ALCOA)
Alcoa is the largest aluminum company in the world. Alcoa has probably the
firmest raw material base, with large reserves in Jamaica, Surinam, Australia, and
(still under development) Guinea, West Africa. The Company also has limited U.S.
reserves, but most of its current raw material requirements are met by importing
bauxite to supply domestic alumina plants. Over 80%. of its smelter capacity is
located in the United States.
BAUXITE AND ALUMINA
Alcoa mines bauxite from properties which it owns in Arkansas and from
reserves -held under mining rights in Surinam (expire 2033), the Dominican
Republic (expire 2007 subject to renewal under conditions contained in the con-
cession agreement), and Jamaica (expire 1982 and 1993, subject to renewals under
conditions prescribed in the mining laws of Jamaica). The Company estimates
that the bauxite contained in such properties and reserves is sufficient in the
aggregate to supply its requirements for bauxite, at current consumption rates, for
at least 40 years.
In Western Australia, the Company has certain mineral rights and also has
options to acquire others. The Company's present mineral rights supply enough
bauxite to produce 7% of the alumina required to operate its present domestic
primary aluminum capacity. The Company can increase this supply to 42'/ of
such requirement by exercising, in five increments, such options to acquire
additional mineral rights. However, the exercise of any such option after Decem-
ber 30, 1986, is subject to the approval of the government of Western Australia.
All such mineral rights are held subject to a mineral lease which expires in 1982
but may be extended to 2045 at the option of a 5 V'/<-owned subsidiary. All
bauxite from such mineral rights is to be refined at an alumina plant or plants in
Australia owned or to be owned by such subsidiary. The right to refine bauxite
from the present mineral rights expires in 1988 but may be extended by the
Company to 2008. Upon exercise of any option to acquire additional mineral
rights, the right to refine the related bauxite has a basic 20-year term, which may-
be extended by the Company for an additional 20 years.
Alcoa also has alumina plants in Jamaica, Surinam, and Australia. It has a
substantial planned surplus of alumina capacity over its own needs, which has
allowed it to sign a number of long-term supply contracts.
Alcoa has a 27% interest in Halco (Mining), Inc., formed as a consortium to
develop the extensive Boke-bauxite deposits in Guinea. (Martin Marietta has a
20% participation.) By 1980, these deposits will be supplying about one-third of
Alcoa's demand. Alcoa is also constructing a SI 25 million alumina plant in Costa
Rica, which may supply 1 5% of its needs at that time.
A-3
-------
PRIMARY ALUMINUM
Most of the bauxite and alumina produced by Alcoa is used to make alu-
minum which is further processed into fabricated products. These fabricated
products are used in various.manufacturing industries. The total production of
primary aluminum by the Company during 1972, including all primary aluminum
produced by nonconsolidated subsidiaries and affiliates, constituted approximate-
ly 15% of the free world's estimated primary aluminum production.
Primary aluminum is produced from alumina at smelting plants at Alcoa,
Tennessee; Badin, North Carolina; Evansville, Indiana; Massena, New York; Point
Comfort, Texas; Rockdale, Texas; Vancouver, Washington; Wenatchee, Washing-
ton; and Surinam. Alcoa's primary aluminum capacity as of December 31, 1972,
including one-half of the capacity of two smelters in Norway in which the
Company holds 50% interests, was 1,725,500 short tons. Its primary aluminum
production during 1972 was 1,392,000 short tons. Capacity is based on normal
operating conditions and does not represent maximum possible production.
Primary aluminum shipments by Alcoa during 1972 were 388,000 short tons.
Alcoa's fabricated aluminum products are produced at 26 domestic and three
foreign plants. The annual capacity of fabricating facilities is dependent upon the
product mix. In 1972, Alcoa's shipments of fabricated aluminum products
totalled 1,178,000 short tons.
In response to the effects of over-capacity in the world aluminum industry,
Alcoa has stated it reduced primary aluminum production so that in 1972 the
Company's average operating rate was 87.1% of the capacity of its domestic
smelters. In the latter part of 1972 and early 1973, as demand increased sharply,
certain primary aluminum production units were started up. The Company's
domestic primary aluminum operating rate on February 28, 1973 was 93.5%.
ALCOA SMELTING PROCESS
Alcoa has applied for patents on the "Alcoa Smelting Process," a new
electrolytic method of producing primary aluminum from aluminum chloride,
made from alumina, which it expects will reduce by as much as 30% the
electricity required by the most efficient units of the Hall process (presently used
worldwide in the production of primary aluminum) and result in lower operating
costs. The new process, which involves electrolysis in a completely enclosed
system, is expected to be essentially free of undesirable emissions and to afford a
superior employee working environment. Moreover, the new process is reportedly
more tolerant of power interruptions than the Hall process and will permit plants
to be located on smaller sites, with greater location flexibility. The new process
does not involve the need for fluoride chemicals, as does the Hall process, and
thereby eliminates the expenses of containing fluoride emissions.
A-4
-------
The Company lias reportedly spent 525 million in the development of the
new process, which has been tested in a full-scale developmental unit. The first
unit of an Alcoa Smelting Process plant, having an initial capacity of 15.000 tons
per year of primary aluminum and an ultimate design capacity of 30,000 tons, is
expected to be completed in 1975. Completion of the entire plant, presently
conceived as a 300.000-ton facility, is contingent upon construction and oper-
ating experience with the first unit. The Company does not expect that the new
process will result in any near-term obsolescence of its existing facilities for
smelting aluminum.
OTHER BUSINESS
In addition to being the largest integrated producer of primary aluminum
and fabricated aluminum products, Alcoa's operations also include the sale of
engineering and construction services, shipping, and the fabrication of products
from other metals.
Under the management of Alcoa Properties, Inc., a wholly owned noncon-
solidated subsidiary, the Company acquires and develops land, develops and
operates real estate properties, sells developed land and properties, and constructs
and sells residential properties, including housing for low and middle income
families. Such operations in real estate, housing, and land development are closely
coordinated with the Company's operations in the manufacture and marketing of
building products, components, and systems combining a variety of materials. The
latter operations are conducted by the Alcoa Building Industries Division.
A recent important policy change is Alcoa's willingness to sell technical
assistance (although the first sale was to Anaconda, hardly a newcomer to the
industry). Alcoa has decided that technical assistance is now available from so
many sources that it might as well take advantage of the profit opportunity-
represented by its own considerable expertise.
CONSOLIDATED INCOME
Table A-l.l presents Alcoa's consolidated income statements for 1968-1972.
Alcoa reported that income from operations for 1971 was adversely affected by
lower shipments, price weaknesses, increased depreciation and interest expense.
and June 1, 1971, labor contracts resulting in higher operating costs. During
1972. shipments increased but the other factors continued to affect adversely the
Company's income from operations.
A-5
-------
TABLE A-1.1
ALCOA AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
Income:
Sales & Operating Revenues
Interest, principally from entities
not consolidated
Other Income
Coats & Expenses:
Cost of goods sold & operating expenses,
not including depreciation & depletion
Selling, gen'l admin. & other expenses
Provision for depreciation & depletion
Interest Expense
Taxes, not including social security &
U.S. and foreign taxes on income
& foreign taxes on income
& foreign taxes on income:
Income before U.S.
Provision for U.S.
U.S.:
Current
Future
Foreign:
Current
Future
Income from Operations
Equity in earnings (losses) of entities not
consolidated:
Real Estate Developments
Other
Income before Extraordinary Items
Extraordinary Items
Net Income
1968
^
1352.8
8.6
8.9
1370.3
882.3
135.3
113.0
32.8
26.5
1189.9
180.4
52.4
7.7
15.8
4.2
80.1
100.3
(1.3)
5.7
4.4
104.7
104.7
1969
1545.2
10.3
13.3
1568.8
1039.5
144.9
121.9
36.9
30.0
1373.2
195.6
49.8
13.3
22.0
2.8
87.9
107.7
6.0
8.6
14.6
122.4
122.4
1970
_6W-1 1 1 4 r\-rto.
1522.4
13.1
7.3
1542.8
1022.5
148.3
127.8
48.6
28.1
1375.3
167.4
27.3
15.1
24.0
.3
66.7
100.7
4.4
9.2
13.6
114.3
(18.8)
95.5
1971
3441.2
12.7
8.2
1462.1
1011.7
149.2
137.5
57.8
29.2
1385.4
76.7
(17.0)
15.2
27.2
(.7)
24.7
52.0
(5.2)
8.5
3.3
55.3
55.3
1972
1753.0
12.1
13.8
1778.9
1269.8
154.9
150.9
61.4
30.4
1667.4
111.5
7.7
8.2
27.7
(1.0)
42.6
68.9
19.9
14.0
33.9
102.8
102.8
Source: Aluminum Company of America, Form 10-K annual report,
-------
Net income for 1972 increased substantially over that for 1971, approxi-
mately S29 million of such increase resulting from the sale of the Company's
interest in three real estate developments. There were no substantial real estate
development sales during 1968 or 1971, but two large properties were sold during
each of the years 1969 and 1970.
Alcoa's cash flow from operations, including the effects of deferred credits
and reserves and equity in non-consolidated entities, was S238 million in 1972,
compared to $188 million for 1971.
ASSETS
Alcoa's consolidated balance sheet as of December 31, 1972, showed total
assets of $2.704 billion. Current assets were S804 million, current liabilities S240
million, providing S564 million in net working capital. Total properties, plant,
and equipment at cost was S3.033 billion, almost twice 1972 sales; net property,
plant and equipment, after accumulated depreciation, depletion and amortization,
was $1.495 billion.
LONG-TERM DEBT
Table A-1.2 summarizes Alcoa's outstanding long-term debt as of Decem-
ber 3 I, 1972. Long-term debt due after one year was $904 million. Deferred
items were S221 million including SI97 million in deferred tax reserves. Equity
consisted of S66 million in preferred stock and $1,119 million in common stock
and retained earnings.
Alcoa is somewhat unique in that while it has a significant amount of
long-term debt, it has a relatively low debt-equity ratio among the aluminum
companies. It appears to be consistent with this financial position that its debt is
in the form of debentures and notes instead of first mortgage bonds.
A-7
-------
TABLE A-1.2
ALUMINUM COMPANY OF AMERICA - LONG-TERM OBLIGATIONS
(December 31, 1972)
(In thousands of dollars)
>
do
Due
1973
1974
1975
1976
1977
Less amount due within one year included in current liabilities.
Noncurrent long-term debt
1978-96
Sinking fund debentures:
3% due 1979 -- ~ $4,071 $4,150 $4,150 $ 8,700
4 1/4% due in 1982 — $ 1,471 5,200 5,200 5,200 26,200
3 7/82 due in 1983 — 3,032 5,200 5,200 5,200 31,400
6% due 1992 — — 7,000 7,000 7,000 104,000
9% due 1995 -- — — — — 150,000
7.4!)% due 1996 — — — — — 150,000
Notes:
3% due 1973 $12,000
4 3/8% due 1988 1,243 3,250 3,250 3,250 3,250 35,821
4.65% due 1989 2,699 5,200 5,200 5,200 5,200 82,608
6% due 1977-89 2,205 2,247 2,296 2,352 2,416 35,311
5 1/4% Convertible Subordi-
nated debentures due 1991 — -- — — 6,250 118,750
6 1/2% bonds due 1986... — — — — — 20,048
Other 9.276 3.930 10,014 4.061 801 3.642
$27.423 $19.130 $42.231 $36.413 $39.467 $766.480
Total
long-term
debt
$ 21,071
43,271
50,032
125,000
150,000
150,000
12,000
50,064
106,107
46,827
125,000
20,048
31.724
$931,144
27.423
$903.721
-------
2. AMERICAN METAL CLIMAX, INC. (AMAX)
AMAX is engaged in the exploration for the mining of ores and minerals and
the smelting, refining, and other treatment of minerals and metals. Its principal
products are molybdenum, aluminum, iron ore, coal, copper, lead, zinc, and
potash. AMAX also fabricates and markets various aluminum products. The
company has substantial foreign operations and investments in other mining
companies, particularly in Zambia, Canada, Australia, Southwest Africa, South
Africa, and Botswana.
AMAX is the leading producer of molybdenum in the United States, through
Climax Molybdenum Company and subsidiaries. In 1972, AMAX's production of
molybdenum sold in the United States represented approximately 45% of total
U.S. sales of molybdenum.
In July 1972, AMAX said it would enter the copper mining business in the
United States in a two-step transaction in which it would acquire Banner Mining
Company, which owned the Twin Buttes/Pima County, Arizona, property then
leased to and mined by Anaconda; and then enter into a partnership with
Anaconda to develop and expand operations at Twin Buttes and in Pima County,
with an expected expenditure exceeding $200 million over the period 1973-1976.
Banner Mining was acquired in 1973, by merger into AMAX Copper Mines, Inc., a
wholly owned AMAX subsidiary, in accordance with the plan of merger and
partnership.
AMAX has substantial U.S. lead and zinc operations, through Blackwell Zinc
Company, Inc., and Missouri Lead Smelting Company, wholly owned subsidiaries.
It is also participating in a joint venture for the operation of a lead, zinc, and
copper mine and mill in New Brunswick, Canada, through Heath Steele Mines,
Ltd., of Canada, another subsidiary.
In October, 1969, AMAX became a coal producer through the acquisition of
Ayrshire Collieries Corporation. In 1972, AMAX ranked among the ten major
bituminous coal producers in the United States.
Table A-2.1 shows the approximate relative contribution to consolidated
sales revenues and consolidated income of AMAX's lines of business for 1972.
AMAX's consolidated financial statements include the accounts of all subsidiaries
in which a voting control of 51% or more is owned, except AMAX Credit Corp., a
wholly owned finance subsidiary, and RST International, Inc. They also include
AMAX's portion of AMAX-Homestake Lead Tollers, a 50%>-owned partnership. In
the table, revenue and income from base metals includes transactions involving
the purchase and sale of metals, the sale of metals processed from concentrates
and scrap, materials, and tolling services. Information concerning dividend
A-9
-------
TABLE A-2.1
AMAX: SELECTED FINANCIAL DATA
1972 Breakdown
$ Millions %_
AMAX Sales Revenue:
Molybdenum & Specialty Metals 114 13
Aluminum 311 36
Base Metals (Cu, Pb, Zn, etc.) 256 30
Fuels & Chemicals (Coal, etc) 137 16
Iron Ore 45 5
863 100
Income Before Taxes & Extraordinary Items:
Molybdenum & Specialty Metals 28 22
Aluminum 16 13
Base Metals 16 13
Fuels & Chemicals 23 18
Iron Ore 25 20
Dividends; and Equity in
Before-Tax Earnings of RST 18 14
126 100
Less Exploration Expense, Unallocated
Corporate Charges, and Interest
Expense (35)
Earnings Before Provision for Federal
and Foreign Income Taxes and
Extraordinary Items $91
Source: AMAX Annual Report 1972.
A-10
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income, investments in other companies, and RST International, Inc., is presented
in subsequent paragraphs.
In summary, AMAX has substantial investments in companies and derives
substantial revenues and earnings from operations outside the United States. In
1972, approximately 16% of consolidated sales and 22 percent of consolidated
income were derived from operations outside of the United States, primarily in
Australia, Western Europe, Japan, and Canada. Approximately 14% of its consoli-
dated income was derived from dividends from foreign investments, primarily in
Africa, and equity in before-tax earnings of RST International, Inc. (Table A-2.1).
AMAX produces primary and secondary aluminum ingot and has extensive
facilities for the manufacturing and producing of a wide selection of aluminum
products. These products include items such as sheet, which are principally sold
for further manufacturing and in AMAX's case, much is sold to the mobile home
industry; and items such as architectural aluminum which are finished products
and marketed under the Kawneer name. AMAX has a 50% interest in the Intalco
primary reduction plants near Bellingham, Washington, which in 1972 accounted
for 6% of the total primary aluminum produced in the United States, making
Intelco one of the largest facilities in the United States.
AMAX is one of the largest suppliers of secondary aluminum ingot through-
out the United States casting industry and also produces zinc casting alloys.
In respect to base metals, AMAX operates a custom copper smelter and
refinery at Carteret, New Jersey, which treats blister copper originating largely
from foreign sources, purchased for AMAX's own account and on toll for others.
It also processes a large volume of scrap and treats precious metal-bearing
secondary material and precious metal from primary sources both for its own
account and for others. In 1 972, silver and gold production was approximately 21
million ounces and 900,000 ounces, respectively. A program to modernize the
Carteret production facilities was initiated in 1968 and is continuing. Programs
have been submitted in respect of the Carteret plant to the New Jersey Depart-
ment of Environmental Protection and the Federal Environmental Protection
Agency involving the design and construction of additional environmental control
facilities. These programs were expected to be approved and to involve the
expenditure of up to $7 million over the next four to five years. Of the $256
million of base metals' sales shown in Table A-2.1, copper sales, exclusive of
trading transactions on commodity exchanges and charges for toll refining of
copper for others, accounted for approximately S90 million.
In May 1972, AMAX announced its intention to shut down its custom zinc-
smelter and refinery at Blackwell, Oklahoma, in late 1973 because of the eco-
nomic inability of the plant to meet Oklahoma's air quality standards. However,
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variances were obtained from the state that will permit continued operation until
the planned shutdown date.
In July 1972, two months after this announcement, AM AX purchased for S3
million the electrolytic zinc refinery of American Zinc Company near St. Louis.
Rehabilitation and reactivation of this plant cost an estimated S20 million and
will provide AMAX with annual designed capacity of 84,000 tons of special
high-grade zinc by 1975. (Note that in comparison, the Blackwell plant produced
77.000 tons of slab zinc in 1972, such production representing 67 percent of its
rated smelting capacity.)
AMAX and Homestake Mining Company are equal partners in a joint venture
to mine their lead deposits with zinc content in Southeastern Missouri. They sell a
portion of their lead concentrates under long-term and spot contracts. Such sales
amounted to approximately 60.000 tons in 1972. All zinc concentrates produced
by the mine and mill are sold to AMAX for treatment at its Blackwell zinc smelter
in Oklahoma. After the Blackwell smelter is closed, the zinc concentrates will be
treated at the smelter acquired from American Zinc Company. AMAX and
Homestake. as equal partners, also own a lead smelter in Southeast Missouri with
a designed annual capacity of 140,000 tons of refined lead. Half of the capacity is
used for smelting AMAX-Homestake concentrates and the other half is committed
under long-term tolling contracts to smelting concentrates produced by others.
On December 31. 1972, ore reserves of the project were estimated to be 60
million tons with an average grade of 4.77f lead and \.17c zinc. The principal areas
to be mined are held under long-term federal mineral leases which call for royalty
payments to the United States Government of 47r to 57c of the actual sales of
concentrates and 47c to 5r/c of the quoted refined metal price, less smelting.
refining, shipping, and selling costs.The profitability of this mine has been high
due to the mining of ore with lead and zinc grades substantially above average.
Future profitability may be unfavorably affected when the ore mined is of
average or below average grade.
As mentioned previously, AMAX has a participation through Heath Steele
Mines in lead, zinc, and copper production in Canada. All of the properties of
copper concentrates are sold in Canada, and its zinc and lead concentrates are sold
in Europe and in the United States. In 1972. a S10 million mine and mill
expansion program was initiated to increase production by approximately one-
third. AMAX's share of the cost of this program will be approximately S8 million.
AMAX's capital expenditures in the aggregate have been increasing in recent
years and during the five years ended December 31. 1972. amounted to approxi-
mately S550 million, excluding S83 million of additional investment in RST
International, and S76 million of fixed assets acquired in the purchase of Ayrshire
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Collieries Corporation. In 1972, AM AX's expenditures on capital projects totaled
$135 million. Such capital expenditures are expected to continue to increase due
to the expansion of AMAX's business botli in the United States and abroad. To
the extent that capital expenditures are not met by internally generated funds,
AMAX has stated that it expects to finance such expenditures through a combina-
tion of debt, production payment, and possibly, equity financing.
AMAX's holdings in other mining and metal companies are summarized in
Table A-2.2 and its dividends from these investments in Table A-2.3.
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TABLE A-2.2
AMAX INVESTMENTS IN OTHER COMPANIES
(December 31,1972)
Name of Securities AMAX Equity Cost (in $ Millions)
Australian Consolidated 33% 3.4
Minerals
Botswana RST Ltd. 30% 15.9
Canada Tungsten Mining 41% 3.5
Corporation Ltd.
Copper Range Company 20% 10.6
Kawecki Berylco Industries 6% 6.1
O'okiep Copper Co. 17% 0.4
Roan Consolidated 20% 34.9
Mines Ltd. (RCM)1
Tsumeb Corporation Ltd. 29% 0.8
Other - 10.2
Total Investments in
Other Companies $85.8
Sale of holdings in RCM is subject to restrictions of the
Zambian Government.
2
While there was no quoted market price for Tsumeb Corporation
shares, that corporation's reported earnings in 1972 were $6.8
million, indicating that AMAX's holdings have value substantially
in excess of its cost.
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TABLE A-2.3
DIVIDENDS RECEIVED BY AMAX FROM INVESTMENTS
IN OTHER MINING AND METAL COMPANIES AND
FROM ROAN SELECTION TRUST LTD.
Roan Selection Trust Limited
Roan Consolidated Mines
Limited1
O'okiep Copper Company
Limited
Tsumeb Corporation Limited
Other
Gross Dividends
U.S. Income Taxes
Net Dividends
Year Ended December 31,
1970 1972
$12,627,000 $
4,250,000
2,397,000
7,108,000
416,000
$26,798,000
2,403,000
$24,395,000
6,125,000
747,000
1,209,000
224,000
$8,305,000
760,000
$7,545,000
Effective January 1, 1970, the Zambian operating properties of Roan
Selection Trust Limited were combined into RCM and 51% of the shares
of RCM were sold to an instrumentality of the Zambian Government.
AMAX, through RST, Inc., owns 20% of the shares of RCM. Following
receipt by AMAX in 1970 of two dividends in respect of the final
two quarters of 1969, dividends from Roan Selection Trust Limited
ceased, and AMAX now receives in their stead such dividends as
RCM pays in respect of AMAX's 20% interest therein. The RCM dividends
are included in equity in earnings of RST, Inc., on the AMAX
Consolidated Statements of Earnings.
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3. AMERICAN SMELTING AND REFINING COMPANY (ASARCO)
INTRODUCTION
The main business of ASARCO is the mining, smelting, and refining of
nonferrous ores and concentrates, producing principally copper, lead, zinc, silver,
and gold, and recovering related by-products. The business also includes buying
and processing nonferrous scrap, and selling the alloys produced, producing and
selling coal and asbestos, and producing chemical materials and manufacturing
machinery for the metal-plating and finishing industry. ASARCO's operations are
carried on principally in the United States with additional operations in Canada
and Peru. In addition, ASARCO has substantial investments in other mining
companies, principally in Australia, Peru, and Mexico, and holds a substantial
interest in Revere Copper and Brass Incorporated.
Sales in 1972 totalled $814 million. Earnings before taxes and extraordinary
items were $59 million, including $34 million in equity in earnings of nonconsoli-
dated associated companies.
ASARCO accounts for between 10 and 20% of domestic sales of refined
copper, lead, and zinc, and somewhat more than one-third of the sales of refined
silver. Through its ownership of Lake Asbestos of Quebec, Ltd. in Canada,
ASARCO has about 6% of the domestic market for asbestos. Coal is its other
principal nonmetallic product, and ASARCO accounts for about 1% of the
domestic market, through its Midland Coal Company Division, acquired in late
1970. ASARCO has approximately 15,000 employees.
Table A-3.1 shows, for the year ended December 31, 1972, the approximate
amounts of ASARCO's consolidated sales of products and services and consoli-
dated earnings (before income taxes and extraordinary items) attributable to its
principal lines of business or other sources.
ASARCO has substantial equity in Southern Peru Copper Corporation,
which is a 51.5%-owned, nonconsolidated associated company. In June, 1971, a
new Peruvian mining law provided among other things that workers, through
"mining communities," must be given increasing participation in profits and
ownership (eventually to 50%) of mining enterprises. The Company's equity
investment in Southern Peru Copper Corporation and in the net assets in Peru of
the Company's wholly owned subsidiary, Northern Peru Mining Corporation,
amounted to $106,757,000 and $8,871,000, respectively, on December 31, 1972.
The Company believed the legislation will not have an adverse effect on its
investments in Peru.
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TABLE A-3.1
ASARCO: SELECTED FINANCIAL DATA
1972
($ Millions)
Sales(a):
Primary Metals ., . 653.7
Secondary Metals 107.7
Other Products 52.9
Total 814.3
Earnings:
(c)
Primary Metals , . 27.5
Secondary Metals 1.0
Other Products ( ,2)
Equity in Earnings of non-consolidated
associated companies 34.1
Non-operating'6' ( 3.3)
Total 59.0
Sales of Metals, Minerals, and Other Products^a) :
Copper 263.9
Silver 110.5
Lead 67.4
Zinc . 56.2
Secondary Metals 107.7
All other(f) 208.4
Total 814.
Does not include sales of non-consolidated associated companies.
Includes surface treatment chemicals.
(c)
After deducting bulk of ASARCO's research and exploration expenses.
Principally M.I.M. Holdings Limited (Australia, Southern Peru
. Copper Corporation (Peru) and ASARCO Mexicana, S.A. (Mexico).
Primarily dividends and interest on investments other than those
accounted for by the equity method; patent royalties and interest
expense.
Includes by-products, toll treatment charges, coal, asbestos, etc.
(a)
6 Includes $173 million in sales of products and services to customers
in foreign countries and operations in foreign countries.
Source: ASARCO Annual Report 1972.
A-18
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Continued development of Southern Peru Copper Corporation's Cuajone
open-pit copper mine and its infrastructure during 1972 required the expenditure
of $37 million of that company's funds, bringing Southern Peru's total investment
in Cuajone at the end of 1972 to about $83 million.
A work plan for Cuajone was filed with the Government calling for the
expenditure or commitment of $47.6 million in 1973. Southern Peru has current
construction plans to meet the requirement. Efforts to arrange financing to assure
completion of this $500 million project were said to be promising. The bilateral
agreement requires minimum annual expenditures, and the entire project must be
completed by June, 1976, but may be extended by any additional time available
by reason of force majeur. The bilateral agreement provides that failure to
maintain the investment program or complete the project as scheduled, in the
absence of force majeur, will result in termination of the concession for the
Cuajone mine.
PROPERTIES
The location and general character of ASARCO's principal domestic mines
and plants are shown below. In addition to the principal metals shown, ores also
contain small quantities of other nonferrous metals.
Galena - Wallace, Idaho - silver and copper - long-
term lease
Ground Hog — Vanadium, New Mexico — zinc and lead —
primarily under long-term leases
Leadville - Colorado — zinc and lead — primarily in fee
Mission* — Sahuarita, Arizona — copper — primarily
State mineral leases renewable at 20-year
intervals, balance in fee under federal
patented mining claims
San Xavier* — Sahuarita, Arizona — copper — leases for
ten years and so long thereafter as minerals
are produced in paying quantities. (The pri-
mary ten-year term began September 1 8,
1959, and is now running under the indefi-
nite secondary term.)
*0pen-put mines
A-19
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Silver Bell* - Arizona — copper - primarily in fee
Coal Lands — Illinois — primarily in fee, some under
long-term leases
Tennessee Mines Division -
American Limestone — Sand — gravel — limestone — primarily in
fee
Several Mines — Zinc — primarily in fee
In Canada the Buchans (zinc and lead) and Granduc (copper) mines are held
under long-term leases, and ownership in the Lake Asbestos (asbestos) mine is by
way of a qualified fee.
Subsurface rights of mines in Peru, Mexico, and Nicaragua are held under
concessions granted by the respective governments. In Australia, the M.I.M.
Holdings Limited (52.7%-owned by ASARCO) ISA mines are held under govern-
ment lease.
Smelters Refineries
Hayden, Arizona1 Baltimore, Maryland1
El Paso, Texas' -2 Perth Amboy, New Jersey1
Tacoma, Washington1 Tacoma, Washington1
East Helena, Montana2 Omaha, Nebraska2
Glover, Missouri2 Amarillo, Texas3
Amarillo, Texas3 Corpus Christi, Texas3
Corpus Christi, Texas3 Denver, Colorado4
1. Copper
2. Lead
3. Zinc
4. Cadmium, high-purity metals
All plants are held in fee. ASARCO also operates two zinc oxide plants in
Hillsboro, Illinois, and Columbus, Ohio.
Capacity utilization of the Company's primary metal plants during 1972 was
75% for copper smelters and refineries, 80% for lead smelters and refineries, and
90% and 80%, respectively, for zinc smelters and refineries.
Open-pit mines
A-20
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Installations of additional air quality control facilities are reducing the need
to curtail production to protect air quality, and oil storage facilities have been
constructed to supplement natural gas supplies.
Major new facilities were completed in the modernization program at the
Corpus Christi electrolytic zinc refinery which will result in improved costs and
increased capacity. The Amarillo zinc smelter, which has operated since 1923,
will eventually be shut down because it cannot economically be made to comply
with applicable air quality standards.
In March, 1973, ASARCO announced plans to phase out production at its
Baltimore copper refinery after 1975. ASARCO will construct a new copper
refinery, with a designed capacity of 420,000 tons of refined copper per year, in
Amarillo, Texas. The estimated cost of the new facility is approximately SI00
million. Construction began in mid-1973, and startup operations are planned for
late 1975 or early 1976. The extent to which the addition of this new refinery
will affect the operations at the Company's Perth Amboy, New Jersey copper
refinery has not yet been determined.
The associated companies - principally those in Australia, Peru, and
Mexico - also have major capital expansion programs under way. Capital expendi-
tures by the three companies in 1972 aggregated $127 million and exploration
expenditures exceeded $5 million.
ENVIRONMENTAL SAFETY AND HEALTH MATTERS
ASARCO has a somewhat unique postion in respect to environmental safety
standards in the nonferrous metals industry because of its role as a custom
smelter . . . and ASARCO has been particularly communicative about this. For
example, in early 1973, the Company stated the following:
• ASARCO has made and will continue to make substantial expendi-
tures for various pollution control facilities.
• ASARCO recently completed construction at its El Paso and
Hayden smelters of facilities to reduce the sulfur dioxide content
of smelter emissions by converting it into su If uric acid. The
aggregate cost of these sulfuric acid plants was approximately $33
million. In addition, ASARCO has begun construction at its
Tacoma smelter of a liquid sulfur dioxide plant, estimated to cost
approximately $16 million to supplement an existing sulfuric acid
plant in reducing sulfur emissions at Tacoma. ASARCO is also
constructing a new, tall smokestack at its Hayden smelter at an
estimated cost of $6 million to improve the dispersion of
emissions.
