interests of Utah, and he mentioned two lead mines in Utah, which happened to be the two largest producers of lead in the State of Utah, and they are shipping ore to our smelters.

The CHAIRMAN. What mines were those?

Mr. BRUSH. Those were the Silver King mine and the Daly West mine. I would not refer to them excepting for the fact that they have been already referred to in the testimony before you. The gentleman testifying spoke of the lead ores as being on an average of 8 per cent lead. I think that possibly he arrived at that percentage by taking all of the ore that was produced and dividing it into the amount of lead that was produced. It was extremely unscientific, as you will find if you undertake to make any investigation. But since he mentioned these two mines, I will say that the Silver King ships to us, but they ship their ore as most lead mines do. They concentrate it and ship it to us in the form of concentrate; and the Silver King, I find by the statistics before me, ships ore that averages 46 per cent lead.

The CHAIRMAN. That is the concentrate?

Mr. BRUSH. The concentrate; yes.

The CHAIRMAN. The process of concentrating eliminates some of the dross?

Mr. BRUSH. It eliminates the iron, and mica, and quartz, and everything that they can in order to save weight-save freights, because the freight item is a very heavy one.

The CHAIRMAN. The concentrate represents 46 per cent lead? Mr. BRUSH. That is the way it comes to us, 46 per cent lead; and the Daly West comes to us as

The CHAIRMAN. Before you go to that, how much copper is there, if any?

Mr. BRUSH. No copper in that ore-well, I say none, but there is a little less than 1 per cent of copper in the ore.

The CHAIRMAN. How much silver?

Mr. BRUSH. An average of 55 ounces of silver. That is one of the richest of the concentrates that I know of in silver.

The CHAIRMAN. How about the gold?

Mr. BRUSH. There was seven-hundredths of an ounce per ton; in other words, in a carload of 20 tons of mass material, looking like dirt, there would be one ounce of gold, which the smelter paid $20 for, and had hard work to find.

The CHAIRMAN. Any other thing of value that comes out of the smelting process?

Mr. BRUSH. No, sir; there are quite a number of things of no value. Sulphur, 12 per cent, and it has to be roasted in order to drive it off, because if the sulphur went into the furnace the whole mass would come out as a matte; it would not come out as bullion at all. We have to get the sulphur down to a very small percentage; we do not like to have more than 2 or 3 per cent of sulphur in the furnace. The Daly-West, if I might give you that

The CHAIRMAN. Before you get to that, and still speaking of the Silver King mine, how much does it cost per ton for the process of smelting and refining? Can you take it for some year, say 1906?

Mr. BRUSH. I haven't any particular year made up. I simply picked out this statement, which covers three months only-it must

be this year, three months of this year.. There is virtually no difference in the character of the ore. These are fair averages. Those happen to be the figures I have before me.

The CHAIRMAN. What was the cost?

Mr. BRUSH. The cost we have figured here, that we had to charge up against ourselves, averages $7.25 per ton of ore. Our charge against the mine, what we call our margin against the mine, was a little less than $10, showing a profit of less than $3 a ton on that ore.

The CHAIRMAN. You say you charged it against the mine. What do you charge against the mine? Give the items.

Mr. BRUSH. The way we arrive at what we call our margin

The CHAIRMAN. Before you go any further, I discover that I omitted one little ceremony. Please raise your right hand.

(The witness was thereupon duly sworn by the chairman.)

The CHAIRMAN. And what you have stated thus far is correct, is it not?

Mr. BRUSH. That may date back; yes, sir.

What we call our margin is-we take the value of the metals at the New York quotation. All the metal contains the ore at the New York quotation. Deduct from that the freight to New York, what we have to pay the refiner for refining, and from this deduct the amount of money that we pay to the miner, and the difference is the margin, the money we have left to do our work with, provided we are able to sell those metals in New York at the price we pay for them. We pay the miner for all the metals in the ore by sight draft when he ships the ore to the smelter, against the weights and assay, which is checked by his own representative; but we do not get the metal to the market on an average of four months after that period, and we always assume that we will be able to sell our metals for what we pay for them, but at times that has been hard work. The CHAIRMAN. What do you charge for smelting that?

Mr. BRUSH. I have not the particulars of what we charge them for smelting, because the contract as it is made pays for a certain amount of lead, pays for a certain amount of silver, and pays for all the gold at the New York quotation, and then makes a deduction which we call a working charge, and that, in the case of these lead ores, is usually about $8 a ton.

