Additional background

How copper is purchased

We are not a mining company; we have to buy our copper. We buy mostly from dealers but sometimes we buy from a mining company or scrapper. We only buy cathodes, created by the electrolytic process, for our con$-$cast plants. If the mining company has an electrolytic refinery we can buy cathodes from them. We buy inferior copper and scrap when needed to keep the furnace going.

We always buy under a contract. Copper contracts call for a total quantity of copper to be purchased and the cost basis but not when or where the copper is to be delivered. The contract says we will specify some portion of the total copper to be delivered to a specific location at a later date.

When coper is needed an order is placed against the contract. The quantity of copper ordered is subtracted from the contract total. The price of the ordered copper is usually calculated at the time of order. The contract specifies the formula for the price. The formula $($called the basis$)$ is almost always the spot price of copper on the order date $($called the commodity exchange or COMEX price$)$ plus either a certain percentage or a fixed amount.

The price of copper is determined by the commodity exchange $($COMEX$)$ which works on a bid$/$ask system similar to the stock market. The dealer tries to lock in as low a price as he can with futures contracts in the hope the price will go up by the time he has to deliver.

The plants are in various places around the mid$-$west. We have several different kinds of plants. The plant is identified by what they process and not by the physical location. Most plants support only one process. A few plants have both a con$-$cast facility and a wire mill on the same property. This is considered two separate plants. We only have one furnace and this is located at our Coldwater, Michigan location along with a con$-$cast plant and a wire mill.

At the furnace we melt down scrap copper and make wire bars. A wire bar is about the size of a railroad tie but made out of copper. Scrap comes from our other plants. It is usually contaminated with plastic insulation or older types of insulation. It may have magnet wire enamel. We chop up the scrap and our blower will remove most of the lighter stuff like the insulation. The furnace burns off most of the rest.

It sometimes happens that we have to buy scrap to supply the furnace. Our least favorite scrap is water pipes because they are alloyed with other metals which we cannot completely remove.

Wire bar is always inferior to cathode. In the past it was the best we could get and we used it to make rod but anymore we mostly sell it$.$

Copper in whatever form is almost always shipped from outside the company in a rail car. It has happened that an order must be shipped by truck or is too big to be shipped in a single rail car. When that happens, there are multiple shipments under one order.

It also happens that a mistake was made and we need copper cathodes to keep a plant running but do not have an open contract. In that case we make a special contract with a single order and expedited shipments. This is expensive and we hate to do it but restarting a con$-$cast process $($or furnace process$)$ is more expensive.

Within the company copper is shipped by truck. This is a simple process. The truck is already loaded and we anticipate sending it to the wire mill. It is just a case of sending it a bit early.

At a con$-$cast plant we melt cathodes to make rod. Today copper is refined by an electrolytic process. They take the ore and burn off what they can. Then they put the copper in an acid bath with two electrodes, one at each end of the bath. They run an electric current thru the bath. The copper atoms move to the cathode end and attach there. The result is pure, $100\%,$ copper. The best the furnace can do is ninety something percent.

We have five con$-$cast plants and they all take cathodes. We buy cathodes from the dealers $($and there are a lot of dealers$).$ Our people negotiate a contract with the dealer. Sometimes we need copper quickly and the contract calls for all the copper to be sent to a plant at a fixed price. Think of it as combining the contract and the order.

All our con$-$cast plants run continually. The Furnace and most wire mills run continuously also. Restarting the continuous process is a real pain so we try never to have a shutdown. The result is a never ending rod but for practical reasons we coil it into the bed of a truck and chop it off at a convenient length. Each plant produces one size rod $$ usually $3/8$ and $(1)/(2).$ In theory we could make any diameter but those two sizes are all we ever use.

We have several wire mills. The mills take rod, heat it to soften it$,$ and pull it thru a series of dice to make wire of a desired diameter of wire. $($Dice is the plural of die. A die is a piece of metal with a very precise diameter hole in it$.$ In a series of dice the first one has a fairly big hole, the