Incorporated: 1887 as American Metal Co. Limited
Sales: $3.79 billion
Stock Exchanges: New York Midwest Pacific Amsterdam Brussels Frankfurt London Paris Basel Geneva Zurich
AMAX is a mining, metals, and energy concern based in the United States with international operations and experience. Decades of diversification have made AMAX a leading natural resource company, although too much of that same diversification nearly brought the company to its knees. AMAX now concentrates on consolidation while working to maintain the spirit of acquisitional adventure, at home and abroad, that allowed it to supply products for two world wars, create new markets for its new discoveries, and stay at the cutting edge of foreign investment. AMAX was formed in 1957 with the merger of American Metal Co. Limited and its longtime associate, Climax Molybdenum Company.
AMAX evolved out of a combination of German bankers, New York traders, and Rocky Mountain miners. The company’s earliest predecessor was incorporated as the American Metal Co. Limited (Amco) in 1887 when it was spun off from the Frankfurt-based Metallgesellschaft, a metals trading concern. In 1884 Metallgesellschaft sent Berthold Hochschild to New York to initiate a metal-trading business. There Hochschild quickly built Metallgesellschaft’s U.S. metals business, due in great part to startlingly productive U.S. copper mines. Amco exported nickel and opened treatment plants for lead and copper. The fledgling company benefited from its German connections during this period, as Germany consumed one-third of U.S. copper exports. Following U.S. entry into World War I in 1917 the 49% German stake in Amco was seized by the U.S. Alien Property Custodian and resold, and all trade with Germany was halted. The huge profits generated by Allied military needs, however, more than compensated for the loss of Amco’s German business. Use of the metal molybdenum also increased during the war. Molybdenum’s special properties as an alloying metal in steel were first recognized during the late 19th century. By 1916 demand for its properties, battle-tough hardness and elasticity, was great. Max Schott, head of Amco’s Denver, Colorado, office, promptly enlisted the aid of Amco’s leadership to buy a mine in Climax, Colorado, that would eventually produce 75% to 85% of the world’s molybdenum. The Climax Molybdenum Company was formed in 1917 by a syndicate that included American Metal Co. Amco’s share of Climax was 10%. Amco president, Manhattan banker Carl M. Loeb, became president of the new corporation.
By 1924 it was recognized that molybdenum, or “moly,” was more than a wartime wonder. Its use as wire for vacuum tubes and incandescent lamps; in steel for machines, railroad and construction equipment, and automobiles; and its compounds in dyes and pharmaceuticals, caused Scientific American in March 1924 to label the nascent industry “one of the most important branches of American metallurgy.”
During the interwar years Amco diversified into copper- and zinc-smelting plants. Also after the end of the war, Amco’s German connection re-emerged. The Germans who formerly had owned 49% of Amco’s stock were alleged to have paid a $441,000 bribe to the Alien Property Custodian, Thomas W. Miller, in a convoluted attempt to gain control of the $7 million that had resulted from the sale of the Germans’s Amco stock in 1917. Miller turned the $7 million over to the German contingent and was subsequently indicted for his actions.
Meanwhile, Climax’s sales of molybdenum soon took off. Climax’s stock rose 116,900% from 1926 to 1936 and as a major Climax Molybdenum Company stockholder, Amco, too, enjoyed huge profits.
Copper once again came to the forefront of American Metal Co.’s concerns in the 1930s, with the overseas development of the Roan Antelope and Mufulira mines on the Rhodesia-Congo border. The Roan Antelope mines were one-third owned by Amco, and the Mufulira mines were two-thirds owned by Amco, through its majority ownership of Rhodesian Selection Trust, Ltd. African investment would prove to be among American Metal Co.’s most volatile, and profitable, ventures. In 1952 Amco’s stake in these mines brought the company about $4 million.
In 1938, during the Soviet Union’s war with Finland, Climax participated in a U.S. embargo of trade with Russia. World War II led to a shift in who mined moly and where it went. In 1939 Climax had halted all exports to the Axis powers. When the United States joined the war, in 1941, moly was mined for use in military products. The end of the war again meant a decrease in the need for molybdenum. Climax responded by advertising new uses for moly including its application as a greaseless multipurpose lubricant in powder form, and in the manufacture of aircraft engines. Climax also diversified into uranium. The company was thus able to keep profits on the rise.