A-21
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• Existing markets, freight rates, and competitive sulfur prices do
not permit ASARCO to sell at compensatory prices the sulfuric
acid and liquid sulfur dioxide produced and to be produced at its
copper smelters. Operating at full design capacity, the Hayden, El
Paso, and Tacoma sulfuric acid plants would produce approxi-
mately 498,000 tons of sulfuric acid per year and the Tacoma
liquid sulfur dioxide plant would produce approximately 83,000
tons per year of that substance, a portion of which will be
consumed in the Tacoma sulfuric acid plant. The copper oxide ore
leaching operations at ASARCO's San Xavier unit and the leaching
of copper from waste material at ASARCO's Silver Bell unit in
Arizona will provide an internal use for approximately 61,000
tons of sulfuric acid per year and other mining operations which
could utilize sulfuric acid are being investigated.
• Capital costs incurred in the construction of the new sulfur con-
trol facilities at the El Paso and Tacoma smelters have been and
are being financed through a surcharge imposed on mines sup-
plying copper-bearing materials to ASARCO's copper smelters, of
\i or \.5i/lb of copper (depending on refined copper prices)
levied on the copper content of the materials received. As an
alternative to the surcharge, two major shippers of copper concen-
trates have elected to participate with ASARCO in a partnership
to own and operate the El Paso sulfuric acid plant and to contrib-
ute capital to the venture.
• ASARCO believes that the capital improvements to its El Paso and
Hayden smelters will cause the operations of the smelters to
comply with applicable Texas and Arizona air quality standards
with only minimum curtailment of operations. However, the
Arizona agency having jurisdiction has recently issued an order
that would have the effect of increasing the level of air quality
controls at Hayden beyond those which ASARCO believes are
required by Arizona law. ASARCO plans to contest the order by
appropriate proceedings. In addition, in July 1972, the EPA
rejected Arizona's proposed sulfur dioxide emissions standards for
smelters and proposed more stringent standards. ASARCO has
participated in administrative proceedings in opposition to the
EPA's proposed substitute standards and, together with others, has
instituted an action contesting the validity of the EPA's rejection
of the proposed Arizona standards. Depending on the outcome of
these proceedings, ASARCO may be required to make further,
extensive investment in control facilities and new process equip-
ment at Hayden.
A-22
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• ASARCO's Tacoma copper smelter is operating under a variance
from the Puget Sound Air Pollution Control Agency, contingent
on ASARCO's agreeing by December 31, 1974 to bring the opera-
tion into compliance with local emissions standards by December
31, 1976. The liquid sulfur dioxide plant now under construction
at Tacoma will not alone be sufficient to bring the smelter's
operations into compliance with existing standards and, unless the
standards are modified, further substantial capital investment
would be required. ASARCO intends to request modifications of
the standards prior to December 3 1, 1974. In addition, regulations
recently adopted by the local agency regarding arsenic particulate
matter will require additional capital investment at the Tacoma
smelter.
• At its East Helena, Montana lead smelter, ASARCO plans to install
an improved particulate recovery system and taller smokestacks, at
an aggregate cost of approximately $6 million. The plant has no
sulfur recovery facilities, however, and emissions standards prom-
ulgated by the Montana Board of Health effective July 1, 1973
would impose strict limits on sulfur dioxide emissions. Standards
recently proposed by the EPA would be slightly less stringent.
ASARCO intends to apply for a variance from the state standards
and has opposed the adoption of the EPA standards in administra-
tive proceedings.
• ASARCO's Glover, Missouri lead smelter has no sulfur recovery
facilities and has operated under a variance from the Missouri Air
Conservation Commission. ASARCO has applied for renewal of
the variance and, as a condition of renewal, the Commission could
require ASARCO to construct sulfur control facilities for the
smelter.
• ASARCO is also subject to federal and state legislation and regula-
tions pertaining to plant and mine safety and health conditions,
including the Occupational Safety and Health Act of 1970, the
Metal and Nonmetallic Mine Safety Act and the Coal Mine Health
and Safety Act of 1969. ASARCO has made and will continue to
make expenditures to comply with such legislation and regula-
tions. Future expenditures for these purposes may be substantial
but cannot be estimated with accuracy at present.
• In November 1972, the Company completed financing arrange-
ments for the construction of certain air pollution control facili-
ties at its Tacoma, Washington plant whereby the Port of Tacoma
A-23
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issued $16.5 million of industrial development bonds, bearing
interest at 3.875% to 4.10% per annum, and maturing as follows:
October 1, 1974- $5 million; April 1, 1975- $5 million; and
October 1, 1975 - $6.5 million.
Pursuant to the terms of a lease and leaseback arrangement with
the Port, the Company will reimburse the Port for principal and
interest payments made by the Port pursuant to the terms of the
bonds. In addition, the Company entered into an indemnity agree-
ment whereby the purchasers of the bonds are indemnified by the
Company against any loss should the validity of the bonds be chal-
lenged or the bonds be declared invalid. Unexpended funds are
committed to construction.
Long-Term Debt
(In S Thousands)
1972 1971
3-7/8% - 4.10% Port of Tacoma,
Washington Industrial revenue
bonds, maturing serially 1974
and 1975 $16,500 $ —
6% notes payable — relating to
acquisitions of zinc properties
in 1971 due in three equal annual
installments commencing in 1974
($3,600,000 payable in 1973 included
in Current Liabilities) 10,800 14,400
4-5/8% twenty-five year subordinated
debentures (amount authorized
$50,000,000) due October 15, 1988
sinking fund payments of $1,637,000
required annually on October 14.
Debentures have been purchased
covering payments through 1975 23,684 23,684
$50,984 $38,084
ASARCO owns 1 ,876,296 shares of common stock (33.4%) and
$22,763,000 principal amount of convertible debentures of Revere Copper &
Brass Inc. No dividends were received during 1972 on the common stock, and no
dividend was declared for the first quarter of 1973. In 1972, Revere reported a
A-24
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loss of 15
-------
Tax accrual under APB Opinion No. 23 has not been made because the
undistributed earnings of subsidiaries and of corporate joint ventures, accounted
for by the equity method, have been reinvested, will continue to be reinvested
indefinitely. No remittance of such earnings to ASARCO is foreseen.
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4. ANACONDA
Anaconda is the third largest producer of primary copper and among the top
ten domestic aluminum producers in the United States. In addition to primary
copper and aluminum, Anaconda produces brass and wire mill products and
fabricated aluminum products. In 1972, total corporate sales were $1.01 billion
and net income before extraordinary items was $44 million. The company has
over 25,000 employees. The estimated breakdown of sales and earnings, as
reported by Anaconda, is shown in Table A-4.1.
Anaconda's North American copper mines, which provide the majority of
present earnings, are relatively high in cost, creating wide cyclical swings, de-
pending on price movements. Anaconda suffered from the expropriation of its
Chilean properties in July, 1971. It is believed that the Chilean copper mines
provided, over 40% of Anaconda's 1970 earnings and an even greater proportion
in prior years.
In addition to copper, Anaconda produces and sells silver, gold, and uranium
oxide concentrate. Production of lead ceased as of December 31, 1971, and zinc
production ended in mid-1972. Cadmium production, which totalled 418,000
pounds in 1971, ceased with the closing down of zinc operations.
Over 40% of North American copper production comes from Montana,
about 30% from Arizona, and the balance from Nevada and Canada. Major
investments in Montana over the past few years have resulted in the ability to
handle substantially larger tonnages there. Additionally, in 1972, Anaconda
decided to proceed with the construction of a new plant in Montana to convert
copper concentrates into electrolytic copper by a new hydrometallurgical process
known as the "Arbiter" process, which was developed by Anaconda's research
staff "as part of the effort to overcome the high costs and air pollution problems
associated with conventional smelting."
In Arizona, Anaconda operates the Twin Buttes mine, which commenced
production in 1969. This mine is located on properties leased from Banner Mining
Company. Sulfide copper ores mined at Twin Buttes are concentrated at an
adjacent plant and the resulting concentrates are, with minor exceptions from
time to time, treated on a toll basis by nearby smelters owned by American
Smelting and Refining Company (ASARCO) and Inspiration Consolidated Copper
Company, Part of the blister copper produced is further treated by ASARCO and
returned to Anaconda as refined copper, and part is returned as blister to
Anaconda for refining at its own plants at Perth Amboy, New Jersey, and Great
Falls, Montana.
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TABLE A-4.1
THE ANACONDA COMPANY AND SUBSIDIARY COMPANIES
SALES AND PRE-TAX INCOME (LOSS)
CONTRIBUTED BY PRINCIPAL LINE 01' BUSINESS
Year Ended December 31, (Thousands of Dollars)
1971 1972
Pre-tax Pre-tax
Sales Income (Loss) Sales Income^ /
Minerals, Metals &
Metal Products 920,595 (7,851) 988,616 43,069
All Other(a^ 25,908 5,154 22,987 6,488
Total 946,503 (2,697) 1,011,603 49,557
(a)
For 1971, there are included herein sales of $19.069 million and pre-
tax income of $2.891 million contributed by the forest products business
The contribution from forest products in relation to total business was
significantly higher in 1971 than it was in certain prior years due to
labor strikes at the company's various mining operations during 1971.
In 1972 the principal assets of the forest products division were sold.
During the years 1968 through 1970, forest products contributed less
than 2% to consolidated sales and pre-tax income; in 1972, the con-
tribution was less than eight percent.
Pre-tax income has been restated. As more fully described on Page 18
of the 1972 Annual Report to Shareholders, the company in 1972 retro-
actively adopted the equity method of accounting for investments in
certain affiliated companies. The accompanying "Summary of Operations"
has been restated to reflect this accounting change which has the
effect of increasing income before extraordinary items by (in thousands
of dollars): $524 (3
-------
In 1972, Anaconda announced an agreement in principle witli American
Metal Climax, Inc. (AMAX), for its participation in the Twin Buttes mine. AMAX
has agreed to purchase Banner's interest and will invest an estimated $93 million
in mine development over a three-year period. AMAX will acquire a 5CK/ interest
in the mine and will be entitled to SO'/ of the mine production. Anaconda and
AMAX will jointly expand production including the construction of a plant for
treatment of oxide copper ore from the mine that was estimated to cost S59
million and will treat 10,000 tons of ore per day.
In 1972, production of copper from Anaconda's mines totalled 242,955
tons, and the company stated that all of the domestic primary copper producing
facilities operated at or near capacity. Anaconda's sales by principal divisions are
listed in Table A-4.2.
During 1972, approximately 12.5^ of Anaconda's net income was attribut-
able to equity in net income of affiliated companies in Mexico and Brazil.
As of December 31, 1972, Anaconda held 27.!'/< of the stock of Inspiration
Consolidated Copper Company, which accounts for about 5% of U.S. mine
output. The investment in the shares of Inspiration is included as an asset in
Anaconda's consolidated balance sheet, and accounted for by the equity method.
Anaconda has approximately a one-third interest in an alumina production
facility in Jamaica, West Indies. Anaconda is entitled to receive its share of the
alumina produced and is committed to pay its share of the venture's costs. The
new aluminum production plant at Sebree, Kentucky, which has a capacity of
120 million tons a year, will be supplied primarily from the Jamaican venture.
With Sebree, and production from Anaconda's Columbia Falls, Montana, reduc-
tion plant, Anaconda will be able to produce approximately 300,000 tons per
year of aluminum, enough for its manufacturing operations (not yet substantial
contributors to profits), plus a sales position in the primary ingot and billet
market.
With respect to the possible impact on Anaconda and its business from
regulations relating to the protection of the environment, Anaconda has been
involved in litigation with the Environmental Protection Agency and the State of
Montana in connection with the proposed emission standards for the Anaconda
copper smelter in Montana. Anaconda had estimated that, under the proposed
standards, it could be forced to expend an additional S60 million in connection
with the air pollution control program at the smelter. In addition, some invest-
ments made already in the program would be rendered purposeless. Anaconda was
granted favorable preliminary relief in the federal case and has sought relief from
enforcement of Montana standards that went into effect in 1973.
A-29
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TABLE A-4.2
ANACONDA: SELECTED FINANCIAL DATA
Division Name 1972 ($ Million)
Anaconda Aluminum Company 198.4
Anaconda American Brass Company 346.5
Anaconda Wire & Cable Company 286.1
Anaconda Primary Metals Div. 360.0
Anaconda Forest Products* 24.6
Total of the above figures = $1,215.6 million
Less Sales Between Divisions *= 204.0 million.
Grand Total $1,011.6 million
*
Sale of assets to Champion International Corporation during 1972
for $117 million.
Source: Anaconda Annual Report 1972.
A-30
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5. CITIES SERVICE COMPANY
Cities Service is engaged in finding, producing, manufacturing, and distribut-
ing oil, gas, and chemical products in the United States and in foreign countries.
The principal areas of operations include petroleum and natural gas, natural gas
transmission, petrochemicals, industrial chemicals, and metals. The Company had
1974 revenues of $2.85 billion. It employs 18,000 people.
Its North American Chemicals and Metals produced the following tonnages
for sale in the last two years:
1974 1973
(thousands tons)
SulfuricAcid 850 910
Copper 31 40
Iron Products 124 217
Zinc Concentrates 6 18
Other Industrial Chemicals 161 206
Total sales from North American Chemicals and Metals operations were S137
million in 1974, SI 52 million in 1973.
INDUSTRIAL CHEMICALS
The Company conducts extensive operations in the "Copper Basin" region of
Copperhill, Tennessee. Cities Service commenced its activity there with the
purchase of Tennessee Copper Company in 1963. The ore is mined from five
underground mines, and contains 35% iron, 24% sulfur, 19? copper and V/f /.inc.
Operations are integrated. (See Figure A-5.1.) The values of iron and sulfur
recovered at Copperhill are considerably greater than the copper values per se. In
1970, a very large expansion and modernization program was begun, including a
new copper smelter iron oxide pellet plant, and an additional sulfuric acid plant.
Construction of yet another acid plant is underway, and construction of two
water treatment plants to remove both chemicals and suspended solids from
process water has begun.
Cities Service thinks of itself as one of the top ten copper producers in the
United States. In addition to operations at Copperhill, a much more extensive
copper mining operation is conducted in Arizona, as will be discussed below.
A-31
-------
ORE STORAGE
CONCENTRATES
UNLOADING
COPPER SMELTER
CALCINE STORAGE
POWER GENERATING
PELLETIZING PLANT
IRON ROASTING
'ASTE H
BOILERS
SoA » WASTE
METALS RECOVERY
GAS CLEANING
BRIKS,
CRYSTALS,
SNOW,
POWDERED,
MONO,
ACID PLANTS
CEMENT COPPER
60* BE COM'L
66* BE TEXTILE
98% TEXTILE
OLEUM
,'i SULFONATEO
S.'«J ORGANICS
•i»
FERRI-FLOC
LIQUID S0e
ORGANIC CHEMICALS
•-I-T*
FIGURE A-5.1 CITIES SERVICE COMPANY (Copperhill Operations)
GENERALIZED FLOW SHEET
A-32
-------
METALS
The mine and mill facilities of the Pinto Valley open pit mine near Miami,
Arizona, were completed ahead of schedule and at capital costs slightly below
estimates. This represents the largest construction project in the Company's
history. The first division began production in June of 1974 and the second
division in October of 1974. The design capacity of 40,000 tons of ore per day
was readied early in 1975. This production rate will recover in excess of 60,000
tons of copper annually.
Copper produced in concentrate form will be controlled by the throughput
of new smelter operations of another company (believed to be Inspiration
Consolidated).
Development of the underground Miami hast ore deposit is continuing and
production is expected to begin in the early part of 1976, eventually increasing to
2,000 tons of high grade ore per day in 1 978.
After many years of production, the in-place reserves of the Copper Cities
and Diamond H open pit mines at Miami were exhausted early in 1975, but
leaching operations will continue at declining rates for several years.
A solvent extraction-electrowinning plant to produce cathode copper at the
Miami leaching operation is under construction and should be completed in
mid-1976. This will eliminate the toll smelting-refining on the major part of the
leach copper output.
An active mineral exploration program is being conducted in the Rocky
Mountain area, in Alaska, and in Canada. The objective is to find deposits of
copper and copper-associated minerals.
METAL FABRICATION AND SALES
Sales of fabricated copper products in the form of sheet, strip, and insulated
wire were at record levels in 1974. Volumes have declined in the early months of
1975, reflecting the trend of economic conditions.
A 50'/ expansion in capacity was completed at the Chester, New York, plant
which manufactures insulated wire and cable for the electric and electronic
industries. Capability to manufacture Hat wire was installed at the Seymour,
Connecticut, plant.
A-33
-------
FINANCIAL DATA
Table A-5-. 1 presents a breakdown of Cities Service's sales, capital invest-
ments, and property by major business category. Also shown are statistics on
capitalization and return on stockholders' equity.
A-34
-------
TABLE A 5.1
CITIES SERVICE COMPANY
SUMMARY OF CONSOLIDATED FINANCIAL DATA
Stated in millions of dollars except per share data
INCOME
Gross income
Sales and operating income
North American petroleum*
Natural gas transmission .
North American petrochemicals
North American chemicals & metals
International*
Other operations
Total . .
Investment and other non-operating income, net
Costs and expenses
Costs and operating expenses
Exploration expenses, including dry hole costs
and lease amortization
Selling, general and administrative expenses
Taxes, other than Federal and foreign income taxes
Depreciation and depletion
Interest expense
Less Interest expense capitalized
Federal and foreign income taxes
Income applicable to minority interests
Income before extraordinary credits
Extraordinary credits (net)
Net income
'Includes sales of purchased crude oil . .
EARNINGS PER SHARE OF COMMON STOCK**
Income before extraordinary credits
Extraordinary credits (net)
Net income
Average shares outstanding (millions)
"Adjusted for 3% stock dividend paid in 1974 and assuming conver-
sion of all Preferred and Preference Stocks while outstanding
CASH DIVIDENDS
Preferred Stock requirements
Preference Stock requirements
Common Stock
Total
Per share of Common Stock
Adjusted for 3% stock dividend paid in 1974
Historical
'Plus 3% stock dividend
1974
2,1025
2034
272.6
136.6
748
164
2,8063
40.3
2,846.6
1,9932
1492
1465
80.1
128.4
56.9
(56)
891
5.0
2,642.8
2038
—
203.8
731 5
758
—
7.58
26.9
—
—
61.0*
61 0
2268
230
1973
1,3823
174 1
215.2
151 5
593
52.2
2,034.6
31 6
2,066.2
1,421.1
895
144.5
59 1
1142
463
(1 6)
552
2.3
1,9306
135.6
11 3
1469
469 1
5.06
.42
5.48
26.8
—
—
573
573
2 136
2 20
1972
1,177.1
1702
2002
2236
458
452
1,862 1
83
1,8704
1.3091
645
157 0
60 1
114.8
432
(5)
21 6
1,5
1,771 3
99 1
13.0
112.1
379.5
373
.49
4 22
266
—
—
56.7
567
2 136
2.20
A-3 5
-------
TABLE A-5.1 (Continued)
Stated m mill'ons of dollars except per share data
CAPITAL EXPENDITURES
North American petroleum
Production
Natural gas liquids
Refined products
Alternate fuels
Natural gas transmission
North American petrochemicals
North American chemicals & metals
International
Other operations
Total plant additions
Investments
Total
PROPERTY, PLANT AND EQUIPMENT
North American petroleum
Production
Natural gas liquids
Refined products
Alternate fuels
Natural gas transmission
North American petrochemicals
North American chemicals & metals
International
Other operations
Total gross investment
Accumulated depreciation and depletion
Total net investment
CAPITALIZATION
Long-term debt
Stockholders equity
Total capitalization
Ratio of !ong-term debt to capitalization
Stockholders equity at year-end per share*
Return on stockholders' average equity —
income before extraordinary credits
1974
182.4
69
49.7
46.4
2854
166
190
905
280
5.4
444 9
20
4469
1,253.1
2207
6965
526
2,2229
3795
3092
3652
508
842
3.411 8
1,481 0
1.9308
581 2
1,6737
2 2549
25 8°'o
6225
12 7%
1973
178.5
4 1
332
49
220.7
13.6
125
75 1
196
549
3964
58
4022
1,1246
2152
691 2
55
2,0365
3654
3133
281 7
390
2555
3,291 4
1 ,437,6
1,8538
6138
1,530,1
2,1439
28 6%
5695
92%
1972
117 4
70
249
—
1493
10.9
126
724
62
90
260.4
1 3
261 7
9946
2166
6882
—
1,8994
3549
3043
255 1
270
2108
3,051 5
1,3564
1,695 1
577 0
1.433 8
2 0108
28 7°0
5367
7 1 %
'Ac jsted for 3°b stock dividend ca'd in 1974
Source: 1974 Annual Report
A-36
-------
6. CLEVELAND-CLIFFS IRON COMPANY
INTRODUCTION
Cleveland-Cliffs was formed by consolidation under Ohio law in 1947 as the
successor to business enterprises whose beginnings can be traced to earlier than
1850. Cleveland-Cliffs is engaged principally in the iron ore business. In particular,
Cleveland-Cliffs holds and leases iron ore reserves, manages and has operating
interests in mining ventures, and sells iron ore. Cleveland-Cliffs owns interests in
electric power generating facilities and a railroad and owns and operates bulk
carriers on the Great Lakes.
The Company also owns extensive timber properties and is engaged in the
harvesting of logs (primarily hardwood) and the production and sale of veneer
logs, specialty hardwoods, and other wood products. The Company owns invest-
ments in five steel companies, has interests in oil shale, and is engaged in explora-
tion and research with respect to certain nonfcrrous minerals. A summary of
major operations and projects is given in Table A-6.1.
Table A-6.2 sets forth the approximate contributions of Cleveland-Cliffs'
mining operations, forest products, investment, and other activities to its con-
solidated revenues and consolidated income before income taxes and extra-
ordinary items for the years 1970-74 as included in the Company's financial
statements. Tables A-6.3 and A-6.4 give details of the royalty income, cost of
goods sold and the value of securities and interest income. Table A-6.5 gives a
comparative financial summary for 1972, 1973, and 1974.
IRON ORE PRODUCTION AND RELATED ACTIVITIES
Mining Operations
Cleveland-Cliffs' predecessors commenced iron ore mining operations m the
Lake Superior region in the mid-nineteenth century, and until the 1950's the
Company's principal activities were the mining, transportation, and sale of iron
ore and related activities. Progressively since the 1950's, its emphasis has shifted
to the development and leasing of its iron ore reserves and the organi/ation and
management of joint ventures for the production of iron ore products, both in the
Lake Superior region and elswhere.
United States and Canada
Cleveland-Cliffs owns, or holds long-term leasehold interests in, active
properties in the United States and Canada containing approximately two billion
tons of proven and probable crude iron ore reserves, principally "low-grade"
deposits requiring beneficiation to produce salable iron ore products.
A-37
-------
TABLE A-6.1
CLEVELAND CLIFFS: SUMMARY OF MAJOR OPERATIONS AND PROJECTS
MARQUETTE IRON MINING COMPANY
Operates Republic Mine & Pellet Plant
Humboldt Pellet Plant
Location Republic, Michigan
Humboldt, Michigan
Participants (1)
Jones & Laughlin Steel Corp
Wheeling-Pittsburgh Steel Corp
International Harvester Co
The Cleveland-Cliffs Iron Co , Manager
EMPIRE IRON MINING COMPANY
Operates Empire Mine & Pellet Plant
Location Palmer, Michigan
Participants
Inland Steel Co
McLouth Steel Corp
International Harvester Co
The Cleveland-Cliffs Iron Co , Manager
TILDEN MINING COMPANY (2)
Operates Tilden Mine & Pellet Plant
Location Tilden Township, Michigan
Partic.pants (1)
Algoma Steel Corp Ltd
Jones & Laugnlm Steel Corp
The Steel Company of Canada, Ltd
Wheehng-Pittsburgh Steel Corp
Sharon Steel Corp
The Cleveland-Cliffs Iron Co , Manager
THE NEGAUNEE MINE COMPANY
Operates Mather Mine
Location Negaunee, Michigan
Participants
Republic Steel Corp
Bethlehem Steel Corp
McLouth Steel Corp
Sharon Steel Corp
The Cleveland-Cliffs Iron Co , Manager
PIONEER PELLET PLANT (2)
Operates Pioneer Pellet Plant
Location Negaunee, Michigan
Participants
Republic Steel Corp
Bethlehem Steel Corp
McLouth Steel Corp
Sharon Steel Corp
The Cleveland-Cliffs Iron Co , Manager
UPPER PENINSULA GENERATING
COMPANY
Location Marquette, Michigan
Participants
Cliffs Electric Service Company (3)
Upper Peninsula Power Company,
Manager
CLIFFS ROBE RIVER IRON ASSOCIATES (2)
Operates Robe River Mine & Pellet Plant
Location Western Australia
Participants (1)
Robe River Ltd
Mt Enid Iron Co Ltd
Mitsui Iron Ore Development Pty Ltd
Tcxasgulf, Inc
Bank of America
First National Bank of Chicago
The Cleveland-Ciilfs Iron Co
Manager Cliffs Western Australian Mining
Co Pty, Ltd. (4)
THE ADAMS MINE
Location Kirkland Lake, Ontario
Participant
Dominion Foundries & Steel, Ltd
Manager Chffs of Canada, Ltd (3)
SHERMAN MINE (2)
Location Temagami, Ontario
Participants
Dominion Foundanes & Steel, Ltd
Tetapaga Mining Co , Ltd (3)
Manager Cliffs of Canada, Ltd (3)
THE MESABA-CLIFFS MINING COMPANY
Operates Canisteo Mine
Location Colerame, Minnesota
Participants (1)
Jones & Laughlin Steel Corp
Cyclops Corporation
Wheehng-Pittsburgh Steel Corp
National Steel Corp
The Cleveland-Cliffs Iron Co , Manager
CLEVELAND-CLIFFS STEAMSHIP
COMPANY (3)
Owns or Charters (5)
E B Greene C M White
W A Sterling W P Snyder, Jr
Cliffs Victory W B Boyer
Cadillac R H Reiss
Champlam W G Mather
T M Girdler Pontiac
T F Patton Frontenac
Operated by The Cleveland-Cliffs Iron Co
CLEVELAND-CLIFFS FOREST PRODUCTS
DIVISION
Operates Forrest Center Sawmill
Location Munising, Michigan
Headquarters Iron Mountain, Michigan
Also coordinates selective harvesting and
sales pnmarly from more than 330,000
acres of timberland owned by The Cleveland-
Cliffs Iron Co in Michigan's Upper Peninsula
PARAHO PROJECT
Purpose Oil Shale Research
Location Anvil Points. Colorado
Participants (1)
Atlantic Richfield Company
The Cleveland-Cliffs Iron Company
Exxon Corporation
Gulf Oil Company
Kerr McGee Corporation
Artnur G McKee & Company
Marathon Oil Company
M o b 11 Oil Company
Phulips Petroleum Company
Shell Oil Company
Southern California Edison Co
Standard Oil Company of California
Standard Oil Company (Indiana)
The Standard Oil Company (Ohio)
Sun Oil Comoany
Texaco Inc
Weob Resources Inc Group
Operator
Development Engineering, Inc
THUNDERBIRD JOINT VENTURE
(Uranu.m Exploration)
Headquarters Casper, Wyoming
Participants
Pioneer Nuclear Inc
Getty Oil Compa-y
Skelly Oil Company
Thunderbira Petroleums, Inc
The C'evelano-Cnffs Iron Co , Manager
CLIFFS-GETTY-SKELLY JOINT VENTURE
(Uranium Exploration)
Headquarters Casper, Wyoming
Participants
Getty Oil Company
Skelly Oil Company
Tne Clevelana-Cliffs Iron Co , Manager
PINTEC JOINT VENTURE
(Uranium Exploration)
Hindquarters Casper, Wyoming
Participants
Pion°er Nuclear, Inc
Texas Eastern Nuclear, Inc
The Cleveland-Cliffs Iron Co . Manager
(1) Directly or through subsidiaries and/or affiliates. (2) Joint venture. (3) Wholly-owned sub-
sidiary of The Cleveland-Cliffs Iron Company. (4) Subsidiary of The Cleveland-Cliffs Iron Company.
(5) Bulk freighters.
Source: Cleveland Cliffs Annual Report 1974
A-38
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TABLE A-6.2
CONTRIBUTIONS TO INCOME BY OPERATING GROUPS
1970
1971
1972 1973
1974
Total Revenues
Mining Operations (1)
Forest Products
Corporate (2)
Income Before
Mining Operations
Forest Products
Corporate
$
89.6
5.6
6.3
$101.5
Income Taxes and
$
$
15.4
1.0
5.3
21.7
88% $
6%
6%
100% $
77.2
7.0
4.3
88.5
Extraordinary
71% $
5%
24%
100% $
17.2
1.3
2.4
20.9
87%
8%
5%
100%
$107.4
7.8
4.4
$119.6
90%
6%
4%
100%
$120.3
9.1
59
$135.3
89%
7%
4%
100%
$116.7
11 1
9.8
$137.6
85%
8%
7%
100%
Items (3)
82%
6%
12%
100%
$ 183
1.9
3.0
$ 23.2
79%
8%
13%
100%
$222
2.1
5.0
$ 29.3
76%
7%
17%
100%
S 263
2.4
9,2 _
$ 37.9
69%
7%
24%
100%
1. Includes royalties, management fees, iron ore sales by Cleveland-Cliffs, lake shipping
revenues, power revenues and equity in net income of unconsotidated railroad and mining
operations. See also Table A-6.3.
2. Consists principally of dividends and interest from investments. See Table A-6.4.
3. After allocation of certain corporate expenses.
Source: Annual Reports 1971-1974.
TABLE A-6.3
CLEVELAND-CLIFFS IRON COMPANY
'SALES, ROYALTIES AND OTHER OPERATING REVENUES" AND
"COSTS OF GOODS SOLD AND OPERATING EXPENSES"
Year Ended December 31
1974
1973
1972
1971
1970
Sales, royalties and other
operating revenues:
Sale of tangible products,
lake shipping revenues
and power revenues
Royalties
Operating management fees
Cost of goods sold and
operating expenses:
Cost of tangible products
sold, lake shipping costs
and power costs
Other costs and expenses
$103,027,000
15,897,000
2,058,000
$107,308,000
13,133,000
1,828,000
$ 98,952,000
9,921,000
1,669,000
$69,657,000
9,146,000
1,494,000
$82,034,000
8,222,000
1,343,000
$120,982,000 $122,269,000 $110,542,000 $80,297,000 $91,599.000
$ 89,377,000
128,000
$ 95,766,000
783,000
$ 86,931 .GOO
650,000
$56,618,000
637,000
$69,935,000
213,000
$ 89,505,000 S 96,559.000 S 87,531,000 $57,255,000 $70,148,000
Source: Form 10-K Report to SEC, for the year 1974.
