Business: Gold’s Tin

Uninformed investors looking for gold stocks might pass over Kaw Crow, Grull Wihksne, McLeod Cockshutt, Cotton Belt, Porcupine Crown, Buffalo Ankerite, Canadian Malartic, Ymir Yankee Girl. But ‘they could hardly resist the most glittering name of all—Yukon Gold. From an investment manual they would be shockingly undeceived. Yukon Gold does nothing but mine tin in the Federated Malay States.

Last week Yukon Gold declared a common stock dividend for the first time in 18 years. Reason behind this sudden change in policy was the new Federal Tax on undistributed profits. Though it is listed on the New York Curb Exchange, only a minor part of Yukon Gold is owned by the public. More than 80% of its shares belong to Pacific Tin Corp., a basket which the Brothers Guggenheim wove in 1928 to hold some of their mining properties. At that time, Pacific Tin took over a debt of some $7,000,000 from Yukon Gold and most of the company’s subsequent earnings have been used to pay off Pacific. The new profits tax may mean an end to that constructive bit of intracompany finance.

Yukon Gold was founded in 1907 as part of the Guggenheim’s gold mining ventures. In the Federated Malay States, it and two subsidiaries hold properties estimated to contain 72,151,000 Ib. of tin. Because the deposits are alluvial, they can be “dredged.” Each cubic yard of dredged earth yields about half a pound of metal. Annual output of the company varies according to quotas set every three months by the International Tin Committee. Bases of the cartel allowances, which apply to about 90% of the world’s production, are 1929 outputs. In 1935, working at 42% of rated capacity, Yukon Gold turned out 1,118 long tons of tin. Selling its metal for an average of more than 47¢ per Ib., the company made $454,100 for the year.

After a $440,600 profit in 1929, Yukon Gold tumbled into the red in 1930, piled up big deficits the next two years. Reason for the decline was the state of tin which,, like most of the world’s leading metals, was caught out on a limb by Depression. In spite of cartel restrictions, output did not drop as fast as consumption from 1929 through 1931 and prices dropped from 45¢ to 24¢ per Ib. In 1932 production was pulled below consumption. Two years later prices were up to 52¢ per Ib., and the company showed a profit of $424,500, even though operating at only 34% of 1929 capacity.