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November 24, 1964

that it certainly will make a payable proposition from the mining standpoint. (1st Tr. 71.)

In describing the exposures of silica on the other claims, he repeatedly indicated that the claims should be explored more fully to determine the extent of the deposits (1st Tr. 74, 76-78).

The testimony given by Milvoy M. Suchy, the government's mineral examiner, at the first hearing was that not enough work has been done on the claims to warrant a guess as to the tonnage of talc that might be there, that the silica deposits have not been delineated, that there is not enough silica exposed on some of the claims to say what the extent of it is, that he found outcrops or float quite widely scattered, that he found what he believed to be a silica boulder buried in the bank which may be another parallel vein or a piece of float.6

At the second hearing, after E. V. Pressentin had described the work done on the claims since the first hearing, including stripping the talc dike, removing several hundred tons of talc, and stripping on the silica claims, and after photographs of the claims, taken in May 1961, had been introduced and after the Pifer statement had been discussed, Herman Smith, a Government witness who mines talc from property which he leases, testified' that looking at the claims he was unable to form any ideas as to the quantities of the deposits. This was because there is no way, only by development work, to prove that.” In reply to the question as to why this was, he responded that talc was not consistent, "it can cut off or fault * * * You have to follow it in order to decide whether it is going on in or whether it is going down.” Responding to a question as to the silica deposits on the claims he replied: “Well, they are just kidneys—they are pockets and boulders of tale. There is nothing to indicate that it would go down.” (2d Tr. 128–129.)

Suchy also testified at the second hearing. He testified that there are three faults on Silica Lode No. 2, one of which had been discovered since the first hearing, that where you have faulting and movement you can not depend upon projection because there is a possibility that the fault has moved the deposit, and that where there are faults it would be "rather risky and unreliable to assign any definite tonnage on the small manifestations that are present, of what you can actually see in the exposed face and in the other exposed dimensions near the face" (2d Tr. 151-152). He described an exposure of silica on another of the claims, stating that there are two contacts shown in one of the

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° 1st Tr. 16, 27, 28, 29, 32, 35.
* Transcript, second hearing (hereinafter referred to as 2d Tr.), pp. 116–140.
8 Tr. 142-176.

photographs introduced in evidence and that there is another contact on that claim not shown in the photograph. He said:

Now, what those contacts mean, I don't know. I don't know if that is a fault of a Silica deposit striking at right angles to it or parallel to it. I don't know. (2d Tr. 153.)

With respect to the projection of indicated and inferred ore that Pifer had made, he stated that such a projection is made very early in the prospecting stage. There is an inferred or indicated tonnage of a certain grade of ore, then it is right for doing considerable prospecting and exploration work, and by doing this work you are starting to delineate. You get more dimensions and eventually you get to the point where you may have a certain amount of proven ore that would justify your further investment and the establishment of a mine. (2d Tr. 169.)

The only evidence of significant quantities of talc and silica on the contested claims is Pifer's projection of indicated and inferred ore. However, his estimate was based on notes made by him in his examination of the claims in 1956. Yet his testimony at the first hearing was clear to the effect that further prospecting and exploration were needed in order to determine the quantity of minerals in the claims. Pifer was not present at the second hearing so that his estimate was not subject to cross-examination. It seems perhaps significant that although contestees at the second hearing requested and obtained time to arrange for a taking of Pifer's deposition, which would become part of the case record, they never did so.

When the Pifer estimate is considered with the other testimony presented at the hearings, including his own at the first hearing, it cannot be accepted as preponderating evidence, or even substantial evidence, that the appellants have demonstrated that there are present on the claims talc and silica in sufficient quantities to justify a prudent man in spending his labor and means with a reasonable prospect of developing a valuable minein other words, that a "valuable mineral deposit” has been discovered.

We turn now to a consideration of the second showing that the appellants contend has been ignored or not given proper consideration. This is the testimony given by J. G. Adderson at the second hearing. They contend that Adderson's testimony shows that Adderson is ready to proceed at the present time with mining operations on the claims, that his company would proceed on the claims with a mining operation which would not be of an experimental character but for commercial purposes, and that, properly construed, his testimony shows a willingness to operate a mine and not just a willingness to explore.

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November 24, 1964 Careful consideration of Adderson's testimony o does not, however, support the conclusion which the appellants reach therefrom.

Adderson is the principal owner, operator, and manager of Manufacturers Mineral Company in Seattle, engaged in the mining and preparation of various types of nonmetallics for various types of market, and one of the two local operators meeting the demand for talc. In 1958 and 1959, his company used some 500 tons of talc from the Silica Lode No. 2 claim, which it got from Morgan Adair, who, Adderson said, had a working arrangement with Pressentin. Asked whether he would say, on the assumption that the estimated total indicated and inferred tonnage on the claim was 350,000 tons, that an ordinarily prudent man would be justified in expending additional time and money in an effort to develop this claim as a tale mine, he answered “Yes” and added that he proposed to do that. "I am hopeful that we will get together and work out an arrangement whereby we can proceed along those lines.” Asked: “Actually it is a paying mine, or was when talc was being taken out, is that correct?”, he replied: “Well, the operation was on such a small scale at that particular time that I wouldn't say that it was a money-maker, but it was not a moneyloser. It was done as an initial state in development." (2d Tr. 69–70.)

