as though no fractional content were involved. Where such fractional content is 0.5% or above, payment will be made at the next higher figure.

The Government contemplates construction and operation of a sampling plant, testing and analytical laboratory at Deming, New Mexico. If and when this is done, in lieu of payment on the above schedule which employs the same recovery factors applicable to all ores delivered to the depot, payment thereafter will be made on the basis of laboratory testing on specific lots of ore, from individual shippers, and a new price schedule made which will reflect the laboratory-determined recoverability. The payment basis will remain the same rate of $2 per long ton unit of manganese contained in a product acceptable to industry the same estimated beneficiation cost, and subject to the specifications, premiums, and penalties of Specification P-30-EPS-GSA, set forth below:

48.0% Manganese.

6.0% Iron.

11.0% Silica plus Alumina.

SPECIFICATIONS

0.12% Phosphorous.

PREMIUMS

Manganese content above 48.5% (dry basis); 1⁄2¢ for each 1.0%. Iron content below 6.0% (dry basis); 1⁄2¢ for each 1.0%.

PENALTIES

Manganese content below 48.0% (dry basis); 1¢ for each 1.0%, down to and including 44.0%. Below 44.0%; 4¢, plus 11⁄2¢ for each 1.0%. Iron content above 6.0% (dry basis); 1e for each 1.0%. up to and including 8.0%. Above 8.0; 24, plus 4 for each 1.0%. Silica plus Alumina content above 11.0% (dry basis); 1¢ for each 1.0%. Phosphorus content above 0.12% (dry basis); %¢ for each 0.01%.

The Government reserves the right to reject any lot which, on the basis of the laboratory testing, cannot be beneficiated to a commercially acceptable grade of manganese.

This regulation shall be effective the

day of June, 1951.

ADMINISTRATOR.

MANGANESE PURCHASE PROGRAM SAID TO BE DESIGNED TO OFFER INCENTIVE TO PRODUCER OF HIGH-GRADE ORE

Mr. ENGLE. Can you summarize what is in it? My information is that it is too little and too cheap, and I would like to have your comment on that.

Mr. MITTENDORF. What we have done-first, as Mr. Bradley has pointed out, are trying to tailor these purchase programs to the individual district.

Mr. ENGLE. Can you speak a little louder, Mr. Mittendorf?

Mr. MITTENDORF. We have tried to tailor all of these programs to meet the requirements and the needs of the particular district as we see them. In the case of Deming, we have a vast amount of background from the experience of MRC during World War II in the purchase of ores. We have had exhaustive engineering studies of the properties and we have what we feel is a very realistic appraisal of the district's ability to produce, both from the standpoint of quantity of ores, and grade of ores.

We have exhaustive metallurgical tests which the Government and the private metallurgical laboratories have made on these ores.

Using all of that background information, we have come out with a schedule of payment for ores which is about twice the amount that was paid during World War II.

Mr. ENGLE. That is the average, is it not?

Mr. MITTENDORF. That is the average.

Mr. ENGLE. But on the low-grade stuff you start with a very low price, do you not?

Mr. MITTENDORF. We do. The price curve falls off rapidly below 20-percent ores. It is intended to keep the Government from buying undesirable ores in great quantities which may never be beneficiated and from which we may never recover but a small part of the contained manganese.

The table that we have submitted gives an incentive for the better class of ores. It gives a definite incentive, I believe, to the small producer who mines ore selectively and cleaner, however, at a higher cost. He can come in with a 5 ton truck load. It will get him going and give him incentive to mine high-grade ores.

I think that the schedules adopted during World War II were based on the average recoverability of all the ores, the average grade, and so forth, and in so devising that schedule the Government realized that there would be certain losses.

That schedule had the effect of working against the man who did have more desirable ore, the ore that we did wish to encourage, and this table that we have presented is intended to correct that fault that is now apparent in the old schedule.

The price curve, even though it is flat on the down side, does go up rapidly. At a mid point, it passes, in price, most of the other proposals that have been received.