A-39
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TABLE A-6.4
MARKET VALUE OF LISTED SECURITIES PORTFOLIO/
DIVIDEND AND INTEREST INCOME
The Cleveland-Cliffs Iron Company and Consolidated Subsidiaries
Market Value of Listed Securities Portfolio/Dividend and Interest Income
The Cleveland-Chffs Iron Company and Consolidated Subsidiaries
Shares
Owned
Dec 31, 1974
Market
Value
Dec 31,1974
Dividend and Interest Income
Year Ended December 31
1974
1973
Listed Securities
Common Stocks
Inland Steel Company . . 660,744
Jones & Laughlm Steel Corporation (A) —
Republic Steel Corporation 392,228
Wheeling-Pittsburgh Steel Corporation . 102,432
McLouth Steel Corporation . 95,100
Preferred Stock
Lykes-Youngstown Corporation . , 79,300
Subordinated Debentures
Lykes-Youngstown Corporation $10,000,000(B)
Total Listed Securities
Other Interest Income (principally from
investments in short-term securities)
Total Dividend and Interest Income.
$21,147,000
—
8,825,000
1,818,000
1,272,000
$ 1,787,000
157,000
1,098,000
71,000
127,000
$ 1,434,000
139,000
843,000
— 0—
16,000
33,062,000
2,121,000
5.575,000
$40,758,000
3,240,000
496.000
750,000
4,486,000
4,477,000
$ 8,963,000
2,432,000
347,000
750,000
3,529,000
2,908,000
$ 6,437,000
(A) Disposed of in 1974, see Note I to the financial statements
(B) Principal amount
Source: Annual Report, 1974.
A-40
-------
TABLE A-6.5
COMPARATIVE FINANCIAL SUMMARY
The Cleveland-Cliffs Iron Company and Consolidated Subsidiaries
Dollars in thousands except per share amounts 1974 1973 1972
Balance Sheet — December 31
Cash and short-term securities
Other current assets . . . .
Total Current Assets
Less current liabilities ....
Working Capital ...
Investments and other assets
Properties — net .
Long-term debt . . . .
Other long-term liabilities ....
Shareholders' Equity ...
Represented by
Preferred Shares ....
Common Shares . .
Capital in excess of par value of shares
Retained income . . ... . . .
Common Shares in treasury
Income Statement — Year Ended December 31
Total revenues . .
Total costs and expenses . .
Income before income taxes and extraordinary items
Income taxes .... ....
Income before extraordinary items .
Extraordinary items
Net income ... . .
Dividend requirements for Preferred Shares — at 54 50 per share
Net income applicable to Common Shares
Per Common Share"
Income before extraordinary items
Extraordinary items . . ...
Net income . . . .
Income before extraordinary items
As a percent of total revenues . ...
As a percent of average shareholders' equity .
Common Share Data
Dividends paid — per share*
— total amount ...
Average number o! shares outstanding'
Sales price range (high-low)'
$ 31,006
49,765
80,771
29,693
51,078
139,234
39,046
229,358
3,000
23,572
$202,786
$ 8,025
3,202
15,287
182,875
(6,603)
$202,786
$137,631
99,723
37,908
12,112
25,796
—0—
25,796
382
$ 25,414
$ 8.35
—0—
$ 8.35
18.7%
13.3%
$ 2.575
$ 7,841
3.044,792
821/2-501/4
S 47.306
30,341
77,647
17,703
59,944
107,446
33,369
200,759
4,000
1 1 749
3185,010
S 9,556
3.202
14 946
165302
(7 996)
$185,010
5135,265
105,969
29,296
8.489
20,807
— 0—
20,807
454
S 20,353
S 6 78
— 0—
S 6 78
15 4%
1 1 7%
S 211
S 6332
3 002 342
833'8-56V2
$ 39,621
37,445
77,066
24,297
52,769
103,088
33,708
189,565
10,000
8,599
5170,966
S 10,602
3,202
14,657
151,281
(8,776)
5170,966
5119,611
96,389
23,222
6627
16,595
2,594
19,189
562
S 18,627
S 535
86
S 621
139%
100%
S 1 82
S 5,462
3000,598
67V2-535/8
'Adjusted for 2-for-1 stock split in 1968.
Source: 1974 Annual Report.
A-41
-------
Cleveland-Cliffs leases or subleases its reserves to unincorporated and in-
corporated joint ventures, which in each case include Cleveland-Cliffs and United
States or Canadian steel producers (who are "participants" directly or through
subsidiaries and/or affiliates) and which pay Cleveland-Cliffs royalties based on
the number of tons of iron ore produced and the iron content. Cleveland-Cliffs
receives royalties with respect to all iron ore produced in the facilities described
except for The Adams Mine. Cleveland-Cliffs' North American iron ore royalty
revenues for the indicated periods, not including underlying royalties payable to
others,are shown in Table A-6.6.
TABLE A-6.6
CLEVELAND-CLIFFS IRON ORE ROYALTY REVENUES
(thousands of dollars)
1970 1971 1972 1973 1974
Total Iron Ore Royalty
Revenues Included m
Consolidated Sales,
Royalties and Other
Operating Revenues $8,222 $9,146 $9,663 $10,991 $13,347
Less Cleveland-Cliffs'
Share as a Participant
in Joint Ventures
Included in Consolidated
Cost of Goods Sold and
Operating Expenses. . . . 2,678 2,951 3,398 3,926 3,274
Net Iron Ore Royalty
Revenues $5,544 $6,195 $6,265 $7,065 $10,073
Source: Annual Report 1974
The major royalties are subject to periodic adjustment based on changes in
the Bureau of Labor Statistics index of wholesale commodity prices or in the
published iron ore pellet prices.
Cleveland-Cliffs' principal North American properties are located on the
Marquette Range of the Upper Peninsula of Michigan where there are four mines
(three open-pit and one underground) and five pellet plants in operation. Two
railroads link the range with Lake Michigan at Hscanaba and Lake Superior at
Marquette. There is also an open-pit mine and pellet plant in Ontario, Canada and
an open-pit mine on the Mesabi Range in Minnesota. The reserves available to the
respective properties are presently estimated to be sufficient, after reflecting
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reductions in crude ore tonnage resulting from anticipated mining, concentrating
and pelletizing conditions, to maintain current rates of production at operating
mines for periods varying from 8 to 50 years.
In addition. Cleveland-Cliffs owns or leases mining rights in substantial ton-
nages of undeveloped natural and low-grade iron-bearing material. Certain of
these properties are currently under study for possible future development, but
there are presently no definitive plans for commercial use. Commercial develop-
ment would involve large expenditures.
Cleveland-Cliffs, pursuant to management agreements with the participants
having operating interests in the mining venture projects, manages the develop-
ment, construction, and operation of iron ore mines and concentrating and
pelletizing plants to produce natural ore and iron ore pellets. Cleveland-Cliffs is
reimbursed by the mining ventures for substantially all expenses directly or in-
directly incurred by it in the operation of the particular properties and is paid a
management fee with respect to North American operating properties, which is
usually subject to escalation as in the case of royalties, based on the number of
tons* of iron ore produced from the properties. The annual production of each of
the mines is determined each year by the participants and, accordingly, the
amount of management fees, like the royalties, during any particular year will
depend upon their ore requirements. Ordinarily the management contracts run
for the economic life of the property but may be terminated earlier. The crude
ore reserves for all these operations are leased from Cleveland-Cliffs except The
Adams Mine, an open-pit mine and pellet plant in Ontario, Canada.
Cleveland-Cliffs' management fees with respect to operating properties are
shown in Table A-6.7.
Cleveland-Cliffs has direct or indirect operating interests ranging from 10%
to 31% in the joint ventures which mine and concentrate iron ore and produce
iron ore pellets from iron ore properties leased or subleased from Cleveland-Cliffs.
Under the operating agreements each participant contributes its proportionate
share of capital, operating costs, and working capital and takes its share of pro-
duction (as its sole means of recouping investments and advances) either for its
own consumption or for sale to others.
The low grade iron ore is crushed, ground, and concentrated by various
methods (e.g., magnetic separation, elutriation, selective flocculation, and flota-
tion) depending on the ore's characteristics. The concentrated ores are then
pelletized. There have been no recent changes in the deposits being mined or
mining conditions at the above-mentioned facilities which have significantly
affected the product or the production cost thereof.
*Unless otherwise specifically indicated, all references to tonnages of iron ore (including "gross
tonnages") are to long tons of 2,240 pounds.
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TABLE A-6.7
CLEVELAND-CLIFFS MANAGEMENT FEES
(thousands of dollars)
1970 1971 1972 1973 1974
Total Management Fee Revenues
Included in Consolidated
Sales, Royalties and Other
Operating Revenues $1,343 $1,494 $1,669 $1,828 $2,058
Less Cleveland-Cliffs' Share
as a Participant in Joint
Ventures Included in Con-
solidated Costs of Goods
Sold and Operating Expenses. 384 348 390 454 379
Net Management Fee Revenues $ 959 $1,146 $1,279 $1,374 $1,679
Source: Annual Report 1974
Table A-6.8 sets forth information as to iron ore produetion and shipments
in the United States and Canada by Cleveland-Cliffs and mining ventures managed
by Cleveland-Cliffs.
TABLE A-6.8
CLEVELAND-CLIFFS IRON ORE PRODUCTION & SHIPMENT
(thousands of gross tons)
1970 1971 1972 1973 1974
Iron Ore Production:
Cleveland-Cliffs'Share 3,493 3,264 3,160 3,223 2,446
Other Participants'Share 8,796 9,030 9,408 9,296 10,106
Total Production 12,289 12,294 12,568 12,519 12,552
Pellets Included in Total
Production 10,072 9,963 10,854 10,935 10,883
Iron Ore Shipments:
Clevelsnd-Cliffs' Share
Other Participants' Share
Production from others'
mines
Total Shipments
Pellets Included in Total
Shipments 9,901 9,486 11,620 11,435 10,976
3,410
8,455
11,865
96
11,961
2,937
8,234
11,171
0
11,171
3,808
9,441
13,249
161
13,410
3,905
9,420
13,325
252
13,577
2,574
9,933
12,507
0
12,507
Source: Annual Report 1974
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Of the approximately 10.1 million gross tons of iron ore produced in the
United States and Canada as "Other Participants' Share" in 1974, the shares of
participants having the four largest amounts, Dominion Foundries & Steel,
Limited, Inland Steel Company, Jones & Laughlin Steel Corporation, and
McLouth Steel Corporation, aggregated 6.8 million gross tons or 67%. None of
these participants accounted for more than 20% of such production. Other
participants in Cleveland-Cliffs' mining ventures in the United States and Canada
include Algoma Steel Corporation Limited, Bethlehem Steel Corporation,
Detroit Steel Corporation, International Harvester Company, National Steel
Corporation, Republic Steel Corporation, Sharon Steel Corporation, The Steel
Company of Canada, Limited, and Wheeling-Pittsburgh Steel Corporation.
During 1974, Cleveland-Cliffs sold 95% of the natural iron ore and pellets
produced in the United States and Canada for its account and iron ore it pur-
chased from others to 10 U.S. and Canadian iron and steel manufacturing com-
panies. Approximately 83% of total 1974 sales were made pursuant to agreements
witli purchasers for remaining terms ranging from 3 to 25 years or life of mine,
some with renewal options. All such agreements provide for sales at prevailing
published market prices at the date of shipment. The Company's present sales
agreements call for the sale of large quantities of natural iron ore and pellets over
the next several years which, depending upon market conditions, may require all
the iron ore expected to be available to Cleveland-Cliffs from its present inter-
ests in the mining ventures.
Empire Iron Mining Company, managed by Cleveland-Cliffs and in which
Cleveland-Cliffs has a 20%; operating interest, has expanded its Empire Mine to
increase its rated annual pellet production capacity from 3.5 million tons to 5.3
million tons. Initial operations of the expanded facilities commenced in the
latter part of 1974. To finance the expansion, $67 million has been borrowed
from banks under arrangements whereby the participants are responsible to the
banks for their separate shares of the borrowing. Cleveland-Cliffs is responsible
for $13.4 million of such borrowing.
Tilden Mining Company, a joint venture of J&L-Cliffs Ore Partnership (a
partnership composed of subsidiaries of Jones & Laughlin Steel Corporation
and Cleveland-Cliffs) and Tilden Iron Ore Company (in which four other steel
companies and Cleveland-Cliffs are the participants), has developed an open-pit
iron ore mine located on the Marquette Range on deposits owned by Cleveland-
Cliffs and has constructed primary crushing facilities, grinding mills, classification
and concentrating facilities, and a pellet plant. Completion of the facilities
occurred early in 1975, although some pellet production commenced in
December, 1974. The crude ore, which is principally a fine-grained hematitic ore,
is crushed, ground autogcnously, concentrated by selective flocculation, elutria-
tion and notation, and pelletized. The facilities, which are designed to produce
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approximately 4 million tons of pellets per annum, were fully completed during
the first part of 1975 at a total expenditure of approximately $228 million
(including preproduction development expenditures, interest during construction,
and other expenses) of which Cleveland-Cliffs'' share is $45.6 million. Cleveland-
Cliffs is managing the project and is receiving an operating management fee. Its
aggregate operating interest in the project is 20%.
A significant portion of the total cost of the project has been financed
through $160 million in long-term borrowings from groups of banks and insur-
ance companies. Cleveland-Cliffs is indirectly responsible for $32 million aggre-
gate principal amount of such borrowings. In addition to the above borrowings,
Cleveland-Cliffs has made $17.9 million in subordinated loans to the associates
of Tilden, of which Cleveland-Cliffs is indirectly responsible as a participant in
the associates for $3,561,000. Cleveland-Cliffs has agreed to loan an additional
$9.1 million, under certain conditions, of which it would be responsible for
$1,564,000. These loans have substantially the same interest rate and maturities
as the insurance company loans. It appears that the project may be able to borrow
approximately $4.8 million under pollution control financing by means of indus-
trial development revenue bonds which may partially reduce Cleveland-Cliffs'
obligation to loan the additional $9.1 million. If such financing is obtained,
Cleveland-Cliffs will be responsible for 20% of such obligation.
Power generating facilities of the Upper Peninsula Generating Company have
been expanded and are nearly completed in connection with the Empire Mine
expansion and Tilden Mine construction programs.
Australia
Cleveland-Cliffs' 53%-owned subsidiary, Cliffs Western Australian Mining
Co. Pty. Ltd. ("Cliffs Western Australian"), has a 30% interest in Cliffs Robe
River Iron Associates ("Robe River Associates"), a joint venture formed in 1970
to mine iron ore deposits acquired by Cleveland-Cliffs in 1964 in the Robe River
region of Western Australia and to develop and construct an open-pit mine, a
processing and pelletizing plant, a 104-mile railroad, a power plant, a port, town-
sites, and other facilities. Production and delivery of pellets and sintering fines
commenced in 1972. Pellet shipments reached approximately 4.0 million tons in
1974. Pelletizing capacity is expected to be further increased by approximately
500,000 tons per annum when current plant extensions are completed late in
1975. Shipments of sintering fines reached 6.9 million tons in 1974.
Most of the production of the Robe River Mine is presently being sold under
long-term agreements with six Japanese steel companies. Under the agreements,
the Japanese steel companies have contracted to purchase from the participants
in the joint venture a total of 86.7 million tons of pellets over 21 years com-
mencing in 1973 and a total of 71.8 million tons of prepared sintering fines over
15 years commencing in 1972 at fixed unit prices in U.S. dollars for initial periods
up to 1980, with renegotiations thereafter based on market price.
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Devaluations of the U.S. dollar and upward revaluations of the Australian
dollar subsequent to entry into the agreements adversely affected the profitability
of these agreements to the participants. (In August 1973, the Japanese steel com-
panies agreed to modify, effective April 1, 1973, the prices under the agreements
generally in recognition of such devaluations and revaluations.)
Further devaluations of the U.S. dollar relative to the Australian dollar, or
revaluations of the Australian dollar relative to the U.S. dollar, would adversely
affect the profitability of the agreements to the participants in the joint venture.
Costs for petroleum products from the Mideast, the primary fuel for firing
the pellet plant and power generation at Robe River, increased drastically in
1974. Additional price negotiations were concluded in 1974 in an effort to reduce
the effect of the abnormal fuel oil price increases.
During 1974, trial shipments of fines were made to European steel firms,
with ongoing shipments planned for 1975. Negotiations for term sale agreements
with European steel companies are presently under way.
The Robe River reserves are held by Cliffs International, Inc., a wholly
owned subsidiary of the Company, under an agreement for a mineral lease from
the State of Western Australia, covering proven and probable reserves initially
aggregating approximately 160 million tons of crude iron ore. In addition, Cliffs
International, Inc. has an agreement for a sublease, subject to royalties, covering
150 million tons of iron ore in extensive deposits located near the Robe River
reserves and held by Dampier Mining Company Limited. Cliffs International, Inc.
has agreed to sublease all these reserves to Robe River Associates for a royalty,
in addition to the underlying royalties, payable to it based on tonnage produced.
Under the agreements pursuant to which the Dampier reserves were acquired,
Dampier has options expiring December 31, 1975 to acquire from the Robe River
Associates, on the basis of depreciated costs at the time of purchase, interests of
up to 50% in the railroad and up to 100% in the port, as well as certain rights to
purchase ore produced by Robe River Associates and to share in the profits of
the joint venture by way of royalties if its option is exercised. Negotiations
between the Government of Western Australia and the joint venture participants
are under way for the addition to the leased properties of other areas containing
iron ore deposits which preliminary drilling work indicates contain substantial
further reserves.
Cleveland-Cliffs receives royalties on ore mined by Robe River Associates.
In 1972 royalties amounting to U.S. $258,000 were received subsequent to the
commencement of operations in the fourth quarter. For the years ending Decem-
ber 31, 1973 and 1974, royalties from Robe River Associates were U.S.
$2,142,000 and $2,550,000 in 1974, of which Cleveland-Cliffs indirectly bears
the cost as to 15.9%.
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Under a management agreement with an initial term of 10 years, Cliffs
Western Australian is the manager of the Robe River project and is entitled to
operating management fees based on the f.o.b. port value of ores shipped.
In connection with the financing of the Robe River project, long-term loan
agreements have been executed by Cliffs Western Australian. Debt of U.S.
568,481,000 was outstanding at December 31, 1974 and an additional
52,519,000 was borrowed in January, 1975. Cleveland-Cliffs is indirectly respon-
sible for repayment of U.S. 536,295,000 of the debt outstanding December 31,
1974 (51,335.000 of the January, 1975 borrowings) through a future date to be
determined in accordance with agreements, at which time Cleveland-Cliffs will be
committed to maintain 53% of working capital of 52.5 million in Cliffs Western
Australian until the loans are repaid.
Marine Transportation
Cleveland-Cliffs operates on the Great Lakes 14 oil-fired bulk carriers, of
which 1 1 are owned and three are chartered. The vessels range in age from 23 to
64 years and in capacity from 13.350 to 26,150 gross tons and have an aggregate
trip capacity of 230,925 tons.
The Cleveland-Cliffs fleet is utilized to carry iron ore produced for partic-
ipants in its various mining operations and iron ore produced by others. Of the
9,307,413 tons of iron ore carried from January 1, 1974, through December 31,
1974, 33% was iron ore produced by Cleveland-Cliffs for itself and for partic-
ipants in its mining operations and 67% was iron ore produced by others.
Pursuant to a long-term agreement with Republic Steel Corporation,
Cleveland-Cliffs transports by vessel all of Republic's domestic iron ore require-
ments shipped through Upper Lakes ports and in 1974 transported in its own
fleet and other vessels 6,824,829 tons under this contract.
Iron ore is transported from loading ports on Lake Superior and Lake
Michigan to unloading ports in the Detroit area, to ports on Lake Erie, such as
Toledo, Huron, Cleveland, Ashtabula, Conneaut, and Buffalo, and to the Chicago
area on Lake Michigan. The fleet also occasionally carries coal cargoes from Lake
Erie ports to Upper Lake ports on Lake Superior and to ports on Lake Michigan
and grain from Duluth-Superior to Buffalo. The primary business of the
Cleveland-Cliffs fleet is the transportation of iron ore; the carrying of other prod-
ucts is largely incidental to such primary purpose.
Pursuant to the bulk cargo exemptions of the Interstate Commerce Act. the
marine transportation charges of Cleveland-Cliffs are not subject to regulation.
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In February, 1972, Cleveland-Cliffs entered into an Interim Capital Con-
struction Fund Agreement with the Secretary of Commerce providing for deposits
by Cleveland-Cliffs into a Capital Construction Fund for the purpose of con-
structing, reconstructing, and acquiring vessels for operation on the Great Lakes.
Under that Agreement the Company has deposited approximately $9.3 million of
which approximately $5.5 million had been expended as of December 31, 1974.
The Company has no definite plans for constructing new vessels; however, a
commitment has been made to lengthen one of its existing vessels at a cost of
approximately $2,735.000, which will be funded from the Capital Construction
Fund.
Other Activities Related to Mining Operations
Power Generation
As an adjunct to its domestic iron ore production activities, Cleveland-Cliffs
owns an 80.96% stock interest in Upper Peninsula Generating Company (the
"Generating Company"), which operates electric generating facilities having a
1974 capacity of approximately 179 megawatts, at its Presque Isle Station in
Marquette, Michigan. Cleveland-Cliffs is currently entitled to approximately one-
half of the Generating Company's output from these facilities, the balance being
available to the other shareholder, Upper Peninsula Power Company, for sale to
residential and industrial customers. Approximately 85% of total power require-
ments of Cleveland-Cliffs mining and pelletizing operations on the Marquette
Range are supplied by the output of the electric power generating facilities. The
balance is purchased from Upper Peninsula Power Company.
In connection with the expansion of the Empire Mine and the development
of the Tilden Mine, the Generating Company completed construction of an
80-megawatt generating unit in December, 1974, and substantially completed
construction of another 80-megawatt generating unit in February of 1975
(Cleveland-Cliffs being entitled to 100% of the output of both units).
As of December 3 1, 1974, the Generating Company had outstanding debt of
$63,007,000. Cleveland-Cliffs is obligated to pay its share of annual fixed charges
to the Generating Company, including amounts sufficient to amortize
$54,754,000 of the debt outstanding on December 31, 1974. Cleveland-Cliffs is
entitled to pro-rata reimbursement for such costs by mining ventures managed by
Cleveland-Cliffs as they require electric power.
Rail Transportation
Cleveland-Cliffs owns a 77.58% stock interest in Lake Superior and Ishpem-
ing Railroad Company which operates approximately 105 miles of track in the
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Upper Peninsula, principally to haul iron ore from mines to Eake Superior at
Marquette, Michigan, where the railroad has a dock, or to interchange points with
another railroad for delivery to Lake Michigan at Escanaba, Michigan. During
1974, approximately 85% of the railroad's revenues were derived from hauling
iron ore and pellets and other services in connection with mining operations
managed by Cleveland-Cliffs. The railroad is subject to regulation as to its rates by
the Interstate Commerce Commission.
Mineral Diversification
In General
In 1962, Cleveland-Cliffs commenced a program of investigating mining
activities other than iron ore, in an effort eventually to diversify into industries
not directly dependent upon the cyclical nature of the American steel industry.
While present activities primarily are concentrated on exploration for uranium
and investigation of the possibility of economically successful recovery of oil
from oil shale, explorations for non-ferrous metals, and a limited program of oil
and gas exploration have been and are being conducted. In 1974 Cleveland-Cliffs'
research, exploration, and development expenditures for mineral diversification
totaled $915,000. Except possibly for three uranium deposits, none of these
exploration activities has resulted in the discovery of significant commercially
minable ore bodies.
Uranium
Cleveland-Cliffs began in 1966 to investigate the possibility of entering the
domestic energy market through uranium and by mid-1967 an exploration cam-
paign was under way in several western states. To date, the Company has
expended approximately $5 million on this project.
In addition to exploring for its own account, Cleveland-Cliffs manages and
participates in uranium exploration joint ventures, including three primary explo-
ration drilling programs in the Powder River Basin of Wyoming. To date, the
Company and the other venturers have expended $9.7 million on uranium
exploration, including the $5 million indicated above. In one of the ventures,
three uranium ore bodies have been discovered, and land patent applications have
been filed. Proposals to examine and develop portions of these uranium properties
have been made to a utility and their evaluation is currently under way. Under
these proposals, further development would entail specific delineation of the
mineralized zone and a pilot mining project before committing to a commercial
mine-mill complex.
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Oil Shale
Since 1964, Cleveland-Cliffs in association with others has been involved in a
research program for the extraction of oil from shale using a process developed by
The Oil Shale Corporation of Los Angeles. An experimental mine and pilot plant
on lands owned by the venture operated intermittently until 1972. In 1974.
Cleveland-Cliffs terminated its interest in this research program. Under the termi-
nation arrangement, Cleveland-Cliffs retained its pro-rata share of the venture's oil
shale reserves by exchanging its interest in certain properties for an increased
interest in other of the joint properties, and sold its interest in three smaller
noncontiguous properties. As of December 31, 1974. Cleveland-Cliffs had spent a
total of approximately SI6.8 million on the research and land acquisition of this
project of which S6.6 million representing essentially land, is currently capi-
talized.
In September. 1973. Cleveland-Cliffs joined with other companies in a joint
venture aimed at evaluating the technical and economic feasibility of an oil shale
extraction process developed by Paraho Development Corporation of Denver.
Colorado. If proved successful, members of the group will receive a license to use
the process. Cleveland-Cliffs is responsible for staffing most of the project and
conducting mining operations during the thirty-month S7.5 million research
program. As of December 31. 1974. Cleveland-Cliffs' share of total program
expenditures was approximately S300.000. To date there has been no commercial
production of shale oil in the United States known to Cleveland-Cliffs.
Copper
Cleveland-Cliffs was engaged in a modest copper leaching joint venture
research program near Mountain City. Nevada. The development work consisted
of preparation of an old underground copper mine for eventual hydrometal-
lurgical copper extraction involving considerable new extraction and minerals
processing technology. Some minor amounts of copper were produced in 1973
and 1974. Operating and development expenditures by Cleveland-Cliffs and a
venturer for the program totaled SI.5 million for 1973 and S2.7 million for 1974.
In December, 1974 a decision was reached to suspend operations, and proceed
towards an eventual shutdown of the operation.
Activities also continue in a search for additional economically feasible
copper and other non-ferrous deposits in which Cleveland-Cliffs might become
involved. Such activities do not comprise a significant portion of Cleveland-Cliffs'
present business.
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Employees
As of December 31, 1974, Cleveland-Cliffs had 5,541 U.S. and Canadian
employees, including employees of iron ore mining ventures managed by
Cleveland-Cliffs. Of the foregoing, 4,297 were hourly employees, of whom almost
all were represented by one of the several unions with which Cleveland-Cliffs or
its affiliated companies have collective bargaining agreements. The United Steel-
workers of America represents the largest number of such union employees. A
fifteen-day strike at the domestic iron ore operations occurred in August, 1974.
Cleveland-Cliffs considers its labor relations to be good.
As of December 31, 1974, the Robe River Mine, managed by Cliffs Western
Australia, had 1,183 employees, 888 of whom are represented by nine different
unions. In common with most industry in Australia, where employment is
currently high, the Western Australia mining industry has had substantial labor
unrest and numerous work stoppages. At the Robe River Mine, during 1974,
labor stoppages have lost approximately 2.5% of total man-hours available.
Competition
Cleveland-Cliffs experiences intensive competition in each of its lines of
business.
There are numerous other mining companies and mining divisions of iron
and steel manufacturing companies which, directly and through affiliates, produce
and distribute iron ore in the markets served by Cleveland-Cliffs.
Cleveland-Cliffs believes that most of the iron ore produced in the Great
Lakes region of the United States and Canada is produced for consumption by
steel companies which, directly or indirectly, are the owners or lessees of the
reserves. Of the portion of the Great Lakes production which is currently not
consumed by the producers, Cleveland-Cliffs is one of the two principal sellers.
although there are several other merchant sellers and several steel companies
which sell significant quantities of Great Lakes iron ore from time to time. The
Company believes that in recent years substantially all sales of iron ore produced
in the Great Lakes region have been made at prices based on the published Lower
Lake Ports quoted prices, and that nonetheless competition among the several
sellers is predicated upon normal competitive factors, such as availability of
supply, product performance, service, and cost to the consumer.
The Robe River Mine in Western Australia, in which Cliffs Western Australia
has a 30% interest, currently sells most of its production to six Japanese steel
companies and the balance to European steel mills. The Robe River Mine is one of
five large mining operations developed in Australia within the last eleven years
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principally for the purpose of producing iron ore for shipment to Japan.
Australian iron ore now constitutes a major portion of the supply of iron ore
consumed in Japan, although shipments are made into Japan from many other
mines throughout the world. Most of the sales of Australian iron ore are made
under long-term contracts at negotiated fixed prices, generally with provision for
renegotiation of prices at specified future intervals. Agreements have been an-
nounced providing for increases in the prices under these contracts in recognition
of the effect of changes in the relationship of the Australian and United States
dollars since the period 1964-1969 when the contracts were negotiated as well as
increases in fuel and other costs. Cliffs International, Inc., as sales representative
for the owners of the Robe River Mine, is currently negotiating with the Japanese
steel companies with respect to possible additional long-term sales contracts.
Cleveland-Cliffs understands that certain other of the Australian mining com-
panies, as well as other producers of iron ore in Canada, South America and
elsewhere, are conducting similar negotiations. In Europe, Cliffs International has
also been negotiating for sales against similar competition, and commercial de-
liveries have just begun. Among the factors involved in these negotiations are the
nature and quality of the iron ore products, available and proposed loading and
shipping facilities, capital requirements for necessary mining, processing and
transportation facilities, financing arrangements, costs to the consumer and reali-
zation to the producer and other factors.
There are numerous operators of vessels on the Great Lakes available for
transportation of iron ore. Cleveland-Cliffs' fleet is one of five principal United
States fleets which together with numerous Canadian vessels are actively engaged
in carrying iron ore for other than the vessel owners. In addition, several steel
companies own their own vessels, which sometimes are available for transporting
iron ore for others. Iron ore is transported on the Great Lakes at published lake
freight rates or under long-term contracts or time charters or other arrangements
at negotiated rates. Most of these vessels are also capable of transportation of
grain, coal and other bulk commodities, and there are a considerable number of
other lake vessels primarily carrying other commodities but usable for iron ore.
Cleveland-Cliffs' forest products division is one of the major producers of
northern hardwood lumber in the Midwest. Its sales of hardwood lumber and
other forest products are made largely in the Midwest and West in competition
with numerous other producers and distributors of hardwood lumber and other
materials, but it also sells for delivery in Canada and other foreign countries.
Environment and Energy
Cleveland-Cliffs has historically sought to preserve the environment in which
the mining operations are located. Operations have been conducted with a view to
minimum disturbance of the natural land conditions in the generally remote areas
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where the iron ore deposits are located, with revegetation of inactive tailings
basins and rock piles and other efforts toward the restoration of natural condi-
tions after mining operations are completed. Because iron ore mining is located in
areas with sparse population, the Company recognizes the benefits of providing
clean air and water, good housing, and open lands around its properties to attract
and retain employees. Due to increased public interest in and demands for a
quality environment, Cleveland-Cliffs has had for a number of years a full-time
Director of Environmental Affairs, a Corporate Public Affairs Committee, and a
Public Interest Committee of the Board of Directors.
These concerns have increased during the past twenty years as the processing
of the low-grade iron ores for the production of high iron content blast furnace
feed has required increasing quantities of natural gas or fuel oil for pelletizing.
