carriers in the world. These are combination ore-and-oil carriers. Not only do they make available low-cost transportation, but their utilization is assued because their purchase and financing were coupled with 7-year ore sales contracts with Japanese mills. URANIUM The uranium industry has had its prospects brightened considerably, and one only needs to engage in the exercise of trying to sell coal to the public utilities to be convinced of this fact. The most serious competition that we encounter in our coal program is no longer natural gas but nuclear fuel as the energy source for the future, and there is every indication that nuclear power in high cost fuel areas will be a serious and growing contender in the 1970's. In recognition of this change the Atomic Energy Commission is undertaking to renegotiate its present purchase contracts which now expire in 1966. From producers who stretch-out the remaining contract quantities until 1968, the A. E. C. will agree to purchase additional poundage through 1970. The price through 1968 would be the existing price of $8 a pound. The price after 1968 would be variable but not more than $6.70 a pound since the factor for plant amortization included in the present price would then be eliminated. Also the A. E. C. would permit consolidation of properties which would allow greater efficiency in mining and processing and allow the miner to recover some of the profits lost through the lower annual tonnage. I mentioned earlier that we are already operating on an interim agreement which contem- 14 plates that we will conclude a final agreement along the lines outlined above. The effect will be to reduce our annual profits from uranium. The result of this has already been felt in the first half of 1963. The impact will be greater in the second half. We are willing to accept a reduction in our near-term uranium profits because our total profits through 1970 will be substantially greater than under our present contract. We believe our shareholders are best served by this program. Our position in uranium is excellent. We have ample uncommitted reserves of good quality ore. We believe that we are one of the lowest cost producers in this country and in an excellent position to compete when the day comes that there is a free market in uraniuma day that seems to be fast approaching. COAL Perhaps the most significant development in our company's picture in the last three years has been our successful entry into a specialized coal operation providing fuel for the generation of electricity. Our Navajo Mine began operations this year and has lived up to our every expecta-tion. It has reserves in excess of 500,000,000 tons, of which less than half is committed to Arizona Public Service under long-term contract. The uncommitted reserves are available for other uses and we have put before other utility companies a well engineered plan to utilize these reserves as a basis for a 1200 megawatt plant at the mine with the power delivered by ultrahigh voltage lines. The cost of the power thus produced would appear to be competitive with the alternative sources of energy that these companies have been studying. 15