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?

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 mine getting anything for the zinc, they are charged a penalty on account of having it, because in the process of lead smelting it becomes a very serious charge. And in this mine, where we have an average margin of only $8, we have an average cost of $1 more than that, so that on that mine, at the smelter, we suffer a loss of $1 a ton. The smelting business has to be done on averages. It is done under very sharp competition. There is not an ore that we buy at any smelter that I know of upon which we are not subjected to competition in buying it: and the smelter seems to be always in need of some kind of ore. He will have a surplus of lead and will need silica, or he will have a surplus of silica and need lead; and the charge we make in getting a contract will depend upon our needs and also the needs of our competitors. But usually the needs of our competitors are the same as ours for the reason that it depends upon a certain situation. At the present time, for instance, with silver at less than 50 cents, the amount of silica produced in connection with dry ores is getting so small that the smelters are bidding for silica, and pay such a high price for it that they would not be able to make any money out of the silica ores, and they will have to make it out of the lead ores. At other times it is just the other way and then there is a shortage of lead ores when the smelter will pay more than the lead is worth. I have known lead ores to be bought at a loss of $5 a ton to a smelter because the smelter could afford to do it and because they had so many silicious ores on which they were making a profit, and which they could not smelt without the lead. And that situation will change month by month and often changes radically in a period of three months.

Following that, I would like to give you an illustration which is pertinent and fair, and when I say "fair," I lean over backward. I did it by beginning with the Silver King mine.

A large proportion of all the lead produced in the United States is in the State of Idaho. I do not think you have had any statement with reference to that as yet, but you will have from the miners representing the lead producers in Idaho. You will have a statement showing the particular situation there. I was able to get the cost of mining of one of the mines that did not close down when lead went below 4 cents. Doubtless you know-I do not know whether anyone has testified to the fact-but as a matter of fact, last year when lead went below 4 cents more than one-half, or at least one-half, of all the lead production of the country was cut off. It could not be produced, and in fact a good deal that was produced was produced at a loss.

The CHAIRMAN. Like all other business in the United States?

Mr. BRUSH. At that figure, yes. The Silver King and the DalyWest as soon as lead went down to 4 cents closed down their mines. It is not the same with all other business, if you will pardon me, for the reason that some businesses do not run because they can not sell their product. That is not the case with the miners. They can sell their product to the smelting company, because the smelting company has a contract that obliges them to take the entire production of the mine, and the smelting company has to take it whether it can sell it or not.

The CHAIRMAN. Certainly, but the price went down.

Mr. BRUSH. Yes, sir.

The CHAIRMAN. And the price went down because of lack of demand?

Mr. BRUSH. Because of surplus of production.

The CHAIRMAN. For the same reason that affected all other industries; they could not sell at a profit, therefore they shut down. If you will pardon me, I think it is a good deal like the other business. Mr. BRUSH. You can see that there is quite a difference in that, because there is some one who stands ready to take the material. The CHAIRMAN. At the market price?

Mr. BRUSH. And they took it.

The CHAIRMAN. The smelter will take it at his price, which is the market price, and when that gets down below the point where it pleases them they shut down?

Mr. BRUSH. That is what they do. I only referred to 4 cents because that was the point that was fixed upon by a number of mines, and I selected a mine in the Coeur d'Alene which was able to make money at four cents, although that mining company owned three other wines, all of which closed down. Now, in working out that ore--the ore ran 8 per cent lead when it was mined and 34 ounces of silver to the ton of ore as it was mined-when it was concentrated 7.8 tons of ore made 1 ton of concentrate. In the process of concentration the mine lost 13 per cent of lead and 33 per cent of silver in the ore, and the concentrates were shipped to our smelters in Colorado. Now, without going through all of the calculations that are before me, I will say that it came down to this: The 1 ton of lead cost the mine-I am speaking now of actual cost-$48.35 to mine

it and to concentrate it, and two-thirds of that cost was labor, while the other third was very largely timber. The amount paid for freight on 1 ton of lead was $25.50; that was freight on the concentrates to the smelter and freight from the smelter to the refiner of the bullion, getting it to the New York basis.

Mr. HILL. How much was that?

Mr. BRUSH. The total amount of freight paid was $25.50. The cost to the smelter was $5.55; the cost to the refiner was $4.50, making a total cost of $83.90. The silver in it was worth $16.21. If you deduct that, and throw all the cost upon the lead, which is certainly not a fair way of figuring costs, you will bring out the cost of 1 ton of lead at $67.69, or $3.38 a hundred pounds. Now, at 4 cents New York, there was a profit of 62 cents a hundred pounds. That profit was divided, 31 cents to the mine, 15 cents to the smelter, and 16 cents to the refiner.

