OCR Text |
Show 2. As mining companies go Utah is well diversified, deriving important earnings from coal, iron ore, uranium, and copper. Each of these minerals has performed well in the past decade and the prospects for each of these minerals, particularly coking coal and uranium, are in my opinion shining more brightly than the outlook for lead, zinc, sulfur, and other minerals. Second, the mines in which Utah owns or has an interest are for the most part low-cost producers well located for the markets they serve and, except for copper, the price structures of the minerals produced are not subject to violent fluctuation. Furthermore, Utah's policy of selling the greater share of its output under long-term contracts with a high proportion of the sales under these contracts protected by price escalation, has given a high degree of assurance that the earnings will materialize on a reasonably predictable basis. This reliability of earnings and cash flow has made it possible to proceed safely in a highly leveraged position, borrowing the greater bulk of the funds needed to carry out a rapid and extensive expansion program of the type that we have underway. Finally, I suspect that the market has given some expectation that management will be able to perform well in the future as it has in the past. It may be modest but I think it is fair to say that over the past 5, 10, or 20-year periods Utah has demonstrated an ability to spend its exploration dollars with unusual success to discover mines producing minerals with brighter than usual prospects and to sell these minerals in the faster-growing markets. In addition to its mining activities, Utah also has through Marcona an important interest in |