INTENT OF CONGRESS TO ENCOURAGE AND ASSIST MINING INDUSTRY THROUGH LOANS AND OTHER MEANS UNDER DEFENSE PRODUCTION ACT ACKNOWLEDGED BY DMA

Mr. ENGLE. I want to call your attention to section 302, which relates to the loan provisions of the Defense Production Act. You are familiar with that, I take it?

Dr. BOYD. Yes, sir.

Mr. ENGLE. And you are aware of the fact that Congress specifically included in that section an authorization to make loans of every type and kind, including participations in or guaranties of loans to private business enterprises, including loans for the exploration, development, and mining of critical and strategic minerals and metals.

Do you believe it was the intention of Congress in passing that section and specifically including that language to indicate to the executive branch that the mining people, both for exploration and development, as well as mining, were intended to be included for loans?

Dr. BOYD. Very definitely.

Mr. ENGLE. And you are in favor of the program?

Dr. BOYD. Very definitely.

Mr. ENGLE. Which would do that.

In addition there is section 303 (a) which relates to purchase commitments and purchase contracts and which also contains specific language providing for the encouragement of the exploration, development, and mining of critical and strategic minerals and metals.

Is it your belief that that section, also, was a direct indication that Congress intended it should be put into execution in some form? Dr. BOYD. Yes, sir.

Mr. ENGLE. You are perfectly willing to do that and you agree with the fundamental policy or philosophy set forth in that section; is that right?

Dr. BOYD. Absolutely. We are carrying it out today.

Mr. ENGLE. You are familiar, I take it, with section 450 of the Excess Profits Tax Act of January 3, 1951, which allows very special consideration for those people producing strategic minerals and metals?

Dr. BOYD. Yes, sir.

Mr. ENGLE. Now, it is perfectly obvious, isn't it, that the Congress of the United States would not have written that into the law unless it was intended by Congress that the Administration should put this domestic mining program into high gear? Isn't that a fair summary?

Dr. BOYD. That is a fair summary.

Mr. ENGLE. And you recognize that to be the intention of Congress?

Dr. BOYD. Very definitely.

FRED SEARLS, JR., ASSISTANT TO THE DIRECTOR, OFFICE OF DEFENSE MOBILIZATION, QUOTED AS OPPOSING LOANS AND OTHER FORMS OF ASSISTANCE TO DOMESTIC MINING INDUSTRY

Mr. ENGLE. Now, in the light of that, I want to call your attention to certain statements made by Mr. Fred Searls whom you have said

is the high man on the totem pole down there as far as mining advisers are concerned. Do you know any man who is higher in this whole lay-out than Fred Searls, Jr., with reference to mining?

Dr. BOYD. No, sir.

Mr. ENGLE. You do not.

I refer, Mr. Chairman, to volume 3, page 284, of the transcript of the hearings before the Senate committee and I want to read a little. piece of it here. Here is what it says-and this is a question by the chairman, who is Senator O'Mahoney, of Wyoming:

The CHAIRMAN. The Secretary of the Interior in the Bureau of Mines of the National Production Authority yesterday submitted to this committee a tentative plan for the allocation of $10,000,000 for the development of a strategical list of materials which I have handed to you. In the light of our discussion today, would you regard an expenditure of that size as being unwise or a calculated risk for the purpose of development of domestic sources of these materials if they exist?

Mr. SEARLS. I would prefer that it not be done.

In the light of Mr. Searls' plain statement to the Committee on Interior and Insular Affairs that he is opposed to loans for the domestic mining industry, do you feel that you can get a policy declaration at high level in the Defense Production Administration or from the. Defense Mobilization Administrator which will effectuate that polity at all?

Dr. BOYD. The only way I can answer it that way is to say that that program which was presented was approved by the Defense Production Administrator. We presented that program and it was approved by them.

Mr. ENGLE. Would you feel like saying whether or not the top, mining advice, which is coming down from the high man on the totem pole in the Administration on this business, on mining, had anything to do with the long time it took you to get it through and the very meager allowance which has been made of some $10,000,000?

Dr. BOYD. Mr. Engle, I don't think you are being quite fair to Mr. Searls in this particular case. He said that he would prefer that this particular program not be approved. We have discussed with this committee before and with the Committee on Interior and Insular Affairs in the Senate as to how to create the climate so that our mining industry can grow and become strong.

