Climax

Only U. S. corporation in which an investor could have made 116,900% on his money in the last ten years is Climax Molybdenum Co., world's largest producer of that elemental metal. In 1926 Climax stock could have been bought for 10-c- per share. Even as late as 1932 it changed hands at $1 per share--perhaps lower, for the stock has never been listed, was then unknown even to over-the-counter traders. Next year it sold as high as $15. By last October it was selling in the 80's, when the stockholders voted a three-for-one split. The new stock continued to climb, was selling last week at $39, equivalent to $117 for the old shares. Ten years ago a long-headed speculator could have bought 10,000 shares for $1,000. Today, if he had held on to his original investment, he would have held 30,000 shares worth $1,170,000.

Last week Climax Molybdenum's contented stockholders received an annual report showing that their 2,520,000 shares are currently selling at 30 times per-share earnings for 1935. On sales of $6,346,000, Climax last year made $3,227,000--a profit margin of over 50%. Year before its profits were $1,790,000. During 1935 the company paid off its $1,000,000 funded debt, boosted dividends four successive times. "Plans are under way for increasing production facilities to keep pace with the increasing demand for the company's product," wrote President Max Schott. Calling for a $2,600,000 expenditure, this expansion will be financed from profits.

Some Climax stockholders must have been completely mystified by the fact that total assets increased during the year from less than $8,000,000 to more than $79,000,000. Furthermore, the entire increase was accounted for in an item called "Discovered Increment." Little light was shed on the subject by a footnote explaining that "Discovered Increment" had been revalued by application of the "Hoskold Formula." What happened was that Climax simply wrote up its ore reserves by some $70,000,000. Formerly carried at what amounted to a nominal $3,600,000, the Climax reserves are by all odds the world's largest. And Climax produces three-fourths of the world's molybdenum.

Molybdenum, first isolated in 1782, de rives its name from the Greek word meaning lead-like, is known in trade as "moly." Little use was found for the metal until the end of the 19th Century, when it was tried as an alloy for tool steels. Sulphur in the moly compounds then available un did what good the metal contributed, with the result that tungsten became the stand ard steel hardener. Not until the War, when it was employed in guns, motors, light armor plate, did moly impress steel makers.

Climax was a War baby. Sired in 1917, by American Metal, the company took over huge ore deposits near Climax, Colo., a little railroad station perched atop the Fremont Pass at an altitude of 11,000 ft. Gold diggers had discovered the deposits, thought them graphite. Even after they proved to be molybdenum no one was particularly excited because the ore was low-grade (8 lb. to the ton) and Scandinavia and Australia, with small reserves higher in metal content, could more than supply what market there was.

During the War, Climax worked its mine at a great rate, but in 1919 the demand collapsed as suddenly as it had started. For the next four years the mine was closed. The price was then $5 per lb., and the big problem was to persuade steel makers and users to buy it at all. Powered by a onetime American Metal employe named Brainerd F. Phillipson. Climax stormed the alloy market, cut prices, set researchers to work developing new uses for the metal.

Moly steels were already popular with airplane manufacturers, since they could be welded better than other alloy steels. First big industrial users were Studebaker and Hyatt Roller Bearing. U. S. motor-makers are now the biggest users of moly steels. In 1929 world consumption of moly was 4,000,000 lb. Last year the figure was about 12,000,000, and the price was down to about 85-c- per Ib.

Molyman Phillipson died four years ago at the age of 42, having literally worked himself to death in his efforts to create moly markets. Summoned to head the company was Max Schott, 59, a shy little German-born mining man who had retired from American Metal to enjoy his six children in sunny Santa Barbara. Heavy Climax stockholders are its directors and the rich Manhattan banking firm of Carl M. Loeb & Co.

Like tin and nickel, moly is a strategic metal that figures in the secret plans of the best war offices. Tungsten is largely imported into the U. S. from China. Moly is found in small quantities in Canada, Turkey and French Morocco, but the only important deposits outside the U. S. are in Scandinavia and Mexico. As early as 1934 the U. S. Bureau of Mines, noting strong demand from Europe and Japan for armament materials, commented la conically: "The normal foreign steel trade does not seem to be large enough to war rant in itself the large exports of molybdenum."

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