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Show 7. could select the minerals we thought had the brightest prospects and could choose to serve the markets that offered the best advantages. All that remained to do was to develop a procedure and an organization for discovering what we wanted to discover, and this we have been able to do as our record will testify. In the 20 year span between 1953 and 1973 Utah will have acquired an interest in 11 new mines - an average of better than one new mine every other year. Except for copper which serves basic needs in many industries, our mines serve primarily two major industries - coking coal and iron ore for the steel industry and uranium and steam coal for the public utility industry, and each of these industries has strong growth characteristics. The increase in energy requirements is well known and the demand for coal and particularly for uranium is expected to be strong in the years ahead. While the steel industry itself on a world-wide basis is growing at a more moderate pace, the shifts within the industry have been dramatic since the end of World War II. The steel centers of the world in the United States, Europe and Japan have become more and more dependent upon the necessity of importing their basic raw materials as their indigenous sources of supply declined, and this has given rise to a rapidly growing international market for iron ore and coking coal. We have moved to take advantage of this, both as a supplier of raw materials and as a transporter of these products from mine to market. Perhaps as a company in these early days we had one further advantage, namely limited financial resources and no access to the equity market on a reasonable basis. To obtain the debt financing necessary to bring our new mines into production we followed the policy of selling our anticipated output under long term contracts, with escalation protection when it was obtainable. As we have prospered, we have continued this practice because we see in it continuing advantages. It gives us an assurance of earnings, a predictability of cash flow, and a freedom from downside risk - factors that are comforting to our shareholders and to our banks. It allows us to proceed safely on a course of vigorous expansion in a highly leveraged situation, and we are so proceeding. The unreliability of projections of earnings and cash flow from our construction operations was certainly one of the final determinants in our decision to dispose of our heavy construction division to the Fluor Corporation in 1969. At the time of this sale this division was prosperous and was earning a return on the funds invested that compared favorably with our mining operations but we knew from experience that violent swings are an inherent characteristic of this business and it seemed more prudent to us to remove this risk at a time when we were embarked upon a heavy mining expansion program based largely on debt financing. Our only remaining construction activities are concerned with hydraulic dredging and a limited partnership with Haas and Haynie in building construction. The sale to Fluor involved the transfer of 40% of our salaried employees and 75% of our total employees. By its very nature construction demands intensive managerial attention and the elimination of these operations has allowed management to concentrate its attentions more appropriately on the principal sources of its earning power. |