The production of the electrical energy required for the crushing, grinding, and
concentrating processes uses water for cooling purposes and requires the con-
sumption of major supplies of coal. In the construction of the Company's
facilities and in its operating arrangements, substantial costs have been incurred,
and will be incurred in the future to avoid undue effect on the natural water and
air environments. Prior to 1971 expenditures for facilities designed to protect the
environment were not separately accounted for by the Company. Cleveland-Cliffs'
commitment to environmental conservation in 1974 required capital expenditures
of $19.4 million by itself and venturers. In the years 1971-1974 the Company and
its joint venturers spent approximately $48.4 million for pollution control facili-
ties, including electrostatic precipitators, tailings dams, in-plant dust collecting
systems, and marine sewage disposal systems.
There have been public hearings held in connection with the necessary
governmental authorizations for the Tilden Mine, open conferences with govern-
mental authorities, public notices and discussions in connection with the Presque
Isle generating station expansion and the Marquette coal unloading facilities, and
public meetings with local residents. These have involved interchanges of ideas
and planning as to operating requirements and environmental concerns, and
public recognition of the importance of the Company's iron ore mining opera-
tions to the economy, employment, and general well-being in the Upper
Peninsula. Additional hearings and securing of permits continue to be required
from time to time.
Some disruption of existing property interests is necessarily involved in the
development and operation of the Company's mining projects. In connection with
the water arrangements for the Empire and Tilden Mines, for example, many
parcels of property have been or are being acquired by the Company. In some
cases property owners adjacent to the plants have sold their properties to the
Company or other plant operators after complaints. Certain legal actions by such
property owners are now pending.
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Cleveland-Cliffs and other Great Lakes bulk cargo vessel operators are
engaged in litigation with agencies of the State of Michigan as to enforcement of
the Michigan Watercraft Pollution Control Act of 1970, which may ultimately
subject Cleveland-Cliffs to additional capital expenditures and possible increased
operating costs to bring its vessels into compliance with environmental require-
ments.
In 1974 the Great Lakes fleet felt the effects of the embargo which resulted
in the increased price of fuel oil. Compared to 1973, fuel prices more than
doubled in 1974.
Although there has not yet been any material interruption of the supply of
natural gas for the Company's operations and the Company has a contract
providing on a firm basis (subject to some curtailment) for the natural gas
requirements of its present operations through October of 1977, the present and
prospective shortage of gas supplies has required the making of arrangements for
the substitution of possible fuel oil to cover part or all of the requirements of the
Company's current operations and expansions. In 1974, the Company finalized a
contract with Exxon Corporation for the supply from the Interprovincial pipeline
of a special blend of heavy fuel oil from Alberta, Canada, at a negotiated price,
including transportation. The imported fuel oil is presently subject to Canadian
export control regulations of the Canadian Energy Board. A wholly owned
subsidiary of the Company has constructed at Rapid River, Michigan, at the
Interprovincial pipeline, a fuel oil storage facility from which the oil is trucked to
the mining properties. The cost of the facility, estimated at approximately $3.8
million, is expected to be financed by industrial development revenue bonds,
subject to necessary local and other governmental action authorizing the financing
arrangements and providing the necessary permits to the facility.
In past years the Company has burned coal on an experimental basis as the
kiln firing source at one of its pellet plants. This was terminated when quantities
of natural gas and fuel oil became available at more attractive costs. In an effort
to further assure future energy fuel supply at reasonable cost, the Company in
1974 again tested such possible usage of coal and is continuing such tests in 1 975.
In view of the Canadian National export policy, the Company is endeavoring to
cover all its pellet plant fuel requirements with back-up domestic fuel supply
sources. At present it is believed that sufficient back-up sources can be obtained.
Currently anticipated capital expenditures to meet the above environmental
and energy problems have been included in the costs incurred and estimated to be
incurred as referred to herein. However, it is impossible to estimate the costs
which may be required to satisfy future requirements and standards. For example,
while the Company believes that the air quality requirements recently established
in Michigan which are applicable to the Presque Isle generating station in 1975, as
A-55
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well as the more stringent requirements established to become effective in 1978,
can be satisfied by the continued use of low sulfur coal, the availability and cost
of such coal in the future is not predictable. Furthermore, the capital costs of any
method which may be developed which would permit the usage of other more
economical coal or fuels, or substitute coal or oil for natural gas, are not known.
Negotiations are under way with respect to long-term coal supply agreements.
While the Company does not believe that additional operating costs which
may be required to satisfy changed energy requirements or appropriate environ-
mental standards will be material, any substantial interruption of operations
resulting from governmental regulations or injunctive order would be materially
adverse.
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7. COPPER RANGE COMPANY
Copper Range Company, a Michigan corporation, and its subsidiaries, have
since its organization in 1899 been engaged in the business of mining and refining
primary copper in northern Michigan and, since 1931, in fabricating and dis-
tributing copper and brass products. The Company is the seventh largest
producer of domestic primary refined copper in the United States. Sales in 1972
were $97.6 million. Refined copper accounted for 59%, fabricated copper prod-
ucts were 39%, and other revenues were 2% of sales. The Company has approxi-
mately 3,800 employees.
The Company's mine, mill, and smelter for producing refined copper are
located in White Pine, Michigan. Its principal fabricating plant is located in
Leetsdale, Pennsylvania, with two smaller plants in Eminence, Kentucky, and
Anderson, Indiana, and its principal executive offices are in White Pine, Michigan.
The mine and mill have a capacity of 25,000 tons of ore per day. The Company is
a relatively high-cost producer. The smelter has a capacity of 85,000 tons of
copper per year.
The copper produced at White Pine is Lake Copper whose principal distinc-
tive characteristic is a natural silver content. It is fire-refined and cast at White
Pine into standard commercial shapes for sale. Copper Range has fabricating
facilities with an annual capacity of 51.5 million pounds of copper-brass products.
Sales and marketing activities with respect to refined copper are conducted
from the Company's offices in New York City. White Pine copper is marketed
principally to domestic copper and brass mills, wire and cable mills, foundries,
and other specialized fabricators. Approximately 17.6% of the White Pine copper
in 1972 was used by the Company in its own metal fabricating activities.
The principal metal products fabricated by Copper Range are copper bar and
copper strip sold through the Hussey Metals Division principally to the electrical
industry and other industrial accounts, standard copper sheet sold principally to
the electrical, graphic arts, and casket manufacturing industries as well as for
general industrial use. The Company also acts as a distributor of products which
are not manufactured by it, mainly copper, brass, bronze, aluminum and stainless
steel sheets, rods and wire which are sold chiefly for industrial use.
About 73% of the total sales of Copper Range's fabricated metal products in
1972 were r ade directly to end-users with the balance made to distributors.
Approximately 24.86% of Copper Range's production of refined copper
during 1972 was sold to Revere Copper and Brass Incorporated (Revere), and
approximately 9.8% to Anaconda American Brass Company (Anaconda). During
A-57
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the past seven years, Revere purchased each year between approximately 20% and
27% of the company's refined copper. The Company states that there are no
material aspects to the relationship between it and Revere or Anaconda outside
the vendor-vendee relationship.
Copper Range does not engage in material operations in foreign countries,
nor is a material portion of its sales or revenues derived from customers in foreign
countries.
Compared to western ores, the White Pine ore has a low sulfur content and
Copper Range has stated that it has met both the primary and secondary Federal
Air Quality Standards under the Clean Air Act of 1970. The Company has stated
that "but given presently available technology, we do not believe that it would be
economically feasible for us to meet a 90% emission standard. A research and
development effort is in progress to identify and develop a process which will
reduce sulfur dioxide emissions from our White Pine smelter on a reasonable
economic basis."
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8. CYPRUS MINES CORPORATION
Cyprus Mines Corporation was incorporated in 1916 in New York. It
operated the Old Dick Mine near Bagdad, Arizona. At present, Cyprus is engaged
directly and through its subsidiaries and affiliated companies in the production
and marketing of a diverse group of metallic minerals including copper, lead, zinc,
iron ore, silver, and molybdenum; ocean transportation of iron ore and other
basic commodities; the production, processing and marketing of nonmetallic
minerals, including premium grade talc, kaolin, clays, and cement; and in the
manufacture and marketing of wire cable, tubing and related products for the
electrical industry.
Cyprus, through Pima Mining and Bagdad Copper, is a source of over 200
million pounds per year of domestically mined copper.
The Company operates principally through wholly owned divisions and
corporations in which it has a majority interest and management control. There
are three exceptions; (l)Marcona Corporation, which is engaged in iron ore
mining, principally in Peru, and shipping, is owned 50% by Cyprus and 50% by
Utah International as to voting stock (and 46% each as to equity); (2) Mount
Goldsworthy Mining Associates, in which the Company owns an undivided
one-third interest in the iron ore reserves in Western Australia and participates
equally with Consolidated Gold Fields Australia and Utah Development Company
in the ownership and management of Goldsworthy Mining Limited, the contract
mining Company; and (3) Hawaiian Cement Corporation, in which the company
owns a 45.4% interest. The products of Cyprus Mines Corporation and the 1972
revenues derived therefrom are listed in Table A-8.1.
NONFERROUS MINERALS GROUP
The nonferrous minerals group of Cyprus Mines Corporation includes the
Pima and Bruce mines in Arizona, the Anvil mine in Yukon Territory of Canada,
and the Cyprus Island operation.
PIMA MINING COMPANY
Pima Mining Company, which has been managed by Cyprus Mines Corpora-
tion since its initial development in the mid-1950's, is a California corporation,
50.01% owned by Cyprus. The balance is owned by Union Oil and Utah Interna-
tional, Inc. While essentially a producer of copper in the form of copper concen-
trates, Pima also recovers minor amounts of molybdenite (a molybdenum sulfide)
concentrates and silver. In 1972, the open pit copper mine and concentrator near
Tucson, Arizona, produced in concentrates 159 million marketable pounds of
copper, 908.301 marketable ounces of silver, and 1,021,000 pounds of molybde-
num contained in the molybdenite concentrates.
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TABLE A-8.1
1972 REVENUES BY PRODUCTS AND INCOME
CYPRUS MINES CORPORATION
Total revenues, including share of revenues
of affiliated corporations:
Nonferrous minerals
Iron ore mining
Ocean transportation
Industrial minerals and pigments
Electrical products
Timber and other divested properties
Other
Add minority share of consolidated subsidiaries
eliminated from above
Totnl
Gross profit and other income:
Nonferrous minerals
Iron ore mining
Ocean transportation
Industrial minerals and pigments
Electrical products
Timber and other divested properties
Other
Less tax provisions by affiliated corporations
Add minority share of consolidated subsidiaries
eliminated from above
Less general and administrative expenses, mineral
exploration and interest:
Less provision for foreign and domestic income taxes
Less Minority Interests
1972 ($ Millions)
72.3
89.6
15.3
20.0
68.2
3.0
268.4
50.5
318.8
22.7
10.6
6.1
3.6
4.3
47.1
(1.4)
16.7
62.4
11.7
10.3
11.5
Income for
28.8
Source: Annual Report - Cyprus Mines - 1972.
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Ore reserves which could be mined and processed commercially at current
copper prices and operating costs on December 31, 1972, were 241 million short
tons averaging approximately .50% copper content.
Under long-term contracts, copper concentrates are shipped to two Arizona
smelters for smelting and refining. About half of the refined copper and the silver
are returned to Pima for sale through normal channels while the balance of the
copper is sold to one of the smelters and the balance of the silver to the other
smelter. Molybdenite concentrates are sold in the open market.
Cyprus has stated that:
"Pima has not incurred any direct cost for compliance with environ-
mental regulations. It is difficult to estimate the cost to comply in
future years, although there is the possibility of a contribution of from
two cents to six cents per pound of copper to a smelter depending on
the requirements of the Pollution Control Board; in this event, the cost
per year would range from S3 million to S9 million."
A 35% expansion of facilities at Pima was completed during the first quarter
of 1972. For the year as a whole, the mill processed an average of 51,200 tons of
the ore per day, a 28% increase over 1971.
ANVIL MINING CORPORATION
Anvil Mining Corporation Limited (Anvil) is a British Columbia corporation
60%-owned by Cyprus. Anvil operates an open pit lead and zinc mine and
concentrator in the Yukon Territory of Canada. It completed its third full year of
production in 1972.
In 1972, Anvil produced lead concentrates containing 194,536,000 pounds
of lead and 2,168,046 ounces of silver, zinc concentrates containing 216,203,000
pounds of zinc, and bulk concentrates containing 32,862,000 pounds of lead,
49,583,000 pounds of zinc, and 428,286 ounces of silver. Concentrates are sold
on the basis of London Metal Exchange quotations for lead and the European
Producer Price for zinc.
CYPRUS ISLAND DIVISION
The Cyprus Island Division is not considered a material asset of Cyprus
Mines Corporation or a foreseeable material contributor to the total revenues of
the Company.
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BRUCE MINE DIVISION
The Company's Bruce mine is a small, relatively high-grade, underground
mine with a mill and supporting facilities, located near Bagdad, Arizona. The
property is secured by patented mining claims on United States Government land.
Like the Cyprus Island Division, the Bruce Mine Division is not considered a
material asset of the Company or a foreseeable material contributor to the total
revenues of the Company.
NEW DEVELOPMENTS
Cyprus Mines Corporation acquired Bagdad Copper Corporation in June,
1973, in an exchange of stock. Bagdad had sales revenues of about $33 million
and earnings of $3.7 million in 1972. Cyprus' financial results are now being
restated to account for Bagdad on a pooling-of-interests basis.
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9. DUVAL CORPORATION (Subsidiary of Pennzoil)
Pennzoil Company (formerly Pennzoil United, Inc.) was formed in 1968 by
the consolidation of Pennzoil Company and United Gas Corporation. Total sales
and operating revenues were $810 million in 1972, operating income $196
million, and net income after taxes was $58.7 million.
Through the United Gas Division,* a large natural gas transmission business
lias been operated, based primarily in the Gulf Coast area, with a pipeline system
serving parts of Texas, Louisiana, Mississippi, with the line extending also to
Mobile, Alabama and Pensacola, Florida. Through Duval Corporation, a wholly
owned subsidiary, extensive interests are held in copper, molybdenum, sulfur, and
potash properties. Through Duval Sierrita, a major copper ore body is being
mined. It is financed by the General Services Administration, the debt being
repaid by delivery of copper to the Government.
Production, refining, and marketing of oil, gas and petroleum products have
accounted for about 31% of revenues and 49% of operating income; natural gas
transmissiort approximates 51% and 36%; and Duval mining, 18% and 15%,*
respectively.
Duval has been operating two open-pit copper-molybdenum mines in
Arizona known as the Esperanza and Mineral Park Properties. Duval estimated its
proven ore reserves as of December 31, 1970 at Esperanza to be 26 million tons,
with an average copper content of 0.037% and an average molybdenum content of
0.034%; and at Mineral Park to be 34 million tons with an average copper content
of 0.47% and an average molybdenum content of 0.048%.
Duval operates two copper-gold-silver open-pit mines located in Nevada,
known as the Copper Canyon and Copper Basin mines, which were placed on a
full production basis in July, 1967. Duval estimated its proven ore reserves as of
December 31, 1970, at Copper Canyon to be 14 million tons with an average
copper content of 0.78% and an average silver and gold content of 0.51 and 0.024
ounces per ton of ore, respectively; and at Copper Basin to be 1.3 million tons
with an average copper content of 1.55% and an average silver and gold content of
0.27 and 0.022 ounces per ton of ore, respectively.
Duval, including Duval Sierrita, accounts for about 6% of domestic copper
production and 9% of domestic molybdenum production.
The prospectus dated March 23, 1971, in connection with a Pennzoil United
debenture offering presented the following financial and accounting information,
fln March, 1974, Pennzoil was making arrangements to spin off its United Gas business.
A-63
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which is useful to an understanding not only in the case of Duval, but perhaps
more generally with respect to many other major, publicly held, mining-based
companies.
Mine development costs of Duval are capitalized for financial reporting
purposes and are depreciated or depleted over the operating lives of the related
properties. For federal income tax purposes, such costs are deducted as incurred.
To the extent such capitalized costs are utilized in reducing current income tax,
such reduction in current tax is charged to income and credited to deferred
income tax. In 1969, Duval sold mineral production payments in the amount of
SI00 million and taxes payable resulting from this sale have been charged to
deferred income tax. Proceeds applied to the liquidation of the production
payments are included in income as produced and the related income tax charged
against income.
DUVAL SIERRITA - GSA CONTRACT*
In November, 1967, the U.S. General Services Administration (GSA) and
Duval Sierrita Corporation, an operating subsidiary of Duval, entered into a
domestic copper production expansion contract pursuant to the provisions of the
Defense Production Act of 1950 for the development of a low-grade copper-
molybdenum ore body (Sierrita Property) adjacent to Duval's Esperanza Prop-
erty.
Construction of a mill and related facilities designed to process an annual
average rate of ore throughput equal to not less than 66,000 tons per day and the
pre-mining stripping of 126 million tons of waste overburden were substantially
completed in March 1970. Approximately $181 million was required to develop
the original project (not including the cost of the expansion project referred to
below) of which $83 million was obtained from the GSA in the form of advances
against future deliveries of copper produced from the property; $48.75 million
from commercial bank loans guaranteed in part by the GSA; $10 million from the
Company; and the remainder from Duval in equity or loans. Duval provides
management and technical guidance to Duval Sierrita at cost.
The contract with the GSA provides that repayment of advances will be
made by delivery of about 218.4 million pounds of copper to the GSA prior to
June 30, 1975. The advances will be credited at the rate of 384 for each pound of
refined copper delivered. While the contract provides that certain minimum
deliveries must be made at stated intervals during the period from commencement
of production to the final repayment date, Duval Sierrita is entitled to sell in the
*This information was taken from Pennzoil-United's March 23, 1971 prospectus.
A-64
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open market its molybdenum and by-product silver production and such amount
of its copper production as may be necessary to cover all cash operating expenses
and maintain working capital. The commercial bank loans are payable in install-
ments from December 1975 through June 1978.
In May 1970 these contracts were amended to provide for an increase in the
mine and mill capacity at the Sierrita Property. Duval Sierrita agreed to spend not
less than S8 million on additional facilities and guaranteed the GSA an average
rate of ore throughput on an annual basis of not less than 72,000 tons per day. In
turn, the GSA and the commercial banks have agreed to permit Duval Sierrita to
sell on the open market for its own account 90% of production attributable to
any ore throughput exceeding 72,000 tons per day. The remaining 10% of such
production (net of sales required to meet cash operating expenses attributable
thereto) will be delivered to the GSA at a fixed price of 38
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10. EAGLE-PICHER INDUSTRIES. INC.
Eagle-Picher is a diversified manufacturer of products sold in industrial
markets. The principal lines of business, products, and markets are:
• Basic Materials and Chemicals
• Machinery and Allied Products
• Transportation Products
Eagle-Picher manufactures a wide variety of products, primarily for other manu-
facturers, at 67 locations. Types of manufacturing include: chemical processing,
mining, metal fabrication, aluminum, bronze and brass foundries, precision
machining, electronic and electrical assembly, molded and extruded rubber and
plastic, printing and publishing, among others.
Products manufactured by the company generally are sold to customers
through company sales organizations which have offices, for the most part, in the
United States and Canada and in certain cases through independent dealers and
sales representatives.
Due to its diversification, Eagle-Picher is not dependent upon any single
source for its raw materials, nor upon any few customers for a substantial part of
its business.
The Basic Materials and Chemicals Group is composed of operations which
produce a basic material or chemical or use one as a raw material. The Machinery
and Allied Products Group consists of capital goods manufactured by the Com-
pany, or products which are sold to other manufacturers of capital goods and
incorporated into their products. Transportation Products includes all operations
which manufacture original equipment and replacement parts for passenger cars,
trucks, buses, aircraft, and railroads.
In the Basic Materials and Chemicals Group, some specific products of
interest are agricultural micronutrients such as compounds of zinc, copper, and
manganese, which replace trace elements depleted from soil; animal feed supple-
ments; diatomaceous earth; porcelain frit; concrete pipe; high-purity germanium
and gallium. Also, Eagle-Picher is the only producer of the boron-10 isotope, used
in nuclear applications.
The Mining Department of the Basic Materials and Chemicals Group is
headquartered in Oklahoma, with operations at a plant in Oklahoma and one in
Illinois. The Oklahoma operation produced about 3000 tons/year of copper
contained in concentrates until recently when it was closed. In the past, this
A-67
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concentrate was sold to ASARCO. Some 70-80 employees are involved. This
represent less than $10 million per year in revenues, and is believed to have
represented a negligible earnings contribution to Eagle-Picher.
The Company's Machinery Group manufactures a complete line of special
purpose batteries, including nickel-cadmium, lithium, magnesium perchlorate,
water-activated, and zinc-air. These are used principally in power systems for
military hardware, submarine, and aerospace applications.
In the Transportation Group, rubber and polyurethane products and elasto-
meric compounds are important.
Table A-10.1 presents a summary of total company sales and income for the
years 1970-1974. Sales in 1974 were $367 million, and net income was $18
million, both representing record high figures for the company. Capital expendi-
tures increased in 1973 and 1974 from the level of the previous several years,
reaching nearly $14 million in 1974. Depreciation and amortization changes were
$9.2 million in 1974 ($7.7 million for 1973), with the result that Eagle-Picher's
cash flow was well in excess of capital spending.
Long-term debt at the end of fiscal 1974 was $43 million, and shareholders'
equity was $118 million, giving the Company a debt-to-equity ratio of 36.5%.
The Company has about 9,350 employees.
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11. GULF & WESTERN INDUSTRIES (New Jersey Zinc)
INTRODUCTION
Gulf & Western Industries, Inc. ("G&W"), known as an acquisition-minded
conglomerate, is a large diversified company whose activities are presently orga-
nized into eight operating groups - Food and Agricultural Products, Manufac-
turing, Natural Resources, Paper and Building Products, Financial Services, Lei-
sure Time, Automotive Replacement Parts, and Consumer Products.
The Natural Resources Group, consisting primarily of The New Jersey Zinc
Company, a division of G&W, operates zinc mines and produces zinc products,
pigments, metal powders, and certain industrial chemicals.
Table A-1 1.1 summarizes recent financial information for G&W and consoli-
dated subsidiaries.
TABLE A-11.1
GULF AND WESTERN FINANCIAL DATA
Years Ended July 31
1973 1974
$ Millions
Income Statement
Net sales and other operating revenues 1,927.2 2,295.5
Operating income* 177.2 224.7
Dividends and other income 3.0 3.0
Interest expense 60.1 87.0
Minority interest 7.1 12.6
Net earnings after taxes 89.2 100.6
Depreciation and depletion charges 44.0 48.1
Balance Sheet
Working capital 545.6 585.8
Current ratio, assets to liabilities 2.2x 1.9x
Total assets 2,364.1 2,683.0
Total assets less intangibles 2,312.7 2,628.6
Long-term debt (less current maturities) 653.3 758.3
Convertible subordinated debt (less current maturities) 419.8 416.7
Shareholders'equity 653.9 706.3
"Includes equity in earnings, before income taxes, of unconsolidated affiliates in the amount of
$44.8 million for 1973 and $28.7 million for 1974.
Source: G&W's Form 10K Report to S.E.C., Nov. 15, 1974.
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Table A-11.2 shows the approximate percentage contributions by each of
G&W's operating groups to G&W's total revenues and operating income for the
past five fiscal years. For the purpose of these calculations, revenues of the
Financial Services Group, not consolidated in G&W's financial statements, have
been included in all periods.
TABLE A-11.2
CONTRIBUTION OF OPERATING GROUPS TO G&W REVENUES
I'J.O 1JT1 1U72 1S73 1914
Food and Agricultural
Products . . . .
Manufacturing
Natural Resources ....
Paper and Building
Products
Financial Services
Leisure Time
Automotive Replacement
Parts
Consumer Products . . .
Corporate F,\penses and
Intercompany Items..
4%
36
5
10
18
12
7
8
100
100%
Operating
15%
39
2
4
30
6
8
104
(4)
100%
Rcvrnue!
32
4
11
19
14
7
9
100
100%
OJH nttim;
18%
16
3
38
15
6
9
112
100%
OiirrntiMj
Revenue* 1m om^di
5%
29
5
11
19
14
8
9
100
100%
11
5
6
37
21
7
8
114
M4i
100%
) Revenues
6%
30
5
12
12
8
8
100
HAKr,
Operating1
Income(a)
20%
14
7
9
27
22
7
8
114
,14)
100%
Operating
Revenues Income (a)
6%
29
6
14
18
11
8
8
100%
100%
26%
24
18
15
9
8
7
6
113%
(13)
100%
i j Denotes deduction.
Xote (a)—Operating income represents earniny.s from opeiations before dividends and other
income, and before deduction of inteie--t '•xpen-e, mmniit\ interest and income taxes, except that for
I'inancial Services it is oncjatmtc earnings before income taxes.
Source: G&W Form 10-K Report to the SEC, November 15, 1974.
NATURAL RESOURCES GROUP
It may be seen from above that G&W's Natural Resources business represents
a very small part of its total business, in terms of revenues; and, until the atypical
economic conditions of 1974, has represented a small contribution to total
earnings.
As indicated above, G&W's natural resources operations are primarily con-
ducted by The New Jersey Zinc Company which is now operated as a division of
G&W ("NJZ"). NJZ is principally an integrated producer of a full line of zinc
products and a manufacturer of titanium dioxide pigments, metal powders,
A-70
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anhydrous ammonia, liquid carbon dioxide, lead concentrates, limestone, spiegel-
eisen (a ferro-manganese product), cadmium and sulfuric acid. The information
on the following pages is taken directly from G&W's Form 10-K Report to the
SEC for Fiscal 1974.
Mining and Milling Operations
Mining operations are carried on at five properties owned by NJZ in
Colorado, Pennsylvania, Tennessee, Virginia and New Jersey. Ores produced are
concentrated at mills at NJZ's mines and all the concentrates are shipped to NJZ's
smelter in Palmerton, Pennsylvania. NJZ's aggregate mine production in fiscal
1974 was 1,789,319 tons, compared to 1,927,672 tons in fiscal 1973; the decline
was attributable to the shutdown in September 1972 of the Flat Gap, Tennessee
mine and reduced production from the Jefferson City, Tennessee property due to
diminishing reserves. At the Friedensville, Pennsylvania mine, a shaft-deepen ing
project, which will make accessible for mining the deeper level ore reserves, is
scheduled to be completed during the first half of calendar 1975. No other
changes have been experienced recently in either mining conditions or deposits
being mined that have materially affected production or costs, and no such
changes are now anticipated by NJZ. In June 1972, NJZ began construction of a
new mine in Elmwood, Tennessee, which is expected to commence initial produc-
tion in November 1974. In August 1973 (as an extension of its Jefferson City
operations), NJZ began construction of a new mine on its Lost Creek, Tennessee
property, which is expected to commence operation in 1975. In October 1974,
work was begun on the further development and construction of the Idol,
Tennessee mine, which is expected to commence operations in 1976. NJZ also
owns or controls undeveloped or nonoperating properties in Tennessee, Virginia
and Canada. At August 1, 1974, reserves at NJZ's operating mines and mines
under development were estimated in the aggregate at 29,553,800 tons of proven
and probable ore with an average content of 6.7% zinc, and reserves at undev-
eloped and nonoperating properties were estimated in the aggregate at 26,995,500
tons of probable ore with a 3.8% average zinc content.
Table A-11.3 summarizes at August 1, 1974 the proven and probable ore
reserves and certain production data of NJZ's developed mines, the proven and
probable reserves of its mines under development and nonoperating properties,
the probable reserves of its undeveloped properties, and additional mineralized
deposits at certain properties.
Manufacturing Operations
During fiscal 1974, NJZ produced 91,608 net tons of zinc metal (including
zinc alloys and rolled zinc but excluding metal used for pigments), 104,117 net
tons of zinc pigments and 74,033 net tons of titanium pigments, compared to
A-7I
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TABLE A-11.3
NEW JERSEY ZINC ORE RESERVES
Ore Re.
MmeMl)
Oilman, CuVrado
Friedcns'. illi\ Pennsvlvania
Jefferson C:t\. Tennessee
AuMrui'le Ivanhoe Virginia
Total Mines
Mlnea T'nder Development ( 1)
FJtTHvood, 1 T.ncssce ( 4) .
!] 1 T
7.1 597o Zn
38'i7Sl 297r Zn
59.".')07 33% Zn
19\Q12 185r/o Zn
1,7R'>.U9
Additlonil Mmeriliird
Dfpolitj (") (10)
Tons
Tennessee:
Sugar Creek 130.000
Independence 900,000
Eid mine in late 1074
(X) The tonnages shown for these properties are probable reserves only.
(9) No allov nncc for pillars or dilution
(10; 'I I KM' prnpeitir."- are not currently listed as ore reserves because they arc not required in NJZ's present plans for supplying
ir; ~tm her op'Tition-;
(11) NJZ lias entered into an agreement witli another mining company for the further exploration of these prnperties and possible
development of mines on them. If certain conditions are met, that company may acquire a We interest in these properties.
(12) Under lease to XJZ
Source: G&W - 10K Form 1974
A-72
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production of 102,792, 106,737 and 70,327 net tons, respectively, for the 1973
fiscal year. Production was carried on at plants owned by NJZ in Palmerton,
Pennsylvania, Gloucester City, New Jersey, Depue, Illinois, and at a leased plant
in Ashtabula, Ohio.
At its Palmerton plant, NJZ processes zinc concentrates to produce zinc
metal of various grades sold primarily for galvanizing steel products, production
of brass or for use in the die-casting industry. Some of the metal is further
processed to produce rolled zinc and zinc dust. Zinc oxide pigments are produced
at Palmerton for sale primarily to the paint, rubber and reprographic paper
industries. The plant also produces spiegeleisen for sale to steel plants and iron
foundries and anhydrous ammonia for sale to industrial users and fertilizer
manufacturers. Cadmium metal, sulfuric acid and liquid carbon dioxide are all
produced as by-products at Palmerton and sold for industrial use. The Palmerton
plant, which comprises approximately 270 acres, has an annual capacity of
118,000 tons of primary zinc metal, 72,000 tons of refined metal and 92,000
tons of zinc oxide. Production of these products at Palmerton during fiscal 1 974
was at approximately 88%, 86% and 96% of capacity, respectively. Current
production at Palmerton is at 86% of capacity for primary zinc metal, 88% for
refined metal and at full capacity for zinc oxide.
At its Gloucester City, New Jersey plant, NJZ produces a full line of
titanium dioxide pigments for sale primarily to the paint, rubber and paper
industries. The plant, comprising approximately 34 acres, has an annual capacity
of approximately 43,000 net tons of anatase and rutile grade titanium dioxide
pigments. During fiscal 1974, operations were at capacity, and current production
is at the same rate.
