think it is fair to say that the company has made good progress and has served its owners well. Why should the shareholders of a company that has fared so well vote overwhelmingly yesterday to merge with General Electric? In my view it was concern about the growing concentration of Utah's earning power in a single commodity produced in a single country. The risks that were of concern to Utah International standing alone were not the least unreasonable to take when the assets of General Electric and Utah were combined. Indeed, of all the minerals coking coal has perhaps the most promising prospects. Australia certainly offers one of the best combinations of favorable geology and favorable investment climate. Furthermore, Utah has in hand mineral reserves that should be and, under merged conditions, will be promptly developed. The source of gross profit and other income has undergone change in the past 5 years. Mining is the overwhelming contributor, oil and gas is a positive contributor, and land development a losing venture in recent years. Affiliated companies and joint ventures were substantial con-tributors in the first three years, modest profit contributors in 1975, and the source of a loss of over $9 million in 1976. While there are other entities in this category, Marcona and Cyprus- Pima are the principal components. MINERAL SALES BACKLOG If there is a single characteristic that distinguished Utah International from other mining com-panies, it is the size and the nature of the Company's backlog of mineral sales. (Chart 3) In 1966, this backlog first exceeded $1 billion. It now exceeds $6.1 billion. As of October 31,1976, 96% of the backlog is represented by long term contracts giving substantial protection against future cost increases and 71.3% of the backlog is represented by contracts fulfillable by mines located outside of North America. Also, 69.3% of the backlog is represented by metallurgical coal, 20.7% by steam coal, 5.3% by uranium, 2.5% by iron ore, and 2.2% by copper, with copper priced for this purpose at 35 a pound. The existence of this backlog and its nature have given Utah an assurance of earnings and a predictability of earnings that have been absent from other mining companies, particularly those engaged in the mining of minerals whose prices are subject to wide fluctuations from year to year like copper, lead and zinc. 1976 RESULTS Focusing our attention on more recent developments, Utah International concluded its fiscal year October 31 with substantially improved earnings over the prior year. This was accomplished despite disappointing results in a few segments of Utah's business. Price changes in copper failed to keep up with changes in operating costs either at Utah's Island Copper operations in British Columbia or at Cyprus-Pima's mine in Arizona. Foreign iron ore operations and ocean shipping were in the red. Slack steel activity held iron ore prices down. Additionally, Mount Goldsworthy in Western Australia experienced higher costs, partly because of higher stripping ratios and partly because of frequent work stoppages by organized labor, a situation common to all Australian iron ore producers. Marcona's New Zealand iron sands operations also operated unprofit- ably. With its Peruvian properties expropriated, Marcona had no ore to sell from that source during 1976 and the impact on its ocean shipping activities was severe. Utah's share of the Marcona loss was $5.0 million, $10.5 million worse than the prior year. All of Marcona's profit centers operated in the red but the hardest hit was ocean shipping. We further decreased our earnings by setting up an $11 million pre-tax write-off against an obligation to deliver through 1980 3.7 million pounds of uranium oxide at a price estimated to be below our costs of production at the times of delivery. Focusing now on the positive aspects, profit improvement in Utah's operations was broadly spread among the various profit centers. Uranium recorded significantly higher earnings. While a major part of our current ship- CHART 3 Utah Sales Backlog ($MM) 8 7000 6000 5000 4000 3000 2000 1000 0 '66 '67 '68 '69 '70 '71 '72 '73 '74 '75 '76 6.1 Billion ments were at low prices contracted for in earlier years, part of the production this year was mar-keted at substantially higher prices. In 1975 our uranium prices averaged approximately $10.37 a pound and uranium mining was only modestly profitable. This year average prices are in excess of $21 a pound and this increase in price combined with higher shipments have made uranium the second largest contributor to gross profits. Increased contributions to gross profits were also recorded by steam coal, domestic iron ore mining activities, and oil and gas activities. Land Development lost less. The strongest contributor to this improvement in profit was Australian coking coal. Shipments were higher 15.5 million tons compared to 13.2 million tons the prior year. Prices were higher. Operating costs were higher and burdened for the first three quarters with a $A6.00 export levy. This was reduced $A1.50 in Utah's fourth quarter, allowing profit margins for the year to widen moderately. Compared to the experience of the prior year, labor relations were relatively calm and loss of production because of work stoppages was more moderate. This improved profit from coking coal is more noteworthy because it occurred in a year when activity in the steel industry was none too brisk, coking coal inventories at the mills were heavy, and coking coal de-mand was down. The combination of these factors resulted in earnings (Chart 4) of $178.8 million for Utah International in 1976, equivalent to $5.67 a share. In the prior year we had earned $135.4 million or $4.29 a share before deducting an extraordinary loss arising out of the Peruvian expropriation of Marcona Mining Company's assets. After the extraordinary loss our earnings were $111.6 million or $3.54 a share. Thus the 1976 earnings represent an increase of 32.1% over the prior year before the extraordinary loss and 60.3% after the extraordinary loss. This is a strong showing and especially so among mining companies which with few exceptions have been reporting lower earnings on a trailing 12-month basis this year compared to last. PROSPECTS FOR 1977 As we look ahead to 1977, barring unforeseen events, Utah anticipates once again having net income at record levels. As we have every year for many years, we plan to increase our expenses for exploration. On the other hand, we foresee greater contributions from virtually all of our major profit centers. In coking coal larger shipments and a further reduction of the export levy indicate another increase in profits from this source. Mount Golds- worthy expects a return to profitable operations because of slightly better prices and improved waste- ore ratios. Marcona also anticipates a return to profitability because of income it expects to earn from the sale of iron ore pellets purchased from the Peruvian government under the terms of the settlement agreements related to the expropriation. Although the charter market is still in poor health, Marcona's shipping activity will benefit with the expiration in 1977 of certain higher-priced charters entered into in earlier years in the expectation that the ships would be used to carry Peruvian ore. Marcona management is also hopeful that increased business activity will improve results it derives from its other activities. Utah's domestic iron ore activities should be more profitable in 1977 than in 1976. We anticipate that SAMARCO, the new iron ore project in Brazil, will experience start-up losses in 1977 before it becomes profitable, expectantly in the relatively near future. So in iron ore we have a mixed bag but on balance we anticipate that the net effect will be an improvement in 1977 over 1976. We also expect better prices and therefore better profits from copper operations. Increased shipments of steam coal with margins and prices that are little changed should also result in better profits at Navajo. We also anticipate modest profits from a new steam coal mine being started up near Craig, Colorado. 9 CHART 4 1976 Earnings 1976 ($ Millions) EPS 1975 ($ Millions) EPS % Increase Earnings $178.8 $5.67 $135.4 $4.29 32.1 Ex. Item - - (23.8) (.75)