The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1917-12-06

taking care Of or handling about one
third Of the production of the Bunker
Hill company, but 1t served Its purpose
of enabling the company to be sure OF
a sale OF at least that amount of Its
production. The balance Of its pro-
lduction prior to the contract at issue
had been sold by the Bunker Hill
company to various shelters. Thus
in 1906, when the contract at issue was
made, the Bunker Hill company had
five smelling contracts with five diff
lferent smelling companies outstand-
ing: The Tacoma Smelling company;
the Selby Smelling & Lead company
lat San Francisco; the Ohio & Colora-
do Smelling company, at Salida, Col
orado; the Pennsylvania Smelling
company. at Carnegie, Pa, and this
plaintiff.
The contracts with the Tacoma
Smelling company and this plaintiff
were at the same price. The contract
with the Selby Smelling company was
50 per ton less advantageous to the
mine
The negotiations for the Bunker Hill
contract are truthfully set forth in the
complaint herein. which I have read
and which | believe to be true in its
entirety.
| inspected the Tacoma smelter
personally; am familiar with smelters,
their value and their efficiency A
smelter equally efficient, equally well
located and equally capable Of treating
the same tonnage as the Tacoma smell
ter could have been erected at the time
for about the sum of 100000 q do not,
of course, include those improvements
in the Tacoma smelter for which we
particularly paid. AS an outside fig
| ure, we calculated that 100000 was
the full reduplication value of the Ia
coma plant, and in paying 100000
for the stock of the Tacoma company.
the plaintiff figured that we were pay
| ing $3,500,000 more than we could re-
duplicate that smelter for. The Bum
this and the negotiation for the Ia
coma smelter was conducted on the
basis of buying going concern that
had an established business which was
the main asset transferred and ac-
quired. The transaction was analo-
gous in~prineiple to buying out we'll
established newspaper or a well es-
tablished and profitable store. In
either case the price paid is generally
far more than the reduplication value
of the actual tangible assets 1t is the
clientele, the good will, the establish
ed position of the business which gives
it, as did the Tacoma smelter in the
preceding year of 1904. when 1t had
similar contract with the Bunker Hill
and the three Alaska companies, as a
basis of its business, had made GER
tain profits which when capitalized
justified the price: but, of course, the
price would not be justified unless we
were reasonably sure of the continual
tion of the business, and to insure this
continuation we stipulated as part
of the Tacoma transaction that con-
tracts Exhibits B, c, d, and e in the
complaint should be executed and be-
come part of the assets of the Ia
coma smelter. Having the business
thus assured, we felt justified in pay
ing the price and this situation was
thoroughly understood by the defend
ant at the time. Hence the stipula-
ton that the contract, Exhibit B,
should be made, authorized by the
stockholders and deposited in escrow
to be delivered If the deal went
through and to be returned to the de-
PENDANT company If the deal did not
go through. Bernard M. Baruch was
acting in that transaction as agent OF
the American Smelling & Refining
company
OF these four contracts, thus exc ,ut-
ed, the Bunker Hill contract Exhibit
b was by far the more important for
the following reasons:
uD. Because the annual tonnage
produced by the Bunker Hill was
nearly three times the ton
mage from the three Alaska compan-
les,
ca. The Bunker Hill contract was |
for rs years, while the three Alaska
contracts We're only for five years and /
thereafter could only be held If this
met the cost of treating the
Alaska ores by the cyanide process 1t /
was we'll understood by all concerned
that the probability was that We could
not meet cyanide competition as 70 |,
pres of the character of those Alaska
,res, and this. in fact, proved to be the
case, At the end of five years the cost
% the Alaska companies Of treating
heir product by the cyanide process
vas so much less than we could afford
o treat 1t that we were forced to give
lp handling their business. The total
onnage shipped in that five years by 1
he three Alaska companies was about /
$4,000 tons, while the total tonnage q
hipped by the Bunker Hill company
or the same period was about AGO. 8
90 tons We all of us understood at +
he time that the probability was that
he three Alaska contracts would only I
ast for the fve-year period and this !,
laintiff so figured 1t in estimating the I