The CHAIRMAN. About $8 a ton?

Mr. BRUSH. That is not always the case, by any means.

The CHAIRMAN. You said about $8, and I asked you if that was

correct.

Mr. BRUSH. My recollection is that with reference to these two mines that I have spoken of, in the case of the Silver King mine it is correct, but in the case of the Daly-West mine it is not. At any rate, on the Daly-West ore we make a loss.

The CHAIRMAN. What do you charge them for freight?

Mr. BRUSH. Well, whatever we have to pay. From Utah the charge to New York is, on the bullion, I believe, $10 a ton. From Colorado it is $7. Unfortunately, I have not the figures before me from Utah, but I know that from Colorado it is $7 a ton.

The CHAIRMAN. You think it is $10 from Utah?

Mr. BRUSH. I think it is, but I am not sure.

The CHAIRMAN. Our recollection is that Mr. Allen said that it was $1.25 per hundred. I think that was the statement, but I have not located it.

Mr. BRUSH. That could not be, because that would be $25 a ton, would it not?

The CHAIRMAN. Yes.

Mr. BRUSH. Of course, freight rates are open to inspection; they are all published.

The CHAIRMAN. But from your recollection it is $10 per ton?

Mr. BRUSH. Certainly not more than $10 a ton, and it may not be more than $9.

The CHAIRMAN. And from Colorado, $7.

Mr. BRUSH. Yes, sir.

The CHAIRMAN. You are positive about that?

Mr. BRUSH. Yes. We have four or five smelters in the State of Colorado, and we only have one in Utah.

The CHAIRMAN. This matte that you send for the smelting process-I suppose you send it to the refinery at Chicago?

Mr. BRUSH. It goes, in fact, to Omaha.

The CHAIRMAN. And is there refined?

Mr. BRUSH. Yes, sir; there it is made into what we call blistered copper, or copper bullion, and from there shipped to Perth Amboy, in New Jersey, where it is refined. The refinery at Perth Amboy is the only copper refinery we have.

The CHAIRMAN. Then it does not go into the market at all until it gets to Perth Amboy?

Mr. BRUSH. There is no consumption for copper, comparatively, in the West.

The CHAIRMAN. Can you give us the cost to you of smelting?

Mr. BRUSH. I can give it to you on that ore, or these other ores that I brought down, which I thought would be typical ores. I have given you already the Silver King, and can give you the Daly-West. The CHAIRMAN. I think you gave me the total cost of smelting and refining, both, at $7?

Mr. BRUSH. That is the charge made by the smelter, and the smelter has to pay the freight to the refinery out of that.

The CHAIRMAN. Something over $7 for that mine, the Silver King? Mr. BRUSH. About-I will give it to you exact. One month it was $6.91; the next month, $6.78; the next month, $7.86. It varies in accordance with the percentage of sulphur and the percentage of zinc in the ore. Where there is a heavy percentage of zinc it increases the cost of smelting, so much so that the smelter, when he buys an ore, places a penalty on the zinc contents of it if it goes over a certain per cent, as I will show you later on some other ore when we are through with the Silver King.

The CHAIRMAN. How much does the lead cost you as it finally comes from your copper refinery at Perth Amboy?

Mr. BRUSH. The smelter is the agent of the miner-there is no such thing as cost to ourselves of lead. We buy from the miner, and pay him the New York quotation, the full New York quotation, for the lead the day that he ships his ore, and we simply act as his agent in the disposition of that lead. If the price of lead goes up, the miner gets it, and if the price goes down the miner loses it. Except, as I

say, that during the four months if it goes down and we have not been able to sell we lose it.

The CHAIRMAN. How much toll do you take out of it? You say that you act as agent. How much commission, or whatever you may call it; how much do you take out of it?

Mr. BRUSH. What we might call toll is the charge we make and the deduction from the total metal contents. The deduction for the total metal contents is only intended to cover the exact amount of metals lost in the process of roasting and smelting and refining.

The CHAIRMAN. What is your profit out of it; what do you get out of it? I am referring to this agency business.