American Metal Co. expanded its African holdings in 1946 by buying, with the Newmont Mining Corporation and Rhodesian Selection Trust, Ltd., the Tsumeb mine in South West Africa, now Namibia. The South African government that controlled South West Africa had seized the copper, lead, and zinc mine from its German owners during World War II. Thanks to modern mining techniques, hospitable South African tax breaks, and low wages, the Tsumeb Corporation, which owned the Tsumeb mine, managed to improve greatly on the production and profits of the previous German ownership.
In 1954 and 1955 racial problems at the Roan Antelope and Mufulira mines came to a head. Black African workers were struggling for the right to work in skilled positions alongside white workers. The white European labor union, making up only 12% of the work force at some mines, opposed a policy of racial equality. The union had successfully enforced a color bar during World War II, when the Allied need for copper was so great that the copper companies could not afford a strike. After the war, however, American Metal Co. and others recognized the benefits of a skilled indigenous work force, and, much to the displeasure of the white union and the powerful South African government, campaigned against the color bar. In early 1955, 18,000 of the 48,000 black Africans at work in the Rhodesian copper mines went on strike. By the end of the year, an agreement between the white union and the Rhodesian Selection Trust, in which Amco participated, brought down the color bar, but did not guarantee blacks equal pay for equal work.
Amco had been consistently augmenting its holdings in North America, as well. Southwest Potash Corporation—later AMAX Chemical Corporation and by 1991 AMAX Potash Corporation—and Heath Steele Mines Ltd., both wholly owned subsidiaries, were formed in 1948 and 1954, respectively. Heath was sold in 1979. AMAX Potash was slated to be sold in 1991. Amco also began developing oil properties in concert with Climax Molybdenum in 1950. In 1957, the two companies, via a stock swap, merged. Climax had been modernizing its facilities, and production of molybdenum had doubled from 1951 to 1955. Climax also had begun mining tungsten and vanadium, as well as developing its uranium interests. Climax president Arthur H. Bunker became chairman of the newly named American Metal Climax, Inc. (AMAX).
During the 1960s, AMAX’s Southwest Potash company purchased a nitrate of potash and chlorine plant. AMAX itself delved further into tungsten with the 1961 acquisition of an interest in Canada Tungsten Mining Corporations, Ltd.; pursued lead in a joint lead-mine-smelter venture with the Homestake Mining Company that went on-line in 1969; and formed AMAX Petroleum Corporation in 1962, which the following year acquired the oil and gas properties of four separate petroleum companies.
Also in 1962, AMAX began work in aluminum by buying the Michigan-based Kawneer Company and Chicago’s Apex Smelting Company. Further diversification into aluminum followed: a factory in West Germany was procured and Kawneer G.m.b.H.—now Kawneer Aluminum GmbH—was established to manufacture aluminum building materials for the European market. In California, Hunter Engineering Company was acquired in 1963, and added the production of aluminum sheet. In 1963 Bellingham, Washington, was the site of a 50%-owned plant to produce primary aluminum. Johnston Foil Company of St. Louis, Missouri, was acquired in 1966 and produced aluminum, tin, and lead foils.
In 1965 a new AMAX subsidiary was formed to hold the aluminum subsidiaries: the AMAX Aluminum Group. By 1990, it would be the third-largest U.S. aluminum company.
Of intrinsic importance to the company’s future was its entrance into the coal market in 1969. Ayshire Collieries of Indiana was purchased and would soon become a new subsidiary: AMAX Coal Company. Four years later, it was the fifth-largest U.S. coal producer. By 1980, it was number three.
The Climax mine continued to be AMAX’s bread-and-butter property, still contributing half of the company’s earnings at the end of the decade. A small molybdenum mine in Clear Creek County, Colorado, added to the profits, and, in 1965, company geologists discovered what many other prospectors had searched for, a moly reserve that rivaled Climax. The Henderson mine, as it became known, was about 40 miles northeast of Climax.