FACTORS CONSIDERED IN FORMULATING DEMING ORE PROGRAM

Now in casting the Deming ore program, we looked at it in three definite stages and these stages were recommended by Mr. Bradley's shop and concurred in by ourselves.

The first step, we wished to get a purchase program established to see what sort of ores would come out, and to encourage mining of ores as quickly as possible.

As the second step, we knew we should have a sampling and testing laboratory; a sampling plant capable of making metallurgical tests

on the ore to determine actual recoveries of the various ores which we anticipate will be sold to the depot.

The third step, of course, is a mill to beneficiate the ores.

We could not gather enough data together to justify the completed program. There were differences of opinion with respect to ore reserves, exact metallurgy that should be employed, and we felt that we were going on indefinitely trying to resolve those various matters of judgment. We took the first step to establish a purchase depot; to get the program started, find out what can be produced, and determine the weaknesses of the schedule, if any.

So we have, as I say, assumed that a certain class of ore will come out which is similar to that which came out during World War II. We base it on the determined recoverability of the ores which have been tested. We have assumed in this payment schedule that a recovery will be made of 70 percent of the contained manganese, based on an average 23 percent grade of ore.

We recognize that this is a first step; it is a tentative schedule that can and will be changed when the sampling plant is in operation.

I think it is a realistic approach. The factors that have entered into it, I feel, could be concurred in by any logical person who has reviewed the background of that district.

INDUCEMENTS INADEQUATE FOR PRIVATE FINANCING OF

MANGANESE

PROCESSING MILLS AT DEMING, N. MEX., AND EL PASO, TEX.

Mr. ENGLE. Is there any contracting process? Do you have any offers on this now to proceed and build the necessary plant? Mr. MITTENDORF. À mill?

Mr. ENGLE. Yes.

Mr. MITTENDORF. No; we have never had an offer to build a mill. That is, using private funds. I don't believe that in the Deming area, nor in the El Paso area, that the applicants themselves felt that there was enough attraction to the proposed enterprise to go ahead and raise private capital for mill construction.

The mills projects have always been proposed on the basis of a Government loan. When we recommend a Government loan, we must adhere to very definite criteria to justify the expenditure of Government funds.

Of course, one of the first considerations is a divisor. That is to say, is there enough ore indicated to amortize the investment of the mill.

That we do not believe can be done at this time. We are taking this first step to encourage the flow of ore coming to the depot. We realize that some people will complain; and that there will be legitimate operators come in with legitimate claims which will be examined with an open mind.

We feel this first step is a realistic approach. I might comment on the case of one of the largest operations in the New Mexico area, who claimed damage at the termination of the Metals Reserve program during the last war and brought suit against Metals Reserve. Very exhaustive analyses were made of their operation to determine the validity of their claims, and it has been demonstrated, that while the Government was paying around $7 to $7.50 for the ores on a posted schedule, the firm was making a profit of almost $3 a ton.

We are now doubling that schedule of pay. We have no reliable estimates as to what the cost of this particular operation will be, if it does resume, but I believe on the basis of the figures at hand, we have made a very realistic schedule of payments by offering to buy the same grade of ores at twice the former schedule.

Mr. ENGLE. What, precisely, are the steps? Do you intend to buy the ore? Is that it?

Mr. MITTENDORF. We intend to establish an ore purchase depot immediately and all ores delivered to that depot in lots of 5 tons or over will be paid for on this schedule.

Mr. ENGLE. Then what is the next step?

SAMPLING PLANT AND METALLURGICAL TESTING LABORATORY TO BE
REHABILITATED BY THE GOVERNMENT

Mr. MITTENDORF. The next step is the rehabilitation of the sampling plant and the metallurgical testing laboratory.

Mr. ENGLE. How is that going to be financed and handled?

Mr. MITTENDORF. Our thinking now is that will be a recommendation for GSA to rehabilitate an existing facility. Under the DPA Act, we feel that this approach is possible, since a similar plant was in operation during World War II. The foundations remain, part of the head house, and other facilities do exist.