In 1972, NJZ took over operation of a titanium tetrachloride and titanium
dioxide plant in Ashtabula, Ohio, pursuant to a lease which gives NJZ an option
to purchase the facilities. Titanium tetrachloride is produced for sale to third
parties and is used as a raw material for production of titanium dioxide pigment.
Most of the titanium tetrachloride produced for sale is sold to one producer of
titanium sponge (from which titanium metal is produced). The Ashtabula plant
has an annual capacity of approximately 29,000 tons of titanium dioxide pigment
and approximately 98,000 tons of titanium tetrachloride. During fiscal 1974 the
pigment plant and the titanium tetrachloride unit both operated at full capacity.
Current production is at the same rate.
At its Depue, Illinois plant, NJZ produces zinc dust from purchased scrap
zinc. NJZ had produced zinc, diammonium phosphate fertilizer, sulfuric acid and
other products at the Depue plant, but all of these operations were terminated in
1971 because of substantial operating losses. NJZ has leased (and given an option
to purchase) to another company the diammonium phosphate and sulfuric acid
A-73
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facilities at Depue, as well as certain other facilities there; pursuant to such
agreement, NJZ received notice from the lessee during the fall of 1974 that it
intends to exercise its option to purchase in September 1975.
NJZ has under way a capital expenditure program at its Palmerton plant to
improve pollution control facilities, operating efficiencies and zinc oxide produc-
tion. Total expenditures for the program (which was initiated in 1971) are
presently estimated at $35 million, of which $12 million has been authorized and
$5.5 million had been spent through July 31, 1974. It is anticipated that a major
portion of this program will be completed by mid-1977.
NJZ is studying the feasibility of constructing a new electrolytic zinc
refinery complex to be located on a 675-acre tract near Clarksville, Tennessee.
Planned annual capacity for this complex would be 160,000 tons of zinc metal
and 260,000 tons of sulfuric acid. If undertaken, this project will require capital
expenditures presently estimated to be approximately $ 130 million.
OTHER MINERAL INTERESTS
Quebec Iron and Titanium Corporation
G&W has a one-third interest in Quebec Iron and Titanium Corporation
("QIT"), which owns deposits of ilmenite ore, an iron-titanium oxide, near Havre
St. Pierre, Quebec. Reserves are estimated at 100 million tons of proven ore,
averaging approximately 34% titanium dioxide and 38% iron. NJZ purchases the
titanium slag requirement of its Gloucester City plant from QIT under a long-term
arrangement.
EXPLORATION
NJZ conducts an active exploration program in various parts of North and
South America and the Middle and Far East in search of zinc and titanium raw
material reserves and other minerals. Exploration expenditures aggregated
$1,585,600 in fiscal 1974 and are expected to approximate $2,530,000 in fiscal
1975. Since 1964 NJZ has been exploring (primarily by diamond core drilling) for
zinc deposits in middle Tennessee where it leased, as of August 1, 1974, prop-
erties aggregating about 160 square miles. NJZ is continuing its exploration
activity in middle Tennessee alone and through joint venture programs with other
companies.
RESEARCH AND DEVELOPMENT
NJZ's Research Department is involved in metallurgical, chemical and miner-
als research, new products research and product application studies. Research
A-74
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expenditures aggregated $1,663,000 in fiscal 1973 and $1,525,000 in fiscal 1974
and are expected to approximate $1,990,000 in fiscal 1975.
COMPETITION
NJZ is one of six primary producers of zinc metal and five primary pro-
ducers of zinc pigments in the United States. Competition is intense among these
American producers as well as a number of foreign producers. The domestic price
of zinc metal is normally subject to worldwide marketing conditions. Until
December 1973 NJZ's base price for zinc metal was limited under the Federal
government's price controls to 20lAi per pound while foreign producers were able
to sell zinc metal in the United States at prices up to 35<^ per pound. In December
1973, Federal price controls on zinc metal and a number of zinc products were
removed. Since then NJZ has increased its base price for zinc metal to 40^ per
pound and has increased its price for other zinc products correspondingly. In
1972, 1973 and 1974 the United States government released substantial tonnages
of zinc metal from its stockpile, due to the recent strong demand for zinc, and
additional stockpile releases are anticipated in 1975.
NJZ's principal products experience increasing competition in most of their
end uses with a variety of other products including corrosion-resistant materials
such as stainless steel, copper, aluminum and plastics used either as the basic
material in fabrication or as a protective coating for other materials. The principal
competitive factors in the sale of zinc are price, product quality and customer
service.
EMPLOYEES
NJZ employs approximately 3,600 persons, of whom about 75% are mem-
bers of a collective bargaining unit. The principal bargaining agreement is subject
to renegotiation during 1975.
RAW MATERIALS
Over the past three fiscal years approximately 68% of NJZ's annual zinc
requirements were supplied by its mines and the balance was purchased. It is
expected that during fiscal 1975 approximately 75% of NJZ's zinc requirements
at its Palmerton plant will be supplied from mines operated by NJZ. Assuming
production of zinc products at the level expected for fiscal 1975 and use of NJZ
concentrates at a 70-75% level, NJZ estimates that its present proven and
probable reserves would be sufficient for about 22% years of operation. Approxi-
mately two-thirds of the zinc content of these reserves are on properties currently
in operation or under development.
A-75
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The proportion of purchased concentrates depends on the supply available
from both NJZ mines and other suppliers, the demands of other users, the
relation between the price of purchased concentrates and NJZ's mining costs and
other factors. Other materials used in NJZ's manufacturing operations are either
purchased under long-term contract or are usually readily obtainable in the open
market. NJZ is experiencing some difficulty in purchasing fuel and other supplies
and materials for its operations, although thus far it has been able to supply its
plants with sufficient fuel and materials at significantly increased cost. If it were
to be unable to continue to obtain adequate fuel and material supplies, some
production cutbacks would be necessary.
ENVIRONMENTAL PROTECTION
NJZ is engaged in various projects to improve air and water pollution control
at its mines and manufacturing plants. Approximately 20% of NJZ's research
expenditures in fiscal 1974 was allocated to investigation of systems to help
resolve effluent problems. Expenditures at all operations for environmental pro-
tection approximated $2.5 million in fiscal 1974 and are expected to average 58
million to S10 million in each of the next three or four fiscal years. A major
portion of these future expenditures will be made at the Palmerton, Pennsylvania
plant to meet air emission requirements and at the Gloucester City, New Jersey
plant to meet water effluent requirements.
At several operations, emissions exceed standards presently applicable or to
become applicable under existing Federal and state environmental regulations,
and JNZ has applied for variances or filed compliance programs under the
applicable laws in order to develop and implement means to bring its emissions
within permitted limits. While some of these variances or programs have not yet
been approved, NJZ expects to be able to reach mutually satisfactory agreements
with the appropriate authorities concerning the terms of these programs, although
of course there can be no assurances as to any such agreements. NJZ expects to be
in compliance with existing environmental standards at all operations by the end
of fiscal 1977, provided that certain emissions can be controlled at reasonable
expense either by use of existing technology with appropriate modifications or by
development of new technology. NJZ does not anticipate that significant produc-
tion curtailments will result from the operation of the pollution control systems
to be installed pursuant to approved programs.
CAPITAL EXPENDITURES AND LONG-TERM DEBT
G&W's total consolidated capital expenditures for property plant and equip-
ment averaged nearly $100 million per year over the period 1972-1974. In
addition, the Company has invested in affiliates and other corporate securities, in
an amount averaging on the order of $50 million per year.
A-76
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In has financed its expansion, investments (and debt repayment) with cash
flow from operations plus disposition of various properties and securities, and
issuance of new long-term debt (aggregating over $500 million over the three
fiscal years 1972-1974).
The capital expenditure program at NJZ is believed to account for on the
order of 10% of G&W's combined total, including investments. However, this
percentage could rise significantly over the next several years - say to on the
order of 20%, depending on pollution control requirements and on the decision to
proceed with the new zinc refinery complex in Tennessee.
G&W has been earning a reasonable rate of return on its shareholders' equity,
although it is leveraged with nearly 50% of capitalization represented by long-
term notes and debentures.
Because of the scale and complexity of G&W's operations and finances, not
much can be deduced about the desire or ability of G&W to make substantial
additional investments in NJZ's operations. There is apparently nothing yet to
indicate any significant change in its posture, however.
Maturities of long-term and convertible subordinated debt during the five
years ending July 31, 1979, are:
1975 538,891,000
1976 40,733,000
1977 47,367,000
1978 70,834,000
1979 31,909,000
The Company has complied with restrictions and limitations required under
terms of vari6us loan agreements.
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12. GULF RESOURCES AND CHEMICAL CORPORATION
Gulf Resources and Chemical Corporation is engaged in the mining, smelting,
and refining of certain nonferrous metals, including lead, zinc, silver, cadmium,
and gold; the strip mining of bituminous coal; the mining of lithium ores and the
production and sale of lithium metal, lithium salts, and lithium compounds; and,
in addition, production of potassium sulfate and sodium sulfate in facilities
located adjacent to the Great Salt Lake at Ogden, Utah.
Gulfs operations are principally carried on by The Bunker Hill Company
(Bunker Hill). C&K Coal Company (C&K), Lithium Corporation of America
(LCA), and by Great Salt Lake Minerals and Chemicals Corporation (GSL). Gulf
has approximately 3,000 employees.
In 1961, Gulf acquired by merger the name, assets and business of Gulf
Sulphur Corporation. In 1967. Gulfs name was changed to Gulf Resources and
Chemical Corporation as the survivor of a merger with Lithium Corporation of
America, Inc. In May, 1968. Gulf acquired by merger the assets and business of
The Bunker Hill Company. In January, 1970, Gulf acquired all of the outstanding
capital stock of C&K Coal Company. Consolidated sales were SI 25. 6 million in
1972. and net income was S3. 5 million.*
The breakdown of sales and pre-tax operating income was as follows:
1972
Sales Income
Coal 14% 32%
Lead, Zinc, Silver 73% 56%
Lithium Products 13% 12%
100% 100%
Bunker Hill is a leading factor in the lead-zinc-silver industry, operating in
the Coeur d'Alene district of Idaho; Bunker Hill accounts for approximately 7-8%
of domestic zinc production, and 14% of U.S. primary refined lead. The major
part of its refined metal output is sold to NL Industries, Inc., under contract
* Great Salt Lake Minerals and Chemicals Corporation (GSL), a 51%-owned subsidiary in 1972,
is in a preoperating and start-up stage, and was not included in consolidated statements of
income. GSL is capitalizing its costs and expenses as preoperating costs rather than expensing
them until it begins operations. On May 8, 1973, Gulf became owner of 10% of the
outstanding stock of GSL. Consequently, in future reports, GSL will be a consolidated
subsidiary.
A-79
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extending through 1975. Various interests are held in other operating and non-
operating mining firms. Bunker Hill's net sales in 1972 were $92 million, about
15f/( from lead and zinc; the rest mainly refined silver, cadmium, and gold.
SMELTING AND REFINING
Bunker Hill's mines produce a portion of the lead and zinc concentrates
required for the operation of its smelters. Other concentrates for the smelters are
obtained under supply contracts from other mines in the United States, Canada,
South America, Australia, and elsewhere. During the five-year period ended
December 31, 1972, the proportion of Bunker Hill's annual lead requirements and
zinc requirements supplied by mines owned or controlled by Bunker Hill averaged
32% and 46%, respectively. In 1971 and 1972, such mines furnished 34% and 29%
of lead and 569r and 47% of zinc requirements, respectively, for its smelters.
Other products which are recovered from lead ores and concentrates through
the lead smelting operation include silver and zinc and minor qualities of gold,
cadmium, copper, and antimony. The silver, zinc, and cadmium are further
processed in separate facilities to produce fine silver, zinc oxide and cadmium
metal, respectively. The gold and copper recovered are sold to others for further
refining. The antimony is further processed by Bunker Hill into an antimonial
lead alloy which is sold chiefly to manufacturers of electric storage batteries.
Zinc concentrates are smelted at Bunker Hill's electrolytic zinc plant at
Kellogg. Related products obtained in the zinc refining operation include cad-
mium and sulfur. Bunker Hill manufactures sulfuric acid from sulfur removed
from the stack gases of the plants located at Kellogg.
Bunker Hill, in a joint venture with Stauffer Chemical Company, produces
phosphoric acid and ammonium phosphate fertilizers at a fertilizer plant in
Kellogg. In the past, a major portion of Bunker Hill's sulfuric acid was sold to this
joint operation. Bunker Hill has installed a third sulfuric acid plant in order to
comply with Idaho clean air standards. Acid produced by such plants will be
marketed in the Pacific Northwest.
Listed below are the major products at Bunker Hill's Kellogg smelters,
including production from concentrates purchased from other sources, for 1972:
Lead Metals (Tons) 131,804
Zinc Metal (Tons) 101,743
Zinc Oxide (Tons of Zinc Content) 25,307
Cadmium Metal (Tons) 540
Refined Silver (Tons) 250
Fertilizer (Tons P2O5 Content) (100%) 26,734
A-80
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BUNKER HILL PLANT FACILITIES
Lead Smelter: The principal facilities are chiefly of steel, brick or concrete
construction, and are in good repair and adequate for present and foreseeable
needs. Annual capacity of the plant was recently increased to approximately
130,000 tons of primary refined lead. Production in 1972 was 126,300 tons and
is expected to reach full capacity in 1973.
Zinc Plant: The zinc plant had been expanded in 1968 to a calculated
capacity of 109,000 tons and production gradually rose toward that level
(103,000 tons in 1968 and 105,700 in 1969). Purposeful curtailment of produc-
tion beginning in mid-1970 as a result of unfavorable market conditions was the
reason for the 1970 decline to 96,000 tons. This factor together with severe
metallurgical (process control) problems encountered in attempting to return to
normal operating rates in mid-1971, caused 1971 production to decline to 94,000
tons. A series of plant modifications were made in the fall of 1971 and a
turnaround was made in 1972 with a production of 102,000 tons. Recalculation
and tests of plant capacity in 1972 indicate that with expected feed materials the
actual average capacity of the plant is about 104,000 annual tons rather than the
109,000 originally projected.
A-81
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13. HANNA MINING COMPANY AND CONSOLIDATED SUBSIDIARIES
GENERAL
The Hanna Mining Company is one of the world's largest independent
producers of iron ore. It operates four iron pellet projects in the United States -
one wholly owned, one jointly owned — and two in which it has minority
interests. It operates one natural ore mine in Minnesota. It is the largest stock-
holder of Iron Ore Company of Canada and serves as manager of that company.
Through St. John d'el Rey Mining Company, Hanna has an indirect one-third
interest in a Brazilian iron ore company which in 1973 began operating a major
new project.
Hanna produces primary nickel, ferrosilicon, and silicon metal at wholly
owned facilities in the United States. It has interest in oil and gas production and
in an integrated aluminum producer in Brazil.
It operates bulk cargo vessels on the Great Lakes and in the St. Lawrence
Seaway, an ocean shipping chartering agency, and coal and ore docks owned by
others.
Hanna conducts geological exploration and metallurgical research, most of
which in recent years has been focused on non-ferrous minerals.
Its investments include minority holdings in National Steel Corporation, two
Canadian concession companies, and a Brazilian petrochemicals holding company.
Table A-13.1,which includes Hanna's equity portion of earnings and losses of
Iron Ore Company of Canada, St. John d'el Rey Mining Company, and other
associated companies, indicates the approximate percentage contribution to
Hanna's total net sales and operating revenues, and to its income before income
taxes, by each of its lines of business for each of the past five years.
The company in 1974 had 3,338 employees.
A summary of Hanna's operating results for the last five years is presented in
Table A-13.2.
Sales to customers outside the United States and Canada accounted for
approximately 24% of the total iron ore tonnage sold in 1974. There is no
significant difference in profitability between domestic and foreign sales of iron
ore originating from the same operation. Foreign sales by Hanna and its subsidi-
aries are made in U.S. dollars and on terms and conditions similar to domestic
sales.
A-83
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67%
15
13
5
67%
19
12
2
70%
20
9
1
76%
15
8
1
74%
16
9
1
TABLE A-13.1
HANNA MINING SALES AND REVENUE
1974 1973 1972 1971 1970
Net Sales and Operating Revenues
($ millions) 272 205 176 197 203
Revenue Breakdown:
Iron Ore
Ferronickel
Transportation
Other
Total 100% 100% 100% 100% 100%
1974 1973 1972 1971 1970
Income before Income Taxes:
Iron Ore 26% 54% 58% 68% 54%
Ferronickel 47 49 61 43 40
Transportation 17 7 3 2 5
Silicon Products 13
Other Products 842
Investments 16 16 14 12 12
Unallocated Exploration,
Administrative and Other (27) (30^ (38) (27) (11)
Total 100% 100% 100% 100% 100%
Source: Hanna Mining Co., 1974 Annual Report.
Approximately 17% of the tons sold in 1974 by Iron Ore Company of
Canada, located in Canada, were to Hanna.
PROPERTIES
Hanna Mining Company has ownership interests and manages six iron ore
concentrate and pellet plant operations in the United States and Canada (Ta-
ble A-13.3).
Each of the concentrate and pellet plants referred to above receives its ore
from nearby mines. (The amount of crude ore which must be processed to yield
one ton of concentrates or pellets ranges from two to slightly more than three
tons for the mines from which Hanna makes purchases.)
Production by Hanna-operated iron ore properties in North America in 1974
totaled some 32 million tons, including 9.9 million tons for the Company's own
account.
A-84
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TABLE A-13.2
SUMMARY OF OPERATIONS
THE HANNA MINING COMPANY AND CONSOLIDATED SUBSIDIARIES
YEAR ENDED DECEMBER 31
Net sales and operating
revenues
Cost of goods sold and operating
expenses
Depreciation and depletion
Interest on long-term debt
Income taxes
Income of consolidated companies
Income(loss) of companies
carried at equity
Net income
Source: Hanna Mining Co., 1974 Annual Report
1974
(Amounts
$272,227
210,686
9,456
4,142
16,262
30,259
(9,756)
20,503
1973
in thousands
$204,790 $1
1972
, except
76,399
168,637 144,759
9,815
2,805
7,285
15,085
7,736
22,821
7,740
2,742
5,166
14,2.25
3,794
18,019
1971
per share
$197,089
165,969
7,149
2,828
4,897
14,993
11,380
26,373
1970
data)
$203,442
167,410
7,165
2,979
9,296
17,460
13,696
31,156
In 1974, Iron Ore Company of Canada shipped 23.1 million tons of ore.
Capacity at IOC has been expanded to about 32 million tons of ore per year. Most
production has already been sold under long-term contracts extending through
1996.
Hanna produces ferronickel from a mine and smelter located near Riddle,
Oregon. The smelter, the only one in the United States, has an annual capacity of
approximately 26 million pounds of contained nickel and produced 26,154,000
pounds in 1974.
Hanna produces silicon metal and ferrosilicon at a smelter near Wenatchee,
Washington. The smelter, which has an annual capacity of approximately
30,000,000 pounds of contained silicon, produced 16,645,000 pounds in 1974,
after acquisition by Hanna.
Hanna-operated vessels on the Great Lakes and in the St. Lawrence Seaway
transported 6.4 million tons of iron ore in 1974 (down from 1973 as a result of
strikes).
A-85
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TABLE A-13.3
HANNA MINING PLANT OPERATIONS
(1974)
Name and ],ocaticm
Croveland Min-, f-iJ ehit^an -• pellets
Butler Taeonite Prc-i^ct
Mesabi Range, ,'M nne.sot / - pellets
National Steel Pellet VUnt
Mesabi Ran^e, Mifinerota - pellets
Pilot Knob Pellet Company
Missouri - pellets
Iron Ore Company c;C Canada: (IOC)
Carol Lake, Lalnador
Pel lets
Concentrates (to i>o sliL|-pcd)
Sept lies, Quebec - pellrts
city in Production
.--a id s ei i n Long
11 ', Tons Tons
',\nf;0 2,015
>.<>00 2,524
:V>r>0 2,477
, 'M)u 686
,.,!JOO 7,969
'|,-K)0-'.- 4,761
-,000-'.- 1 ,999
Hanna ' s
Interest
lOOTo
37.57=
15%
507,
26.377=
26.377=
26.377;
* Capacity when Cull operating rates arc achieved.
Source: Hanna Mining Co. Annual Report 1974
Additional information is presented in Table A-13.4.
CAPITALIZATION AND FINANCES
The Company had $48 million in long-term debt at December 31, 1974. This
represented 15% of total capitalization.
Net working capital was $47.5 million, the second-lowest level in several
years, and the current ratio was only 2.0, the lowest in over a decade.
A seven-year financial comparison is presented in Table A-13.5.
The Company's 27.1% interest in Iron Ore Company of Canada is carried at
cost adjusted for equity in earnings and losses since date of acquisition, less
dividends.
A-86
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TABLE A-13.4
HANNA MINING PROPERTIES, AFFILIATES AND OPERATIONS
Iron Ore/United States
Wliolh/OuiK-d
Gios'el.md Mine
Open pit mine, conccntiator and pellet plant,
Michigan
Butler Taconite Project ( 37.5V )
Open pit mini', concentrator and pellet plant;
Minnesota
I lanna Oie Mining Company ( 15V )
\Vhitne\ Mine; Minnesota
National Steel Pellet Company ( 15!( )
Open pit mine, concentrator and pellet plant,
Minnesota
Pilot Knob Pellet Compam (50V )
L'ndei gi oinid mine, con cent i at 01 and pellet plant,
Missom i
()ie Sales Di\ ision
Cleveland, Ohio
Iron Ore/Canada
r
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TABLE A-13.5
SEVEN YEAR FINANCIAL COMPARISON
SUMMARYOF
OPERATIONS 1974 1973 1972 1971 1970 1969 1968
The above summary lias been restated to reflect various accounting changes.
Source: Hanna Mining Co. — Annual Report 1974
( Amounts In Thousands, Except Per Share Data )
Net Sales and
Operating Revenues . . . $272,227 204,790 176,399 197,089 203,442 175,988 153,104
Cost of Goods Sold and
Operating Expenses . . . . $210,686 168,637 144,759 165,969 167,410 141,314 130,262
Depreciation and Depletion . . $ 9,456 9,815 7,740 7,149 7,165 7,113 5,943
Interest on Long-Term Debt. . $ 4,142 2,805 2,742 2.828 2,979 3,317 3,637
Income Taxes $ 16,262 7,285 5,166 4,897 9,296 7,592 146
Income of Consolidated
Companies $ 30,259 15,085 14,225 14,993 17,460 16,028 12,548
Income (Loss) of Companies
Carried at Equity ....
Net Income
Net Income Per Share ....
Cash Dividends
Dividends Per Share ....
BALANCE SHEET
Working Capital
Property, Plant, and Equipment
Other Assets
Long-Term Debt
Total
Less Reserves
Total Stockholders' Equity .
Shares Outstanding
Book Value Per Share ....
$ (9,756)
$ 20,503
$ 2,32
$ 11,927
$ 135
$ 47,483
53,42 1
246,375
(48,503)
$298,779
15616
$283,163
8,835
$ 32.05
7,736
22,821
258
11,927
135
49,392
52,27 1
227,221
( 39,0 14 )
289,843
15 256
274, 5S7
8,835
31.08
3,794
18,019
2.01
11,927
1,35
46,680
45,783
217,606
(31,810)
278,229
1 4 537
263,692
8,835
29.85
11,380
26,373
2.99
11,485
1 30
74,102
38,775
192,972
(30,813)
275,036
17 437
257,599
~8,835
29.16
13,696
31,156
3.55
11,403
1.30
74,141
36,942
179,189
(30,860)
259,412
16 701
212,711
8,835
27.47
5,472
21,500
2.47
10,658
1.225
63,663
39,982
167,491
(31,591)
236,5 18
15671
220,877
8,747
25 25
9,945
22,493
2.59
8,684
1.00
56,370
42,669
165,317
(41,583)
222,773
14086
208,687
8,688
24.02
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Following is a summary of financial information of Iron Ore Company of
Canada:
1974 1973
Net current assets $ 58,583,000 S 21,257,000
Investments and other assets 16,410,000 17,646,000
Property, plant and equipment-net 690,918,000 708,462,000
765,911,000 747,365,000
Long-term debt and reserves (498,501,000) (481,638,000)
Net assets $267,410,000 $265,727,000
Sales and operating revenues S364,121,000 $281,085,000
Net (loss) income $(48,317,000) $ 11,324,000
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14. HECLA MINING COMPANY
Hecla and its subsidiaries are engaged in three lines of business: mining and
concentration of nonferrous ores, production and sale of sand and gravel prod-
ucts, and fabrication of prestressed concrete structures. Over 50% of Hecla's
revenues come from silver mining, with the balance split about equally between
lead and all other products. The Company has substantial interests in the Coeur
d'Alene silver mining district of Idaho.
Hecla owns the Lucky Friday Mine (acquired in 1964) and a one-third
interest in the Sunshine Unit Area (operated by Sunshine Mining Company - see
separate profile), and has a 30% interest (with Bunker Hill owning the balance) in
the Star-Morning Unit Area production of silver, lead, and zinc. The Company
also owns Ace Concrete Company, a producer of ready-mix concrete and sand
and gravel; and owns 10.3% of the stock of Day Mines.
Hecla holds a 50% interest in the large Lakeshore Copper property near Casa
Grande, Arizona, and is the operator of the Lakeshore Mine project (El Paso
National Gas owns the remaining 50%). Production of electrowon cathodes and
copper precipitates began in 1975, and should build up gradually to a total of
65,000 tons of copper per year by the end of the year. An agreement was made
covering 35,000 tons/year of copper, contained in precipitates, which will be sent
to ASARCO for smelting at its Hayden, El Paso, and Tacoma smelters. The total
cost of the project is estimated to be nearly $200 million. Hecla's share (exclusive
of interest) of the cost to complete the project is expected to be $30 million.
This project thus looms large in Hecla's outlook, since the Company's total
revenues in 1974 were only $29 million (an all-time high). Capital expenditures in
1974 were $29 million. The Company has a credit agreement with major com-
mercial banks to assist in financing its share of costs to complete the Lakeshore
project. The Company's total capitalization at year-end 1974 was represented by
$20 million in debt and $63 million in stockholders' equity (the latter around
$100 million with common stock at market value).
Hecla also owns 35.4% of Granduc Mines, Ltd. (British Columbia), whose
Granduc Mine is leased to ASARCO and a Newmont Mining subsidiary for
development. Granduc Mines, Ltd. has been in financial difficulties. Hecla
recorded a small loss on its equity in 1974, and was "uncertain as to what extent
and when further income might be realized."
A-91
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15. HOMESTAKE MINING COMPANY
Homestake Mining Company and its subsidiaries are principally engaged in
mining and related activities. The Company has a total of about 2000 employees.
Its products are gold, lead, zinc, copper, silver, uranium, and forest products.
Total revenues in 1974 were $125 million, with net income of $34 million.
Gold bullion, which is produced at the Homestake gold mine in Lead, South
Dakota, is sold mainly to commercial consumers within the U.S. Gold sales ($59.8
million in 1974) also include unrefined bullion purchased for further processing.
Homestake is the largest U.S. gold producer (343,650 ounces in 1974). The
Company claims total reserves of over 15 million tons of ore averaging 0.262
ounces of gold per ton.
Lead-zinc operations ($51 million in 1974 sales) are believed to provide the
largest share of profits. Lead and zinc concentrates and refined lead are produced
at a mine, mill, and lead smelter near Boss, Missouri, which are owned jointly with
AMAX. Refined lead (33,586 tons in 1974) is sold to U.S. commercial consumers.
Lead concentrates are sold to domestic and foreign smelters. Zinc concentrates
(55,181 tons in 1974) are sold to a domestic smelter. (Additional details are
provided below under Homestake Lead Company of Missouri.)
Silver-lead concentrates are produced at the Company's Bulldog mine and
mill near Creede, Colorado and sold under a contract with a domestic smelter.
Silver sales in 1974 exceeded 1 million ounces.
Uranium ore is mined and processed at the United Nuclear-Homestake
Partners' facilities (30%-owned, with a carrying value of $2.3 million) near Grants,
New Mexico. Uranium concentrates produced from the partnership mines are
distributed in kind to the partners. In addition, Homestake operates a uranium
mine in the Grants area and these ores are processed through the partnership mill
on a toll basis. Uranium concentrates are sold primarily in the domestic market.
The Company also purchases uranium concentrates for resale. In 1974, Home-
stake's share of production amounted to 200 tons of U3O8; revenues were $1.7
million.
Copper, lead, and zinc concentrates are produced at the Madrigal Partner-
ships' mine in Peru and sold to smelters in Japan. The Homestake-Keweenaw
Venture, in which Homestake Copper Company, a wholly owned subsidiary, has a
60% interest, is exploring copper properties on the Keweenaw Peninsula in
Michigan; a pilot mill is under construction and expected to produce 3100 tons of
copper per year. The subsidiary's investment in the venture aggregated
$1,256,000 as of December 31,1974.
A-93
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Lumber and by-products are produced at Spearfish, South Dakota from
timber harvested from company-owned and U.S. Forest Service lands in South
Dakota and Wyoming. Lumber products are sold in the midwest commercial
market and are also used in the gold mining operation.
Homestake's consolidated income statement for the years 1973 and 1974 is
presented in Table A-l 5.1.
Homestake had operating revenues in 1974 of $122 million, with operating
income of $53 million, and net income of $34 million - all were all time high
figures, reflecting the recent historically high gold prices and strong lead-zinc
markets.
The Company had total assets as of December 31, 1974, of $155 million, of
which mining properties and plant and equipment accounted for less than $40
million, at book value. The Company has built up substantial investments in
marketable securities, and a strong working capital position.
Stated capitalization at the end of 1974 was $128 million of which 4% was
debt, and the balance, shareholders' equity.
Homestake Lead Company of Missouri, a wholly owned subsidiary, has a
50% undivided interest in lead-zinc mining properties and a concentrating mill
near Boss, Missouri; Homestake Lead's interests are included in property, plant,
and equipment. Mining and milling operations of the jointly owned facilities are
conducted at cost for the tenants in common. Amax-Homestake Lead Tollers, a
partnership in which Homestake Smelting Company, a wholly owned subsidiary
of Homestake Lead, has a 50% interest, operates a nearby smelter which provides
services for the partners and others on a toll basis. Homestake Smelting's invest-
ment as of December 31, 1974 and 1973 aggregated $11,698,000 and
$11,543,000 respectively, represented by its equity in the partnership,
$11,386,000 and $11,201,000, and unamortized interest cost of $312,000 and
$342,000. Financial statements of the partnership are included in annual reports
filed with the Securities and Exchange Commission; summarized financial posi-
tion as of December 31, 1974 and 1973 and operating results for the two years
then ended are listed in Table A-l 5.2.
Uranium
The partnership mill operated at near capacity in 1974. Approximately 33%
of the available capacity was used to process ores on a toll basis for a non-partner
(Anaconda) in accordance with an agreement entered into in late 1973. The
partnership encountered significant amenability problems in processing the non-
partner's ores. As a result, the processing of these ores was suspended in late 1974
and possible remedial steps are being studied.