In 1969 Ian K. MacGregor, a former head of AMAX Aluminum Group, became chairman of American Metal Climax, Inc. MacGregor, noted for a managerial style based on consensus, launched a $2 billion expansion program in 1971.
AMAX continued to advance its international status with new holdings in Australia, the Netherlands, and the United Kingdom. The African holdings were affected by local governmental policy. Northern Rhodesia, the site of the Roan Antelope and Mufulira mines, was now independent Zambia; Rhodesian Selection Trust, of which AMAX had 42% ownership, was renamed Roan Selection Trust (RST); and the government of the British Empire had been replaced by nationalist leader Kenneth Kaunda. As early as 1962 Kaunda had stated that he opposed nationalization of the copper industry. As late as the spring of 1969, he was making the same assurances. A year later, however, under pressure from tribal militants, Kaunda took over 51% of RST. AMAX negotiated control of RST’s remaining 49% in the mines, while Zambia would reimburse AMAX in bonds for the 51 %. AMAX also negotiated a management contract that would allow it to continue to supervise day-to-day mine operations for 25 years. In 1991 AMAX owned 29.8% of RST.
In bordering Namibia, formerly South West Africa, however, AMAX was being accused of handling itself with less sensitivity. The Tsumeb mine was still a profitable source of copper, and the country was still conflict-ridden. The United Nations (U.N.) had, in 1966, repudiated South Africa’s control of the country. South Africa ignored the U.N. resolution, as did AMAX, which continued paying taxes to South Africa instead of to the United Nation’s Council for Namibia. AMAX forced opposition within Namibia, where workers went on strike in 1971, and at home, where descendants of Max Schott initiated a suit on behalf of AMAX stockholders that charged the company with paying taxes that were illegal in the eyes of the world.
Another big challenge for MacGregor was financing the multitude of businesses into which AMAX was buying. The company’s long-term debt, $15 million in 1960, reached $500 million by 1973. Joint ventures were one solution. In hopes of getting debt-stalled projects off the ground, AMAX sold half its AMAX Aluminum Group to the Japanese Mitsui & Co. in 1973. AMAX Aluminum was subsequently renamed Alumax, Inc. MacGregor’s active interest in U.S.–Japanese trade put AMAX once again on the cutting edge of international investment. The joint venture with Mitsui marked the biggest U.S.Japanese venture to that point. An even larger infusion of cash came with the sale of 20% of AMAX to Standard Oil Company of California (Socal) in April 1975.
In 1974 American Metal Climax, Inc. officially adopted its nickname and became AMAX Inc. In 1977 MacGregor named Pierre Gousseland AMAX’s new CEO. MacGregor remained chairman of Alumax briefly, still pursuing heavy-spending policies. While the rest of the aluminum industry was cutting back production, Alumax raised some eyebrows by putting upward of $500 million into expansion. At the end of the 1970s Alumax was the fastest-growing aluminum company in the United States.
Standing in the way of AMAX’s continued growth were numerous delays consequent to increasingly stringent environmental regulations. AMAX, however, displayed less reluctance to bow to environmental concerns than many of its competitors. The restoration of one AMAX mine site won a national environmental industry award. The Henderson mine featured nearly ten miles of underground railroad to preserve the integrity of the surface landscape. The contradictions between massive mining projects and the environment came to a head in the highly publicized battle over Crested Butte, Colorado. In 1978, after four years of exploratory drilling, AMAX announced it had found more moly in the tiny, low-key Rocky Mountain resort town of Crested Butte. Townspeople and environmental groups, led by the town’s mayor, W. Mitchell, vociferously campaigned against the planned mine. The company lobbied with equal fervor to win the support of the town, even bringing in psychologists to study the social effects of the proposed mine. The battle remained a stalemate until a metals recession in 1982 led to a slump in moly prices that made AMAX postpone the project indefinitely.