His testimony with respect to silica was that his company was always studying and examining properties to determine available known sources of silica for its type of use, that he has seen the outcrop on Silica Lode No. 3, that he had asked another person to make an examination—"a cursory examination”—and to bring him samples, that he had examined those samples and feels that the material is definitely of interest to his company from a quality standpoint, that he is familiar with the practice of estimating indicated and inferred tonnages, and that the practice is standard in the mining industry. Asked whether he had specific plans as to further inspection of the property to see whether or not it might be operated by his company, he replied:

Yes, we expect to get at that before this summer is over. We are just now waiting to get some tangible evidence of our right to go in there and to protect it if we find we can go ahead. (20 Tr. 75.) He was then asked what the nature of the operation would be. "How would you approach it from a tonnage standpoint?" His reply was:

Because of the nature of our business, we look at these things a little bit differently, particularly now on the silica. It is a little bit different than an

24 Tr. 65–97.

operator might whose sole interest was in metallurgical rock, for example. Our primary interest would be to appraise the property from the standpoint of the fine ground industrial material and primarily the construction aggregate type of rock with the idea that we would open up on a relatively small scale until such time as our development had proved the quality and quantity for the metallurgical type of operation, at which time we would certainly not turn our back on that type of operation. The principal problem in this metallurgical field of endeavor is to get adequate sampling and to determine the quality of rock from that particular standpoint. You can sample the surface of these deposits from now until Doomsday and you are still not assured of anything; but once you have the deposit opened up and you can take good cross sections, then you are reasonably sure. That is one other approach that can be used and that is to thoroughly drill the deposit; but that is a very costly type of operation in quartz and we choose to do it the other way because we are more or less paying our way as we go. (2d Tr. 75–76.)

Further stating what his plan of operation would be, Adderson stated:

Now, in some cases and under certain circumstances, you would diamond drill and outline your ore body completely before you ever started to mine-or you might outline it up to a point where you were satisfied you had a sufficient reserve, ignoring what might be an addition to that, to justify the capital expenditures that are necessary to put it into operation.

We, because of our unique market position in the type of materials we furnish, we choose to do it the other way because diamond drilling is just dead expense and it has to be amortized or lost if the deposit doesn't develop.

We are going to do it the other way. We approach it from the standpoint of the small producing unit and pay our way as we go and at the same time open it up and as the material and quantity measures up, we can proceed. (20 Tr. 78.)

Asked whether, in his opinion, an ordinarily prudent man would be justified in spending time and effort to develop a paying mine without knowing the proved tonnage, but on the basis of indicated and in ferred tonnage, he replied:

It depends on how you are going to develop. It is an absolutely firm rule, as far as I am concerned, that you don't start building mill facilities until you have proved tonnage adequate to justify the expenditure for those facilities. In the case of a situation such as we are contemplating, if detailed examination of the property indicates a reasonable tonnage of ore in our judgment--and we rely entirely on our judgment when we make that decision-we will undertake to develop but not to put in mill facilities at that point. (2d Tr. 95.)

Asked whether the operation he was discussing would be an actual commercial operation, he replied:

Very definitely. It would not be experimental. It would be with the idea that we were going to recover several years at least of ore from that property; otherwise we don't want to introduce it into the market because we would then have the obligation to our customers to continue to furnish that type of material. (2d Tr. 95.)

November 24, 1964

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Asked by the hearing examiner: “This is something you are going to do, but haven't done yet? Is that right, as far as exploring the tonnage?” Adderson replied: "That is correct.” (2d Tr. 95.) Asked

" whether on the basis of Pifer's report giving the indicated tonnage he would figure on a mining operation, he replied: "No. I just said that we based upon our judgment-my judgment of the indicated tonnage." (2d Tr. 97.)

It is somewhat difficult to evaluate Anderson's testimony. At first reading it seems to support the appellants in the positive statements made by Adderson that his company is ready to commence a commercial operation on the claims, rather than an experimental operation, and that it intends to start with a small producing unit that would pay its way as operations continued. However, a careful analysis of Adderson's testimony raises a serious question as to whether, in fact, he was not really talking simply about a program of exploration.

Adderson was on Silica No. 2 twice in 1958 and 1959. He had seen the silica outcrop on Silica No. 3 but not on the other claims; however, he had asked Evan M. Johnson to make a "cursory” examination of the properties and to bring him samples. (2d Tr. 69, 73.) Johnson testified that he had made “very sketchy estimates” of quantities, that he was mostly interested in quality, and that he would not be qualified, without further examination, to say whether there was sufficient quantity on the claims to justify an operation (2d Tr. 102–103). Adderson said he would not figure on a mining operation on the basis of Pifer's report, but on his own judgment of indicated tonnage. Thus, there is no evidence that Adderson had any idea as to the amount of minerals in the claims. Yet contestees would have his testimony accepted as establishing justification for a person of ordinary prudence to spend labor and money with a reasonable prospect of developing a valuable mine on the claims.

It is to be further noted that at the time Adderson testified he was simply "hopeful" of getting together with the contestees and working out an arrangement to develop the claims (2d Tr. 69). Even then it was not decided whether his company would do the mining although he thought it would probably contract it out (2d Tr. 87). This again is hardly indicative of any considered evaluation of the facts leading to an informed judgment as to the probable success of a mining operation on the claims.

It would appear that the only proper reading to be given to Adderson's testimony is that the quantities of talc and silica on the respective claims are unknown and therefore a full scale commercial development would not be warranted, that drilling to determine the extent of the

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