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This article is lifted from Wikipedia on August 03, 2007, at the following link: Please give Wikipedia the clicks.
http://en.wikipedia.org/wiki/Anaconda_Copper
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Anaconda Copper
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Anaconda Copper Mining Company (until 1915 known as the Amalgamated Copper Mining Company), one of the largest trusts of the early 20th century which owned all the mines on Butte Hill, Montana, USA. The Anaconda Company was purchased by Atlantic Richfield Company (ARCO) on January 12, 1977. At present (2007), Anaconda exists only as an environmental liability for BP, the current owner of ARCO.
The history of Anaconda Copper Mining Company starts in 1881 when Marcus Daly bought a small silver mine called Anaconda, near Butte, Montana. He asked George Hearst (father of publishing magnate William Randolph Hearst) for additional support, who agreed to buy one-fourth of the new company's stocks without even visiting the site. Huge layers of copper were discovered soon and Daly became a copper magnate. Butte, a small and poor town, became one of the most prosperous cities in the country, often called "the Richest Hill on Earth".
At first, Daly quietly bought up neighboring mines forming a mining company. He then built a smelter at Anaconda which he connected to Butte by a railway.
In 1889 the Rothschilds attempted to control the world copper market. In 1892 the French Rothschilds began negotiations to buy the Anaconda mine. In mid-October 1895 the Rothschilds, French and British, bought one quarter of the stock in Anaconda for 7.5 million dollars. By the late 1890s the Rothschilds probably had control over the sale of about forty percent of the world’s copper production.
The Rothschilds’ role in Anaconda was however brief. In 1899, Daly teamed up with two directors of Rockefeller’s Standard Oil to create the giant Amalgamated Copper Mining Company, one of the largest trusts of the early Twentieth Century.
By 1899 Amalgamated Copper acquired majority stock in the Anaconda Copper Company and the Rothschilds seem to have had no role any longer in the company. Marcus Daly had just become president of the seventy-five million-dollar holding company at his death in 1900.
How the take-over was carried out is an interesting story in itself. The leading roles were played by Henry H. Rogers (John D. Rockefeller’s friend and business partner) and William Rockefeller (John’s brother), aided by company promoter Thomas W. Lawson. It is noteworthy that although Rogers and William Rockefeller were Standard Oil directors, Standard Oil itself did not take part, perhaps because its founder and head, John D. Rockefeller disliked such stock promotions. Rogers, Lawson, and William Rockefeller acquired Anaconda – the company worth millions – without the expenditure of a single dollar of their own.
This is how they did it:
1. First Rogers and William Rockefeller took title to the mine properties, giving to Marcus Daly a check on the National City Bank of New York for $39,000,000, with the understanding that the check was to be deposited in the bank and remain there for a definite time (National City Bank was run by Rockefeller’s friends).
2. Rogers and Rockefeller then set up a paper organization known as the Amalgamated Copper Company, with their own clerks as dummy directors, and transferred all the mines to this Amalgamated for $75,000,000. The Amalgamated gave them not cash, but all of its capital stock, which was conveniently printed for the purpose.
3. From the National City Bank, Rogers and Rockefeller now borrowed $39 million to cover the cheque they had given to Marcus Daly, and as collateral for this loan they used the $75 million in Amalgamated stock.
4. They now sold one-third of Amalgamated stock on the market for twice the amount they had paid Daly.
5. With the proceeds, they retired the $39 million loan from the National City Bank, and pocketed nearly 40 million dollars as their own profit on the deal.
Finally, they engineered a panic to drive down the price of Amalgamated Copper stock and bought most of the outstanding shares for pennies on the dollar. Thousands of investors were ruined. One source reported that as many as 30 committed suicide. Others were driven to crime and spent their retirement in prison.
Rogers used his “money machine” in order to “have a little fun”. This was “the system” which tumbled ministers, doctors, lawyers and shopkeepers throughout the country to ruin, and sent “their innocent daughters out to walk the streets” (from the famous bestseller Frenzied Finance - the Crime of Amalgamated, 1905, by their estranged former partner Thomas Lawson).
Between 1899 and 1915, Anaconda, controlled by Standard Oil insiders, stayed under the name of Amalgamated Copper Company. Then things changed. Amalgamated fell into conflict with a powerful copper king, F. Augustus Heinze, who also owned mines in Butte. Thus they were unable to monopolize copper extraction in Montana. In addition, although Butte was then the most prolific copper-mining district in the world, Amalgamated could not control other copper-mining districts, such as those in Michigan, Arizona, and foreign countries. At the beginning of the 1900s, due to electrification (and Amalgamated's maintenance of an artificially high copper price), copper was very profitable, and copper mining expanded rapidly.
William Rockefeller, together with his son, Percy turned for help to a shrewd, intelligent businessman, John D. Ryan. Not long before, Ryan came to Montana, became a close friend of Marcus Daly’s widow, then a president of Daly’s bank and manager of widow’s fortune.
Ryan, famous for his negotiation skills, convinced Heinze to walk away with abundant compensation. Rockefellers won complete control of Butte's copper. Ryan was rewarded with significant package of Amalgamated shares.
In 1915 Ryan took over Heinze’s properties and the properties of William A. Clark (Butte’s third copper king) and merged them all with Amalgamated. The reorganized company was again named Anaconda. Ryan became its president.
The “right hand” of John Ryan was Cornelius Kelley, young attorney, who soon was given the position of vice-president.