A-94
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TABLE A-15.1
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE YEARS ENDED DECEMBER 31, 1974 and 1973
1974 1973
$ Millions
Revenues:
Sales:
Gold $ 59.8 $ 40.10
Lead and zinc 51.1 36.44
Silver 6.3 5.47
Uranium 1.68 9.30
Forest products 2.84 3.80
Interest and dividends 4.59 2.84
Losses — marketable and other securities (2.67)
Share of profits — mining ventures .48 .47
Royalties .71 .58
Sales of exploration venture interests .60
Other income .78 .86
Total 125.72 100.49
Costs and Expenses:
Product and shipping costs — excluding items listed below 57.60 54.65
Administrative and selling expenses 5.58 4.50
Taxes — other than income taxes 3.57 3.15
Exploration costs 2.79 1.38
Amortization, depreciation, and depletion 3.56 3.40
Interest — principally long-term bank loans .52 .68
Provision for loss on stock previously acquired in disposition of
Port Costa Products Company
Income taxes
Total 91.62 77.98
Income Before Extraordinary Item 34.10 22.51
Extraordinary Item — Income tax reductions resulting from
utilization of loss carryforwards .70
Net Income $34.10 $23.21
Earnings Per Share: (11,300,000 shares outstanding at 12/31/74)
Income before extraordinary item $3.01
Extraordinary item
Net income
Dividends Per Share
Source: Homestake Annual Report 1974.
A-95
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Exploration and development expenditures were substantially increased in
1974, to nearly $3 million. Homestake acquired the 50% interest, previously held
by a partner, in several promising properties and completed the acquisition of an
85% interest in lands known as the Pitch properties which are located in
Colorado. Exploration and development expenditures in 1974 were mainly
directed toward the development of properties held by the Company rather than
seeking new properties.
TABLE A-15.2
AMAX-HOMESTAKE LEAD TOLLERS
(Homestake's 50% portion)
1974 1973
Financial position:
Current assets S 4,392,000 $ 3,597,000
Property and deferred charges-net 7,874,000 8,105,000
Total $12,266,000 $11,702,000
Current liabilities and deferred income $ 880,000 $ 501,000
Partner equity 11,386,000 11,201,000
Total $12,266,000 $11,702,000
Operating results:
Revenue $ 7,601,000 $ 6,314,000
Costs and expenses 5,943,000 4,747,000
Depreciation and amortization 928,000 904,000
Total 6,871,000 5,651.000
Net income $ 730,000 $ 663,000
A-96
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16. INSPIRATION CONSOLIDATED COPPER COMPANY
Inspiration is almost entirely a domestic copper producer and accounts for
about 4% of U.S. refined output. A continuous cast and rolled copper rod-making
facility converts about 65% of Inspiration's copper production into a fabricated
form sold to wire and cable manufacturers.*
The bulk of its mine production comes from relatively low-cost open-pit
operations in Arizona. Sales were $85 million in 1972, and included $73.9 million
in deliveries of copper and SI 1.2 million in smelting and refining tolls and other
operating revenues.
Total mine production in 1972 was 132 million pounds of copper, of which
some 75% was obtained from open-pit mining. The Inspiration area mines in-
cluding heap and dump leaching operations, contributed 77%, Christmas Mine
16%s and the Ox Hide Mine's open-pit and heap-leaching operations, 7%.
The average price received for the 145.5 million pounds of refined copper
delivered in 1972 was 50.8<^/pound versus 52.0^ in 1971. Costs before deprecia-
tion, depletion, and taxes were about 4.4
-------
The smelter at Inspiration treated 356.000 tons of new copper-bearing
material during 1972. Toll and custom material from other producers' mines
accounted for 59% (56% in 1971).
Inspiration has faced one of the heaviest burdens for pollution abatement
expenditures and costs, relative to the size of the Company and its financial
resources. In 1972, Inspiration's plan for meeting Arizona smelter emission
control standards by 1974 called for a new installation costing about S45 million.
Some $13.2 million was to be advanced by a toll customer, to be repaid over the
term of a ten-year contract for treating the customer's concentrates. The balance
was being borrowed on bank revolving credit, to be replaced by long-term debt
financing.
Expenditures for Inspiration's smelter pollution control project reportedly
reached S54 million by year-end 1973. Some $16.8 million has been advanced by
toll customers with repayment to be made over the term of ten-year contracts for
treatment of concentrates. Following receipt of a favorable ruling from the
Internal Revenue Service in October, 1973, an additional S38 million in bank
loans was converted into tax exempt Pollution Control Revenue Bonds. These
bonds, held by the same banks, will be repaid quarterly over a six-year period
beginning May 15, 1974.
The new smelter, using an electric furnace design by Elkem of Norway,
converters designed by Metallurgie Hoboken-Overpelt of Belgium, and including a
Lurgi (German) sulfuric acid plant adjacent to the existing Arizona smelter, was
scheduled to come on-stream in early 1974. The new complex is designed to meet
Arizona's air pollution standards.
A key ingredient in Inspiration's opting for an electric furnace was the
availability of a "large block of interruptible reserve power at a tolerable price"
from the Salt River Power Project in the area.
Another factor was Inspiration's large tonnage of submarginal mineral
amenable to copper recovery by sulfuric acid leaching and Inspiration's prior
work on acid leaching. Thus, unlike most other companies, it could utilize most
of the acid produced from the new smelter complex.
When sulfuric acid from the new plant is available, a heap-leaching operation
will be started at Willow Springs, using ore from the new Red Hill and Barney
mines, which will produce about 10 million pounds of copper annually.
A-98
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17. KENNECOTT COPPER CORPORATION
Kennecott Copper Corporation is the largest domestic producer of copper,
the second largest domestic producer of molybdenum, and an important source of
gold, silver, lead, zinc, high quality iron, and titanium slag. Kennecott is an
integrated producer of minerals, metals, and metal products. Kennecott has also
been engaged in the coal mining business through its wholly owned subsidiary
Peabody Coal Company. Total annual revenues exceed $l billion. Peabody is one
of the two largest producers of coal in the domestic market and the largest
supplier of coal to the electric utility industry in the United States.
As of December 31, 1972, the Company employed approximately 29,800
persons in all its divisions and subsidiaries, both domestic and foreign.
Table A-l 7.1 sets forth, for the year ended December 31,1972, the approxi-
mate amounts of the Company's consolidated sales and income (before income
taxes, minority interests, and extraordinary items) attributable to each of its
principal lines of business or other sources.
Copper and copper products comprised approximately 80% of Kennecott's
Minerals, Metals, and Metals Products sales in recent years. Lead and zinc
concentrates have accounted for 2.5-3% of such sales, and amounted to $25
million in 1972.
Kennecott's 49% interest in Sociedad Minera El Teniente S.A., a Chilean
corporation which owns and operates the El Teniente copper mine in Chile, was
expropriated by the Chilean Constitutional Reform Bill, which became effective
in July, 1971. In prior years, Kennecott received over $20 million per year in
dividends from El Teniente. Kennecott's investment in Chile was carried at
$143.3 million as of December 31, 1971. Some $84.6 million of El Teniente
Mining Company notes was the subject of a Contract of Guaranty with the U.S.
Overseas Private Investment Corporation. In 1972, Kennecott received a $64.9
million settlement of its expropriation insurance claim, and wrote off its $50
million ($26 million after tax effects) equity in El Teniente stock. Wholly owned
subsidiaries include Chase Brass and Copper Co., and Ozark Lead Company. Chase
is a leading fabricator of copper and brass mill products. Chase buys a large
portion of its copper from Kennecott. accounting for about 10% of Kennecott's
copper sales. Profit margins are typically low in this part of the industry; in fact,
Chase showed a loss in 1971 and 1972. (In 1972, operations at Chase were
profitable in the latter part of the year, but offsetting this was an extended strike
in the first quarter.)
A-99
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TABLE A-17.1
KENNECOTT: SELECTED FINANCIAL DATA
1972
(In $ Millions)
Sales Income
Minerals, metals and metal products $800.9 $117.7
(2)
Nonoperating income 9.6
Nonoperating deductions (1.6)
Coal(3) 10.2
Nonoperating income 344.4 8.3
Nonoperating deductions (2.8)
Shutdown expenses during strikes (3.9)
Other nonoperating income 2.3
(4)
Other nonoperating deductions (32.6)
Totals $1.145.3 $107.1
As a result of an adverse court decision, income for the years 1968
through 1971 has been restated to reflect additional Utah State
franchise taxes plus interest.
(2)
In each of the years 1968 through 1970, a substantial portion of non-
operating income resulted from dividends and interest received from
Sociedad Minera El Teniente S.A. in which the company held a 49% equity
interest. The company's interest in El Teniente was expropriated by
the Government of Chile during 1971 (see "El Teniente" infra).
Peobody Coal Company was acquired on March 29, 1968. Sales and income
exclude revenues applied against the Peabody production payment.
(4)
Consists of interest, research and miscellaneous expenses.
Source: Kennecott Annual Report 1972
A-100
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Kennecott also holds two-thirds of Quebec Iron and Titanium Corporation.
(Gulf & Western/New Jersey Zinc have minority interests.)
Kennecott operates four copper properties in the United States. In both
1971 and 1972, these divisions produced about 450,000 tons of copper, and
13,000,000 pounds of molybdenum. Kennecott's Utah Copper Division mine in
Bingham, Utah, is the second largest copper producer in the world, ranking next
to Chile's Chuquicamata mine. (The El Teniente mine in Chile is the world's
largest underground copper mine.) Blister copper from the Utah smelter is refined
at the company's electrolytic refinery at Garfield, with an annual capacity of
260,000 tons.
The Chino Mines Division comprises the Chino mine at Santa Rita, New
Mexico and a concentrator and smelter at Hurley. New Mexico, nine miles away.
The Chino mine is an open-pit operation and produced 80,000 tons in 1 970 and
71.500 tons in 1971. The Ray Mines Division operates an open-pit mine at Ray,
Arizona. The ore is concentrated and smelted in Company facilities at Hayden,
Arizona.
At the Nevada Mines Division, mining is by the open-pit method in Ruth,
Nevada. The ore is concentrated, then smelted in company plants at McGill,
Nevada. Blister copper produced from the Ray Mines and Nevada Mines is refined
at the refineries of Kennecott Refining Corporation and American Smelting and
Refining Company in Baltimore, Maryland.
During 1972, the Federal Environmental Protection Agency (EPA) dis-
approved portions of the "implementation plans" submitted under the require-
ments of the Clean Air Amendments of 1970 by the four western states in which
Kennecott operates copper smelters. In each case, the portion so disapproved
included the state's control strategy for meeting federal air quality standards for
sulfur dioxide, emitted by the Company's copper smelters. The plans rejected by
the EPA were evolved by the states after lengthy hearings and, in each case,
contained stringent requirements with respect to emissions from the Company's
smelters. Believing that the states' implementation plans are adequate to ensure
compliance with federal air quality standards, Kennecott petitioned the federal
courts to review the action of the EPA in rejecting these plans. The requirements
of the rejected state plans would necessitate the expenditure by Kennecott of
substantial amounts (estimated to total more than SI60,000,000) for pollution
control equipment and would result in increased operating costs. To the extent
that the EPA substitutes more stringent requirements for those included in the state
plans, it can be expected that the cost of compliance will increase substantially
over the amount indicated above. In the case of Kennecott's Nevada smelter the
imposition by the EPA of more stringent requirements than those contained in
the Nevada plan may result in the closing of the smelter. In addition, the EPA has
A-101
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recently announced its intention to revise certain of the federal air quality
standards. While the effect of this action upon the Company's operations cannot
be predicted, Kennecott stated it is reasonable to assume that any increase in the
level of air quality standards from those presently in effect will require both
additional capital investment and increased operating costs.
In addition to federal regulation, each of the four states has adopted local air
quality requirements which, in some cases, are more restrictive than the federal
requirements. In Utah. Kennecott is operating its largest copper smelter under a
variance which expired on July 1. 1975, while in Arizona operations are being
conducted under a conditional operating permit that expired in January, 1974.
The Arizona permit, however, cannot be renewed, and the Company's Arizona
smelter was to have been in compliance with the state's requirements by January,
1974.
\-102
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18. MOLYCORP, INC.
GENERAL
Molycorp is engaged in the mining, refining, and distribution of molybdenum,
tungsten, boron, rare earths, and columbium.
Molycorp is a leading producer of molybdenum concentrate and the world's
leading miner and processor of rare earth products. The Company's principal
mines are in New Mexico and California; its principal processing plants are in
Pennsylvania (ferroalloys) and Colorado and California (chemicals).
Sales for 1974 were $75 million, with net income of $14 million. Molybde-
num products accounted for 56% of sales and 37% of operating profits; rare earth
products 31%, and 52%; and (other) ferroalloys 13% and 11%, respectively.
Approximately 27% of sales were for export.
Molybdenum concentrate production totaled 11.2 million pounds of con-
tained Mo in 1974. Proven ore reserves at January 1, 1975, were 98,152,000 tons
grading 0.1 7% molybdenum disulfide (about 60% molybdenum by weight).
Rare-earth operations are conducted at the Mountain Pass, California open
pit mine. Production of rare-earth concentrate in 1974 was 43.9 million pounds.
Mill capacity is being expanded to 60 million pounds per year. Proven minable ore
reserves at 1974 year-end were 6,118.000 tons containing 7.29% rare-earth
oxides. (Major uses for rare-earth products are in color television phosphors,
catalysts, glass, iron and steel.)
Molycorp is also a principal domestic supplier of ferrocolumbium and
columbium concentrates, which are imported. A 33%-owned Brazilian affiliate,
Comp. Brasileira de Metalurgia e Mineracao, is the world's largest producer of
columbium concentrates. Production of columbium oxide in concentrates totaled
22.7 million pounds in 1974. (Molycorp and Kennecott Copper each own a
substantial interest in Quebec Columbium Ltd., which has mining rights in
Quebec.)
Since processing of molybdenum concentrates has been one of the principal
activities of Molycorp, further details are important. These concentrates, con-
taining approximately 75% to 90% molybdenum disulfide, are converted to
molybdenum oxide by roasting in two furnaces at its Washington, Pennsylvania
plant. Roasted product (molybdenum oxide), which contains approximately 60%
molybdenum, is the principal product sold. A portion of molybdenum oxide is
further processed to ferromolybdenum and molybdenum chemical products. A
portion of Molycorp's molybdenum oxide produced must be chemically treated
to reduce its lead content to acceptable levels.
A-103
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Since February, 1966, Molycorp has used concentrates from its Questa mine
for approximately 77% of raw material required at its processing operations. In
addition, MoS2 concentrates and other molybdenum products have been pur-
chased from domestic producers and from government stockpiles.
In 1974, Molycorp sold 17.9 million pounds of molybdenum contained in
products. Molycorp has a purchase contract with a domestic copper company
(believed to be Kennecott) for the purchase of molybdenum concentrate pro-
duced as a by-product of copper mining. Such purchases were 1.5 million pounds
of contained Mo in 1974. Stockpile purchases were 4.6 million pounds, and the
sources accounted for 0.6 million pounds. The balance of 11.2 million pounds, or
62.59?, represented the production from Questa.
Table A-18.1 summarizes details of the Questa and Mountain Pass opera-
tions.
The following information and caveats are taken from the May 9, 1975
prospectus issued by Molycorp, Inc.:
UNCERTAIN FUTURE OF QUESTA MINE
Molycorp has been engaged in large-scale open-pit molybdenum mining
operations at its Questa, New Mexico facility since 1966. In mid-1971,
it became apparent that Molycorp, as a result of, among other factors,
higher production costs and lower sales prices than anticipated, would
be unable to generate sufficient funds to meet its then current debt
repayment requirements and continue its planned rate of development
of the Questa mine. As a result, in July 1971, Molycorp instituted a
plan restricting the amount of waste removal at its Questa mine to a
point which would permit continuation of mining until 1977, and
arranged to reschedule the maturities of its bank debt. Recent improve-
ments in market conditions for molybdenum together with Molycorp's
improved financial condition, permitted adoption of a modified mining
plan which will allow continuance of operations in the present open-pit,
with a limited amount of additional waste removal, through 1979 and
possibly 1980. Operations at Questa beyond then will require removal
of substantial amounts of waste overburden in the present pit or
development and preparation for mining of a mineralized zone located
about 5,000 feet southwest of the present pit, which is being evaluated
by diamond drilling but has not been established as proven or probable
ore reserves. Either alternative would require favorable market condi-
tions for molybdenum and substantial additional funds, neither of
which is assured. If operations at the Questa facility are not continued
so as to ultimately enable mining of substantially all proven and
A-104
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TABLE A-18.1
MINING OPERATIONS: PRODUCTION COSTS
A. Molybdenum (Questa Operation)
1971 1972 197.1 1974
Ore to primary crusher, tons . . .
Grade, 'i MoS^
Screen reiect. tons
Grade.'; MoS2 .. .
Ore milled, tons
Grade. rc MoS2
Mill recovery. ' '<•
Production, mohhdenum concen-
trate. Ihs Mo.
Sales value of production, per Ih
Mo. in concentrates ( 1 ). .
Cash cost of production, per Ih Mo
( 2 \ ...
Total cost of production, per Ih Mo
<3i
6.2'7"7 208
185
9 So.1' 8 2
082
5. 2^.226
204
7S 00
10,1 12 370
M 69
v i oo
-. i 39
6,495.109
182
890. 277
094
5.604.832
196
76 83
10.062.186
il 68
$1 04
SI. 49
5.575.036
218
237.209
084
5.337.827
224
76 80
10.974.761
SI. 52
S.85
SI 27
5.351.008
220
—
5.309,236
.220
78.35
10.866,261
SI. 47
$.96
$ 1 40
5,840,277
.218
5,818,276
.218
74 98
11,199,993
SI. 96
SI. 03
$1.53
B. Rare Earths (Mt. Pass Operation)
Ore milled, tons 204.397 181.175 22S.488 305,073 499,597
Flotation plant teed. cr. oxides
("RhO")
Flotation pL
mt recovers'.
(
Production, rare earth concentrate, i!^-. RLO (in
thousands )
Sales value i
trates( 1 )
Cash cost of
Total cost ol
if production
. per Ih. Rt C) in concen-
production, per Ih
' production, per Ih.
REO, 2 i
RFOi ')
2u
s
s,
S
7 2
(.8 2
054
397
154
192
7 9
75 2
21, 6^5
S373
S 121
S 152
23
S
S
$
7 3
72 3
.602
.377
118
146
38
S
S
S
8.6
74 3
,682
393
.121
139
8.2
53.4
43,883
S.497
S.186
S.205
( I ) Sales value of production i-- based on actual .sales to customers plus f.nr market value of
intracompanv, shipments, plus or minus fair market value of increase or decrease in inventories.
(2) Cash cost of production includes all expenditures at mine and null and chemical plant" except
capitalized expenditures tor land, plant, equipment and mine development
( 3 i Tot || costs are i.i>.h costs pi..- depreciation amoni/ation and cost depletion Home office, selling,
Source: Molycorp Prospectus - May 1975
A-105
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probable open-pit ore reserves, it may be necessary at some indeter-
minate future date to write off significant amounts of the net book
investment in the Questa mine and mill. Molycorp's net book invest-
ment in the Questa mine and mill was approximately $66 million at
December 31, 1974.
CHANGING CONDITIONS IN MARKET FOR MOLYBDENUM
Molybdenum operations, after allocation of interest expense, were not
profitable for the years 1971, 1972 and 1973. For more than two years
prior to mid-1973, molybdenum was in over-supply and during much of
such period price discounting was prevalent. However, in 1973 demand
firmed due to the higher rate of steel operations and by year-end, prices
had returned to levels prevailing prior to the price discounting. In 1974.
prices were further increased on several occasions to a level which in
January and February 1975 remained approximately 60% above the
lowest levels of 1973. Molybdenum operations during 1974 were profit-
able.
Competitively, Molycorp believes that other major producers of molyb-
denum, particularly those whose production is as a by-product of
copper mining operations, have a cost advantage over Molycorp. Also, a
significant new source of molybdenum is under development by Amax
at Henderson, Colorado. Molycorp has no contractual assurance of a
market for its molybdenum products.
Molycorp's mining, milling and processing operations require significant
amounts of energy. Molycorp's power generation facilities at its Questa mine are
powered by natural gas, with diesel fuel as a standby source of energy. Molycorp's
gas purchase contracts are terminable by the sellers and there can be no assurance
that adequate supplies will continue to be available.
If operation of the Questa mine is discontinued, it will be necessary to
purchase all molybdenum concentrates from others. Molycorp has no commit-
ments for such supplies of molybdenum concentrates.
Molycorp obtains water for use in Questa operations from the Red River and
from wells owned by Molycorp. Current milling rates require approximately
3,900 gallons per minute. Molycorp believes present supplies are adequate for
continuous operations at these levels.
As of March 1, 1975, the Questa operation employed approximately 550
persons.
A-106
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ENVIRONMENTAL MATTERS
Molycorp has been granted a permit under the Federal Water Pollution
Control Act to decant water from its Questa tailings pond into the Red River.
However, the restriction on fhe molybdenum content in the effluent is, in the
opinion of Molycorp, excessively restrictive and would require the installation of
a reclaim water line at a cost estimated to be $4 million. Molycorp has appealed
for a lower standard than that set by the Permit, and such appeal is pending.
Molybdenum roasting operations at the Washington plant result in the
discharge of pollutant sulfur dioxide. Molycorp has been granted a variance by the
State of Pennsylvania to permit operation until January 1, 1976 without meeting
established pollution control regulations. Molycorp does not expect to be able to
comply with the air pollution standards by that date, and, if the variance cannot
be extended or modified, it may be necessary to discontinue molybdenum
roasting operations at the Washington plant. Molycorp has not decided whether to
install air pollution control equipment at the Washington roasters, to construct
new roasters (with pollution control equipment) at another location, or to
construct new facilities using a hydrometallurgical process (presently being
tested). In part, the decision as to whether Molycorp will continue roasting
operations depends upon the determination of the future of the Questa mine with
respect to periods after 1979. If Molycorp cannot process molybdenum disulfide
concentrates, Molycorp's molybdenum operation (including the Questa mine)
would be adversely affected.
In 1972, 1973 and 1974 Molycorp made capital expenditures of approxi-
mately $39,000, $315,000 and $174,000, respectively, which were directly
related to pollution control. By reason of changing legislation and enforcement
policies, Molycorp believes that it is not possible to accurately predict future
expenditures for pollution control. However, based upon present conditions,
Molycorp believes that necessary capital expenditures directly related to pollution
control at its mines and plants may aggregate as much as $5 million over the next
several years, assuming that roasting operations at the Washington, Pennsylvania
plant are discontinued. Molycorp estimates that it may be required to spend as
much as an additional $10 million if new molybdenum processing facilities are
constructed. Since the mining and chemical industries are particularly affected by
environmental problems, expenditures in excess of those currently anticipated
may be required. It is likely that such pollution control expenditures will increase
production costs, which may not be matched by increased sales prices of prod-
ucts.
A-107
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FINANCIAL
Molycorp's capitalization at year end 1974 consisted of $13.7 million in
long-term debt and $87 million in stockholders' equity. Table A-18.2 presents a
five-year summary of changes in financial position.
Molycorp is affiliated with International Mining Corporation, which owns
18% of Molycorp common stock, plus warrants and preferred stock. Internationa]
Mining and Molycorp also have some common officers and/or directors; as of
March 3, 1975, International Mining was deemed the "parent" of Molycorp
within the meaning of the Securities Act of 1933 and SEC regulations thereunder.
Under a 1974 agreement, on January 1, 1975, Mitsubishi International
Corporation began to serve as exclusive sales agent for Molycorp in Japan. As part
of the agreement it purchased from Molycorp a 6.59?, 15-year subordinated note
for $5 million due 1989, and convertible into Molycorp common stock at $40 a
share.
A-108
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TABLE A-18.2
MOLYCORP, INC. AND SLBSIDIARIES
CONSOLIDATED STATEMENT OF CHANCES IN FINANCIAL POSITION
For the five years ended December 31, 1974
\ cars ended December 31,
FUNDS PROVIDCD BY
Income after current tax provision
Charges (credits) not requiring expenditure of
funds:
Amortization, depletion and depreciation
Amortuation of bond discount and expense .
Deferred bond discount and expense allo-
cable to purchased debentures
Equity in earnings of affiliate, net of cash
distribution received
Adjustments of prior year tax provisions
charged to deferred taxes
Total from operations
Notes payable to banks
Notes payable to others
Increases in accounts payable and accrued ex-
pense. ... .
Sales of common stock, net of expenses
Total from other sources
TOTAL FUNDS PROVIDED
FUNDS usro FOR'
Additions to property, plant and equipment.
Repayment of notes to banks
Repayment of other debt
Purchase of debentures
Increase in other deferred items
Increases in other current assets and cost of
investments
Preferred dividends paid . . ...
Purchase of treasury shares
TOT AI i UNDS tisi D .
Nit INKRIASI — (DKRIASI)
IN CASH. .
* Restated for comparative purposes
1970
$ 4,494,751
5,272,061
307,800
( 1,637,128)
(77.312)
S 8,360,172
$10.150.000
200,845
726,730
$11.077.575
$19,437,747
$11, 449,667
5,900.000
389,405
305,189
1,794,769
502.586
$20,341,616
$ (903,869)
1971
$ 1,080.942
5,894.427
307,801
541.108
7S.7S5
$ 7.90 7.0 !3
$ 5,734.%o
(386 <•>«)
2.6?4
$ 5,351.0^6
$I3,25S.O,S9
$ 8,664 68 7
500 000
202 70|
1.126.529
2,746 940
502 <7X
$13,743,4.14
$ (485.355)
1972
$ 5,053,683'
6,055.329
198,354
689,729
( 1,617,645)
(24,979)'
$10,354,471
$ 317,129
2,077,376
9.506.317
$1 1.900.822
$22.255,293
$ 7.029.911
6.000.000
61 044
6.013.300
(402,809)
2,262.321
$20,9(,3.767
$ 1,291,526
1973
$12,091,331
6,451,548
112,807
281,390
(4,482,319)
75,809
$14,530,566
$ 1,847,975
750
$ 1.848,725
$16,379,291
$ 6,215.200
2,750,000
93,268
3,264,100
273.031
1,494,343
1,005,046
$15.094,988
i, 1.284.303
1974
$18,410,128
7,434.491
181,559
(5,543,720)
42,364
$20,524,822
$ 5,000,000
4,112.023
(33.865)
$ 9.078.158
$29,602,980
$12,189,796
12,000,000
79,448
1,329,900
241,787
3,329,562
733 646
502.518
634.751
$31.041,408
$( 1.438,428)
Source: Molycorp Prospectus May 1975
A-109
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19. MOORE MCCORMACK RESOURCES, INC. (PICKANDS MATHER & CO.)
INTRODUCTION
Moore McCormack Resources, Inc. (formerly Moore & McCormack Co.,
Inc.) is a water transportation and natural resource company engaged in cargo
liner services, the management of iron-ore and coal-mining properties and related
transportation services, and the sale of mine-related products.
Regularly scheduled cargo liner services are provided by Moore-McCormack
Lines, a federally-subsidized ocean carrier, which operates two steamship lines
between the Atlantic Coast and foreign ports.
The Company significantly increased the scope of its operations in April
1973, with the purchase of substantially all of the assets of Pickands Mather &
Co. (PM) from Diamond Shamrock Corporation (for $6.1 million cash, a $30
million short-term note, and $30 million in the preferred stock of a subsidiary).
PM is a leading supplier of iron-ore pellets and services to the steel industry. PM
also owns and operates dry bulk cargo ships that carry iron-ore, pellets, coal and
other minerals between the Great Lakes ports.
Moore McCormack groups its sales and revenues by lines of business as
shown in Table A-19.1.
Financial position for the same three years is shown in Table A-19.2.
A description of each line of business is presented below:
1. Cargo Liner Services
Moore-McCormack Lines, Incorporated (Lines), a wholly owned subsidiary,
operates fourteen general cargo vessels in foreign trade between East Coast United
States ports and the East Coast of South America (American Republic Line) and
to the South and East Coasts of Africa (Robin Line).
In July and September of 1974, two C-3 class vessels came offhire from
charters to the Military Sealift Command and entered the usual trading routes
serviced by Lines.
In its overall operation, Lines employs 340 domestic, 281 foreign, and 588
seagoing employees.
A-lll
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TABLE A-19.1
MOORE MCCORMACK RESOURCES: SALES AND REVENUE
Cargo Liner Services
1974
1973
(1)
Revenue Operating Revenue Operating
Profit Profit
108.0
Millions of Dollars -
23.0 69.7 6.1
1972
Revenue
56.9
Operat
Profit
4.4
Bulk Transportation
29.4
2.9
23.1
4.3
Management of Properties
5.4
2.4
4.1
1.9
Sales of Products
Coal
Other
91.2
48.2
f
6.8
18.0
26.7
3.1
Totals
282.1
35.2
141.5
15.5
56.9
4.4
NOTES:
(1) Includes results of Pickands Mather & Co., acquired April 3, 1973.
(2) Operating profit is before federal income tax, extraordinary items,
and net interest.
Source: Moore McCormack Resources, Inc. Form 10-K report for year ending
December 31, 1974.
A-112
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TABLE A-19.2
MOORE MCCORMACK FINANCIAL POSITION
1974 1973
Net Working Capital
Ratio of Current Assets to
Current Liabilities
Total Assets
Funds provided from operations
(a)
Ratio of average long-term
debt to average capitalization
(a)
Average long-term debt
Average stockholders' equity
Average capitalization
Return on average stockholders'
equity
1972
40.8
1.6
278.2
32.4
37%
63.9
107.3
171.2
— — -_
-------
In August 1974, Lines entered into a new Operating Differential Subsidy
Agreement with the Maritime Administration. The new agreement became effec-
tive, for the purposes of payment of subsidy, on January 1, 1975, and will run for
a period of 20 years. Lines has an obligation under the agreement to replace its
existing fleet with deliveries beginning in 1985. The agreement terminates on
December 31, 1994, and is subject to earlier termination by the United States in
the event of various defaults thereunder.
Lines' existing labor agreements with the National Maritime Union, the
Masters, Mates and Pilots Union, the Marine Engineers Beneficial Association,
American Radio Association and Staff Officers' Association, were scheduled to
expire in June 1975, and Lines was negotiating for their renewal as this was
written.
2. Bulk Transportation
Pickands Mather & Co. (PM), a wholly owned subsidiary, operates the Great
Lakes fleet of The Interlake Steamship Company, a wholly owned subsidiary of
Lines, consisting of eleven bulk freighters with an aggregate capacity of 223,000
gross tons, used primarily to transport iron ore at competitive rates for four iron
and steel companies pursuant to contracts which expire between 1976 and 1987.
PM also has an ownership interest in, or manages on a fee basis, the
operations of several dock facilities for the transshipment of iron ore and coal
from bulk vessels.
PM employs approximately 500 employees in its related bulk transportation
activities.