We believe that legally we can rehabilitate that plant without DPC authority.

Mr. ENGLE. Are you going to do that on a loan to somebody or is private capital going to do it?

Mr. MITTENDORF. So far we have no proposals to do it by private capital. It will be Government financed as a cost incidental to this program.

Mr. ENGLE. In other words, you will authorize a loan to be made by the Government to build this sampling plant?

Mr. MITTENDORF. No; we won't handle it that way. I might have to call on Mr. Bradley to confirm the breakdown of his budget estimates. In the presentation of the manganese program, the contingent liability of each phase was calculated and in stating the total cost to the Government of some $8 million for the Deming program, the cost of the sampling plant was included in that over-all request for appropriation certification; is that right, Mr. Bradley?

Mr. BRADLEY. That is correct.

Mr. ENGLE. After you get the sampling plant what do you have? Mr. MITTENDORF. We will have a facility which will demonstrate the type and quantity of ores coming in to or that can be mined in the Deming area, and their amenability to commercial and economic beneficiation.

There are many reports on file written by laboratories and the opinions differ widely. I have seen conclusions where it is considered wholly impracticable to beneficiate ores peculiar to the Deming area. I have seen other reports stating that, by some complicated and uneconomic metallurgical tests, commercial recoveries can be made. At the same time we recognize that advances made in the metallurgical field, and the flotation of manganese ores in particular, have been made and our purpose in recommending the sampling plant is to get primary production started, to have a fair schedule which pays the

miner for his ores, to immediately set about to sample the ores and determine their metallurgical tenor, the production potential, and then be able to sit down with an engineering problem and devise what type of mill should be constructed to beneficiate them.

It is a progressive step.

Mr. ENGLE. Then your first step is to get the ores; is that right, and you set up a schedule on which you intend to purchase them?

Mr. MITTENDORF. That is right

Mr. ENGLE. Then the second step, and that is simultaneous with the first, is to set up the sampling plant; is that right?

Mr. MITTENDORF. That is right.

Mr. ENGLE. For the purpose of determining the nature and usability of the ore in a process?

Mr. MITTENDORF. That is right.

Mr. ENGLE. Then on the basis of that you intend to put in a mill; is that right?

Mr. MITTENDORF. When we reach that step, we are going to stop and make a very good appraisal of the justification for a mill; that is, the size of the mill, type, and exactly where it should be located.

MANGANESE PROCESSING MILLS PROPOSED TO BE CONSTRUCTED BY THE GOVERNMENT WITH DEFENSE PRODUCTION ACT FUNDS

Mr. ENGLE. The Government is going to finance the third step, too, by putting up the capital investment to establish the mill as well as the sampling plant?

Mr. MITTENDORF. That is an unanswerable question at this time.. Perhaps if under proposed revisions of the Defense Production Act there is made authority for defense production plants, then that will serve as one medium.

Mr. ENGLE. At the present time, as I understand, the act is interpreted as not granting that authority; is that right, Dr. Morgan?

Dr. MORGAN. I am not a lawyer, but I understand that is correct. Such revision has been requested in the proposed modification of the Defense Production Act.

Mr. ELLIOTT. That is correct, but I think it can be done under the existing law, because under the purchase authority in section 303 there is included the power to store and beneficiate, and I think the power to store and beneficiate would include the power to have a mill for that purpose.

Mr. ENGLE. It could be done under the stockpiling program, couldn't it?

Mr. ELLIOTT. Yes, sir; but I think it can be done under the Defense Production Act also.

Mr. ENGLE. The reason you prefer to do that is because it takes this defense-production money instead of the stockpiling funds; isn't that right?

Mr. ELLIOTT. Yes, sir.

Mr. ENGLE. What I am afraid of is that we are going to run out of time here. The assumption, I take it, is that the Defense Production Act will be renewed. Is that the assumption you are proceeding on?

Mr. ELLIOTT. Yes, sir.