Mr. ENGLE. I am going further with Mr. Searls' testimony and quote it and determine if I am being fair. I quote from page 262 and this is a question by the chairman. He says:

The CHAIRMAN. Now, the simple question is, do you believe that any action should be taken under that authority

referring to the authority Congress gave in the Defense Production. Act of 1950

through Congress to stimulate the production of domestic minerals in the United States?

Mr. SEARLS. If I had my way, during the period of intensive expansion of facilities and of production of military end items at top speed I would stop any such funds from being borrowed from the Government.

Dr. BOYD. I am sorry, I had not seen that testimony, Mr. Engle, but my understanding of Mr. Searls' position in this matter has been somewhat the position we have discussed with you.

Mr. ENGLE. You don't have to defend Mr. Searls' position. What I am trying to indicate to this committee is that you are in an impos-.

sible situation. I don't expect you to comment on it but I think the difficulties under which you are operating should be disclosed to this committee and to the mining industry. That is just one example. Now, I am going to turn back to even a better statement here. Mr. REGAN. These quotations all come from the same volume? Mr. ENGLE. That is correct; volume 3 of the hearings of the Committee on Interior and Insular Affairs of the Senate, February 3, 1951. Now, on page 228 of that same document, Mr. Searls was asked this question:

The CHAIRMAN. I would want you to comment on that nowcovering what would be for over-all mining—

I want to know where we go from here.

Mr. SEARLS. With respect to the letter which you quote, I remember writing that letter 2 years ago. I have not seen it since, and I am not sure whether I would have given the same emphasis to the reasons for not subsidizing mining equipment at that time, which was during peacetime, as I would now, but— and I emphasize this

but I feel now as I did then, that any type of subsidy for the development of mining is objectionable because it does tend to socialize the mining industry.

Now, have you had any discussions at all down there with regard to over-the-market price contracts or subsidy-type contracts for the domestic mining industry?

Dr. BOYD. Yes, sir, we have.

Mr. ENGLE. Have you gotten any through?

Dr. BOYD. We haven't actually recommended to DPA today any particular program for subsidizing critical materials. We have those programs in the process of development, trying to simplify them so they will work more simply before we recommend them.

Mr. ENGLE. As a matter of fact, you don't have any program at all, so far for over-the-market price contracts?

Dr. BOYD. No, that is not correct.

Mr. ENGLE. I want to read from page 243 of this transcript. This is the chairman talking again:

A question has been propounded by Senator Cordon as follows:

Senator CORDON. But you feel that any sympathetic cooperation advanced by the Government of the United States would have exactly the opposite effect in the United States. Is that your line of reasoning?

In explanation, I will say to the committee that it is developed in these hearings that Mr. Searls, president of the Newmont Mining Corp., has a mining operation in South Africa on which he has received very substantial tax considerations and depletion allowances by the South African Government.

In addition to that, he has a mining operation in north Africa on which he has received a loan of $4,000,000 from the ECA in the nature of a subsidy to help those operations and Senator Cordon was asking if those things were good in Africa, North and South, why weren't they good here.

Then the chairman interceded and he said:

The CHAIRMAN. Before he answers, may I read this sentence from a letter in which Mr. Searls made his remarks and which he addressed to me. This is the letter of August 8, 1949:

"I am convinced that the best thing the National Government could do to help the mining industry in this country is to let it alone."

Mr. Searls didn't contradict that statement or modify it in any particular. As a matter of fact, he affirmed it on several occasions in his testimony.

In the light of that attitude, in the top echelon, dealing with mining under the Defense program, I want to ask you whether or not you feel-you may answer this question or not as you choose-that from the standpoint of establishing policy you have a basic concept the intent of the Defense Production Act, which agrees with our own? Dr. BOYD. I am sorry; I don't quite get the question.

Mr. ENGLE. What I am trying to determine, Dr. Boyd, is whether or not you, sitting down at the bottom of the totem pole and trying to formulate a domestic mining program, are, in fact, faced down there in the Defense Mobilization Director's set-up with people who are basically opposed and unfriendly to the program envisioned by Congress when it passed the Defense Production Act of 1950 and the excess profits tax of January, 1951?