Moore-McCormack Bulk Transport, Inc. (Bulk), a wholly owned subsidiary
of Lines, executed a Contract of Purchase with National Steel and Shipbuilding
Company in July of 1973, for the purchase of three 39,700 ton Coronado class
tankers at a cost of $49 million including capitalized interest and net of Construc-
tion Differential Subsidy. The vessels are scheduled for delivery in 1975, 1976,
and 1977. Bulk has obtained preliminary commitments from the Maritime Ad-
ministration for the issuance of U.S. Government guaranteed Title XI Merchant
Marine Bonds for 75% of the actual cost of the three tankers, and has obtained a
commitment for the sale and leaseback of each of the tankers effective at their
respective delivery dates. Bulk has executed Charter Agreements with Shell
International Petroleum Co., Ltd. to charter each of the vessels for a period of
seven years. Bulk has entered into an Operating Differential Subsidy Agreement
with the Maritime Administration for the operation of each of these vessels.
A-114
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3. Management of Properties
PM is the manager of five operating iron ore properties located in Minnesota,
Ontario, Newfoundland, Quebec, and Tasmania and has an interest of approxi-
mately 5%, 25% and 24%, respectively, in the mines at the latter three locations.
As manager, PM supervises the mining of the iron ore and the construction and
operation of concentration and pelletizing plants to produce primarily high-grade
iron ore pellets. It also plans, manages the construction of, and in some instances,
operates the town sites located near the mines and the railroads, docks, and
loading facilities required for the transportation of mine products. These proper-
ties are operated by PM pursuant to agreements with the owners who are
primarily major steel companies, and as compensation PM is reimbursed for
substantially all expenses and receives a commission based on the number of tons
shipped. The agreements generally continue for the economic life of the property,
but may be terminated by either party at the end of any year upon one year's
notice. However, in the case of some of the properties, the agreements extend to
the end of fixed periods ranging between 1976 and 1988. During 1974, produc-
tion from these properties amounted to 21,300,000 tons (which amount is
substantially the annual capacity), and of this amount, approximately 1,060,000
tons were for PM's account. The three properties in which PM has an interest are
held under leases expiring between 1996 and 2055, and at the current rate of
production, the economic life for one is one to two years, and the lives of the
other two properties are 11 and 65 years. PM also receives payments measured by
tonnages shipped from certain properties previously transferred to others.
PM, with Bethlehem and another steel company, is proceeding with the
construction of a new pelletizing complex in Hibbing, Minnesota, the initial
production of which will be approximately 5,400,000 tons of pellets a year. PM
will manage the property and will have a 15% interest therein. Production is
expected to be on-stream in 1976. The management arrangement, economic life
of the property and the terms of the leases fall within the ranges set forth above.
Plans have recently been announced to enlarge the plant's productive capacity
50%, increasing its projected output to 8,100,000 tons annually beginning in
1978. The extent of PM's participation in the expansion tonnage is as yet
undetermined.
PM, with a syndicate of European and Japanese companies and an Ivorian
Government company, is currently investigating the feasibility of an iron ore
development in the Ivory Coast, Africa, where a large scale low grade ore deposit
is located at Mount Klahoyo near the City of Man. Preliminary test results
indicate that ore at the initial mine site could be beneficiated to produce an
estimated 350 million metric tons of high grade magnetic concentrate. Annual
production could be in the range of 9-12 million metric tons of pellets.
A-115
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PM has a one-half interest in a property in Quebec, Canada, estimated to be
capable of yielding approximately 200,000,000 tons of iron ore concentrates for
pelletizing or for use in a direct reduction process.
PM manages three coal mines, one in Kentucky and two in West Virginia. PM
has no ownership interest in two of the mines, but holds a 12.5% interest in the
other West Virginia mine which has a production capacity of 1,500,000 tons
annually and its reserves are sufficient for 27 years at this production rate.
Various steel companies own the first two mines and the balance of the ownership
in the third mine. PM has organized and is developing two new underground coal
mines in Pike County, Kentucky. The start-up of production is scheduled for late
1976 and 1977, and the financial arrangements for these operations are in the
final stages of negotiation. A third mine is in the organizational stage. PM will
have a 20% interest in each of these mines, with the balance being held by major
utility, steel and manufacturing companies. The projected total annual capacity of
these three mines is planned at 3,250,000 net tons. Based on total estimated
reserves of 80,000,000 tons, the average life of these three mines will be approxi-
mately 25 years.
PM employs approximately 330 persons in its management of properties and
supervises approximately 7,000 employees (including 5,300 hourly and 1,700
salaried) who are employed at the various managed operations.
Table A-19.3 summarizes PM's property management business.
4. Sales of Products
PM manufactures and sells foundry coke and related by-products produced
at its Solvay Coke Co. Division plant, Milwaukee, Wisconsin (annually approxi-
mately 248,000 net tons of coke from its 100 coke ovens). PM also sells
commodities both as broker for its own account and as sales agent. These include:
the resale of iron ore from its ownership interests and/or iron ore purchased from
others; the resale of coal from its ownership interest and coal sold as sales agent;
coal purchased and resold as broker; and the sale, as sales agent, of pig iron,
ferroalloys, and coke. PM holds the exclusive United States and Canadian rights to
issue licenses for the INMOLD and FLOTRET processes (both registered trade-
marks of Materials and Methods, Ltd.) relating to the production of nodular iron
castings. Several licensing arrangements have been consummated and others are
pending.
PM has limestone quarrying and processing operations located in adjoining
areas of eastern Ohio and western Pennsylvania, near Youngstown, Ohio, on
properties owned or held under leases which expire between 1977 and 1997.
During 1974, the operations produced 1,870,000 net tons of limestone and
128,000 net tons of by-product.
A-116
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TABLE A-19.3
PICKANDS MATHER MANAGED PROPERTIES
Managed Iron Ore Properties
Owners
line Mining Company,
Minnesota
Helhlehem Steel Coi poration, I.;, kes-Youngslown Corporation;
Intel-lake, Inc ; The Steel Company of Canada, Limited
Wabush Mines,
Newfoundland and
Quebec, Canada
'I he Steel Company oi Canada. Limited; Dominion Foundries and
Steel. Limited; l.ykrs-Youngslown Corporation. Inland Steel Company;
Inleil.ike, Inc ; Wheeling-Pittsburgh Steel Corp,oration; Fmsider (Italy);
Pickands Mather & Co
S,i\ age Ku or Mines,
Tasmania, Australia
Mitsubishi Corporation: Pickands Mathor & Co International;
Sumitomo Shoji Kaisha, Lid; CYrro Corporation;
Chemic.al International Fiance. I Id ; seven Australian firms
Annual
Production
PM Capacity
ownership in Tons11'
Interest {000 omitted)
— 10,300
fi.OOO
2,500
The Griffith Mine,
Ontario, Canada
The Hilton Mines,
Quebec, Canada
The Steel Company of Canada, Limited
The Steel Company of Canada Limited, Jones & I.aughlm
Sleel Corpoiation; Pickands Mather & Co
— 1,500
25% 900
I Iibbing Taconite
Company, Minnesota*2'
Hethlehem Steel Corporation: Pickands Mather & Co.;
The Sleel Companv of Canada, Limited
15% (3)
5,400(3)
(!j Dry long tons (2,240 pounds). [2\ Under construction (1! Oiignuil «>nslruc lion
Managed Coal Properties
Owners
lieckley Mine,
West Virginia
Chisholm Mine,
Kentucky
Jones & Laugh I in Sleel Corpora I ion: 1 loogovens IJmuiden li V.,
The Steel Compaiu ol Canada. Limited, Pickands Mather & Co.
The Steel Company of Canada, Limited
Annual
Production
PM Capacity
ownership in Net Tons
Interest (000 omitted)
1,500
1,000
Madison Mine,
West Virginia
'I he Steel Company ol Canada, Limited
750
I esiie Mine,
Kentucky'2'
Carolina Pouer and Light Company;
Pn kands Mather ik Co
Si otts Branch Mine,
Kentucky' -'
Foid Motoi Comp,iu\ , Wheeling Pittsburgh Steel Corporation;
Inlerlake, 1m: . Pi' kands Mather S. Co.
1,000
1,250
1 Under < onstruction.
Source: Pickands Mather Annual Report 1974.
A-117
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PM employs approximately 530 persons in these operations, including 235 in
its coke activitites and 240 in the limestone activities.
5. Moore-McCormack Energy, Inc.
(Energy), a wholly owned subsidiary of Moore-McCormack, is a development
company which promotes projects utilizing foreign and domestic crude oil sources
which involve the utilization of water transportation and related logistical skills. It
is anticipated that if such development projects come to fruition, Energy will
retain the right to some equity participation and will obtain long-term contracts
for water transportation which will be supplied by other related subsidiaries. In
addition, Energy has purchased and resold liquid petroleum gases and natural gas
liquids.
FINANCIAL STRATEGY AND COMMENTS
Moore-McCormack has given considerable attention to its investment and
financing philosophy in its 1974 annual report, embracing many of the questions
which EPA has been concerned about in specific cases. It may therefore be useful
to present here the approach Moore-McCormack appears to be taking toward
investment opportunities, expected returns and risks, and the mix of debt and
equity financing in respect to its announced S200 million "Resources Expansion
Program."
In view of the strong long-term demand foreseen for such resources as coal
and iron ore and for various types of vessel services, the Company has reevaluated
and increased its expected after-tax return on the aggregate S200 million in new
investment from 10% to approximately 13%. Allowing for an overall six percent
cost of new debt capital, Moore-McCormack Resources has in turn raised ex-
pected after-tax net return on total capital employed in the projects from 4% to
7%, with the return considerably higher on stockholders' equity alone.
The nature and extent of the company's participation in these new projects
is indicated in Table A-19.4. At present, adequate construction financing required
in connection with these projects has been arranged and commitments for $171
million of long-term financing have been made, including SI36 million in Title XI
vessel financing, under the Merchant Marine Act, which is backed by government
guarantees. The Company's success in financing such substantial sums in a
relatively stringent credit market "confirms management's confidence in the
soundness of the expansion program."
The effect of the large proportion of the financing that will be committed in
debt form will be to increase, over time, Moore-McCormack Resources' debt-to-
capitalization ratio which averaged 37% during 1974. Although "the company has
A-118
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TABLE A-19.4
FINANCIAL STRUCTURE OF MOORE MCCORMACK
RESOURCES EXPANSION PROGRAM
Financial Structure of Moore McCormack Resources Expansion Program
) Thousands of Dollars)
Project
Moore McCormack
Participation Equity
Moore-McCormack Lines
Sliclbocii Consersion
o( Two Constellation
Class Vessels
15,000
4.000
Debt
Hibbing Taconite
Mooiu-McCormack
Hulk Transport
Thiee Coion.ulo Class
J-.i 700 13 UT Tankers
Scott's Branch Coal
36,000 10,000
15%
49,000 0
10,000 0
20°o
2b.()00
49,000
leveraged
lease
10,000
11,000
(In Thousands of Dollars)
Project
The Inteilake
Steamship
Company
Two 59,000 Ton
Bulk Carriers
Leslie Coal Mining
The Interlake
Steamship
Company
Conversion of the
H C Jarkson
Moore McCormack
Participation Equity Debt
88,000 12,000 70,000
9,000 0 9,000
20° u
6,000 1,000 5,000
not yet defined an ideal target mix of debt and equity in its capital structure.
management feels that continued involvement in projects of the quality under
current development, requiring heavy capital investment, warrants a prospective
debt capitalization of 509^ or more."
Moore-McCormack Resources believes that a high degree of security obtains
in its new projects, illustrated by some of their major characteristics: Most of the
projects are based on medium- to long-term contractual obligations of others to
Moore-McCormack. Such arrangements help to input stable, predictable revenue
flows.
The size and relative financial strength of companies with which Moore-
McCormack has such contracts also gives additional assurance of stability which,
in turn, will assist in financing the projects. Examples are tanker charters to a
member of the Royal Dutch/Shell Group, the presence of major U.S., Canadian,
and international iron and steel companies as project partners in iron ore develop-
ment and property interests, and the association of large steel, iron, automotive.
and utility companies as partners in coal projects.
A-119
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"Even though the activities of Pickands Mather & Co. are clearly tied to
historically cyclical industries such as steel, the downside risk is not great in a
recessionary period. One reason is that most of the mining properties which are
managed by PM are designed to be run at capacity. Further, taconite pellets enjoy
greater relative demand than natural iron ore, even when a general industry
decline occurs in iron ore requirements."
The company stated in its Form 10-K report to the SEC early in 1975 that
"Compliance with Federal, state and local provisions regulating the discharge of
materials into the environment and relating to the protection of the environment,
has not had a material effect upon (its) capital expenditures, earnings or competi-
tive position."
A-120
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20. NATIONAL ZINC COMPANY
The National Zinc Company operates a horizontal retort smelter in Bartles-
ville, Oklahoma, which has a capacity of about 55,000 short tons per year of slab
zinc and zinc dust. National Zinc accounted for about 7% of domestic primary
zinc production in 1972. The Company has an affiliate — Cherry Vale Zinc
Company - which is a small feed preparation plant near National Zinc. The
horizontal retort smelter is operating under a variance from the Oklahoma
participate emission standards which are reportedly similar to the federal stan-
dards.
National Zinc is a custom smelter for domestic mines and sells approxi-
mately 45% of its output to hot dip galvanizers and the balance to steel
companies directly. Several years ago, the Company spent $2 million for an acid
plant which will enable it to meet federal ambient sulfur dioxide emission
standards. National Zinc is the only horizontal retort smelter in the U.S. with acid
production facilities. Acid sales are now made to large industrial customers such
as chemical companies and soap and detergent manufacturers. National Zinc was
contemplating an expenditure of about 5300,000 to recover sulfur, lead, and
cadmium values presently escaping from the sintering plant. With respect to
particulate control, National Zinc estimated in 1972 that a bag filter collection
system would cost in excess of $5 million and require on the order of SO.8-1
million in annual operating costs.
National Zinc was owned until late 1972 by a New York-based holding
company, Metminco, Inc. We understand that the Company was sold in its
entirety to a group of private investors from Bartlesville.
In early 1974, Engelhard Minerals & Chemicals Corporation announced plans
to acquire, through its Philipp Brothers division, the assets of National Zinc
Company, and to construct a 56,000-ton smelter on the Company's plant site.
The total cost of the acquisition and construction program combined is expected
to be $30 million to $35 million. (Philipp Brothers is a major merchant of more
than one hundred minerals, metals, ores, and ferroalloys, and counts lead and zinc
among its more profitable items.)
Engelhard expects that permission will be granted by Oklahoma authorities
to continue the plant's operation until the new facilities are completed in about
two years. The new plant will include some of the existing facilities. The present
smelter operation employs about 450 workers.
A-121
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According to Engelhard, the National Zinc facility's present infrastructure
would be retained, and the horizontal retort smelter would be replaced with a
"nonpollution" electrolytic zinc smelter.
Early last year, National Zinc stated that it would make capital investments
to convert its operation during the 1973-1975 period to an electrolytic plant
having approximately a 50,000-ton capacity.
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21. NEWMONT MINING
Newmont is a diversified holding company, whose subsidiaries explore,
develop, finance, manage, and operate mineral properties. Newmont also has
interests in petroleum and cement companies and maintains a securities portfolio.
Total revenues in 1972 were S302 million, and net income S44.8 million.
Magma Copper Company is the single largest source of Newmont's income:
SI66 mDlion in sales and S26 million in net income for 1972 (compared to SI 13
million and S24 million, respectively, in 1971). Magma, wholly owned is the
fourth largest U.S. copper producer. Its principal copper properties, smelter, and
refinery are located at San Manuel, Arizona. Another mine-mill complex is at
Superior. Arizona.
In Canada, the Granduc copper mine in Northern British Columbia is jointly
leased with American Smelting & Refining Company (see ASARCO). The wholly
owned Similkameen project near Princeton. B.C., began producing copper con-
centrates in mid-1972. Design capacity is 15,000 tons of ore daily. Newmont has
sold its share of concentrates production at both Canadian properties for several
years to Japanese interests.
O'okiep Copper Company, 57.5% owned, operates several South African
copper mines; AMAX has a 17% interest. Other mining subsidiaries include Carlin
Gold Mining Company, wholly owned: Dawn Mining Company, 51% owned: and
Idarado Mining Company, 80.1% owned. Resurrection Mining Company, a wholly
owned subsidiary, has a joint venture with ASARCO which is producing lead and
zinc concentrates from a mine near Leadville, Colorado; production began early in
1971.
Newmont is engaged in petroleum and natural gas exploration and produc-
tion in the U.S. and Canada. It also owns, jointly with Cerro Corporation.
Atlantic Cement Company.
Investments in other companies are substantial and, as of December 31.
1972. had a market value of more than S350 million. Investments include 18.8%
ownership of Canadian Export Gas & Oil Ltd.: 4.2% of Continental Oil Co.:
32.8% of Foote Mineral Co.;* 11.9% of Highveld Steel & Vanadium Corp., Ltd:
28.6% of Palabora Mining Co., Ltd.; 8.1% of St. Joe Minerals Corp.; 39.7% of
Sherritt Gordon Mines Ltd.; 10.3% of Southern Peru Copper Corp.: 34.6% of
Tsumeb Corporation, Ltd.: 1.6% of Transcontinental Gas Pipe Line Corporation:
13.39c of Cassiar Asbestos Corp.. Ltd.: and 3.4% of International Minerals and
Chemical Corporation.
*Proposed merger into Newmont in 1973.
A-123
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The consolidated financial statements include Newmont and all of the domes-
tic and foreign subsidiaries in which Newmont's ownership is more than 50%. In
1972, Newmont adopted the practice of accounting on an equity basis for
investment in companies owned 20% to 50%. Newmont's equity in their net
income was $13.0 million in 1972. Investments in companies owned less than
20% are recorded at cost. The latter accounted for $5.5 million in dividends paid to
Newmont in 1972.
With respect to the impact of pollution control regulations, Newmont stated
in its 1972 report to stockholders that a major unresolved problem remains - the
establishment of regulations to be prescribed for Magma Copper Company (and
other U.S. copper smelters) in achieving either federal or state air quality stan-
dards.
In March, 1973, the Arizona State Hearing Board granted Magma a one-year
renewal of its conditional operating permit, based on a $30 million plan to meet
air pollution standards by installing an acid plant for conversion of the sulfur
dioxide in the converter gas to sulfuric acid which is expected to remove up to
70% of the smelter's SO2 emission. The plan includes a revised collection and
cooling system for the converter gases. The acid plant is now under construction,
and an ambient air monitoring and weather forecasting system has been installed
around San Manuel to aid in control of the smelter to meet Arizona and federal
ambient air quality standards. Arrangements have been made to dispose of up to
500,000 tons of acid annually from the production of Magma's new sulfuric acid
plant through a long-term sales contract with a major company.
In May, 1972, the EPA rejected parts of Arizona's implementation plan for
air pollution control, including regulations covering existing copper smelters. The
EPA then proposed to establish regulations of its own that would have imposed
fixed emission limitations on each individual smelter. These regulations would
have required Magma to be able by mid-1977 to recover 96.4% of all sulfur
contained in the smelter feed in order to meet only the federal primary ambient
air standards. Magma has stated it believes no known technology is available to
attain such a level of emission control except at prohibitive cost; both the copper
industry and the State of Arizona challenged the proposed regulations in court.
The Company's management believes EPA's proposals were inadvertently based
on erroneous data.
With respect to financing, Newmont took steps in 1972 to restructure its
corporate debt. A loan of $50 million from a leading insurance company in New
York was closed in November, 1972, in the form of 12-year notes, with repay-
ment beginning in December, 1978. Simultaneously, the $130 million revolving
credit, placed in 1971 with a group of New York banks, was restructured to
reduce the principal amount to $100 million and to include the right, within five
A-124
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years, to permit conversion to a five-year term loan. In 1972, Magma negotiated
with a major New York bank and the State of Arizona the purchase of a Final
County pollution control revenue bond issue of S30 million. The funds are to be
used for Magma's air pollution control program.
A-125
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22. OGLEBAY NORTON COMPANY
INTRODUCTION
Iron Ore
Oglebay Norton is the managing agent for Eveleth Taconite Company, which
mines taconite iron ore on the Mesabi Range near Eveleth, Minnesota. Eveleth
Taconite Company is 85% owned by Ford Motor Company and 15% by Oglebay
Norton. In addition to the mine site, Eveleth Taconite Company owns and
operates a processing plant near Forbes, Minnesota, with a production capacity of
approximately 2.4 million tons of iron ore pellets per year.
With three major steel producers* the Company formed in 1974 a partner-
ship, Eveleth Expansion Company, to develop and construct a mine and related
facilities which will increase its capacity, at operations managed and partially
owned by the Company, to approximately six million tons of pellets per year.
The Company's participation in the partnership is 20.5% and its share of output
has been sold under long-term contract.
Other Mining and Minerals
The Saginaw Mining Company subsidiary was formed in 1974 to operate the
Saginaw Mine, located near St. Clairsville, Ohio. This is a bituminous coal mine
producing about 500,000 tons per year of steam coal under a long-term contract
to a major electric utility.
The Company owns an undeveloped 7,500 acres of coal reserve known as the
Rock Creek property located in Boone County, West Virginia. At Ceredo, West
Virginia, the Company owns a dock, rail transfer, and river loading facility
capable of loading approximately four million tons of coal per year into barges
for shipments on the Ohio River. This facility is undergoing an expansion
anticipated to be completed by the end of 1975, which will result in increasing its
transfer capacity to eight million tons per year.
The Central Silica Company subsidiary is engaged in the mining of sandstone
for processing into quartz sands used principally in the glass, paint, ceramic, and
foundry industries. It has two operating divisions located at Glass Rock, Ohio,
and Millwood, Ohio.
*Armco, Dominion Foundries, and Steel Company of Canada, Ltd.
A-127
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At Brownsville, Texas, the Company operates a fluorspar briquetting facility
which is designed for annual production of 35,000 tons of metallurgical fluorspar
briquettes for customers in the steel industry.
The Company also acts as an agent for the sale of coal and broker for
taconite pellets, fluorspar, phosphate rock, and other raw materials produced by
others and used in the steel, chemical, glass and ceramic industries.
LAKE TRANSPORTATION
The Columbia Transportation Division operates a fleet of 18 vessels consist-
ing of seven bulk freighters, nine self-unloaders and two crane vessels engaged in
the transportation of iron ore, coal and other dry bulk cargo on the Great Lakes.
In 1974, Oglebay Norton's vessels carried about 17,000,000 tons of commodities.
Of the Company's 1974 revenues from vessel operations, approximately 35%
came from transportation of iron ore for Armco Steel under a long-term contract,
and approximately 6% came from a similar contract with J&L Steel.
The bulk freighter vessels customarily carry iron ore from ore loading ports
on Lake Superior to unloading docks at Lake Erie ports. (Approximately
5,400,000 gross tons of iron ore were carried in 1974.) The self-unloader vessels
are equipped with a cargo hold conveyor system and a self-unloader boom. They
normally carry coal, sand, stone, slag, and other bulk cargoes. The crane vessels
are equipped with revolving cranes to handle pig iron, scrap, and finished steel.
The self-unloaders and crane ships combined carried 11,500,000 tons of cargo.
The Company also operates two docks on the Great Lakes, located at
Saginaw and Bay City, Michigan. Each dock is engaged in and equipped to handle
overseas as well as lake cargo traffic.
MANUFACTURING
Ferro Engineering Division and its Canadian subsidiary design, manufacture
and market a wide variety of hot top types as well as various products used in
steel castings. Ferro Engineering operates three manufacturing plants in the
United States, two located in Cleveland, Ohio, and one in Calumet City, Illinois.
The Canadian subsidiary operates a similar manufacturing plant near Hamilton,
Ontario.
The T & B Foundry Company subsidiary owns and operates a well-estab-
lished gray and ductile iron foundry in Cleveland, Ohio. This facility manu-
factures high-tensile iron castings for a variety of industrial uses, including
machine tools, forgings, heavy electrical equipment, pumps, valves, printing ma-
chinery, and hot tops for the steel industry.
A-128
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The Cleveland Metal Stamping Company subsidiary is engaged in tool and
die making, the production of metal stampings, spot weldings, assemblies, and
wiper strips used in the manufacture of hot tops.
SOURCESOF EARNINGS BY LINES OF BUSINESS
Oglebay Norton had sales and revenues of S87.1 million in 1974, and net
income after taxes of S8.7 million.
The approximate percent of total consolidated sales and revenues (including
sales commissions, royalties and management fees) and total consolidated profit
from operations for the five years ended December 31, 1974, attributable to each
of the Company's lines of business are shown in Table A-22.1.
A five-year financial review is presented in Table A-22.2. The Company
employs about 1550 persons.
NOTES ON OGLEBAY NORTON'S BALANCE SHEET AND INVESTMENTS
The Company has no long-term debt. Investments include S5.4 million at
December 31, 1974 representing the 157r interest in Eveleth Taconite Company.
The investment is stated at cost which is the equity in underlying net assets.
Eveleth has no income as the stockholders reimburse it for all costs incurred in
proportion to their ownership, and the production of the mine is taken by the
stockholders in like proportion.
The Eveleth Expansion Company partnership completed long-term financing
arrangements for the expansion project with a group of insurance companies, to
finance the project solely with proceeds from the issuance of long-term debt
securities aggregating $195 million (556,250,000 issued at December 31, 1974).
Agreements relating to the expansion project provide, among other things, for the
participants, in proportion to their ownership, to furnish any additional funds
necessary to complete the project and purchase pellets produced at prices suffi-
cient to cover all costs of production, which include debt service requirements.
The project is expected to be completed in 1976.
A "Capital Construction Fund" (shown as an asset) consists of marketable
securities and was created in connection with the provisions of the Merchant
Marine Act of 1970. Maximum deposits to the fund are limited to taxable income
from vessel operations and may be deducted from such taxable income in the year
earned. Deposits and fund earnings amounted to SI 1.1 million in 1974 and S9.4
million in 1973. Amounts in the fund may be withdrawn for investment in vessels
without incurring income tax liability. Such withdrawlas amounted to SI5.3
A-129
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TABLE A-22.1
OGLE BAY NORTON SALES AND REVENUE
Sali'N aiul Ri \rnucs Profit fioin Operations
a^ .i PCI cent of a> a Percent of
( nnvilulated Salo C oiwilidated Profit
and Revenues horn Opeiauons (1)
Lake
I ranspui tation
\T4 45'; 58','
45',' 69',;
40'; 64c;
iManutar turm£>
- > i
1T4 ">-<''
23'';-
24';
<\] Certain corporate general and administrative expenses
and dividends, inteicst and miscellaneous income cannot be
allocated to am division in a practicable manner The profit
from operations' percentage shown abo\e excludes these items
Source: Oglebay Norton Annual Report 1974.
A-130
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TABLE A-22.2
OGLEBAY NORTON COMPANY FIVE YEAR FINANCIAL REVIEW
OPERATIONS
Gross operating income
Income before income taxes and extraordinary items
Income before extraordinary item1,
Extraordinary items, less applicable taxes
Net income
Clash dividends paid
Net income invested in the business
Depreciation, amorti/ation and depletion
Expenditures for properties and equipment, including
investment in the Eveleth I aconite Compam
FINANCIAL POSITION
Current ratio
Working capital
Total properties, net
Total assets
Total stockholders' equity
Common stockholders' equity
DATA PER SHARE OF COMMON STOCK (*)
Income before extraordinary items
Extraordmars items, less applicable taxes
Net income
Cash dividends paid
Equity per common share
OTHER STATISTICS
Preferred shares outstanding at year-end
Shares of Common Stock outstanding at \eai- ml
Number of stockholders at \ear-end
1974
1973
1972
1971
1970
$ 87
14
8
8
2
5
4
18
25
58
117
76
66
,062
,332
,323
,686
,659,686
—
,659,686
,917
,741
,194
,239
,658
,593
,765
,284
,837
,745
,941
,847
,883
2.35
,434
,794
,745
,617
,117
8.78
—
8.78
2.60
S72
10
6
6
9
3
3
9
26
44
97
70
61
72.16
188,950
926,218
1
,154
,717
,127
,07?
,077
,499
,577
,918
,724
,036
,964
,411
,518
,071
,870
,164
, 1 64
—
,164
,398
,766
,752
,613
4 30
,995
,580
,257
,908
,408
6.01
—
6.01
2 15
65 99
188,950
925,481
1
,196
$66,314,840
7,893,689
4,728,689
(1,800,000)
2,928,689
2,365,324
563,365
4,004,466
2,513,804
4 24
23,431,073
42,624,278
89,404,397
66,974,392
57,526,892
4.54
(1.94)
2.60
2.00
62 09
188,950
926,481
1,201
$63,
(>,
4,
4,
2
1,
3,
4,
22,
46,
87,
66,
57,
131
919
150
150
387
763
901
436
951
015
566
679
232
,407
,338
,338
—
,338
,074
,264
,352
,201
4.10
,937
,838
,313
,902
,402
3 88
—
3.88
200
$60,
7,
4,
4,
2
i!
3,
7,
23,
45,
83,
66,
56,
61.28
188,950
933,981
1
,246
710,933
116,795
350,766
—
350,766
468,164
882,602
885,355
647,569
5.12
393,777
720,378
491,567
064,388
616,888
3.92
—
3.92
2.00
58.36
188,950
970,101
1,241
(*) Per share figures, except equity per sli.u
outstanding during eacli year and ha\i
Equity per share of Common Stock is I
I Common Stock, are based on the average number of Common Stock shares
n computed after provision for annual preferred dividends and stock options.
I on the actual number of shaies of Common Slock outstanding at year-end
Source: Oglebay Norton Annual Report 1974.
-------
million in 1974 and $7.7 million in 1973. However, the depreciable tax basis of
the vessels is reduced by the amount of such investment.
The Company's return on stockholders' equity has been in an uptrend for
the past five years, and exceeded 12% after taxes for 1974.
A-132
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23. PHELPS DODGE CORPORATION (PD)
Phelps Dodge is the second largest domestic copper producer. Sales and
operating revenues in 1972 were $766 million. Net income after taxes was $82
million. Sales of Phelps Dodge-mined copper in 1972 were 328,000 tons, com-
pared to 289,000 tons in 1971. The Company has approximately 16,000 em-
ployees.
The principal business of Phelps Dodge is the production of copper from
mines located in the United States, the sale of part of such copper as refinery
shapes or as rods, and the fabrication of the remainder of such copper (as well as
copper purchased from others) for sale as wire, cable, and tubular products. PD
also does smelting and refining of copper and rolling of copper rod on toll for
others.
COPPER MINING
Phelps Dodge fills most of its copper requirements from its own open-pit
mines at Morenci, Ajo, and Bisbee, Arizona; Tyrone, New Mexico; and under-
ground mines at Bisbee.
During 1971 and 1972, mine output of copper averaged close to 300,000
short tons. Some 40% was produced at the Morenci mine, 20% from Ajo, 20% at
Bisbee, and 20% at Tyrone. Reserves are large, with the exception of the Bisbee
mine. Additional capacity is expected to be brought in during the early 1970's to
replace the Bisbee operations, raising overall capacity to 330,000 tons a year.