Mr. BRUSH. I don't know any other way to answer that, Mr. Chairman, excepting by referring to the annual report of the company. Our company in the last annual report showed that they made a profit of $7,000,000. We refined 216,000 tons of lead, including Mexican lead, which was refined in bond, and we refined about 50,000 tons of copper, and about 60,000,000 ounces of silver, and about 1,000,000 ounces of gold, at a total value of about ninety millions of dollars. It is next to impossible to say what profit we made on each of these operations; but for years, assuming-which I think is fair-that the profit in refining of lead is $2.50 per ton-and when I say profit I mean profit at the works that does not take out interest, which is a very large item in the carry, nor does it take out depreciation or administrative expenses or selling expenses and the inevitable loss in connection with selling. It is simply the profit at the works. If we assume that as $2.50 on lead bullion, and $4 on copper bullion, and a quarter of a cent an ounce on the refining of silver, and, say, 25 cents an ounce on the refining of gold worth $20.50 an ounce, with all the risk of loss in it, that would leave a profit for the smelting business of about $1.50 a ton, smelted. We smelted 3,372,750 tons. I do not know any other way to get at our profit of smelting, and that of course includes all kinds of ores.

The CHAIRMAN. You say your annual report did actually show a profit of seven millions of dollars?

Mr. BRUSH. That was one mine. If you care to have some other mines, I will show you something quite different. We have to get an average profit out of all the ore that goes into the furnaces, and any one charge into a furnace may mean, and probably does mean, ores from thirty to fifty different mines, all mixed together in a body to get the proper metallurgical formula. We get out average cost and average margin, the difference being the average profit at those works. That is the only way we can do business.

The CHAIRMAN. Your report was made from your books, of course? Mr. BRUSH. Absolutely. "The proof of the pudding is in the eating."

The CHAIRMAN. Did that annual statement show any interest account?

Mr. BRUSH. No, sir. The interest account on the carry is more than a million dollars from the time we pay for the material to the miner.

Mr. CLARK. Now, right there let me ask you a question for information. Why is it that the business men come in here right straight along and when they are asked about their profits they always leave out the interest charge, just as you are doing now?

75941--H. Doc. 1505, 60-2-vol 3- -15

Mr. BRUSH. Exactly. It is because it is a custom in works to figure cost on what they pay, what they pay for anything, and what they have to pay out in order to work it. The manufacturing books, I believe, are kept on that basis.

Mr. CLARK. It seems to me that the first thing that a man would do when he was calculating whether he had made a profit or a loss would be to put in the interest on his investment.

Mr. BвUSH. I believe you are right, sir, but it is not the way that manufacturing books are kept.

The CHAIRMAN. I do not see how you can make that work unless you have sufficient capital-money in hand-to handle this without borrowing any money.

Mr. BRUSH. That is exactly what we do. The American Smelting and Refining Company paid no dividends until it had accumulated a sufficient amount to carry all this material, amounting to about $25,000,000, and not borrow a cent. After they had done that they commenced to pay dividends.

The CHAIRMAN. Money to carry on business is like a plant-it is part of the capital stock.

Mr. BRUSH. It is, undoubtedly.

The CHAIRMAN. And when you come to make dividends, you make dividends on your capital stock?

Mr. BRUSH. Yes, sir.

The CHAIRMAN. And those dividends are 7 per cent on the common?

Mr. BRUSH. No; 4 per cent on the common.

The CHAIRMAN. And 7 per cent on the preferred. That is the regular dividend?

Mr. BRUSH. That has been the regular dividend for the last year and a half, I believe.

Mr. MCCALL. If you borrow money and pay interest to a bank, or to a person who loans money, you would charge that in as cost of the business, would you not?

Mr. BRUSH. Yes, sir.

Mr. McCALL. And only this capital escapes which is part of your capital stock capitalization?

Mr. BRUSH. That is all that ought to escape.

Mr. McCALL. You charge interest on all of the other money? Mr. BRUSH. I am just giving the answers to these questions offhand. The exact figures ought to come from our manufacturing books.

The CHAIRMAN. How long ago was the American Smelting and Refining Company established?

Mr. BRUSH. If you will allow me, I think it is only fair, as long as two mines were quoted in Utah, that I should give you both mines. The CHAIRMAN. Very well, go on with that.

Mr. BRUSH. I only want to be fair. I gave you one of the most profitable illustrations that I could give you first.

The CHAIRMAN. I lost sight of that other mine. Mr. BRUSH. The Daly West only contains 25 per cent of lead. It contains 17 per cent of sulphur and usually over 17 per cent of zinc. I believe in one month there was 19 per cent of zinc. As I told you, we are obliged to charge a penalty for that zinc. Instead of the