Dr. BOYD. I can only answer that by saying that as far as I know, I have never dealt with anybody in the higher echelons who are opposed to that program, as stated in the Defense Production Act, the people I have to deal with in formulating policy decisions.

Mr. REGAN. I want the committee to know and show on the record that Mr. Chenoweth of Colorado is here. We are glad to have you.

PROPOSED CONTRACT WITH SAN MANUEL COPPER COMPANY, A NEWMONT INTEREST, CONTAINS SUBSIDY ELEMENT

Mr. ENGLE. Are you familiar with the San Manuel Copper Co.? Dr. BOYD. Yes, sir.

Mr. ENGLE. Do you mind telling this committee whether there is under negotiation in your shop down there a contract for the production of copper from that mine?

Dr. BOYD. Yes, sir, there is. We have already recommended it.

Mr. ENGLE. And that contract sent over in February was written on the basis of cost plus 7 cents per pound, was it not?

Dr. BOYD. No, sir, not quite. We established a floor in the contract, which is well below the market price, at which the Government would guarantee to buy copper from the company if the price should fall below that level. There is an escalator clause in it, based on cost of construction of the plant. If it takes 5 years to construct it it might cost more and it would have to be a higher price to take care of that cost and amortization.

Mr. ENGLE. It is an 11-year contract?

Dr. BOYD. That is right.

Mr. ENGLE. And there would be a 4-year development period during which no copper would be produced at all?

Dr. BOYD. That is correct.

Mr. ENGLE. And it contains a provision, does it not, that for money borrowed by the San Manuel Copper Co. over a stipulated minimum, that the price paid by the Government shall go up one-tenth of 1 cent per pound?

Dr. BOYD. That is correct.

Mr. ENGLE. In other words, when they borrowed over $40,000,000 or whatever it is, it would be one-tenth of 1 percent on every one of those?

82354-52- -5

Dr. BOYD. That is right.

Remember, that price, however, is well below the present market price.

Mr. ENGLE. I understand that the contract provision is cost plus 7 cents?

Dr. BOYD. No, sir, that is not correct. The reason for that escalation clause is to permit the company within that period of time to amortize its investment.

Mr. ENGLE. I am asking about the letter you sent to DPA in February of this year, about the same time Mr. Searls was before the Senate committee testifying against subsidies. Did you send over a letter which carried with it a contract which called for cost plus 7 cents?

Dr. BOYD. No, sir, that is not correct. That contract is not cost plus 7 cents. It is only a floor price. The Government does not buy unless the price of copper falls below that price.

Mr. ENGLE. In which event the price paid by the Government would be a subsidy, would it not?

Dr. BOYD. That is correct, sir.

Mr. ENGLE. All right.

One further question:

Is it a fact that the San Manuel Copper Co. is a subsidiary of the Magna Copper Co.?

Dr. BOYD. That is right.

Mr. ENGLE. And the Magna Copper Co. is owned by the Newmont Mining Co., of which Mr. Fred Searls is president; is that right?

Dr. BOYD. That is correct.

Mr. ENGLE. And so it seems, does it not, then, that the gentleman who appeared before the Senate committee and who debated against subsidies for anyone else was, in fact, going to be the beneficiary of a contract, himself, or through his company; is that right?

Dr. BOYD. That is correct.

Mr. ENGLE. Just one other question: Do you know whether or not Mr. Fred Searls is paid by the Government or the Newmont Mining Co.?

Dr. BOYD. No: I do not know.

Mr. ENGLE. What?

Dr. BOYD. I do not know.

Mr. ENGLE. I refer to a press release issued by the Office of Defense Mobilization on January 3, 1951, announcing the appointment of Herbert A. Birdson as general counsel and Fred Searls, Jr., assistant to the director. It was announced by Charles E. Wilson, Director of Defense Mobilization, that both would serve without compensation. That appears on page 223 of the record that I previously referred to. Mr. Fred Searls was not paid by the Government. Presumably he is paid by the Newmont Mining Co.

Dr. BOYD. I presume so. I might say on that point that I or my staff have never talked to Mr. Searls, as far as I know, about the San Manuel contract. We, ourselves, asked the company to come in and present a proposal. To our knowledge, that was the quickest source of the largest increase of copper in this country of a reasonable expectation of production at a reasonable cost. We asked the company to come in and present the program. We were not approached by the company or any individual in it.