In general, PD is thought to be one of the lowest cost , Dpper producers.
The Company has reported that production costs, per pound of copper mined, are
lowest at Morenci, and are by far the highest at the Bisbee mines-- "osts at Ajo and
Tyrone are somewhat higher than at Morenci and are about the same as the
average costs of all PD operating mines.
The Tyrone mine has been expanded to 100,000 tons annual production
capacity. PD expects to shut down the open-pit mine at Bisbee due to exhaustion
of economical ore reserves in the near future. It appears likely that the Bisbee
underground mines will also shut down at that time, unless the price of copper is
high enough to make their operation economic for a while longer.
A new mine near Morenci, Arizona, to be known as the Metcalf mine, is
expected to be ready for production in late 1974 with an estimated annual rate of
production in excess of 50,000 tons of copper. The cost of developing the Metcalf
will be about $180 million of which about $80 million was expended through
December 31, 1972. Unit production costs at Metcalf are expected to be similar
to those at Ajo and Tyrone.
A-133
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All the ore at PD's mines is classified as sulfide ore, except for some oxide
ores at the Bisbee underground mines. As of early 1973, PD estimated the copper
ore reserves at its properties to be approximately 1,580,000,000 tons of ore,
containing 9.4 million tons (18.8 billion pounds) of recoverable copper. The
Morenci property, the largest of PD's mines, also holds about 60% of PD's
reserves.
COPPER SMELTING
PD's copper smelters are located at Morenci, Ajo, and Douglas, Arizona.
Production of the Morenci mine and most of that from Tyrone is treated at the
Morenci smelter, which has the capacity to treat approximately 900,000 tons
annually of new metal-bearing material (that is, copper-bearing materials such as
concentrates, ore, and scrap). Production of the Ajo mine, and a portion of the
Tyrone production, is treated at the Ajo smelter which has the capacity to treat
approximately 300,000 tons of new metal-bearing material annually. Production
from the Bisbee mines and a portion of that from Tyrone, as well as custom
material and scrap, is treated at the Douglas smelter which has the current
capacity to treat approximately 860,000 tons of new metal-bearing material
annually. The smelters produce anode copper which is then shipped to PD
refineries. When the Metcalf development has been completed, Metcalf concen-
trates will be smelted at Morenci. The latter plant is a custom operation,
processing copper for other producers and treating scrap.
Refinery capacity is located at El Paso (electrolytic and fire-refined) and
Laurel Hill, New York (74,000 tons electrolytic and 20,000 tons fire-refined).
Refined production including custom output totalled 552,000 tons in 1970. Wire
mills are located in New York (4), New Jersey (2), Indiana (2), Kentucky, and
Arkansas. Tube mills are in California and New Jersey. A brass foundry is
operated in Alabama and interests are held in 13 foreign fabricating operations.
PD is building a new smelter in Hidalgo County, New Mexico, in order to
have capacity available to treat concentrates from Tyrone after production begins
at Metcalf. The cost of the new smelter, which is the first in the U.S. to use the
flash process, is estimated at well over $100 million. This sum includes a townsite
and a 36-mile railroad connection.
Substantial capital expenditures, as well as increased operating expenses,
will be required to enable PD to comply with existing Arizona air quality
regulations at its smelters. Construction of air pollution control facilities at the
Ajo smelter, the Company's smallest smelter, is under way at an estimated cost of
$28 million. The proposed programs at Morenci and Douglas are more compli-
cated because the material being treated contains more sulfur per ton of copper
than at Ajo and because the design of those smelters will necessitate the replace-
ment of basic furnace units.
A-134
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The program at Ajo includes new converter flues with waste heat boilers,
improved electrostatic precipitators, an absorption plant — of a size beyond any
ever tried before — to concentrate the SO2, and a large sulfuric acid plant.
During 1971 installation of new electrostatic precipitators, either replacing
or supplementing less efficient existing units at the Morenci and Douglas smelters,
and construction of a new reverberatory furnace with improved emission control
equipment was begun at Morenci. Detailed engineering and cost studies were
completed for additional emission control facilities that may be required at these
two smelters.
POLLUTION CONTROL AND RELATED FINANCING
PD stated the following in its 1972 reports:
With respect to air quality control at PD's smelters, efforts in 1972 were
complicated by uncertainties and conflicts that developed during the year in the
establishment of state and federal regulations. The Arizona regulations were
amended in May 1972. While the amended regulations maintain stringent ambient
air quality standards, they eliminate the 90% sulfur removal requirement and
allow smelter operators some flexibility in selecting means for achieving new
standards. However, the EPA, which has the duty under the Federal Clean Air Act
either to approve a state's regulations or to establish its own regulations applicable
to that state, has not yet found Arizona's amended regulations to be acceptable.
On the contrary, in July 1972, EPA proposed sulfur emissions limitations for
copper smelters that in most cases are even more stringent than the original
Arizona requirement. However, EPA is now reviewing further evidence presented
at hearings held in September, and whether Arizona's regulations will ultimately
be approved remains to be decided, possibly by the courts.
Notwithstanding these uncertainties, PD's air quality program made substantial
progress in 1972. Installation of emissions control facilities at the Ajo smelter is
being completed at an estimated cost of $28 million. At the Morenci and Douglas
smelters, programs are going forward to enable compliance with the Arizona
regulations, at an estimated cost of $85 million at Morenci and $15 million at
Douglas. Thus, the total cost of the program is now estimated at $128 million.
Of this amount, $41.2 million had been spent by the end of 1972. PD has been
issued permits under the Arizona Air Quality Law to operate its smelters at Ajo,
Morenci, and Douglas. These permits are conditioned upon satisfactory perfor-
mance under a separate plan for each smelter to comply with the state's air
quality standards, as amended in May 1972. If the more stringent requirements
proposed by the EPA last July should ultimately prevail, substantial additional
expenditures would be needed at Morenci, and the Douglas smelter would be
forced to shut down because large additional expenditures there cannot be
justified.
A-135
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PD had $181 million in long-term debt outstanding December 31, 1972,
compared to $166 million at December 31, 1971. Reports to the Securities and
Exchange Commission showed that, as of September 30, 1973, long-term debt
had increased to $288 million primarily as a result of the issuance of nearly $100
million in pollution control obligations, as follows:
Pollution Control Obligations Issued 1973:
Amount
($MM)
4-3/8% Bond due 1980 26.6
7% Loan due 1987 10.0
Series A Note securing bonds of the following
maturities of Industrial Development Authority
of Greenlee, Arizona:
— 5.6% Pollution Control Revenue Bonds
Series A due 1983 1.0
— 6% Pollution Control Revenue Bonds
Series A due 1993 9.0
- 6-1/4% Pollution Control Revenue Bonds
Series A due 2003 50.0
Total 96.6
INVESTMENTS AND HOLDINGS IN OTHER COMPANIES
PD's investments and stock holdings in other corporations as of December
31, 1971, included the following:
Percent of Voting Power
American Metal Climax 3%
Southern Peru Copper Corporation 1 6
Allied Nuclear Corporation (Wyoming) 34
Consolidated Aluminum Corporation (N.Y.) 40
Metminco Incorporated (Delaware) 43
PD Enfield Corporation (Delaware) 71
PD Svenska Metallverken International
Corporation (Delaware) 67
Western Nuclear, Inc., was acquired by merger in 1971 and operates as a
wholly owned subsidiary.
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24. REYNOLDS METALS COMPANY
Reynolds Metals Company is the second largest U.S. producer of primary
aluminum and manufactures aluminum products for a broad variety of industries.
Reynolds' rated annual domestic primary aluminum capacity of 975,000
tons was approximately 20.4% of the reported total rated domestic capacity of
4,771,000 tons as of December 31,1972.
Reynolds distributes its industrial-related products principally through direct
sales from its manufacturing plants to converters, fabricators, and distributors,
and its consumer-related products principally through sales to wholesale and retail
distributors.
Net sales for the five years ended December 31, 1972, are presented in
Table A-24.1.
The net income after taxes for Reynolds was only $0.19 million in 1972,
compared to $5.6 million in 1971 and $46.9 million in 1970. Included in these
was equity in income to subsidiaries and associated companies of $40.4 million in
1972, $37.4 million in 1971, and $50.5 million in 1970™ each larger than
Reynolds' pre-tax income in the respective years, indicating the poor results of
Reynolds' domestic aluminum business.
Looking at the consolidated statements, the overall pre-tax income was $5.1
million deficit in 1972, $5.5 million in 1971, and $69.5 million in 1970. In the
consolidated statements, the equity in income of unconsolidated subsidiaries and
associated companies added only $7 million in 1970, $3.9 million in 1971, and
$5.5 million in 1972; however, the latter was still large compared to 1972 net
results.
PROPERTIES
Reynolds mines bauxite in Jamaica, Arkansas, Haiti, and Guyana. It pro-
duces alumina at Hurricane Creek, Arkansas; Corpus Christi, Texas; and Nain,
Jamaica. Reynolds Jamaica Alumina, Ltd., a wholly owned subsidiary of
Reynolds, formed a partnership, Alumina Partners of Jamaica, with Anaconda
Jamaica, Inc., a wholly owned subsidiary of The Anaconda Company and Kaiser
Jamaica Corporation, a wholly owned subsidiary of Kaiser Aluminum and Chemi-
cal Corporation, under the laws of the State of Delaware, for the processing of
bauxite into alumina at Nain, Jamaica. Primary aluminum is produced at Lister-
hill, Alabama; Longview, Washington; Jones Mills and Arkadelphia, Arkansas;
Troutdale, Oregon; Corpus Christi, Texas; Massena, New York; and Baie Comeau,
Canada. Primary aluminum production for Reynolds in 1972 was 938,501 short
tons.
A-137
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TABLE A-24.1
REYNOLDS METALS COMPANY
NET SALES
Primary Aluminum (1)
Tons (2) Amounts
Aluminum
Fabricated
Products
Other
Sales
Total
Net Sales
(In Millions of Dollars)
1968
1969 (2)
1970
1971
1972
304.6
474. 3
495.2
376.2
357.0
$143.1
232.9
255.2
185.5
164.2
$613.8
683.0
664.6
759.1
863.3
$ 86.9
96.7
115.3
148.6
134.7
$ 843.8
1,012.7
1,035.2
1,093.2
1,162.2
(1) Includes small quantities of secondary aluminum.
(2) Includes Canadian Reynolds Metals Company, Ltd. from 1969.
A-138
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Additionally, Reynolds' proportionate share in primary aluminum capacity
of foreign companies (other than Canadian Reynolds Metals Company Limited) in
which it has varying degrees of interest is 121,700 tons.
LONG-TERM DEBT
Reynolds owns all of its principal plants and machinery except that part of
the land and buildings of certain can plants held under a long-term lease.
Substantially all the land, buildings, and equipment of the Reynolds Metals
Company in the United States are subject to the lien of the mortgage securing its
First Mortgage Bonds.
Reynolds' property additions and retirements are shown in Table A-24.2.
Reynolds has built up a very high debt-to-equity ratio and this, combined with
the extremely high capital intensity of the primary aluminum business, provides
enormous leverage in Reynolds' financial outlook. A very small change in the
operating rate or cost or price of aluminum will be magnified in the resulting
changes in Reynolds' earnings and profitability.
A-139
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TABLE A-24.2
REYNOLDS METALS COMPANY
PROPERTY ADDITIONS AND RETIREMENTS
Year Additions
1968 $127,372
1969 128,600
1970 112,670
1971 79,319
1972 70.079
Total $518.040
Retirements
(In Thousands of Dollars)
$14,330
13,765
13,183
10,736
11,913
$63,927
Net Additions
$113,042
114,835
99,487
68,583
58,166
$454,113
Source: Reynolds Annual Reports 1968-1972.
A-140
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25. ST. JOE MINERALS CORPORATION
The principal products of St. Joe Minerals Corporation and its subsidiaries
are metallic lead and zinc and lead and zinc oxides and alloys (sold to consumers
or to or through distributors), iron ore pellets (sold to or by Bethlehem Steel
Corporation) and oil and gas (sold to distributors). St. Joe is one of the largest
producers and sellers of lead, zinc, and zinc oxide in the United States. The
Corporation believes that Meramec Mining Company (owned 50% by the Corpora-
tion and 50% by Bethlehem Steel Corporation) is one of the smaller producers
and sellers of iron ore pellets in the United States. CanDel (93.6% owned by the
Corporation) is one of the smaller producers of oil and gas in Canada. Net sales,
excluding operations sold in 1972, were $205 million, and net income for 1972
was $26 million. Although St. Joe has embarked on an acquisition and diversifica-
tion program, lead and zinc still account for about 80% of consolidated sales and
more than 80% of profits.
The principal markets for lead and lead oxide are for use in batteries, cable
coverings, ceramics, construction items, motor fuel additives, and pigments; for
zinc and zinc oxide, for use in ceramics, die casting, galvanizing, manufacture of
brass and bronze, paints, Pharmaceuticals, photocopying, and rubber com-
pounding; and for iron ore pellets, for use in the manufacture of steel.
The EPA has published a recommended schedule under which the permis-
sible lead content in gasoline would be progressively reduced between 1974 and
1977, and certain state and local agencies have prohibited or limited the use of
lead fuel additives. Widespread prohibitions or limitations on the use of tetraethyl
lead as a fuel additive could adversely affect the market for lead. St. Joe's sales of
refined lead to tetraethyl lead manufacturers in 1972 amounted to approximately
8.2% of its total dollar sales for the year, as compared with approximately 5.5% in
1971.
Raw materials for St. Joe's lead, zinc, and zinc oxide are lead and zinc ore
obtained from the Corporation's own mines, and zinc concentrates purchased
from others. Meramec Mining Company produces its iron ore pellets using iron
ore from its mine. All raw materials are readily available at present.
The Corporation and its domestic subsidiaries employed 3,963 persons as of
December 31, 1972.
The approximate percentage of total sales contributed by each class of
similar products was as follows:
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For the Year Ended December 31, 1972
Product 1972 1971
Lead and Lead Oxides 31% 30%
Zinc and Zinc Oxides 49% 50%
Iron Ore Pellets 6% 8%
Oil and Gas 3% Q%
Others 11% 12%
Total 100% 100%
Properties
Zinc Mining and Smelting. The Corporation owns and operates underground
zinc mines in the Balmat-Edwards mining district in St. Lawrence County in
northern New York State. In addition, the Corporation's mines in Missouri,
described below under "Lead Mining and Smelting," yield zinc as well as lead. In
1972, 84% of the recoverable zinc from the Corporation mines came from the
Balmat-Edwards district and 167r came from Missouri. The mill at Ed wards has a
capacity of 600 tons of ore per day. A new mill, opened in 1971 at the site of the
Corporation's new Number 4 shaft at Balmat, processes ore from the Balmat
shafts and has a capacity in excess of 4.300 tons of ore per day. The Balmat-
Edwards Division is installing mechanical mining operations at its older mines. As
a result of the new shaft and mill, the Corporation expects to increase the
recoverable zinc content from Balmat-Edwards from 63,500 tons in 1972 to
approximately 100,000 tons in 1973.
Substantially all of the zinc concentrates produced at the Balmat-Edwards
and Missouri mines are used by the Corporation's Zinc Smelting Division, which
runs a smelter near Monaca, Pennsylvania, approximately 30 miles northwest of
Pittsburgh. Production from the Balmat-Edwards and Missouri mines accounted
for approximately 447r of the zinc concentrates used by the Corporation's Zinc
Smelting Division in 1972. The Corporation anticipates that the increase in zinc
production from the new shaft and mill at Balmat-Edwards will increase the
percentage of Corporation-produced zinc concentrates used by the Zinc Smelting
Division to approximately 70%, thereby increasing the profitability of the Corpo-
ration's zinc business.
The Zinc Smelting Division presently has an aggregate monthly productive
capacity of 17,500 tons of zinc metal, 3,000 tons of American Process zinc oxide,
4,500 tons of refined zinc and 1.800 tons of French Process zinc oxide. The Zinc
Smelting Division also has facilities for the small-scale commercial production of
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lead alloy strip as well as a pilot galvanizing facility to investigate hot-dip
galvanizing problems and applications.
Out of the Corporation's total capital expenditures of $31 million budgeted
for 1972, approximately $5 million was expended to enable the Zinc Smelting
Division to improve environmental aspects of its operations. It is estimated that
an additional $8.5 million will be spent for this purpose in 1973, and that a total
of approximately $22.5 million will be spent for this purpose during the years
1972-1977. The Corporation expects to finance much of such expenditures from
the proceeds of the 5.60% Pollution Control Revenue Bonds, due December 1,
1997, issued by the Beaver County Industrial Development Authority in Decem-
ber 1972 in the aggregate amount of $22.5 million and backed by the Corpora-
tion's credit.
Listed below are the quantities of zinc ore mined at the Balmat-Edwards
Division and the quantities of slab zinc and zinc oxide produced at the Zinc
Smelting Division for each of the past five years:
Slab Zinc Zinc Oxide
Year Ore Mined Production Production
1968 797,469 206,259 33,851
1969 751,750 221,739 35,160
1970 753,364 192,847 34,802
1971 789,765 213,275 37,647
1972 869,229 229,709 52,730
Sulfuric acid, cadmium, and mercury are produced as by-products at the
Division's smelter. In 1972, 262,944 tons of sulfuric acid (100% base; sold to a
single customer under a contract terminable by either party upon twelve months'
notice), 677 tons of cadmium and 76 flasks of mercury (76 pounds per flask)
were produced. Ore mined at the Balmat-Edwards Division also contains small
amounts of lead, and the lead concentrates produced at the Division are sent to
the Corporation's smelter at Herculaneum, Missouri.
Lead Mining and Smelting: The Corporation's Southeast Missouri Mining and
Milling Division operates underground lead mines in southeastern Missouri.
Although lead is the most important product, the Division's mines also produce
small amounts of zinc and copper concentrates. Listed below is the mineral
production from the Division for each of the past five years:
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Lead Zinc Copper
Year Concentrates Concentrates Concentrates
1968 249,536 21,661 18,849
1969 349,209 33,398 22,725
1970 313,189 31,649 19,903
1971 301,655 25,315 16,684
1972 310.632 23,247 13,623
In December 1972, the surface plant facilities of the Southeast Missouri
Mining and Milling Division were comprised of three mills having an aggregate
daily capacity of 15,000 tons. On October 1, 1972, the Federal mill, with a daily
capacity of 12,000 tons, was permanently shut down because of the closure of
the Federal mines. It is expected that in May 1973 the Brushy Creek mill, with a
daily capacity of 5,000 tons, will start operation.
Approximately one-third of the Division's current ore production comes
from land belonging to the United States Forest Service and leased to the
Corporation under 20-year leases, renewable for successive 20-year periods. Under
the terms of these leases and certain development contracts relating thereto
between the Corporation and the Federal Government, the Corporation pays to
the Bureau of Land Management a royalty of between 47r and 57r of the gross
value of the mineral products produced at the processing mill.
In addition to the Missouri mines now in operation in the New Lead Belt
mining district, the Corporation has continued development of a new mine at
Brushy Creek, Missouri, within the New Lead Belt, on lands leased from the
United States Forest Service. The Corporation has completed a mine shaft and has
substantially completed a mill and other surface facilities with a planned capacity
of 50,000 tons of lead per year, at a total estimated cost of S19 million.
Production from Brushy Creek, began early in 1973, and replaced production
from the Old Lead Belt, which ceased during September 1972. St. Joe anticipates
that production costs at Brushy Creek will approximate those at St. Joe's present
operations in the New Lead Belt and will be substantially lower than those in the
Old Lead Belt. As a consequence of the shutdown of the Old Lead Belt and of the
continuing development at the Brushy Creek property, lead production is ex-
pected to be reduced temporarily in 1973. By the end of 1973. Brushy Creek
production is expected to reach full capacity and to produce some 50,000 tons of
lead annually as compared with 38,000 tons produced in the last full year of
operation of the Corporation's mine in the Old Lead Belt.
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Almost all of the lead concentrates produced by the Corporation's Missouri
mines are smelted at the Corporation's Lead Smelting Division at Herculaneum,
Missouri. Production from the Corporation's Missouri lead and New York zinc
mines accounted for all of the lead concentrates used at the Lead Smelting
Division in 1972.
The Herculaneum smelter has an annual capacity of approximately 225,000
tons of pig lead. A sulfuric acid plant utilizing waste gas from the smelter in 1972
produced 55,089 tons of sulfuric acid (100% base; sold to a single customer under
a contract terminable by either party upon 24 months' notice).
In 1972, the Corporation spent approximately $3.4 million at its Hercu-
laneum smelter to improve environmental aspects of its operations. Construction
continued on a $4.5 million facility which will double the smelter's gas cleaning
capacity. Major alterations have been made in the sulfuric acid plant to improve
sulfur dioxide recovery, and in-plant water treatment facilities have been up-
graded. It is anticipated that the Corporation will expend approximately $2.0
million in 1973 to improve environmental aspects of operations of the Hercu-
laneum smelter and that a total of approximately $16 million will be expended
for this purpose through 1979. Compliance with state or federal environmental
regulations may require further substantial expenditures at the Herculaneum and
Monaca smelters. Such expenditures may be financed out of general corporate
funds or through the issuance of pollution control revenue bonds.
Listed below are the quantities of lead ore mined at the Southeast Missouri
Mining and Milling Division, the quantities of lead concentrates produced there-
from, and the production of pig lead at the Lead Smelting Division for each of the
past five years:
Lead Pig Lead
Year Ore Mined Concentrates Production
1968 6,209,814 259,536 170,799
1969 6,249,963 349,209 223,540
1970 5,978,760 313,189 196,628
1971 5,230,358 301,655 222,006
1972 4,875,072 310,632 209,987
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FINANCIAL NOTES
All subsidiaries of the Corporation except its South American subsidiaries
are included in the financial statements relating to periods subsequent to January
1, 1971.
In May, 1972, the Corporation acquired 93.6% of the outstanding stock of
CanDel Oil Ltd., a Canadian oil and gas production company, from Sohio
Petroleum Company for approximately $47 million. Approximately $27.6 million
was paid in cash obtained from short-term bank borrowings, and approximately
SI9.4 million by a note to Sohio paid in December, 1972. The results of CanDel's
operations since the date of acquisition have been included in the consolidated
income statement. For the year 1972, CanDel had sales of approximately $9.3
million ($5.1 million from crude oil and natural gas liquids and $4.2 million from
natural gas) and net income of approximately $3.1 million. St. Joe itself is also
participating in worldwide oil and gas exploration, and expects to spend $4-5
million annually for this purpose, commencing in 1973.
In October, 1972, the Corporation sold the capital stock of Lead Belt Water
Company for SI.4 million in cash, an amount substantially in excess of its book
value.
In October, 1972, the Corporation sold the capital stock of Quemetco, Inc.,
(a manufacturer of lead oxides and secondary lead alloys which St. Joe had
purchased in December, 1970) in which it had invested approximately $20
million to RSR Corporation for $20 million in cash, a $2 million subordinated
note payable in October, 1977, and the assumption by RSR of St. Joe's contin-
gent obligations as guarantor of Quemetco's leases of certain of its plants.
Notwithstanding such assumption, St. Joe remains contingently liable as guaran-
tor of such leases. Rental payments under such leases are approximately $315,000
per year for initial lease term, which ends in 1997.
On March 6, 1973, the Corporation acquired 55.46% of the outstanding
stock of Energy Research Corporation for $ 1 million. The results of the Energy
Research Corporation since the date of acquisition have been included in the
consolidated income statement.
On September 6, 1973, St. Joe and A. T. Massey Coal Company announced
negotiations for St. Joe's acquisition of Massey on the basis of the exchange of
five shares of St. Joe for each share of Massey, subject to adjustment in certain
circumstances. Negotiations and further investigations are currently in process.
A.T. Massey is a privately owned corporation producing coal of both metallurgical
and steam grades in West Virginia and Eastern Kentucky and also selling coal as an
agent in the United States and overseas. Massey had sales, as principal or agent,
totalling approximately $63 million for the six months ended June 30, 1973.
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In 1972, Beaver County Industrial Development Authority sold $22.5 mil-
lion of 5.67c Pollution Control Revenue Bonds to provide funds for the construc-
tion of pollution control facilities at the Corporation's zinc smelter near Monaca,
Pennsylvania. The bonds are due December 1, 1997; however, they are subject to
optional redemption commencing December 31, 1982, and to mandatory redemp-
tion in accordance with sinking fund provisions under the Indenture, commencing
December 1, 1988. The Authority and St. Joe have entered into an Installment
Agreement whereby St. Joe is unconditionally obligated to make payments to the
Trustee sufficient (together with other available funds) to pay all amounts due on
the bonds. Title to the project remains with the Authority until the bonds are
fully paid.
For accounting purposes, the pollution control facilities are capitalized and
depreciated, and the bonds are shown as long-term debt in the consolidated
balance sheet. The debt at December 31, 1972 represents the amount of proceeds
from the sale of bonds applied to construction payments; the balance of the
proceeds are held and invested by the Trustee pending disbursement and, if not
applied toward construction payments, are available to service the debt.
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26. SUNSHINE MINING COMPANY
Sunshine Mining Company operates the Sunshine Unit Area silver producing
property (in the Coeur d'Alene Mining District of Idaho) which accounted for
3.8 million ounces of silver in 1974, of which Sunshine's share was 2.2 million
ounces worth $9.7 million. Sunshine has numerous other mining and mineral
interests, including: garnet production in Idaho, and oil and gas production in
Alberta; electrolytic antimony production; exploration on properties in Montana
(gold), Alaska (copper, zinc, and silver), and elsewhere.
However, the bulk of Sunshine's business today comprises the manufacture
and sale of chain link fencing and fence parts, through its subsidiary, Anchor Post
Products, Inc. It also manufactures electronic components including quartz
crystals, and precision-built enclosures, panels, slides, and fans.
Table A-26.1 presents the consolidated statement of income for 1974. Table
A-26.2 presents line-of-business information.
Sunshine's year-end balance sheet showed $57 million in assets, with $25
million in net working capital. Long-term debt was $21 million, nearly equal to
stockholders' equity of $25 million. Capital spending has been modest the last
few years.
The dividend paid on Sunshine's common stock was reduced for the fourth
quarter of 1974. According to the Company, this was primarily because of a new
agreement entered into with American Smelting and Refining Company
(ASARCO) which substantially increasec refining costs and adversely affected
cash flow by deferring ore pricing and pt./ ments for three months.
Nevertheless, cash dividends for 1974 were the highest Sunshine has paid
since 1940.
SUNSHINE'S EXPLORATION PROGRAM IN ALASKA*
Sunshine's main exploration effort during 1974 was in Alaska. By the end of
the working season more than two dozen mineral occurrences had been located
on the approximately 24,000 acres under Sunshine's control. Preliminary drilling
in one area disclosed interesting zinc-copper-lead-silver mineralization.
Further exploration in this area will require major expenditures and late in
1974 Sunshine began discussions with The Anaconda Company. In February,
* Information taken from 1974 Annual Report.
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TABLE A-26.1
SUNSHINE MINING COMPANY
Consolidated Statements
of Income
For the years ended December 31, 1974
Operating Revenue
Mining and Oil
Manufacturing
$12,676,989
47,271,250
59,948,239
Operating Costs
Mining and Oil
Manufacturing
Depreciation, depletion and amortization
7,030,266
34,117,451
1,032,586
42,180,303
Gross Profit
Exploration, intangible drilling costs and abandon-
ments including depreciation and amortization
(1974, $109,569; 1973, $109,740)
Selling, administration and general
17,767,936
1,036,419
7,893,077
8,929,496
Income from Operations
Other deductions (income) :
Interest expense
Interest income
Miscellaneous, net
8,838,440
1,470,319
(1,350,821)
205,059
324,557
Gain on comnletion of sih cr concentrate sale
Income before Provision for
Income Taxes
Provision for income taxes
8,513,883
8,513,883
3,475,000
Net Income $ 5,038,883
Source: Sunshine Mining Co., Annual Report 1974.
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TABLE A 26.2
SUNSHINE MINING COMPANY
LINE-OF BUSINESS INFORMATION
Years ended December 31
____ 1974 1973 1972 1971 1970
Total Revenues:
Mining and Oil (1) 21.1% 14.1% 10.2% 19.6% 24.3%
Fencing Products 68.6% 74.9% 77.4% 69.0% 62.0%
Electronic Products 10.3% 11.0% 12.4% 11.4% 13.7%
Income (2) :
Mining and Oil 39 1% 51.0% 47.09o 39.6% 72.69r
Fencing Products 49.2% 38.9% 20.0% 49.8% 22.5%
Electronic Products 117% 10.1% 33.0% 10.6% 4.9%
( 1 ) Sales of silver concentrates (included in the mining and oil line of business) accounted in I lie .iggiegate for approximately \lr'i . \2r,'<- , 7%, 16rc and 20C5-
of the Company's sales in 1974, 1973, 1972, 1 97 1, and 1970, respcclivcl) It should be noted that the . Sunshine Mine, from \vhich these revenues
are derived, was closed by a fire on May 2, 1972 and did not reopen until late in 1972 and was shut down by a strike from March 1 1, 1973 to July
16, 1973. In 1974, revenues derived from the mine reflect a full year's pi oduclion as well as highci average silver pi ices
(2) Before income taxes and general corporate administration expenses, interest expense, miscellaneous income, and realized loss and piovision for uniealized
loss on investments, none of which has been allocated to lines of business. The Company maintains a general corpoiate staff to service the needs
of its various divisions. In addition, all significant bonowings and investment of funds not needed for daily operations are made at the general corpo-
rate level. Consequently, it is impractical io allocate these items to particular lines of llie Company's business.
Income in 1972 is before extraordinary items Mining and oil income in 1973 includes gain on completion ot sale of silver concentrates delivered in 1968
and 1969 which had been written down to prevailing market prices in 1970and 1971.
Source: Sunshine Mining Company 1974 Annual Report.
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1975, the Company entered into a letter agreement with Anaconda and a formal
contract is expected to be signed in the near future incorporating the terms of the
letter.
Thereunder Anaconda becomes the operator of the exploration project
committing itself to expenditures of at least $500,000 for exploration this year.
Anaconda may terminate the agreement at the end of any 12-month period after
giving proper notice, but should it decide to go through with all of the terms of
the agreement it could be extended as long as twenty-five years and involve the
expenditure of up to $11,000,000 by Anaconda. Anaconda could earn a 75%
interest in the mining claims with Sunshine retaining a minimum 25% carried
interest in the Alaskan properties. When Anaconda has spent a total of
$3,000,000 on exploration, it will have earned a 51%, interest in the property and
from then on its share would increase 3% with each additional $1,000,000
invested up to 24%.
If the properties are brought into commercial production, Sunshine would
be reimbursed for the $1,000,000 it has expended so far on exploration, on a
pro-rata basis and Anaconda would get back its exploratory costs on the same
basis before the net operating revenue is divided.
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