The CHAIRMAN. I do not follow you when you go from tons to hundreds.

Mr. BRUSH. Well, divide by 20. The price of lead is always figured by the 100 pounds, not by the ton, and that is the reason why I use those figures.

The CHAIRMAN. You went from tons to hundreds so suddenly that I did not quite follow it out.

Mr. BRUSII. The ton was $67.69.

Mr. HILL. Was that 2,240-pound or 2,000-pound ton?

Mr. BRUSH. Two thousand pounds. All American business is done in tons of 2,000 pounds. In the first place the mine has to charge off, or ought to charge off, its amortization. When a mine makes a profit it takes it out of its capital, and we know by past experience that a mine sometimes comes to a very sudden end, but rarely lasts through a period of more than ten years; on an average they do not last that long.

I have before me a letter from Professor Buckley, who was for seven years the director of the Missouri bureau of geology and mines, and who has made an exhaustive study of the lead bodies in the State of Missouri, in which he states that at the present rate of production of lead in Missouri the entire lead fields will be exhausted in not over twelve years. It is easier to compute that than it is with mines that go right down.

Mr. CLARK. Do you not know that recently they have discovered a lower stratum of lead and zinc in Missouri? They have been working close to the surface for years, but now they have begun to go down, as they ought to have done before.

Mr. BRUSH. I believe that this statement of Mr. Buckley is based upon the examinations that have been made by the state geologist, and also examinations that have been made by all of the large mining corporations that are operating in Missouri. Those corporations are constantly sinking their drill holes all over their territory, and those drill holes go to a depth of many hundred feet, away beyond anything that has been done.

Mr. CLARK. They discover very rich deposits when they go down deep.

Mr. BRUSH. It takes that all into account, as I understand it.

Mr. CLARK. Who is this professor that you quoted?

Mr. BRUSH. Mr. E. R. Buckley, who was director of the Missouri bureau of geology and mines for seven years. I believe that at the present time he is not, but is acting as an independent mining geologist.

The CHAIRMAN. What is the date of that letter?

Mr. BRUSH. This was dated December 9, 1908. It was in response to an inquiry that was made of him upon that very point.

The CHAIRMAN. Where is Mr.Buckley?

Mr. BRUSH. He wrote this letter from Washington. At that time he was in attendance at the Conservation Congress.

The CHAIRMAN. Where does he live?

Mr. BRUSHI. He lives in Missouri, and, I think, in St. Louis, but I am not sure about that. And then all of the mines are getting deeper constantly. There has been no new discovery of lead made in the United States, so far as I know, in the last ten years since the tariff was placed upon it; and the mines are all getting deeper. And with depth their timber cost becomes heavier, so that it is becoming a serious matter as to where they will get it from at any cost, especially in the Coeur d'Alenes. It is constantly increasing in cost. Labor is constantly increasing in cost, and has increased during the last five years. About three years ago the State of Idaho passed a law making the day eight hours. The mines were not able to decrease their labor per day at all, consequently it added just 25 per cent to their labor cost. And with the smelter and refiner, their profits are reduced by the wear and tear, depreciation, by interest, which is not taken off in this at all, and by the general expense of administration of the corporation, by the cost of selling, and the inevitable losses in connection with selling. All of those come out of this profit. These are only mill profits, all that I have given you.

The CHAIRMAN. That would not come out of the statement that your company made; so many million dollars made in one year?

Mr. BRUSH. No; that was, as I showed you, an average of about $1.50 per ton of ore smelted.

The CHAIRMAN. But you mentioned $7,000,000.

Mr. BRUSH. Yes.

The CHAIRMAN. Of course you did not estimate in that any bad debts or anything of that kind, as assets, did you?

Mr. BRUSH. Oh, no. Of course, if there were any bad debts accruing during that year, it did come out of that. I gave you the mill cost and mill profit, and I simply stated what ought to and does have to come out of the mill profit.

The CHAIRMAN. That was 1908?

Mr. BRUSH. Nineteen hundred and eight; yes, sir. That was made out on the basis of 50 cents for silver.

The CHAIRMAN. What was it the year before?

Mr. BRUSH. When lead was higher the mines made more profit, because they got the benefit of the higher prices.

The CHAIRMAN. How about the smelter? What was his profit in 1907-your company?

Mr. BRUSH. The profit that I gave you was of 1907.

The CHAIRMAN. What was it in 1906?

Mr. BRUSH. I think the smelting profit was something like $10,000,000.

The CHAIRMAN. What was it in 1905?