Anaconda & Copper

By no stretch of imagination could the 118,000 stockholders in Anaconda Copper Mining Co. be called "satisfied." They have received no dividends for four years. In that respect they are not alone among U. S. investors, and their grudge has another basis. A number of them still resent the price they paid for Anaconda in 1929 when the stock touched a high of $174 per share. Three years later it could have been bought for $3. Moreover, many stockholders feel they were high-pressured into buying Anaconda by no less a supersalesman than Charles Edwin Mitchell. The onetime National City Bank chairman fired his security salesmen with the same enthusiasm for Anaconda as they exhibited in distributing shares in his own institution. Now practicing investment banking as head of Blyth & Co., Mr. Mitchell last week resigned as an Anaconda director.

Mr. Mitchell undoubtedly regrets his copper crusades profoundly but his retirement from Anaconda was not precisely an act of atonement. Simultaneously Anaconda filed a registration statement for a new $55,000,000 bond issue. Listed as one of the underwriters was Mr. Mitchell's Blyth & Co., which will probably head the banking syndicate. Under the Securities Act, Mr. Mitchell must deal at arm's length with Anaconda, may not serve as a director of a company whose securities he plans to purchase for resale.

Filing of the big Anaconda issue was significant for more than its size. The low estate of Anaconda stock in the black day of Depression reflected a not unreasonable doubt as to the company's ability to survive. Not only was Anaconda suffering from an unprecedented drop in copper prices; in the final stages of a long expansion program it had piled up bank loans of $70,000,000. During the past few years the company has whittled this figure down to about $57,000,000 but Anaconda's balance sheet is still enough to give a banker the jitters. Proceeds of the bond issue will be used to convert the loans into long-term indebtedness, thus reducing Anaconda's current liabilities to pleasing proportions.

Anaconda did not merely postpone the maturity of its debts to some comfortably distant date. A stiff sinking fund provision may well retire the whole issue before it falls due in 1950. In addition to an annual sinking-fund appropriation of $1,000,000, Anaconda will apply 20% of its profits for the next 15 years (with certain limitations) to debt retirement. In boom years when copper profits are fattest, Anaconda will be spending millions buying in its bonds--a shrewd selling point, for sinking-fund buying will provide strong market support at a time when rising interest rates generally send the bond market into a decline.

Copper was used by the Indians before 1492 but copper as a major U. S. industry is a contemporary of the power business, which is hardly two generations old. Originally the copper industry was cleanly divided into three parts: 1) mining 2) smelting & refining, 3) fabricating. In varying degrees, the smelters have gone into mining, the miners into smelting, both into fabricating. Like U. S. Steel Corp., Anaconda is a fully integrated business from mine to finished product. It is the world's biggest copper fabricator as well as the world's biggest raw producer.

But Anaconda is not the leading U S producer. That title is held by Kennecott Copper with Phelps Dodge runner up. Anaconda's domestic production, largely centred in Montana, amounts to about 40% of its total capacity of 1,000,000,000 lb. per year. All domestic output and more, is absorbed by its fabricating units of which the biggest is American Brass. Its principal foreign copper properties are Chile Copper Co. and Greene-Cananea in Mexico. Big sidelines are lead and zinc, and like all copper companies Anaconda gets gold and silver as a byproduct.

In Anaconda's expansive management President Cornelius Francis Kelley was once overshadowed by the fame of the late John D. Ryan. Today the company has no chairman and beaming President Kelley rules his $575,000,000 empire in solitary splendor for a stipend that amounted last year to $171,666.64. A lawyer by training, a Catholic by faith, something of an orator by reputation, he played as a boy on the bleak Montana hills when Butte was a silver town, not copper. Now 60, he has been president since 1918. He it was who in the final swirl of the New Era powered the pegging of copper at 18-c- per lb. And in 1929 Anaconda made $69,000,000.

When the reckoning came, President Kelley was caught three ways. After his peg finally broke, copper coasted down to a historic low of 4.7-c-. He had paid boom prices for new properties. He was in debt to the banks. In 1932 Anaconda lost nearly $17,000,000.

Numerous efforts to bring world production under control eventually blossomed. For more than a year the U S copper industry had a code and the rest of the world still has one (TIME, April 8). Meantime the gap between foreign and domestic prices has almost closed--an important fact to a company with nearly two-thirds of its mines outside the protective wall of a 4-c--per-lb. tariff. In the first six months of this year Anaconda made $5,000,000.

Copper prices dipped to 8-c- after the lapse of NRA, recovering to its Blue Eagle level of 9-c- last fortnight. In the past few months more copper was sold than during the entire first half. A durable goods industry, copper generally parallels the business curve of steel which is now running at about 50% of capacity. Copper shares have been touted lately by stockmarketeers as likely "war babies" but, barring a major conflict, the copper companies will prosper no more, no less than other heavy industries. Marketwise the coppers usually enjoy their big rise at the tail-end of a big boom when investment in capital goods is largest.

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