RECEIVED OCT 27 1971 GIBBS AND BISSELL ATTORNEYS AT LAW FINLEY J. GIBBS RUTH A. BISSELL I620 EL CAMINO REAL MENLO PARK, CALIF. 94025 TELEPHONES: 415-323-0588 415-323-4111 CABLE ADDRESS: "GIDE" October 25, 1971 Mr. Weston Bourret Utah International 555 California Street San Francisco, California 94104 Dear Wes: I am enclosing annual reports of Industrias Penoles for years 1969 and 1970. I am also enclosing various reports issued by "The Mexican Investor" and a report by Banco Nacional de Mexico (Banamex). I would appreciate the return of the annual reports for Industrias Penoles when you are through with them but you need not return the other information. In reading the reports remember that the dollar sign means Mexican currency and only when the letters M.A. appear after the figures is U.S. currency designated. Also, some ad-ditional capital was raised this year through the sale of 625,000 shares of stock to the stockholders at $100.00 Mexican currency a share so that its present capitalization is 3,125,000 shares. As presently set up the shares of Penoles are 85% in the hands of Mexican nationals and 15% in the hands of foreign-ers. One-third of the foreign stock is held by Bethlehem Steel which is interested in the new zinc smelter which is in the process of construction and apparently will buy part of the production. There are several subsidiary corporations in which American companies have an interest. American companies parti-cipating in the operations of Penoles include Allied Chemical, Bethlehem Steel, Continental Company, Freeport Sulphur and Du-Pont of Canada. A Canadian company, Pure Silver Mines, Ltd. is also associated in a silver exploration venture in Guanajato. Apparently DuPont of Canada has some interest in this venture. I am enclosing a reprint from a bulletin from DuPont referring to its interests in Mexico and to an exploration program entered into with Penoles. Penoles has expanded very rapidly in the last few years and the B shares, which are the shares which can be bought by foreigners went up to a high of around $260.00 Mexican cur-rency a share this year but recently have dropped to around Mr. Weston Bourret -2- October 25, 1971 $189.00 Mexican currency. The lower prices for its products, particularly silver, have resulted in a substantial reduction in its earnings. Penole's latest venture is the mining of fluoride and the production of hydrofluoric acid. Apparently Penoles will become the largest producer of hydrofluoric acid in North America and possibly in the world. It has accomplished this by acquiring some fluoride deposits held by Allied Chemi-cal and other U.S. companies and forming subsidiary corpora-tions with these companies to mine the fluoride and produce hydrofluoric acid. According to the 1970 annual report the Mexican government is giving special tax benefits to Mexicanized mine-ral ventures and in particular to Penoles which appears to be in a powerful position politically. The company seems to have good financial connections through the Chase Manhattan Bank and Kuhn Loeb & Co. and the First Boston Corporation of New York. There is some danger that the company may have ex-panded too rapidly and in the face of lowered metal prices its immediate future is somewhat cloudy. However, in view of its strong political position and its apparently able management and the fact that it has several strong American companies working with it I feel that its long term future is good; pro-vided, of course, the political situation in Mexico remains stable. If you should ever wish to talk with the management of the company, I would be glad to give you a letter of intro-duction to Ingeniero Jose A. Garcia who is the senior vice president or to Ing. Vincenti Cisnero who is on the executive committee. Ing. Garcia does not speak English too well but un-derstands it well enough. Ing. Cisnero speaks English beauti-fully and received his engineering degree in the U.S. If you would like me to translate any part of the reports for you I would be glad to do so the next time we get together. Best regards, Finley Finley FJG/hem Enclosures