Crested Butte’s orebody was not the only moly that went unmined in the wake of the slump. In February 1981 AMAX had agreed to initiate a joint venture with Washington’s Colville Confederated Tribes to mine a 900-million-ton moly reserve found on the tribe’s reservation. The price of molybdenum oxide, however, dropped from $25.50 per pound to $4.25 per pound in just two years. The project was halted. AMAX, which had enjoyed sales increases of 43% in 1979 and a ninefold earnings increase over a ten-year period, found most of its businesses bottoming out. During the first nine months of 1981 profits were down 43%; the company’s long-term debt was $1.2 billion; the following year would find it up to $1.7 billion.
The same spending spree that had made AMAX profits soar in the 1970s made them crash when the market dipped. Some stockholders blamed Gousseland; others felt he was the victim of MacGregor’s debts. Even Gousseland’s backers, however, had difficulty defending his rejection of Socal’s 1981 merger offer. After failing in 1978 to acquire the 80% of AMAX it did not already own, Socal tried again three years later. It raised its offer from $57 to $78.50 a share, double the market value of AMAX’s stock. Gousseland decided to remain independent. AMAX’s stock plummeted from $68 at the height of merger speculation to $26.25 a year later.
Gousseland, however, kept buying, depending on silver and coal sales to lift AMAX’s profits. Finally, in 1985, Gousseland started divesting, but following the 1985 shareholders meeting, amid shareholder accusations of mismanagement and unethical behavior, the board of directors stripped Gousseland of the titles of president and chief operating officer. These responsibilities were conferred on Allen Born, head of Placer Development Ltd. and a former AMAX executive. A year later Born was also CEO.
Born settled on a five-pronged approach, emphasizing molybdenum, aluminum, coal, oil and gas, and gold. He bought back Mitsui’s half of Alumax, developed the Sleeper Gold Mine in Nevada, and sold many other parts of the business. Sleeper turned out to be one of the lowest-cost gold producers in North America, and aluminum prices jumped in the year following the Alumax purchase. Born cut 4,300 people from the payroll and, as part of a general downsizing of moly operations, mothballed the Climax mine. Results were swift: the company, after years of losses, made $14 million in 1986, $146 million in 1987, and $740.9 million in 1988. Lower sales and a decrease in the price of aluminum reduced profits by almost 51 % the following year.
The year 1990 found AMAX increasing holdings and enjoying the ensuing profits in gold; increasing profits in coal, although a May bid for Peabody Holding Company, the largest U.S. coal producer, fell through; increasing ventures and earnings in oil and natural gas exploration; continuing to downsize molybdenum production; and consolidating corporate structure— AMAX cut 40% of its corporate work force in June 1990. Aluminum prices continued low, but Alumax seemed to be riding out the storm and planned to double its aluminum capacity with a new aluminum smelter in Quebec.
Environmental problems continued to challenge AMAX as it entered the 1990s. Allen Born favored “regulation that legitimately protects public health and the environment without restricting our free-enterprise system. . . . And the costs of such controls should be weighed in terms of the benefits achieved not only in environmental improvement but also on the international competitiveness of United States industry,” as reported by American Metal Market, September 29, 1988. This mixed view of environmental policy had mixed results: while AMAX’s Belle Ayr mine was named the safest in the United States by the Mine Safety and Health Administration in 1987, Citizen Action, a private group based in Washington, rated AMAX among the top-ten offenders in the release of toxic industrial waste in 1988.
AMAX retains important elements of the two companies from which it sprang. Like Climax Molybdenum, AMAX is a mining company that owes most of its profits to one metal, but aluminum has replaced molybdenum in this regard. AMAX concentrates on downstream operations, creating aluminum products that will create markets. Like its predecessor American Metal Co. in Africa, AMAX is willing to explore potentially profitable operations in other countries.
Alumax Inc.; Amax Coal Industries, Inc.; Amax Gold Inc. (87%); Amax Oil & Gas Inc.; Climax Metals Company.
“Element Number Forty-Two,” Fortune, October 1936; “Can Coal Save Pierre Gousseland?,” Business Week, October 18, 1982; Wilson, Arthur J., The AMAX Century, Greenwich, Connecticut, AMAX, 1987.