During the 20’s metal prices went up and mining activity increased. Those were really the golden years for Anaconda. The company was managed by dexterous Ryan-Kelley team and was growing fast, expanding into new areas of activity: manganese, zinc, aluminum, uranium and silver.
In 1922 the company acquired mining operations in Chile and Mexico. The mining operation in Chile (Chuquicamata), which cost Anaconda $77 million, was the largest copper mine in the world. Then it was the source of two-thirds to three-fourths of the Anaconda Company's profits.
The same year ACM purchased American Brass Company, the nation's largest brass fabricator and a major consumer of copper and zinc. In 1926 Anaconda acquired the Giesche company, a large mining and industrial firm, operating in the Upper Silesia region of Poland.
At that time Anaconda was the fourth largest company in the world. These heady times, however, were short-lived.
In 1928 Ryan and Percy Rockefeller aggressively speculated on Anaconda shares, causing them to go up at first (when they sold) and then to go down (when they buy them back). Known today as a "pump and dump", at the time it was not illegal, and was actually quite common. The prices, under the pressure of a "joint account" set up by Ryan and Rockefeller of nearly a million and a half shares of Anaconda Copper Company, fluctuated from $40 in December, 1928 to $128 in March of 1929.
Smaller investors were completely wiped out. The results are still considered one of the great fleecings in Wall Street history. The American Senate hearings concluded that those operations cost the public, at the very least, $150 million.
A 1933 Senate banking committee called these operations the greatest frauds in American banking history and a leading cause of the 1930s depression.
In 1929 Anaconda Copper Mining Co. issued new stock and used some of the money to buy shares of speculative companies. When the market crashed on Oct. 29, 1929, Ryan lost a fortune and the Anaconda suffered serious financial setbacks. Moreover, at the same time, copper prices started going down dramatically. During the winter of 1932-33 copper prices had dropped to $0.103 per kg, down from an average of $0.295 per kg only two years earlier. The Great Depression took its toll with massive unemployment in both the United States and Chile (up to 66 percent unemployment rate in the Chilean mines). On March 26 1931, Anaconda cut its dividend rate 40%. John D. Ryan died in 1933 nearly broke, but was buried in a copper coffin. His mighty Anaconda shares, once worth $175 each, had dropped to $4 at the bottom of the Great Depression. Cornelius Kelley became the sole leader of the company. It was his strength and persistence that saved Anaconda.
Butte mining, like most U.S. industry, remained in depression until the dawn of World War II, when the demand for war materials greatly increased the need for copper, zinc, and manganese. That relieved some of the economic tensions. The end of World War II brought another downturn in the copper industry.
During post-war years prices of copper dropped. At the same time mining costs had risen precipitously. As a result, copper production from Butte's underground vein mines dropped to only 45,000 mt annually. Clearly, something had to be done if mining were to continue to prosper in the Butte district. The answer was called the "Greater Butte Project" (GBP). The project would exploit lower-grade underground reserves by the block-caving method. The new method was successful, although short-lived. In 1956 Anaconda netted the largest annual income in its history: $111.5 million. But since then ore grades were continuing their decline, mining costs were rising each year, and profits were diminishing. To stay alive, the company switched to open-pit mining, a very area-consuming method. The Berkeley Pit kept expanding and ate away at the older parts of Butte.
In 1971 Chile's newly elected Socialist president, Salvador Allende, confiscated the Chuquicamata mine from Anaconda. Anaconda lost two-thirds of its copper production. Two years later, a compensation of $250,000,000 was paid to Anaconda by the Chilean government.
Losses from the Chilean takeover, however, had seriously weakened the company's financial position. Later in 1971, Anaconda's Mexican copper mine Compañía Minera de Cananea, S.A. was mexicanized by president Luis Echeverría's government. An unwise investment in the unsuccessful Twin Buttes mine in southern Arizona further weakened the company, and in 1977 Anaconda was sold to Atlantic Richfield Company (ARCO) for $700 mil. However, the purchase turned out to be a regrettable decision for ARCO. Lack of experience with hard-rock mining, and a sudden drop in the price of copper to sixty-odd cents a pound, the lowest in years, caused ARCO to suspend all operations in Butte.
By 1983, six short years after acquiring rights to the "Richest Hill on Earth," the Berkeley Pit was completely idle. Market experts wonder why this acquisition took place at all. Perhaps the investors were looking for huge tax write offs, as Anaconda had a significant loss after Chilean vest (a net loss of $375.3 million).
Closing down the mines was not the end of new owner’s problems…
The area of Butte, Montana, Anaconda, Montana, and the Clark Fork River were highly contaminated. Milling and smelting produced wastes with high concentrations of arsenic, as well as copper, cadmium, lead, zinc, and other heavy metals. That’s why, beginning in 1980s, the Environmental Protection Agency designated the Upper Clark Fork river basin and many associated areas as Superfund sites - the nation's largest. The EPA named ARCO as the "potentially responsible party." Atlantic Richfield Company was obliged to remediate (i.e. clean up) the area. Since then, Atlantic Richfield has spent hundreds of millions of dollars decontaminating and rehabilitating the area, though the job is far from finished.
ARCO, officially BP West Coast Products LLC, is now a subsidiary of BP.
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Resources:
* The independent documentary An Injury to
One chronicles the history of Anaconda in Butte, Montana, and its efforts to
suppress unionization by its workers. The short film ends with a discussion of
Berkeley Pit.
* Chris Harvey “Critical Biography…” from WIIS Resources [1]
* Columbia Falls Aluminum Company LLC [2]
(end Wikipedia source article on Anaconda Copper History)
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